Essay Sample on Vietnam's International Business

Introduction

Vietnam's economy is rapidly growing together with the wealth of its citizens. Besides, this growth may be attributed to globalization. With an educated workforce and industries, Vietnam has opened its boundaries to international markets and foreign investors. This has made it become the main exporter of apparel and electronics. Also, globalization has introduced positive impacts on the majority of Vietnamese. Its GDP has increased with a significant percentage for the last three decades to approximately $2,600, as per the data collected in 2018 (Kopf, 2018). According to recent research, approximately 95% of the Vietnamese expressed that internal trade is important (Kopf, 2018). This is due, in comparison to other developing countries, growth in Vietnam has equitably been felt among its citizens. Besides, the number of individuals that were in absolute poverty also decreased from around 70% to 10% from 1990 to 2016, respectively (Kopf, 2018). Therefore, if people want to assess the impact of globalization, they should start by looking at Vietnam's economy.

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In 2018, Vietnamese trade denoted 208% of Vietnam's gross domestic product (Nordea, 2020). Vietnam mainly exports automatic data processing machines, technology products, footwear, and electronic apparatus, among other products. Its imports include petroleum oils, micro assemblies tool machinery, and electronic integrated circuits. Therefore, there is a need for foreign currency such as the U.S. dollars used in the international markets as its trades with other countries. Some of the key trading partners of Vietnam include South Korea, China, Japan, and the United States. Its economic model also extensively relies on exports and foreign investment, particularly to Europe and the United States (Nordea, 2020). Besides, recently, Vietnam expressed a commitment to trade liberalization. Trade liberalization is described as the decrease or removal of barriers or restrictions on the free exchange of commodities between countries. Vietnam in 2007 joined WTO and entered into an agreement called Free Trade Agreements (FTAs) with the United States and ASEAN nations. It furthermore enjoys a cooperation treaty with the E.U. Besides, this is a free trade agreement that was ratified by in February 2020 by the European Parliament, and it is anticipated that Vietnam will enter into force soon (Nordea, 2020). Therefore, activities such as exports, imports, and trade liberalization help grow the Vietnam economy.

Vietnam's International Business Environment

Business Climate

Vietnam is among the rapidly developing counties in Asia for the last three decades. Besides, this has derived it from poverty to a middle-lower income economy. Before the economic and political reforms initiated in 1986, it was among the poorest country globally. It had a per capita income of approximately $100. However, towards the end of 2015, it grew its per capita income to almost $1,200 that is attributed to its per capita GDP growth approximated to be around 7.1 in 2018% (The World Bank, 2020).

Besides, Vietnam has opened its bounders for business with other countries for some decades now. The culture of its people is, however, inclined towards entrepreneurship and work, aspects that have brought revival in its economy. For example, shifting from the agricultural and traditional economy, its government has gradually though steadily opened Vietnam to expatriate workers and foreign investments. This move has been facilitated by an attractive tax system, which has therefore enhanced the growth of local businesses.

Cultural Aspects

In Vietnam culture, trust is a significant aspect. It irritates people, particularly business individuals from other countries since they interact with Vietnamese with the influence of their cultures (Bui et al., 2018). The business environment in Vietnam is not simple since it is centered on reputation and trust. Vietnamese are often suspicious of new people until they get to know you personally. Besides, just like in another society, trust is a long process that may take many years to create as well as second to destroy. Therefore, while interacting with people in Vietnam, particularly Vietnamese, individuals should be careful.

Transactions in Vietnam are often negotiated. Purchasing in Vietnam is always a battle of strategy and subtleties. Foreigners in Vietnam should expect to pay the seller more since they do not know you, an aspect Vietnams take advantage of (Bui et al., 2018). Therefore, the most effective weapon for foreigners is their negotiating skills.

Food is a significant aspect of the culture of Vietnamese. Due to this, it is seen as rudeness to leave food uneaten, particularly where one has visited any Vietnamese home and is welcomed with a meal. Besides, the Vietnameses view this as an insult to their land as well as the people who prepared the food (Bui et al., 2018). Therefore, while in Vietnam, whether in a restaurant or someone's home, it is advisable to take the amount of food one can eat and be sure to offer various compliments such as thank you.

The Currency of Vietnam

The Vietnam currency is free-floating. Since 1999, the government of Vietnam has managed to maintain the Vietnamese currency at a floating exchange rate despite it being de factor pegged to the United States dollar. According to the de factor exchange rate of IMF arrangement classification, the exchange rate has been categorized as free-floating (The World Bank, 2020).

The Determinant of the Vietnamese Dong Exchange Rate

The exchange rate of Vietnamese dong, the Vietnam currency, is determined by the inflation rates in Vietnam. Inflation is defined as the rate in which the overall price levels increase over a given period (Nguyen et al., 2012). If inflation in Vietnam surpasses the rates of foreign inflations, this may decrease the buying power of Vietnamese dong relative to foreign currencies. Such a decrease would thus be revealed in a relative reduction in the value of the Vietnamese dong. Besides, this effect would be felt where the inflation in Vietnam surpassed the foreign currencies (Nguyen et al., 2012). Therefore, if low inflation is sustained in Vietnam, it would have a positive impact on the Vietnamese dong.

It is also determined by the interest rates. Moderately higher interest rates in Vietnam escalated the demand for foreign investment for Vietnamese dong-dominated securities. Nevertheless, the foreign investment rate of return relies on the projected future performance of the Vietnamese dong. Therefore, where foreign investors expect a decrease in the value of the Vietnamese dong, they tend to demand more interest rates, particularly on the Vietnamese securities.

Different Modes of Entry in Vietnam

The easiest mode of entry in the Vietnam market is the use of a representative officer abbreviated as R.O. R.O. provides a cost-efficient entry to Vietnam markets for business with a desire to attain a better comprehension of their market. An R.O may be utilized by first-tike entrants. Representative officers currently undertake various activities for businesses such as performing market research and acting as a liaison office primarily for his parent firm as well as promoting its operations via conferences, among other approaches, which result in the initiation of business at later phases. R.O. does not face the degree of compliance requirements imposed on the wholly established businesses by the Ministry of Planning and Investment (Ha et al., 2020). While allowed to participate in particular operations, for example, market research, R.O. is, however, subjected to various restrictions. Thus, this may make R.O less effective entry mode for a business with a desire to enter the Vietnam market.

Another mode of entry in the Vietnam market is through joint ventures. They involve a partnership between two or more individuals or companies to conduct a particular business (Ha et al., 2020). Besides, for investors buying shares in state-owned corporations equitized in the Vietnamese exchange. Therefore, while entering the Vietnamese market, people from other parts of the world may decide to enter into a joint venture either as minoring that is by owning less than 50% or as the majority by owning more than 50% of the shares of that company (Ha et al., 2020). It enables foreign investors to gain access to various sectors such as conditional sectors that is, in most cases, imposes ownership restrictions. Besides, for those entering the Vietnamese market for the first time, joint ventures offer them greater accessibility to customers, supplies, and in some cases, the reputation of their brand in improved within the local market.

Conclusion

Vietnam has been discovered as one of the most growing countries currently. It has been positively impacted by globalization. Similar to other countries, it also engages in imports and export that relies on foreign exchange. Besides, business climate, international trade has helped grow its GDP and eradicated poverty within Vietnam. Trust, negotiation in transactions, and food are also seen as some of the significant aspects of its culture. Since its currency is a free-floating, its rate of exchange is determined by various factors such as inflation and interest rates in Vietnam. However, the most convenient mode of entry in the Vietnam market is through a representative officer and a joint venture to ensure a successful business. Thus, for anyone or Company with a desire to expand business operations in Vietnam, these are some of the most crucial aspects that should be taken into consideration.

References

Bui, Q. N., Han, M., Diwan, S., & Dao, T. (2018). Vietnamese-American family caregivers of persons with mental illness: Exploring caregiving experience in a cultural context. Transcultural psychiatry, 55(6), 846-865. https://doi.org/10.1177/1363461518793185

Ha, N. M., Binh, Q. M. Q., & Dang, P. P. (2020). Cultural Distance and Entry Modes in Emerging Markets: Empirical Evidence in Vietnam. Journal of Risk and Financial Management, 13(1), 14. https://doi.org/10.3390/jrfm13010014

Kopf, D. (2018). Vietnam is the most globalized populous country in modern history. Retrieved May 29, 2019. Retrieved April 24, 2020, from https://qz.com/1409407/vietnam-is-the-most-globalized-populous-country-in-modern-history/

Nguyen, H. M., Cavoli, T., & Wilson, J. K. (2012). The determinants of inflation in Vietnam, 2001-09. ASEAN Economic Bulletin, 1-14. https://www.jstor.org/stable/41446022

Nordea. (2020). Vietnam's economic and political overview. Retrieved April 24, 2020, from https://www.nordeatrade.com/fi/explore-new-market/vietnam/trade-profile

The World Bank. (2020). The World Bank in Vietnam. Retrieved April 24, 2020, from https://www.worldbank.org/en/country/vietnam/overview