Business Expansion into Vietnam

By: Shaylene Apley

 Why would a business look at Vietnam for potential global expansion? Please provide 3
substantial reasons supported by content from the presentation provided and
globalEDGE. 
One reason that a business would look at Vietnam for potential global expansion is for the
reduction in costs for creating any good or service. As evidenced by GlobalEdge data one of the
strengths of Vietnam is having a large labor pool that has low labor costs. According to Duong
Vietnam has a large population of 93 million with half of which are under the age of 30. This
would benefit any company because there would be several workers to choose from who
potentially already have the skill sets needed to make the product or with labor costs being so
low you could invest the time to teach new employees how to make your product or provide a
service.

Strengths
 Dynamic economy featuring one of the fastest growth rates of the region
 Development strategy based upon production upscaling and diversification
 Large labor pool and low labor costs
 Strong agricultural potential and good endowment of natural resources
 Potential benefactor of US-China trade war

Another reason to expand your business into Vietnam is to expand revenue into additional
markets. According to GlobalEdge the GDP per capita is $7,448 with a population total of
95,540,395 in 2018. Also, in 2019 Vietnam was ranked 70 out of 188 for ease of doing business.
According to Duong’s presentation, Vietnam has the strongest average GDP growth till 2050,
exceeding 5.1% every year. This tells us that there is a larger population in Vietnam that could
benefit from a new business and this new business would help expand this countries GDP and
that it would one of the easier countries to bring your business into.

Key Facts
GDP per capita, PPP (current international $)
$7,448 (2018)
Population, total
95,540,395 (2018)
Ease of Doing Business Rank
70 out of 188 (2019)
The third reason to expand your business into Vietnam is the growth expectations of the
economy. As Duong discusses in his presentation that Vietnam will move from the 32nd largest
economy to the 20th by 2050. They also have the fastest growing middle and affluent classes in
the region. This would benefit any business during their global expansion into Vietnam because
the economy in this country has been and is predicted to continue to grow at a substantial rate.
When an economy is growing then most businesses grow, when an economy takes a downward
turn then most businesses follow that. I feel that the success of an economy goes hand in hand
with the success of businesses.
 If your company were to expand into Vietnam, what are 3 important considerations? 
Please provide substantiation from the content from the presentation provided and
globalEDGE. 
The first important consideration for expanding a business into Vietnam would be looking at the
risks levels of doing business in this country. According to GlobalEdge Vietnam is at level B for
acceptable risk for both the Country risk and Business Climate risk ratings. This means that it
won’t be the easiest to conduct business, but it also won’t be the hardest either. There will be
some occasional obstacles like collecting some payments for the business but overall not a lot of
risk to expand your business into Vietnam.

Country Risk Rating VIEW ALL

COUNTRIES
B
Political and economic uncertainties and an occasionally difficult business environment
can affect corporate payment behavior. Corporate default probability is appreciable.
- Source: Coface
A1A2A3A4BCDEVery Low RiskAcceptable RiskVery High Risk

Business Climate Rating VIEW

ALL COUNTRIES
B
The business environment is mediocre. The availability and the reliability of corporate
financial information vary widely. Debt collection can sometimes be difficult. The
institutional framework has a few troublesome weaknesses. Intercompany transactions
run appreciable risks in the unstable, largely inefficient environments rated B.

A1A2A3A4BCDEVery Low RiskAcceptable RiskVery High Risk

Another important consideration for expanding a business into Vietnam would be the political
challenges like high tariffs and the ineffective protection of intellectual property. According to
Duong’s presentation the piracy rates for software were estimated to be 78% in 2015 which was
signaling a steady decline. Duong also stated that Vietnam has high tariffs in agricultural
products, processed foods, and nutritional supplements. With these facts any company looking to
expand their business into Vietnam should consider how these political factors would affect their
business.
A third factor to consider would be the type of transportation most commonly used in Vietnam.
As Duong mentioned in his presentation the most common vehicle is the scooter and motorcycle
as there are far less cars in Vietnam than in the United States. Businesses should consider this for
how it would affect their business if they provide any sort of delivery service, need to gather and
transport supplies, products, or people as part of their business. It could become very difficult on
only two wheels. If a business sold large items like furniture that currently do not offer delivery
services, then you may have to invest in offering this for customers in Vietnam. Or if you need to
transport supplies to your business then would a scooter still efficiently complete this task for
you, or would you need to have a second vehicle like a delivery truck.
 What US business do you believe would have success in Vietnam? Why?  Please provide
substantiation.
I believe that the US business that would have the most success expanding into Vietnam would
be from the food processing industry like Nestle or Kraft foods. As shown in the image below
from GlobalEdge the top industries in Vietnam include food processing, garments, shoes, and
machine-building. So, when you do a google search for top US companies in food processing
and find Nestle and Kraft among other top performers you would assume that they would have
the same measure of success in other countries that they do domestically. According to Duong’s
presentation there are several opportunities for US companies to expand into Vietnam like
information technology, oil & gas exploration, aviation, health care, telecommunications,
agriculture, and education to name a few. The key to any of these industries succeeding in
Vietnam would be to take jump on the bandwagon and follow how KFC stayed their original
business but added a taste that would appeal to the consumers in Vietnam.

Vietnam: Economy
Income Level
Lower Middle Income
(by per capita GNI) 

Level of Developing
Development 

Vietnam is considered one of the leading agricultural

Economic Trivia
exporters of Southeast Asia.

Top 3 Trade Partners (2016): China, United States, and

South Korea
Trade 
Top 3 Exported Goods (2016): Electrical Machinery,
Footwear, and Apparel: Non Knit

Top Industries  Food Processing; Garments; Shoes; Machine-Building