Cultural differences have the ability to affect multinational businesses from one region to the other. While some businesses may thrive in low-income regions, others may find it hard to earn enough revenue to cover their fixed costs. Therefore, any investors seeking to expand their businesses must understand the cultural factors that may affect the business significantly. Today, Vietnam is one of the fastest growing economies. However, investors choosing Vietnam as their ideal investment destination must also consider factors such as insecurity and the presence of counterfeit goods, which thrive more than the genuine products. On the other hand, developed economies such as Australia and the US provide better security for any investments but equally high competition and stricter entry policies into the markets. Regardless, investors choosing Vietnam need to understand options that US, South Africa and Australia provide that could benefit them equally without incurring the risks. In order to understand the risks versus benefits, it is crucial to carry out the rank comparative of Vietnam versus the three countries in different regions.
Vietnam is a fast growing and Vietnamese-speaking economy located in the Asian continent. Investors in Vietnam use the Dong, which is the official currency. Vietnam is a communist country with a GDP of $194 billion, which is the 49th largest in the world. Since 1995, the Vietnamese GDP has continued growing at a slow but steady rate. Currently, the Vietnamese GDP is growing at a rate of 6.68%. In 2008 and 2011, the Vietnamese inflation rate was at peak. However, this inflation rate has been declining since 2011. This is part of the evidence indicating rapid growth in the Vietnamese economy. When planning to trade in Vietnam, one should be aware of the limitations on economic freedoms. These are subject to several institutional factors. The Vietnamese regulatory environment is least efficient and transparent. Additionally, the country has a weak justice system and a lot of bureaucracy, which has seen the state owning more than 40% of all the enterprises in the country. Therefore, barriers that exist for foreign investors are still high despite the slow liberalization process. Credit growth is a major problem due to the high number of non-performing loans and the constant government involvement in the financial sector.
Vietnam Vs US
US is one of the world’s superpower that continues to play a significant role in helping other countries develop through foreign investments. In the recent years, many US multinationals have shown a lot of interest in doing business in Vietnam. People in Vietnam provide ready and cheap labor, which makes it ideal for investment. Additionally, Vietnam is still in the young stages of infrastructure development. Thus, American companies face very little competition since many of the international investors have not settled fully in Vietnam. For high-tech companies in America, Vietnam presents an ideal opportunity for investment while profiting from low manufacturing costs in China. America is under the leadership of a Federal government and practices democracy.
Currently, America has a very high GDP of $18 trillion and continues rising at a steady rate. However, Vietnam still has a higher GDP growth, indicating more potential in future growth for investors. The level of security in the US makes it an ideal market as opposed to Vietnam where insecurity and the high level of counterfeit makes it a challenging market especially for high-end products such as technology. This is because Vietnam is an OECD country unlike the US. Women also receive equal treatment in USA than in Vietnam, which has majority of men in leadership positions and Islam as a major religion. Another benefit of investing in the US is the high number of skilled and trained employees. However, strict employment laws in the US require that employers pay a certain minimum wage, which may be costly for startup companies. Additionally, investors in the US have to pan strategically in order to stay ahead of stiff competition unlike investors in Vietnam who face little or no competition since it is a growing economy. When investing in the US, one may choose to invest in the service sector (79.5%), Industry sector (19.4%) or the agriculture sector, which takes up only 1.1%.
Comparing Australia vs Vietnam
Australia earns 13 times more revenue than Vietnam. This is because Australia earns an estimated $504.70 billion while Vietnam earns an estimated $38.90 billion. In Australia, the official language is English while the currency is the Australian Dollar. Australians have a parliamentary democracy based on the values of the commonwealth. The Australian GDP ranks 12th in the world at $1.34 trillion USD. Regardless of the size, the Australian GDP has been growing at an alarming rate until in 2013 when it started to decline. On the other hand, the Vietnamese GDP has been growing at a slow but rapid rate. The Australian GDP is growing at a rate of 2.24%. Therefore, an Australian investor should chose to invest in Vietnam since Vietnam has the higher GDP growth. However, one should also be weary of the insecurities in Vietnam in order to avoid losing an investment. It is worth noting that the unemployment rate is higher in Australia at 6.0% while that of Vietnam is 2.3%. Despite this difference, the unemployment rate in Australia has been declining since 1993 when Australia had the highest unemployment rate of 10.9%. in terms of exports, Australia exports are worth an estimate of $257. 90 billion while in Vietnam, the exports are worth $114.60 billion. Vietnam has an estimated population of 95 million people living across 331 thousand square kilometers.
Vietnam Vs South Africa
The South African per capita GDP is estimated to be $11, 500 while that of Vietnam is $4, 000 per capita. The people in Vietnam also have a longer life expectancy at 72.91 years while those in South Africa are projected to live an average of 49.56 years. This may be attributed to the high risks of diseases and poverty in South Africa. Some most of the South Africans live below the poverty line, any investor choosing South Africa as a destination must consider carefully the price of the products or services. Additionally, incidences of diseases such as HIV/AIDS are higher in South Africa indicating a higher demand for welfare products and services than luxury products. In Vietnam, products and services that use alternative sources of power are more likely to thrive than those that rely on electricity. This is because Vietnamese tend to consume less electricity than South Africans. The poverty rates in South Africa are significantly high at 24.9%. This means that an investor in South Africa is likely to get cheap and ready labor hence lower production costs. Although South Africa is larger in terms of square kilometers and populating, it is a less viable market due to insecurity and poverty. However, one may find South Africa to be offering promising business opportunities depending on the type of products or services as well as the price per unit.
Challenging Key Aspects of Local Business Culture in Vietnam
Foreign investors have to consider multiple factors before doing business in other regions. When investors from Singapore, Australia, South Africa and the U.S choose to invest in Vietnam, they have to be aware of the need to sit down with their Vietnamese partners. Vietnamese are very flexible people who resolve issues through dialogue. Meetings are important in ensuring that Vietnamese people build trust with their partners. On the other hand, people from the US prefer doing business fast hence communication does not need to be face to face for a deal to go through. Singapore has multiple ethnicities, including Malay, Indian, Chinese and the Eurasian communities. It is also one of the most developed Asian countries. Therefore, it is likely to see investors from Singapore seeking investment opportunities outside their country. Travelling from Vietnam to other regions and vice versa is very easy hence making it ideal for investors.
In terms of disasters, Vietnam has the best climate. There are no incidences of cyclones, monsoons or tsunamis hence indicating fewer natural risks for the investments. Despite these factors, the lack of proper policing makes it challenging for foreign investors. While Vietnam may be a major tourist attraction for international tourists, the high number of scammers makes it an unattractive place to invest in. It is therefore likely that foreign investors may fall prey to scammers unless the right procedures are followed. The law enforcement officers are more concerned with confiscating plastic chairs and arresting street vendors as opposed to arresting real criminals. This is contrary to the culture in the US and Australia where law enforcers are often quick to follow up such incidences hence making the business environment conducive for investors.
Investors are likely to be victims of fake licenses by police officers or be offered dodgy business deals that may see them lose their money to fraudsters in Vietnam. As a result, many tourists choose not to return after visiting Vietnam. On the other hand, countries such as Thailand have seen a tourist return rate of 55% while Vietnam has a meager return rate of 5%. It is worth noting that touring Thailand is more expensive than touring Vietnam. Similarly, many people may choose to visit or order form the US because of the many international couriers and the online shops that do not require people to cross any geographic boundaries to order genuine products. This is because majority of products in Vietnam are counterfeits hence tourists often avoid buying in Vietnam. This is likely to affect an investment where fraudsters make counterfeit products to compete with the genuine products.
People touring the Asian region know that they can get genuine products in Malaysia or Hong Kong as opposed to the counterfeit in Vietnam. Additionally, most products are more expensive in Vietnam than in America or Australia. With all the risks of counterfeit products and the high prices, investors from Malaysia, Singapore and Thailand are less likely to thrive in Vietnam. Undoubtedly, Vietnam is one of the fastest growing economies in the Asian region. However, it is also volatile in terms of security and future prospects. Considering the degree of uncertainty and the average household income, investors are likely to choose investing in Australia and the US, two of the most stable markets. Stable growth should see tourists coming back to Vietnam once security measures are upgraded.
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