About entry decisions of 3 corporations in Vietnam.

1. Vietnam Market Entry Decision
IBM - Case Study
Presenters:
Balaji Chettiyar (Roll No 1410)
Chinmay Patil (Roll No 1443)
Deepak Kulkarni (Roll No 1428)
Devendra Pataskar (Roll No 1445)
Ganesh Patil (Roll No 1444)
Nikhil Tathe (Roll No 1455)
Ritesh Khadke (Roll No 1427)
Shivraj Pawar (Roll No 1447)
Vinayak Jaybhaye (Roll No 1423)
Vishal Vadkar (Roll No 1459)

3. Vietnam- PESTEL Model
Political
 Communist Party(CPV) - Centralized control
over media, military, state
 Special unnerving powers with government
 Improved relationship with neighboring
countries
 Trade embargo lifted by US government in
1994
 Amended Constitution 1992 - Recognized the
role of private sector in the economy
 Bureaucracy
Economical
 Member of Association of SE Asian
nation (ASEAN)
 Full diplomatic ties with China in 1991
 Doi Moi economic reforms
 SOE contributes 40% share in GDP
 Significant contribution by private organisations
 Expected high investment in coming years by
Japan
 Joined Asia-Pacific Economic
Cooperation (APEC)
 Average annual growth rate of 7.5% in FY1991-
96
Social
 Economically efficient labor force
 90% literacy rate
 Attraction towards western brands
 Young population (50% population < 21 years)
 Hard working entrepreneurs
 Socialist oriented market economy
 High corruption
Technological
 Major industrial growth in Oil &Gas, Power,
Real Estate, Hotels & telecommunication
 Lack of communication channels (telephone,
television etc)
 Lack of distribution network
 Lack in capacity and equipment for increasing
imports

4. Vietnam - PESTEL Model
Environmental
 Shallow water harbors
 Lack of infrastructure and transportation
 Developing tourist industry due to rich natural
and cultural heritage
 Long coastal area and opportunity of marine
transport
 Equidistantly located from emerging markets
viz. Malaysia, Indonesia, China, Thailand,
Singapore & Hong Kong
Legal
 Allowed max 70% FDI
 100% ownership approved only for large &
complex organisation as rare case
 Benefits of re-exports
 Foreign companies operating through local
dealer can establish office only for promotion
of international trade or technical support.
Trading / marketing / investment is prohibited
for such offices
 Build-operate-transfer ventures allowed
 Business Cooperation contract – Freedom to
design own contract

5. Chemical Corp- Overview
 World Leader in Chemical adhesives & sealants.
 Superior replacement technology,
 Diverse & fragmented customer base.
 Highly trained sales force expert in value based selling.
 Technological leadership (30% revenue from newly introduced products – Innovation).
 Highly profitable business-61% Gross margin
 International distribution - Strength. (56 Distributors in totality).
 Strong & well dispersed global manufacturing presence – USA, Peurto Rico, Ireland, Costa
Rica, Japan, India, Brazil, China.
 Existence in almost all neighbouring countries of Vietnam which are contributing handsome
revenues.
 30% import duty in Vietnam for chemical products. Which will result into product pricing 3 to 4
times higher than present competition.
 Incase of export to Vietnam through dealer network , no Direct marketing / Sales promotion is
allowed.

6. Chemical Corp - SWOT
Strengths Weakness
 Perception about US (Based on Wars in
history)
 Faith in market
 No experience as “JV”
 Language Barriers
Opportunities
 Trade Embargo lifted by US government
leading to new investments.
 Huge Automotive, Power, Oil & Gas
industries with new entrants as prosperous
customers as well as vendors.
 Vietnam became member of ASEAN in
1995.
Threats
 30% import duty in Vietnam for chemical
products. Which will result into product
pricing 3 to 4 times higher than present
competition
 Existing Competitors.
 Loss of technology in case of JV
 Communist government with single party
ruling having almost all controls on
corporate world..
 Superior replacement technology
 Highly trained sales force expert in value
based selling
 Technological leadership (30% revenue
from newly introduced products –
Innovation)
 Highly profitable business-61% Gross
margin
 International distribution - Strength
 Strong & well dispersed global
manufacturing presence – USA, Peurto
Rico, Ireland, Costa Rica, Japan, India,
Brazil, China

7. Chemical Corp – Six Forces
Rivalry
amongst
existing
Customers
Bargaining
power of
Buyer
Threat of
Substitute
Bargaining
power of
Supplier
Government
Policies
Threat of
New
entrants
•Highly skilled
•Trained Sales Force
•New market with increased demand
•Quality
•Cost competitive
•Superior technology
•New products - R & D
•Currency conversion
•Capture market by reducing
cost margins & eliminate
customers
•Technology Benefits
•Capital intensive
•Import duty 30 %
•Export benefits
•ASEAN Trade Group
•Raw material constitutes of
crude oil based products
•Crude Oil production.

8. Chemical Corp
0.8
15
32
50
80
106.23
120
140.51
173.3
0
20
40
60
80
100
120
140
160
180
200
1980 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
TB/D
YEAR
Production of Crude oil in Vietnam
Crude Oil Production Graphs

9. Chemical Corp – Recommendation
Start Manufacturing Plant - JV with SOE
1. Import Tariff eliminated (30%)
2. Localized Raw material Sources
3. Export benefits via ASEAN group
4. SOE influence in Govt policies & procedures
5. Labor cost
6. Currency 1$ = 15000 Dong
7. Rising Market ( Automobile, Oil & Gas & Power Industry)
8. Competitor impact is less as R&D is Innovative with new
products

10. Sports Corp- Simon’s Model

11. Sports Corp
•Intelligence
•Large & young population base
•No Competitor – First movers advantage
•Brand attraction in consumers
•Most famous sports: Football, badminton,
tennis, athletics, chess, volleyball, table tennis
•Increasing trend in Olympic participation
•Smuggled items as threat
•Competitors are planning to enter into market aggressively.
•Design
•Organization Determinants
•Social Forces
•Psychological Determinant
•Project characteristics
•Economic rationality

12. Sports Corp
Determinants Dealership Joint venture Subsidiry
Organization
Determinants
Compromise on core
competencies (Marketing)
Let the business be hand if
people who know the market
best
Mfg: Local POE
Mkt & brand promotion:
Sports corp.
No holds on growth
Mfg: Sports
Mkt & brand promotion: Sports
corp.
Social Forces
Cost sensitive market &
price is higher
Low cost manufacturing
Price reduction upto 50%
Low cost manufacturing
Price reduction upto 50%
Psychological
Determinant
High brand awareness by
Viet Kieu
Profit realization from
agency
High brand awareness by
Viet Kieu
Local manufacturing will help
brand positioning
High brand awareness by Viet
Kieu
Local manufacturing will help
brand positioning
Project characteristics
Exclusivity & authority to
dealers
Better retail management
Selection of business partner
having manufacturing and
retail management is
essential
Retailing & Micro-
management is a challenge
Economic rationality
High import costs of 40%
Threat of low cost
counterfeits
APAC market share is just
7% but high growth potential
Market is futuristic and
infrastructure investment will
be not economical
Maximize or Satisfice?Minimum Maximize Satisfice
•Detailed design:

13. Sports Corp
•Feedback
•Enter or not to enter? If yes,
•Appointing independent distributor
•Joint venture
•Fully owned subsidiary
•Successful:
•Increase equity shares
•Convert into 100% subsidiary
•Failure:
•Wait and watch
•redesign
•Choice
•Joint venture with manufacturer in Ho Chi Minh city & enjoy the benefits of
low cost manufacturing, saving on taxation & ready set up of retail chain
•Focus on core competencies of innovation, segmented marketing &
branding/promotions
•Sponsorship to local teams, organizing sport events, endorsement by
celebrities, special discounts to school & university students
•Implementation

14. CONCEPTUAL MODEL
Why Conceptual Model ?
 Directly Correlate the Forces / Factors ( Firm, Market & External )
 Evaluation gives Timing, Location and Mode of entry,
 Timing can be First / Second / Later mover
 Location can be identified based on Market & External Factor
 Mode of entry is overall judgment from all THREE forces / Factor
What is Conceptual Model ?
Model evaluating correlation between Factors / Forces predicting
overseas market entry order decisions.

15. CONCEPTUAL MODEL
Advantages of “Timing of Entry” ( Competitive )
- Entrepreneurial & Innovative,
- Initial Occupant ,
- Niche gains access to resources & Capabilities,
 First Mover : Trend Setters
 Second Mover : Trend Follower
 Late Mover : Competitor / Product Differentiator / Opportunist
Advantages of “Location Selection ”
- Market Penetration,
- Market Share,
- Determine Demand,
- Profitability Judgment,
Advantages of “ Mode of Entry ”
- Avoid unwanted risks,
- Analysis can be done on “What might GO Wrong”
- Decision on Company Structure, Investments, Marketing Strategies & Future
Prospects.

16. Children CONCEPTUAL MODEL
External Factors
Firm Factors
Market Factors
- Concentrated Population in
Two cities,
- Lack of Infrastructure,
- Poor Network Connectivity,
- Poverty, Low Purchasing
Power,
- Smuggling, Corruption
- Legal Restrictions of direct
production or direct trading,
- Labor intensive market,
- Centralized Control over
Media ( Marketing /
Advertising Limitations)
- Market Leader & Branded
Toys,
- New Product Development,
- 15 Manufacturing Facilities,
- Understanding Consumer &
Play patterns,
- Competitive Price ,
- Well Managed Marketing &
Advertising,
- OEM to Assembler to
Subsidiaries,
- No Exp of Wholly Own
Subsidiaries,
- Extensive Marketing Practices
(Co-promotions, In-store
Merchandise, Advertisements )
- Presence of 2 SOE’s
- Low priced substitutes,
- Competitive products
- Rivalry companies with wide
distribution network.
- 50% Young population
- Children’s Corp toys
Available at Duty free Shops
at airports
- Market Price driven ( Price
dominated by two SOEs),
- Liking of western brands,
LOCATION DECISION OPTION

17. Children CONCEPTUAL MODEL
LOCATION DECISION OPTIONS
Ho Chi
Minh City Hanoi CityInter-connected
Individual Individual
 General Agents
 Exclusive Agents
 Distributors / Importer Company
 Contract with Pvt. Enterprises
 Licensing to Assemble product
(Own Brand name )
 Wholly owned subsidiary(70% FDI)
 Licensing to produce product
Market Entry Strategy Options
Time to
Penetrate Market Share Profitability Risk
LOW
LOW LOW LOWHIGH
HIGH HIGH HIGH

20. Summary
 Chemical  Enter Immediately
 JV with SOE.
 Local Vendor Development.
 Sports  Enter Immediately
 Joint venture with local manufacturer to gain first mover’s advantage
 Follow core competencies
 Take market feedback & decide the next move and long term strategy
 Children  Wait
 Focus on 2 major cities Ho Chi Minh & Hanoi
 1st Step = Appoint a distributor to start selling in Vietnam
 Next step:
o Joint venture with SOE
o Processing contract with SOE

22. Vietnam is [Still] Hot, don’t get burned…
Don’t think they don’t know or wont know…
Don’t go in for a quick buck, it will be a quick-burn,
Work as diligently as you would elsewhere, once you
cross the Dark Side, you are safe.
The ATM syndrome. If you start to bribe, you will never
stop
GDP Growth does not equate to growth in earning
Look for gradual growth , at least 3 years ++
Learn to navigate the red tape and bureaucracy, there is
no escape
Integrate CSR ( Corporate Social Responsibility) into

23. THANK YOU!!!

24. APPENDIX

25. Vietnam- Markets in 1995
 Conglomerates were created and state owned sector decreases greatly
 Population is youthful and large, workforce most educated among Asian emerging economies
 Vietnam joins ASEAN and signs cooperation agreement with EU, grants Most Favored Nation
to encourage trade with other countries
 Regulations and tariffs are reduced to encourage foreign investments but the number of
licenses granted still monitored
 Local entrepreneurs could not invest due to
o Underdeveloped banking sector
o Low availability of capital
o Country’s low saving rate
 More than half population still lives in poverty

26. Vietnam-Other Factors Affecting Vietnam
 Distribution
o Plentiful but concentrated only on specific area
o Company must choose between partly/wholly owned distributions vs small privately
owned distributor
o To distribute nationally require extensive network of partners
 Corruption
o Rampant within industrial and government sectors
o Smuggling of goods
 Infrastructure
o War and economic hardship left country in turmoil
o Difficult Transportation - Inadequate roadways & ports lacked capacity, goods were lost
& damaged
 Costs
o Very low labor cost
o However, managerial talent was not readily available
o High Office Rents
o High telecommunication costs

27. Vietnam- Đổi Mới Economic Reforms
 Efforts to stabilize the new currency “Dong”
 Stimulate economy included:
o Deregulation of prices
o Subsidies to state enterprises, ends collective agricultural system
o New commercial ownership laws that encourage private enterprise
o New foreign investment laws
 Foreign direct investments pour in
o Taiwan, Hong Kong, Japan and Singapore were largest sources of FDI
 New private Vietnamese owned organizations increase greatly
o 20,000 Vietnamese private firms by end of 1995
 Attempts to build market oriented economy controlled by the state or “Market socialism”

28. Chemical Corp- Opportunities
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