Sample Business Paper on Business Expansion into Vietnam

Today, Vietnam has emerged to become a preferred strategic location for foreign entrepreneurs to invest due to its increased production capacity and favorable policies. According to GlobalEdge (2020), the country has a fast-growing economy; hence, both domestic and international investors can be assured of getting positive Returns on Investment (ROI). Further, Vietnam’s energetic growing population has resulted in plentiful labor, which is both highly qualified and relatively cheap, making the country quite attractive for foreign entrepreneurs from the labor-intensive manufacturing sector. The country’s workforce makes investing in Vietnam a viable move. Foreign investors who seek to expand their business into Vietnam would benefit from its readily available workforce, robust government support p for external entrepreneurs, and favorable environment for Foreign Direct Investment (FDI).

Vietnam’s governmental policies are highly supportive of FDI. The Vietnamese government persistently commits to encouraging foreign investments by reforming numerous regulations, which previously barred external investors. The administration tries to maintain political and economic stability, develop human and capital infrastructure, and liberalize economic competition (Lan, 2006, p.14). The effort to attract foreign investors is evident in Vietnam’s performance in the regional annual survey; which proves that the country’s ease of doing business is regularly improving.

Since Vietnam is a member of regional and global trade organizations, investors expanding into the country would experience a relatively favorable business environment. The country has also signed regional and bilateral free trade agreements with the majority of the world’s leading economies, thus creating peaceful condition for foreign investment. The 2015 Free Trade Agreement (FTA) with the European Union, supported Vietnam’s eagerness to promote the country’s economic growth through external investment activities (Massmann, 2016, p.1). Vietnam’s international commitments encourage external investors to enter the country’s market through FDI.

Most business would find it profitable to consider Vietnam for global expansion due to the country’s dependence on FDI. According to Lan (2006, p.3), FDI in Vietnam has been a major contributor to the GDP since 1990. FDI in the country has an inward potential index of 80, which is a commendable score compared to neighboring nations (GlobalEdge 2020). The expanding Gross Domestic Product (GDP) and a dramatic increase in FDI, are signs that Vietnam has transformed into an attractive investment destination.

Although Vietnam can be a good place to invest, there are barriers to doing business in the country that require incurring additional investment expenses. While venturing into business with Vietnam, an external investor may face language barrier challenges. The Vietnamese population barely speak English, and therefore, a foreign investor may need to hire a local representative or interpreter to cultivate good interactions with the locals. This could discourage external investors since they would have to incur additional operational costs. Moreover, the country has a high Corruption Perceptions Index of 117 out of the worst possible ranking of 180 (GlobalEdge 2020). Further, Infrastructure in Vietnam is still underdeveloped, which can prove challenging for manufacturers to set up efficient supply chain operations (GlobalEdge 2020). Such shortcomings may highly discourage foreign investors due to transparency concerns surrounding the Vietnamese business environment and additional costs they may have to incur.

An American household pet retail and supply venture would do well if it expanded into Vietnam. Despite the geographical distance between Vietnam and the United States, the two countries have excellent foreign relations due to significant Vietnamese exports of manufactured products into the American market (Lan, 2006, p.28). The good commercial relations make the Vietnamese market more welcoming for American investors. Pet sales and services in Vietnam can be a viable venture due to the gradual increase in the pets’ humanization and acquisition among citizens. Further, the Vietnamese value leisure time and would be open to purchase pets as companions for when they are home. The local population is also attracted to western culture including the idea of owning a pet. Cats, Puppies, and Fish are already preferred pets in Vietnam. Improvements in population health and wellness means that more pet owners are willing to spend their disposable income on pet food (Lien, 2017, p. 1-2). Thus, Vietnam already has an established market for pets, and its citizens would be further attracted to investing in pets and pet supplies from an American brand, because of their appreciation for western culture.

 

References

GlobalEdge. (2020). “Vietnam: Risk Assessment.”  Retrieved from https://globaledge.msu.edu/countries/vietnam/risk.

Lan, N. P. (2006). Foreign direct investment and its linkage to economic growth in Vietnam: a provincial level analysis. University of South Australia, Australia27(5), 1-42. Retrieved from https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=ESAM07&paper_id=24.

Lien, T. (2017). Vietnam – 2017 Pet food. British Business Group Vietnam. Retrieved from https://bbgv.org/wp-content/uploads/2017/10/Pet-Food-New.pdf.

Massmann, O. (2016). EU-Vietnam Free Trade Agreement-Market Access Opportunities. Retrieved from http://www.gba-vietnam.org/files/0ebbb33e-d25d-f71d.pdf.