Comparative analysis: Vietnam & China
11th of August, 2009
With its booming economy, huge manufacturing base, enormous supply of natural resources, and expanding consumer spending, it’s no surprise that China is high on the agenda for businesses around the world. More than 90 percent of multinational companies say that China is important to their global strategies, with 52 percent calling it critical (Marsh, 2006). In the past decade, China has been growing at an extremely rapid pace resulting in a huge increase in the number of middle class consumers creating many opportunities for foreign companies. However, along with the opportunities from doing business in China, risks occur and as a result do foreign companies face different challenges when they invest in China.
Although many westerners still imagine Vietnam through the lens of war, it is in reality one of the fastest growing economies in Asia and offers many opportunities for investors in different markets. Vietnam is a country still transforming into a bigger player on the global market and is still in transition stage. Currently, they are changing from a centrally-run to a market economy. Vietnam, with this new policy, wants to catch up with countries like India and China. However, when investing in Vietnam one should be aware of the fact that it will take some time to run a profitable company. It will take typically between five to 10 years before positive results occur. Vietnam is nearing that peak, but China is cooling down (i.e. maturity stage).
Foreign firms are faced with different opportunities and challenges in both countries. Both countries require different approaches to implement a successful strategy. Furthermore, a firm needs to analyze the major characteristics of a country before an investment eventually will become a success. These characteristics help a firm to identify which country would be the firm’s preferred choice for investment. In the first chapter of this paper, therefore, the most relevant characteristics of these countries from a business perspective will be discussed. Different aspects of the business environment will be highlighted, but only the aspects relevant for the businesses itself will be discussed. So, religion and how the government is exactly organized will not be analyzed extensively, since it goes beyond the aim of this paper.
Both countries face different challenges and need to invest heavily to remain or to become attractive for foreign firms to set up their business. On the other hand, what is important for foreign firms to focus on when they want to set up a business in one of the countries? A firm needs to know what the attitude of the nationals toward brands is and how the companies in China and Vietnam are organized. A general overview of those challenges for foreign companies will be provided. These have to be taken into account by foreign firms, because many firms fail to understand these important aspects of a country’s culture and economical system before they enter the country while it is proven to be a key factor towards a successful project. The second part of this chapter is a narrower analysis of the main opportunities in both countries. What market(s) is (are) most profitable in the future? After reading this chapter, a foreign firm knows whether their structure fits in one of the upcoming Chinese or Vietnamese markets. Business Environment ChinaChapter 2.1
China is still moving towards a fully established market economy with the state responsible for guiding the transition. Economic decision making in China can therefore look to the foreigner like a confusing network of competing geographical and sectored authorities (University of Salford et al., 2006). Each imposes taxes, regulations and rents, because they claim ‘stakeholder’ status in the different business...