Strategies for MNCs: International Market Expansion in Asia, Vietnam

This report analyzes key considerations for firms expanding internationally, including market selection, entry timing and scale, and entry modes. It uses real-world examples to illustrate these concepts. The report then examines Vietnam's attractiveness as an investment destination for multinational corporations (MNCs), highlighting its favorable geographical location, political and economic stability, open-door policies, and improving business environment. Key sectors that can attract MNC investment in Vietnam, such as electronics, textiles and apparel, and medical devices, are identified. Furthermore, the report discusses the opportunities for MNCs in Asian markets, including China, Vietnam, and ASEAN nations, while also addressing the risks associated with doing business in emerging markets, such as political, economic, and currency risks. Finally, the report also mentions the benefits of MNCs such as, developing a pool of senior executives with international and contacts across the borders, shared learning, and reducing resentment.

Question 1/ (4 points) Firms expanding internationally must decide on 3 key
important questions. Explain your idea with real examples.
1. Which markets to enter
There are more than 200 nation-states in the world, firms do not all hold the same profit potential
for a firm contemplating foreign expansion. The long-run economic benefits of doing business in
a country are a function of factors such as the size of the market (in terms of demographics, the
present wealth (purchasing power) of consumer in the market, and the likely future wealth of
consumers, which depends upon economic growth rates.
Creating Value in Foreign Market
Another important factor is the value an international business can create in a foreign market.
This depends on the suitability of its product offering to that market and the nature of indigeous
competition.
2. When to enter them and on what scale
When to enter
One attractive markets have been identified, it is important to consider the timing of entry. Entry
is early when an international business enters a foreign market before other foreign firms and late
when it enters after other international businesss have already established themselves.
On What Scale
Another issue that an international business needs to consider when contemplating market entry
is the scale of entry. Entering a market on a large scale involves the commitment of significant
resources. Entering a market on a large scale implies rapid entry.
3. Which entry mode to use
Exporting is a typically the easiest way to enter an international market, and therefore most firms
begin their international expansion using this model of entry. Exporting is the sale of products
and services in foreign countries that are sourced from the home country. The advantage of this
mode of entry is that firms avoid the expense of establishing operations in the new country.
Firms must, however, have a way to distribute and market their products in the new country,
which they typically do through contractual agreements with a local company or distributor.
When exporting, the firm must give thought to labeling, packaging, and pricing the offering
appropriately for the market. In terms of marketing and promotion, the firm will need to let
potential buyers know of its offerings, be it through advertising, trade shows, or a local sales
force.

How can Vietnam become the key destinations for many MNCs.
Identify the key sectors that Vietnam can attract the investment of
MNCs.
1. FAVORABLE GEOGRAPHICAL LOCATION
Possessing a long coastline, close to the world's main shipping routes, located in the heart of
Southeast Asia - both the connection center of the region and the gateway to penetrate the
economies. in the western part of the Indochinese Peninsula are the perfect natural conditions for
Vietnam's international trade.
Vietnam also has a location adjacent to neighboring China. Besides, Vietnam also possesses a
long coastline, adjacent to the East Sea, close to the world's main shipping routes, which is the
perfect condition for the trade process. The two big cities in Vietnam are Hanoi and Ho Chi
Minh City. In which, the capital Hanoi, located in the North, has very favorable business
opportunities. Ho Chi Minh City, with the largest population, located in the south, is considered
the industrial "mecca" of Vietnam.
2. STABLE POLITICS
Vietnam's political stability is one of the top factors attracting investors to Vietnam . If we look
at some countries in the region, it is easy to see that most of the countries have experienced
coups or political crises, while Vietnam's politics has always been stable. ensure consistency in
economic development policy.
3. STABLE AND DYNAMIC ECONOMY
In recent years, Vietnam has been one of the fastest growing economies in Asia. The average
economic growth rate of Vietnam in the period 1991-2010 reached about 7.5% and in the period
2011-2013, despite many difficulties, it still reached 5.6%. With a GDP of about $223 billion
and a growth rate of 6.8% in 2017, Vietnam has made its name on the list of the world's most
dynamic economies.
4. OPEN DOOR POLICY FOR FOREIGN INVESTORS
Vietnam is always open and encouraged to welcome foreign investors through actions to update
and adjust investment regulations. Vietnam is continuing to implement preferential policies to

attract foreign investors such as corporate income tax exemption and reduction, import tax
exemption for a number of goods, land rental and land use exemption and reduction, etc.
committed to continue reforming administrative procedures to create favorable conditions for
investors.
5. THE BUSINESS ENVIRONMENT IS CONSTANTLY IMPROVING
According to the Foreign Investment Agency, in recent years, Vietnam's business investment
environment has been continuously improved in the direction of openness, transparency, and in
line with international standards.
Another demonstration of Vietnam's openness to the global economy is the numerous trade
agreements that Vietnam has signed to attract the market.
Member of the ASEAN Free Trade Area (AFTA)
Vietnam - EU FTA Agreement (effective in early 2018)
Bilateral Trade Agreement (BTA) signed with the US
Member of the World Trade Organization (WTO)
All these agreements have shown that Vietnam is very eager to boost the country's economic
growth and will continue to sign other trade deals with many countries. Since then, Vietnam's
business environment has been continuously improved.
6. ENHANCE COMPETITIVENESS
The Vietnamese government is making more efforts to improve the country's competitiveness. In
2017, the World Economic Forum ranked Vietnam's competitiveness up 5 places, to 55/137; The
World Bank's ranking on Vietnam's business environment increased 14 places, to 68th out of 190
countries and territories. Vietnam's sustainable development index in 2017 increased 20 places to
68/157 countries and territories.
7. INFRASTRUCTURE IS GRADUALLY IMPROVING
Previously, limited infrastructure, especially transport infrastructure, was identified as one of the
causes creating invisible barriers in the process of attracting foreign investment into Vietnam .

However, in recent years, in order to remove these barriers, the government and localities have
been actively deploying to attract all resources to invest well in infrastructure, arterial roads.
circuits, airports, routes to border gates, borders, economic zones, industrial parks.
8. YOUNG AND HIGHLY COMPETITIVE WORKFORCE
Vietnam is a country with a young population and an increasingly young population structure
with an average age of 30.8 years, according to 2017 statistics. In addition to youth, Vietnam's
labor force is also evaluated. high by hard work, high level of education and ease of training.
Vietnam has also been and will continue to invest more in education and training than other
developing countries. This is one of the competitive advantages of Vietnam compared to other
labor markets in the region.
9. COMPETITIVE LABOR COST
In addition to an abundant and qualified workforce, labor costs in Vietnam are considered to be
very competitive compared to the region. Most Vietnamese workers have good working skills
and high adaptability to the working environment while the labor cost is only 10% or 5% in
industrialized countries and lower than in low-income countries. similar income.
10. BEING A MEMBER OF MANY FREE TRADE AGREEMENTS
Another example of Vietnam's economic opening is its participation in signing many bilateral
and multilateral free trade agreements with many countries and regions to attract foreign
investment and markets. Vietnam such as bilateral trade agreements with the US, Korea, Japan,
the European Union, ASEAN Economic Community, CPTPP, etc. and are continuing to
negotiate in many other trade agreements. Increased integration with the world will bring many
advantages to investors from these countries and regions when investing in Vietnam .
The key sectors that Vietnam can attract the investment of MNCs.
Electronics
Vietnam has emerged as an important electronics exporter, with electrical and electronic (E&E)
products overtaking coffee, textiles and rice to become the country’s top export item in 2012, as
well as capturing a six percent share of the computer and telecom equipment market, up from
zero. The country has recently attracted substantial investments from multinational giants such
as Samsung and Mitsubishi, and analysts predict that once Thailand moves up the value chain,
Vietnam will take its place.

Textiles and Apparel
Within ASEAN, Vietnam is the strongest competitor for inheriting low value-added textiles and
apparel manufacturing from China. In contrast to other leading textile exporters in the region
(Indonesia, Thailand, Malaysia), the share of Vietnam’s textile exports against its total exports
has grown in recent years, based on WTO figures. As of 2012, there were over 3,800 companies
in the industry in Vietnam, the majority of which are cut-and-sew enterprises. The industry’s
comparative lack of upstream suppliers, where various fabrics and accessories must be imported
from outside Vietnam, makes it a prime candidate for regional integration.
Textiles consistently rank among Vietnam’s leading export industries, employing upwards of 1.3
million workers in directly related jobs and more than two million with auxiliary work included.
The country’s voracious demand for cotton (400,000 megatons consumed in 2012) is primarily
fed by the U.S., India, and South Africa.
Vietnamese-produced yarn is then exported to buyers in China, Korea, and Turkey. Vietnam has
set targets for 2020 of increasing investment capital in its textiles industry to US$25 billion and
the related workforce to three million.
Medical Devices
A rapidly expanding middle class and, for some, the beginnings of a greying population, has
been driving the boom in trade of medical devices in the region. ASEAN’s medical device
market, which was worth about US$4.6 billion in 2013, is expected to double to US$9 billion by
2019, according to Pacific Bridge Medical.
Local medical device markets within the region have been charting double digit growth rates in
recent years, and will likely continue to do so. With the increased demand for better healthcare,
encouraged by governmental focus on healthcare as a priority sector for trade and service
liberalization under the AEC Blueprint, the upside market potential for medical devices in the
region is immense.

What are the main opportunities for MNCs when they do business in Asian markets such as
China, Vietnam, ASEAN Nations. What are the risks of doing business in Emerging markets?
 MNCs can develop a pool of senior excutives with international and contacts across the
borders
 The expertise of each manager can be used for the accomplishment of MNCs objective as
a whole
 Reduction in resentment the sense of unfair treatment reduces
 Shared learning, the employees, will learn from each other's experiences
The risks of doing business in Emerging markets?
 Political risk. Emerging markets may have unstable, even volatile,
governments. Political unrest can cause serious consequences to the economy
and investors.
 Economic risk. These markets may often suffer from insufficient labor and
raw materials, high inflation or deflation, unregulated markets and unsound
monetary policies. All of these factors can present challenges to investors.

 Currency risk. The value of emerging market currencies compared to the
dollar can be extremely volatile. Any investment gains can be potentially
lessened if a currency is devalued or drops significantly.