Vietnam has sealed its position as a safe and stable destination for investment thanks to its strategic location, stable political system, ample workforce, and a relatively open environment for FDI. Its GDP growth in 2020 increased by 2.91 percent despite COVID-19.
Vietnam is entering its ‘golden period’. Of Vietnam’s population of around 98 million people, nearly half is in the labor force. The median age of 30 years makes it a young crowd.
In addition, Vietnam has joined in numerous FTAs and as a result, it has attracted foreign investments in recent years
To help foreign businesses/startups better understand the key factors of the Vietnamese market environment and explore the rising opportunities in the country, many enterprises think of the market entry strategy. Market entry strategy is an important step to bring success for every international business, but if you get it wrong, it might be difficult to recover your market position. The popularity of each market entry strategy seems to vary from one particular market to another.
With highly skilled and experienced consultant in Vietnam, we are on the ground to listen and understand the local context, that’s why we can share a few points to help you understand:
- The Market Entry Framework
- Our One Stop Service
- Four Steps to prepare the Market Entry (4Ws)
The Market Entry Framework
In order for a company to penetrate in one market smoothly and well prepared. We propose a market entry framework that breaks down the complex question of whether or not the company should enter the market into smaller, more manageable questions. We categorize into 4 areas:
There are a number of different factors you can look at to assess the market potential:
- What is the market size?
- What is the population? How big is the golden age labor force?
- What is the market growth rate?
- What are average profit margins in the market?
- How strong are substitutes?
- How strong is supplier power?
- How strong is buyer power?
- How high are barriers to entry?
- Are there other macroeconomic, geopolitical, or social factors to consider?
There are a number of different factors you should consider in assessing the competitive landscape:
- How many players are in the market?
- How difficult is the industry entrance?
- How much market share does each player have?
- Do players have competitive advantages?
- Do players have meaningful differentiation from one another?
There are a number of different factors you should consider in assessing the company’s capabilities:
- Does the company have significant capability gaps?
- Can the company leverage synergies with existing capabilities?
- Is the company in a favorable financial position to enter the market?
- Does the company have the right distribution channels?
- Does the company have the right relationships with suppliers?
Depending on what the specific goal of the market entry is, you may need to look into the following questions:
- What are the expected costs of entering the market?
- What are the expected revenues of entering the market?
- What are the expected profits from entering the market?
- How long will it take to break even?
- What is the expected return on investment?
Our consulting solution can be captured in one picture below:
For Multinational Corporations (MNC)
We support you in building practical and solid implementation plans from a professional third-party perspective, while offering flexible on-demand local labor assistance.
Before Market Entry
After Market Entry
For Small and Mid-sized Enterprises (SME)
We give hands-on help to reduce the requirement for initial labor, money, and lead-time necessary for a lean international growth.
Before Market Entry
After Market Entry
Four Steps to Solve a Market Entry – 4Ws
Step One: Why market entry?
Before going outside, investigate your company inside-out to find the reasons behind the desire to enter the new market. Only when the motives for new market entry are comprehended, will you have well-prepared context to properly assess whether or not you should enter.
The four most common reasons are:
- The company wants to increase profit
- The company wants to increase revenues
- The company wants to invest in a fast-growing market
- The company wants to gain access to new customers
Step Two: What does your future market look like?
With solid and clear objectives of the market entry in mind, the process of gathering data and information is compulsory in building concrete foundations for your moves.
A thorough research should include analysis of both specific and general market environments. Quick SWOT analysis accompanied with P.E.S.T.L.E factors (Political, Economic, Sociological, Technological, Legal and Environmental) can propose a general overview about the market engaged in.
The most efficient method to do this is application of a market entry framework to structure all of the important questions you need to answer.
- Market potential: Is this an attractive market to enter?
- Competitive landscape: How strong are competitors and how easy is it to capture meaningful market share?
- Company capabilities: Does the company have the capabilities to successfully enter the market?
- Financial implications: Will the company achieve its financial goals or targets from entering the market?
Step Three: Who will help your company enter the market?
The market entry framework will be your guide in appropriately locating and utilizing the resources or tools to gain a successful entry to a new environment. Restrictions and requirements to undertake licensed activities should be taken with care to prevent unexpected consequences. This will have an impact on the appropriate structures and processes when undertaking entry into Vietnam.
Although Financial, Tax, Legal and Commercial Due Diligence processes may be regarded with international standards, it should be kept in mind that historic tax risks (ie, potential liabilities) present difficulty in validation as well as effective defendness. Therefore, it is common for a newly established company in Vietnam to acquire the assets of an existing business as part of a transaction process.
For a newcomer, it is highly recommended to form a partnership or joint venture with local partners who establish good comprehension of market climate, laws-related problems, especially customers’ mindset and behaviors. Only when you have dependable domestic support will your entry to the desired market be less complex and more “risk-proof”.
Step Four: When will your company be ready to enter the market?
By this stage, you should have explored all of the major areas and questions needed to develop a recommended market entry strategy.
A well-evolved strategy consists of a clear timeline with specific objectives for different stages. Completion of all the steps mentioned above provides you with a market opportunity assessment, from which can progress into pre-market, go-to-market, and In-market strategies.
Step by steps, consolidate your recommendations, then support them with reasons so as to not be off the track during the entry process. Please take time to make evaluation after each stage to make favorable adjustments and enhance elasticity in approaching the new market.
These are some of the suggestions and guidelines which are hopefully helpful. If you need further consultation, please kindly contact us.