Business Expansion in Vietnam: Opportunities and Challenges

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INTERNATIONAL MARKETING

BUSINESS EXPANSION IN VIETNAM 1
Introduction
Vietnam is the World’s 47th largest economy which is measured by nominal GDP and it ranked
35th in the world measured by PPP. Previously Vietnam is a member of Association of Southeast
Asian Nations and Asia-Pacific Economic Cooperation, but when it became a member of World
trade organization the foreign countries shows their interest more in the investing in Vietnamese
economy. The topic for which is selected for this report is Expanding business in Vietnam
because the economy is doing well in the world and attracting many developed nation to invest
in the economy.
Lee, K. and Jung, M., (2015) Overseas factories, domestic employment, and technological
hollowing out: a case study of Samsung’s mobile phone business. Journal of World
Economics, 151(3), pp. 461-475.
Over past few years, Vietnam has become a best place for business expansion and investment.
Many U.S investors and exporters are showing their interest in Vietnam market. Vietnam market
considered to be the fastest growing market, it has the highest economic growth rate worldwide.
The average growing rate of Vietnam is 7.2% annually. Vietnam is also experiencing amazing
industrial production growth. In last decade the average industrial production was approx. 12%
per year. All these contribute in raising GDP of the country. The U.S foreign direct investment
flows in Vietnam, in 2013 the US foreign direct investment I Vietnam was estimated approx.
$524 million which is 10.8% more than last year. The good infrastructure is a factor which has
made Vietnam appealing for U.S firms to set up their business here in the country. In Vietnam,
international business owners are allowed to own and operate their firms either through indirect
or direct foreign investment. Indirect investment refers to acquiring shares in the Vietnamese

BUSINESS EXPANSION IN VIETNAM 2
firms that are either wholly foreign-owned or joint business venture with local business owners.
Direct foreign investment refers to the business or operations conduct by foreign company
directly with any collaboration with national company or firm and by establishing their own
office or business in the country.
Dinh, T. Q., and Hilmarsson, H. P., (2014) What are the Economic Justifications for the
Existence of Export Credit Agencies and How Can They Facilitate Cross Border Trade to
Emerging Market Economies? Journal of Regional Formation and Development
Studies, 6(1), pp. 15-25.
Setting up a business in Vietnam is quite complex task in comparison to other companies for
foreign business owners. The laws and procedures that are related to foreign direct investment
are complicated and rising difficulties for international companies in setting up their business
and operations in Vietnam. Therefore, it is recommended to a business who are interested in
setting up their business and operations in Vietnam to experienced and understand the
Vietnamese company set up laws and procedures. If the international entrepreneur were thinking
of setting up their business in Vietnam, then there are two ways to enter the market of Vietnam.
The international business owners have a discrete power to choose the most suitable way of entry
in the country market. The first method of entering Vietnam market is direct investment, direct
investment means the owners of business can invest directly in the market without any local
support and the second way of investment in Vietnam economy is indirect investment. In
indirect investment the foreign investor have to take help or has to involve local company or firm
to invest in the market