Vietnamese business Flashcard
During the first years of AFTA participation, Vietnam had been able to fulfill its formal annual tariff reduction commitments (Giam 2000, p. 96). It can be argued that trade has arguably been one of the areas with the fastest progress since then. WTO membership makes sense for Starbucks. This entails further liberalization of trade and FDI. Implementation of market-compatible trade procedures are all legally bound in WTO agreements.
This should help to reallocate the company’s resources more efficiently.Furthermore, WTO membership increases export market access and reduces exposure to non-tariff protection. Vietnam became a big and promising market of great interest to exporters and investors from current WTO member countries. The best strategy to use in entering Vietnam is tailored to the specific needs of Starbucks, its product, and its strategic objectives.
The biggest problem in entering Vietnam is the misconceptions about the market.If Starbucks is basing its decisions on these myths rather than the current reality of Vietnamese and Asian markets, the company will very likely make strategic errors (Beresford 1997, p. 96). These myths are so firmly set in the minds of foreign firms that even the most experienced ones have fallen victim to them. Companies that think they have no chance of distribution without a Vietnamese partner might end up with a partner who, actually, contributes little strategic value.
Yet changes in retailing, the emergence of internet opportunities, and other channels give more openings than ever to move products to consumers more efficiently. Firms that think Vietnamese consumers are inherently different might neglect market research that could prepare tremendous insights to guide market entry. Companies that believe Vietnamese customers will not buy from foreign European and American brands might undervalue the importance of creating their own independent brands (Sinh 1995, p. 29).There are really many reasons to be in Vietnam, comprising direct sales to the Vietnamese market, research and development, or as a basis of exploring other Asian markets (Mccargo 2004, p. 56).
The strategic goal will form good strategy for entry. Another strategic issue is the role of Vietnamese entry in the company’s overall global strategy. Starbucks coffee gives opportunity for a more global strategy. One of the common mistakes made by successful global companies entering Vietnam is to believe that Asian markets are all alike.
There will be no success until Starbucks gains a deeper understanding of the Vietnamese market and adapts its product to the Japanese market. The same tradeoffs apply when deciding whether to partner with a Vietnamese firm. Although traditional wisdom about Vietnam is that foreign entrants need a Vietnamese partner to succeed, some companies had success entering alone. But these entrants have often relied upon relationships with Vietnamese suppliers and distributors even if they were not joint ventures (Abuza 2002, p.
125).Joint ventures with Vietnamese trading companies, especially, have become less popular as foreign entrants find the trading companies bring trading expertise, but not the marketing savvy needed to achieve success in Vietnam (Abuza 2001, p. 90). (Mccargo 2004) It is much easier for Starbucks to make its way directly into Vietnam, given alternations in regulations, distribution systems, and other segments.
There are also other reasons to make a partnership, especially to leverage research and knowledge bases in industrial markets.In assessing the importance of Vietnamese partners, it is crucial to analyze the nation’s unique market conditions. Starbucks can underestimate the role of trading companies and other aspects of the Vietnamese infrastructure that seem unnecessary but are really quite important for successfully conducting business. Without the benefit of a local partner, the company may encounter serious problems, for example, bureaucratic obstacles.
It is really important decision in creating an entry strategy whether to partner with a native company or go into Vietnam alone.As noted before in this paper, some of the compelling reasons for partnering, such as access to complex distribution, are no longer as compelling (Gainsborough 2002, p. 245). But other reasons for partnering, such as, for example, understanding the emerging Vietnamese consumer, are still significant. Starbucks should be very careful to assess the current market insight of potential partners rather than their past successes. Today, the costs of developing independent networks are lower and the challenges of hiring employees are decreasing.
This makes it far easier to go alone than it has been before.One strategy foreign firms quickly build their presence in markets is through franchising. However, in many cases, it is problematic. This is because the obstacles of franchising outweigh the benefits (Fforde 1997, p.
215). When the firm needs the flexibility to explore new directions to meet market demands, it might be willing to own its business. In addition, because of the close cooperation required between the headquarters and franchisees, an understanding of the Vietnamese market and Vietnamese business owners is essential. These relationships are often much easier for a Vietnamese firm to develop than a foreign company.
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38, no. 12 (December 1998).ADB. 2000, Country Economic Review – Socialist Republic of Vietnam, Manila: Asian Development Bank. ADB.
2000, Country Economic Review – Socialist Republic of Vietnam, Manila: Asian Development Bank. American Chamber of Commerce in Vietnam. [Accessed 1 February 2008]. Available at: http://www.amchamvietnam.com/