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Entrepreneurs who know how to navigate Vietnam’s rapidly growing economy can find great opportunities in its diverse business landscape. There are different types of businesses in Vietnam, from state-owned enterprises (SOEs) to multinational corporations, conglomerates, and the vibrant SME sector. Success in each sector depends on several factors, including the business mindset of the CEO and the C-suite team, access to capital, licenses, and loans, and the ability to adapt to the local market’s needs. Expats with experience in these areas may have an advantage in navigating Vietnam’s complex business environment.
There are mainly 4 types of businesses in Vietnam :
- SOE or State-Owned Enterprises
- Foreign Multinationals
- SME or Small and Medium-sized Enterprises
Here is a guide to help entrepreneurs conduct business successfully in Vietnam:
State-Owned Enterprises (SOEs) in Vietnam
SOEs, or State-Owned Enterprises, hold a dominant position as the largest and most established businesses in Vietnam. With exclusive rights to strategic sectors such as healthcare, energy, banking, and insurance, private companies have minimal access. However, it is important to note that SOEs are primarily managed under a Marx-Leninist concept that optimizes the common goods of the laborers, which is different from the capitalist concept of shareholder value optimization. This management style can create challenges for expat business leaders who may not be accustomed to this approach.
SOEs in Vietnam are characterized by their abundant tangible and intangible assets. They often hold monopolistic positions in industries such as airports and ports. In these cases, exclusive rights to freight, sales, rental rights, and other privileges are granted to entities like Sasco or the Port authority if the government owns the land. SOEs are also designated partners in strategic sectors such as healthcare, energy, banking, and insurance, where private companies face minimal access. Despite any lack of profitability, SOEs are protected and subsidized due to their government links and large number of employees, with contributions to state coffers being optional.
To do business with SOEs as an entrepreneur, you must understand their protected and subsidized nature, regardless of profit-making. Therefore, you should focus on developing a long-term relationship, providing value, and leveraging your expertise to be their designated partner in strategic sectors.
Foreign Multinational Enterprises (MNEs) in Vietnam
Foreign Multinational Enterprises (MNEs) have an opportunity to tap into Vietnam’s market of 100 million inhabitants. These companies possess a competitive advantage, thanks to their capital, technology, market research, and past accumulated experience. Companies like Coca-Cola, Nestle, or Unilever invested in factories and expat teams during their initial stages of operating in Vietnam. They aimed to acquire a small client base that could afford their premium brands of beverages, milk, or shampoos. Profitability may take years to achieve.
These companies set a benchmark for compliance, elevating Vietnam’s standards for compliance worldwide. Nike and Adidas spearheaded equal rights at work and banned child labor, while Holcim cement established a waste and emission-free factory. Lego also contributed to Vietnam’s environmental standards by setting up its first carbon-neutral factory. In addition to their branding and international status, MNEs actively contribute to elevating Vietnam’s standards for compliance.
Conglomerates in Vietnam
Privileged business people or the son/nephew of a hi-ranking politician usually own conglomerates in Vietnam. COCC among Vietnamese stands for ‘con ông cháu cha’ means the son/nephew of a hi-ranking politician or à ‘đại gia’ privileged business person. As opposed to the masses or not privileged folks. They hold unlimited wealth, including access to real estate, mining exploitation rights, and monopolistic imports rights in healthcare equipment. However, these privileges do not automatically make them visionary business leaders or expert managers. Entrepreneurs dealing with them should be aware of this fact.
To put in perspective, the Vinhomes central park -landmark 81 + 16 buildings- took 5-years to build, when the HCMC metro subway started in 2012 is 91% completed as of March 2023.
To create a synergistic relationship, entrepreneurs should leverage the strengths of the conglomerates, such as their access to real estate rights and sector rights. They should also consider the risks of doing business with them, including the potential for sudden falls and arrests when privileges stop due to changes in government. Moreover, expats should be mindful of these risks as they navigate the business landscape in Vietnam.
Doing business with the COCC is exhilarating as money and power are flooding. Licenses granting and land evictions expeditive, and bank support compensate any financial management hiccups. The 2 main problems when dealing with the new conglomerates are:
- Privileges do not make you a visionary businessman and expert manager
- Privileges usually stops when your sponsor/Mentor is dismissed from the government
Small and Medium-sized Enterprises (SMEs)
The SME sector in Vietnam has risen since 2008 private enterprise laws. It is now vibrant, shrewd, and visionary. Entrepreneurs can leverage SMEs’ strengths to create a competitive advantage by producing and serving clients quickly. Entrepreneurs must focus on leveraging people and capital to succeed in this sector. Partnering with other SMEs can also help piggyback on the main business. Additionally, providing personalized offers and services is crucial for success.
Expats can also play a crucial role in this sector by bringing their expertise and knowledge to the table.
Being a hi-ranked sibling can help get licenses and loans. Entrepreneurs must be shrewd and visionary business leaders, such as An Cuong, BIS, Mekong Capital. It is essential to adapt to the local market’s needs.
Being a successful entrepreneur in Vietnam
Entrepreneurs seeking success in Vietnam should seek out market and competition information. They can build customer and supplier relationships, and adapt business models. Expats with local language and cultural understanding are particularly effective. They can build relationships and understand market nuances.
Entrepreneurs should also be willing to invest in their businesses, both in terms of time and resources. Entrepreneurs can build sustainable and profitable ventures in Vietnam by investing in local staff and networking. Training programs can also help. This long-term approach can contribute to the local economy and the broader business community.
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