Vietnam Market Entry Decisions free essay sample

When thinking of the position many Multi-National Companies were in during 1998, it is easy to see why there was hesitation when considering entering the Vietnamese market. The countries political, economic, and social situations could adversely affect these companies if they are not careful in their entries. However, it may not be too late for companies to enter this market and take advantage of its workforce, resources, consumers. First and foremost, it is important to look at Vietnam’s market as a whole to see whether it really is an attractive investment opportunity. To do that, we must look at the recent events in Vietnam’s history. In the aftermath of the Vietnam War in April 1975, the Communist Party, which controlled the government, spent a few years regulating the country and helping to build up their largest city, Ho Chi Minh City, to become the productive center of the nation. Then, in 1986, the government decided to implement an economic renovation, referred to as Doi Moi in Vietnamese. We will write a custom essay sample on Vietnam Market Entry Decisions or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page This resulted in a great deal of inflowing FDI as well as new Vietnamese-owned organizations that were privately owned. The government made it clear that they wanted to allow these investments to encourage industrial growth as long as it did not impact Vietnamese industries. After almost doubling their FDI in a matter of years, by 1995 the total GDP in Vietnam was a whopping $19 billion, with their major investment sectors being in oil, gas, hotels, real estate, and services. As investment increased, so did privatization. This is the key element these MNC’s need to look at, since a politically Communist country would have to have some pretty serious regulations when it comes to private companies. However, by the end of 1995, private investment was almost level with FDI. With these regulations allowing privatization, the government also put into effect some policies that encouraged citizens who fled to return, so many people who left the country after the Vietnam War returned to their homeland. This made Vietnam the 12th largest country and one of the youngest populations, as well. This also counts as an advantage in regards to MNC’s because this gives them a large and young workforce to employ. Another advantage to be taken into account was the education level of this population, with around a 90% literacy rate. Some other encouraging factors were their eventual joining of the Association of South East Asia Nations (ASEAN), which allowed them to reduce tariffs on trade through the ASEAN Free Trade Area. Very soon after this, they also signed an agreement with the European Union (EU) that allowed Vietnam to trade with 15 EU countries and guaranteed European aid to Vietnam. Within months of this agreement, the United States had restored diplomatic relations, with some extra regulations in place to allow trade. With all of these things taken into consideration, it could definitely be an attractive investment opportunity for many MNC’s, even as late entrants. The surplus supply of young, well-educated labor would make it easy to gain employees, the investment in the country brings security and reduces uncertainty risk, as well as the added security that comes from being a late entrant, and the numerous different trade agreements between Vietnam and the EU, ASEAN, America would make trade barriers and tariffs virtually a non-factor. All of these things outweigh the possible uncertainty when it comes to their political ideals, and we can use China’s political ideals as a reference for a profitable investment opportunity in a Communist country with regulations much like Vietnam’s when it comes to privatization. Now, all that is left to consider is mode of entry, timing, and manufacturing strategies.