Case 1 - in the International Spotlight, Vietnam

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Jason Proctor

Case 1:

In the International Spotlight, Vietnam

Management 4600 – International Management
CRN 85418
1. In what way does the political environment in Vietnam pose both an opportunity and a threat for the American MNCs seeking to do business there? The political environment poses an opportunity for American firms because the Vietnamese government is now working hard to attract U.S. investment. Their Government is continually being innovative and perfecting mechanisms and policies to encourage all non-state economic sectors to expand investment, including the U.S., to increase the efficiency of foreign investment. Now American companies have the chance to gain a strong position by investing while the political opportunities are good. The United States has emerged to become the largest investor in Vietnam, accounting for 47.8 percent of total newly registered capital. (Vietnam Business News Online) Becoming the 150th member of the World Trade Organization shows the country has the willingness to open its trade doors and a strong political move to prove that the country is willing to abide by outside rules and regulations. This would impress investors and would likely consider doing business with Vietnam. Being a communist nation, the government still closely controls the economy and U.S. firms may find that their opportunities will be limited and a number of unforeseen possible legal problems may exist. Typically a communist government does not care for a multinational business as they only want what’s best for their country. An example of this type of action would be that the government will try to pawn one multinational off against another in order to gain a better position for itself. This would sour relationships between those multinational investors while only making minimal or short term gains for them. The organization and structure of how Vietnam does business is not as efficient as some of the multinational corporations that want to do business there. David Dapice, an economist with the Vietnam Program at Harvard University’s John F. Kennedy School of Government said “Vietnam's economic system is dualistic: the export and domestic sector are quite efficient and use capital pretty efficiently; while some government-controlled enterprises are largely inefficient.” (International Business Times) This would indicated that the high political influence and control of Vietnamese firms have much to learn since its 2007 induction to the World Trade Organization to have a dominate place in the global economy as an effective and efficient leader. A more extreme threat would be that the communist state of Vietnam could take over a corporation and seize control over its assists. There could also be underlying tension from past relationships that Vietnam and the U.S. have had especially being around four decades from the Vietnam War. Many of whom who lived through that could hold currently hold political and government positions that could weaken relations with American investment.

2. Why are U.S. multinationals interested in going into Vietnam? How much potential does the country offer? How might Vietnam compare to China as a place to do business? With a population of 90 million, Vietnam has an average national income of $ 1,168 per person annually and a literacy rate is 90%. (US Department of State online) Even though the income level is low compared on the global scale, this indicates that there is a willingness to learn and grow as a population. This is much potential for investing into this country as you have a workforce that can read, understand and has the capacity to learn. This makes it an attractive market for many firms. Vietnam is showing effort to be multination by not only learning the English language but showing efforts to improve their overall education....
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