Vietnam

Marketing

Case 2-1

Vietnam's Market Potential

1.

The amount of opportunities in the country of Vietnam is immeasurable for American consumer-products companies and American industrial-products companies. In the last decade America has continued to open up doors to Vietnam for America. In the 1990's President Bill Clinton ended the 19 year American economic embargo of Vietnam, and reestablished diplomatic relations with the country of Vietnam. With President George Bush many other improvements have opened up more of an opportunity for both Vietnam and America. President George Bush exempted Vietnam from the Jackson Vanik amendment allowing American companies investing in Vietnam could apply for financial assistance from the Overseas Private Investment Corporation and the Export-Import Bank. Also by signing an agreement that created a U.S. - Vietnam free trade area President Bush opened the country up for influx of American investors, and the county of Vietnam.

The Country of Vietnam is crawling with teenagers, especially in southern portions of countries. The UN estimates that in the southern areas of Asia 507 million adults will die before they turn forty. Two-thirds of Asia's population is under thirty and, thanks to years of bloody warfare, about 50 percent of the population in Vietnam was born after 1975. All in all, the so-called global teen demographic is estimated at one billion, and these teenagers consume a disproportionate share of their families' incomes. This is in many ways good for both Vietnam and American Investors and Industrial Companies. With all that White House has done to bring American attention to Vietnam companies can begin to build the economic infrastructure of Vietnam with new factories, and cooperate jobs for the people of Vietnam.

Through all of this Vietnam has become a country that is looked at as the new frontier for a lot of markets in America. Already most major companies such as Coke, Pepsi, Colgate, Mobil Oil, Caterpillar, and many many more have made the move into the country of Vietnam. The cheap labor and fast new market to sell items to is a positive step to a strong future for both American Companies and the people of Vietnam.

The Nature of the opportunity is one that will allow big business to produce products in Vietnam at a lower labor coast then here in the United States. Where this may sound as if it is both good and bad for all parties involved the people of America benefit from lower prices at the stores, and higher profits from the companies producing the products. This in turn will create more capital for the companies to hire more workers in the United States, and in Vietnam. Now some will look on this as unfair to the Vietnamese people and state that this is in-fact creating a modern form of slave labor in Vietnam, but this is just the way that things work in the world of globalization. With an influx of jobs from American companies in Vietnam the quality of life will increase. Yes some people may see the income that they make as dismal when compared to others, but what they are not doing is comparing it to the income that the people of Vietnam were making in the past before they had jobs in the factories of American Companies. The cycle is one that takes time and can not just be adjusted over night. Over time the quality of life will improve for the Vietnamese people and they will create the same forms of Unions that we as Americans did just 100 years ago. They will demand increases in their pay and many other benefits. Down the road Vietnam will blossom into a stronger nation and the people of Vietnam will have a much higher standard of the perception of a new quality of life. The nature of this opportunity in Vietnam is one that is positive for all parts in every way.

There is however with all the opportunities in Vietnam an optimal amount of risk that must be focused on not to have strong repercussions against the company. An example of this risk is found at Reebok's international manufacturing operations. The risk of the American company Reebok doing business abroad, which could affect their ability to manufacture their products from foreign suppliers or control the cost of their products. Manufacturing operations in Vietnam are subject to the following risks, fluctuations in currency exchange rate, limitations on conversion of foreign currencies into United States dollars, restrictions on dividend payment and other payments by their foreign subsidiaries, and investment regulation and other restrictions by foreign governments.

"Despite two decades of market reforms," reports the Economist Intelligence Unit, "Vietnam remains a difficult business environment. Relative political and economic stability must be weighed against poor physical infrastructure, government red tape and corruption, unevenness of skills and other obstacles to foreign investment." (4)

According to the U.S. Trade Representative, "the ...extensive investment licensing process...is characterized by stringent and time-consuming requirements that are frequently used to protect domestic interests, limit competition, and allocate foreign investment rights among various countries.... [A]ll enterprises operating in Vietnam [are limited] to employing foreign nationals at the lesser of: (1) a maximum rate of 3 percent of their total work force; or (2) 50 persons." The International Monetary Fund reports that both residents and non-residents may hold foreign exchange accounts, subject to restrictions and government approval for resident accounts held abroad. Payments and transfers face restrictions, including requirements for government approval over established amounts. Most transactions in money market and capital instruments, derivatives, commercial credits, and direct investments either are prohibited or require government approval. Foreigners may not own land but can lease it from the government. (4) Despite all of this many American Companies still fill that is in the best interest of their Companies to conduct business in Vietnam.

Vietnam's membership in the ASEAN Free Trade Area (AFTA) and entry into force of the US-Vietnam Bilateral Trade in December 2001 have led to even more rapid changes in Vietnam's trade and economic