by Lawrence Chong and Helena Pham
The world has certainly not lost its appetite for more trade liberalization. When the Doha round of talks broke down in 2008, it seems that all was lost. But even without a global deal, regional trade liberalization talks continued and with the recent launch of the Trans-Pacific Partnership (TPP) and the ASEAN Economic Community, our region, more than the world is open for a wave of trade and business opportunities. As the trade barriers come down quickly – Under TPP, around 98 percent of tariffs will be removed after ten years. And as more companies come into the Vietnamese market, there is only one thing that Vietnamese companies can do, that is to raise their business management capabilities to retain customers and be ready to enter into other markets.
Among all the countries in ASEAN, Vietnam is an attractive destination for foreign brands and investors. According to Deloitte, between 70% of the population are aged between 15 and 64 years, and this will be a key driver for the robust retail market. With growing disposable incomes and rapid urbanization, Vietnam is the market to be for the next decade. More importantly, vast sectors like retail, banking, food and beverage suffer from poor quality and service experiences, so there is still a lot of room for foreign players to bring in better quality regarding products and experiences. The popularity of Lotte stores from Korea are a sign of that demand for higher standards.
The rise in popularity of Highlands coffee after the acquisition by Jollibee also proves that a good and well-executed transformation exercise can make a Vietnamese brand highly valuable. The acquisitions of Vietnamese brands over the past five years by foreign companies demonstrate that there is a lot of value in the culture, products and ideas from Vietnam. The one systemic issue confronting most Vietnamese companies is not the lack of ideas but that most business strategies are poorly executed. Hence, they can only command low returns and result in low-efficiency when it comes to resource deployment.
If Vietnamese companies want to compete on an equal footing as a new wave of competition appears on the horizon, then it is a matter of choice and not about the environment. In our work with many Vietnamese companies, the problems are rather obvious. Here are four critical aspects:
1. Set up a strategic plan
Too many Vietnamese companies react and fail to analyse their capacity and business environment to plan a viable roadmap. Without a strategic plan, the companies are unable to build long-term competitive advantage. This lack of strategic planning then lowers their chances of moving up the value-chain
2. Treat talent seriously
Too many companies pay lip service to talent development, they don’t have the plan to groom talents and lack proper succession planning. This is risky because when companies with good human resource approaches come along, they can easily attract their talents away.
3. Total discipline in terms of execution
Too many Vietnamese companies compromise on quality regarding service, product quality and communication. The lack of attention to details and commitment to improvement affects business success. But when you have a company like Ngon Restaurant that pays a lot of attention to details and execution, it is very easy to see why it is a gem in the food and beverage sector.
4. Confidence in the Vietnamese Brand
Finally the thing that sets Vietnam apart from all the foreign brands is its culture. We have found it so shocking that we have to spend so much time to convince Vietnamese companies to use Vietnamese names. Many are uncomfortable and prefer to use English or European-sounding names. From experience, this is something that many companies in Vietnam will regret in the future if they do not take this opportunity to own uniquely Vietnamese names and terms for global success. Already foreign companies are taking an interest to acquire Vietnamese brand names.
Perhaps Vietnamese companies need to take a cue from their illustrious history. In 1077, the Vietnamese Imperial Navy led by Admiral Lý Thường Kiệt defeated a much larger invasion force from the Song Dynasty. He won through a combination of tactics, discipline and planning. Similarly, there is no replacement for good strategy and hard work. The opening up of the Vietnamese economy should mark the rise of more global brands from Vietnam and it can only happen by choice. Time to think different.
Lawrence is the CEO of Consulus and Helena is the Partner at Consulus Vietnam. Consulus is a global innovation and design firm that helps companies, governments and non-profit organisations achieve sustainable profit and growth by redesigning their organisations, business models and brand experiences.
The article is featured on Saigon Entrepreneur Newspaper, Spring 2016 edition