American Rice Inc. in Vietnam
American Rice Inc. in Vietnam
American Rice’s strategy is to expand internationally by using one of the three main rice manufacturers in Vietnam. The horizontal integration with Vianafood allowed ARI to expand internationally and enter new markets. This expansion within the same industry was necessary for ARI in order to achieve an economy of scale. This venture brings ARI a larger customer base, bigger facilities, the first American rice maker in Vietnam, a larger work force, lower cost production, new relationships with suppliers and customers, and tax benefits as a result of the joint venture. ARI’s main input for the joint venture is to set up a management team that will run the operation and to consult the plant operation, plant design, improvements, and marketing. Also, ARI will provide machinery, equipment, technology and some working capital. In contrast, Vianafood’s main input was to provide a sufficient quantity and decent quality rice at a competitive cost, obtain government license, and tax benefits from the government. In addition, Vianafood will provide their Can Tho property, rice milling, equipment, labor, and other infrastructure at Can Tho.
Another aspect that ARI was able to benefit from is that Vietnam offered consistent exportable rice volumes. The Vietnamese rice industry did not overlap with the same markets as ARI. This can potentially increase the market share and sales for both companies. U.S. share of world rice trading was in decline and U.S. rice imports were rising. Vietnamese offered low cost rise production, room for expansion, increasingly business friendly.
I believe that ARI is taking the right steps in order to become a bigger international competitor in the rice market. However, I don’t think it will be enough to reach their goals. Also, I think that their plan for this joint venture is not coordinated tightly enough from a managerial aspect. ARI is not paying enough attention to the culture of this business in Vietnam and
American Rice’s strategy is to expand internationally by using one of the three main rice manufacturers in Vietnam. The horizontal integration with Vianafood allowed ARI to expand internationally and enter new markets. This expansion within the same industry was necessary for ARI in order to achieve an economy of scale. This venture brings ARI a larger customer base, bigger facilities, the first American rice maker in Vietnam, a larger work force, lower cost production, new relationships with suppliers and customers, and tax benefits as a result of the joint venture. ARI’s main input for the joint venture is to set up a management team that will run the operation and to consult the plant operation, plant design, improvements, and marketing. Also, ARI will provide machinery, equipment, technology and some working capital. In contrast, Vianafood’s main input was to provide a sufficient quantity and decent quality rice at a competitive cost, obtain government license, and tax benefits from the government. In addition, Vianafood will provide their Can Tho property, rice milling, equipment, labor, and other infrastructure at Can Tho.
Another aspect that ARI was able to benefit from is that Vietnam offered consistent exportable rice volumes. The Vietnamese rice industry did not overlap with the same markets as ARI. This can potentially increase the market share and sales for both companies. U.S. share of world rice trading was in decline and U.S. rice imports were rising. Vietnamese offered low cost rise production, room for expansion, increasingly business friendly.
I believe that ARI is taking the right steps in order to become a bigger international competitor in the rice market. However, I don’t think it will be enough to reach their goals. Also, I think that their plan for this joint venture is not coordinated tightly enough from a managerial aspect. ARI is not paying enough attention to the culture of this business in Vietnam and