For many companies assessing their “China+1” strategy, Vietnam has become +1. Companies seeking a new manufacturing footprint for North American and European export markets have found the advantages Vietnam offers with its abundant Free Trade Agreements, large and productive labor force, competitive wages, established industrial zones, and strong infrastructure for the manufacturing of high value-add products like electronics, consumer goods, and process industries as well as the labor intensive goods. Sustained high levels of economic growth are expected to continue due to the headwinds pushing companies to Vietnam’s shores. Economic forecasters predict sustained high rates of growth driven by continued growth of the country’s 95 million citizens entering the middle class and continued FDI.

Since 2007, Tractus has been assisting companies in developing their Vietnam market entry and FDI strategies, helping them to make good decisions about how to structure their business model and where to locate their investments in Vietnam’s dynamic economy and increasingly crowded economy. Despite significant improvements in its investment attractiveness, Vietnam is a centrally planned economy with a complex process of investment approvals and business licensing at the provincial and sometimes national level. Tractus’ team in our Ho Chi Minh office assists our consulting, economic development and business Inc.ubator®clients navigate these complexities to build sustainable business in Vietnam’s rapidly growing economy.

MARKET ENTRY STRATEGIES & EXECUTION

Tractus’ Strategy & Execution practice focuses on helping our clients make informed decisions about where to invest in Vietnam and how to most effectively structure their investments. This includes providing accurate intelligence for their business decisions and assisting them with their implementation needs, as their team on-the-ground in Vietnam. Typical Tractus projects in Vietnam include manufacturing site selection, real estate and investment incentives negotiations, distributor search and project approvals and licensing.

The attractiveness of the Vietnam market with companies assessing the “China+1” footprint has led to increasingly crowded industrial zones throughout the main hubs of manufacturing in Ho Chi Minh, Hanoi, Binh Duong, Dong Nai, and Bac Ninh. Tractus has worked with our multinational clients to identify the optimal location in Vietnam, assessing not only site-specific factors, but also labor force requirements, proximity to clean industries and “good neighbors,” and identifying plots in zones that allow room for future expansion using our systematic Site Selection Methodology.

Tractus has found that real estate negotiations and transactions can be cumbersome if a proper negotiation strategy is not in place. Our Vietnam Team works with our clients to establish and implement a strong negotiation strategy in the preferred location as well as in back-up locations to ensure a credible and competitive atmosphere. Past project experience has given our Vietnam Team a strong understanding in approaching the delicate cultural aspects to negotiating property acquisition agreements in Vietnam and ensuring a proper transfer of land use rights ownership to our clients under Vietnam’s Investment Law.

The investment approval process in Vietnam requires a strong relationship management as well as the engagement with authorities from provincial to central management in order to gain the necessary approvals. Tractus works with our clients throughout the investment approval and incentive negotiation, often with upfront due-diligence to plan the process to ensure that approvals are conducted in a transparent and efficient manner to meet important project deadlines. Our team in Vietnam also has experience meeting the project deadlines and budgets that come with establishing a Greenfield facility in Vietnam through our Program Management services.

Regardless of the investment strategy chosen, Tractus’ Vietnam team has the expertise and experience to support our clients with their investment strategy execution. Whether this is the registration of the legal entity, recruiting key management personnel, selection of professional service vendors to managing the design, engineering and construction project management of a new or existing facilities, Tractus’ Ho Chi Minh City-based team of professionals supports consulting and business Inc.ubator clients throughout their business strategy development and execution process.

CORPORATE FINANCE

As Vietnam’s economy develops in size and sophistication, acquisitions and joint ventures are becoming an increasingly interesting alternative for companies looking to benefit from Vietnam’s growth as they offer a quick path to the market. This approach however comes with challenges including an undefined regulatory framework, lack of public information and the cultures that exist in many Vietnamese owned businesses. Tractus’ Corporate Finance service line helps international investors to identify and assess opportunities, conduct necessary the due diligence, structure the engagement. Led by Richard J. Smith, a long-time Corporate Finance professional in Southeast Asia, the Vietnam team supports Corporate Finance initiatives in-country.

• Private Placements & Fund Raising

• Target / Partner Identification & Screening

• Corporate / Deal Structuring

• Financial Modeling, Analysis, Planning & Evaluation

• Negotiations & Documentation Support

• Operational & Financial Due Diligence

• Dispositions

ECONOMIC DEVELOPMENT

Economic Development Organizations (EDOs) have continued to use Tractus and our experienced Vietnam Team to meet trade and investment promotion efforts in Vietnam. EDOs across the globe and in all sectors, rightly notice the opportunities that Vietnam provides for boosting trade in a dynamic market with a strong industrial base and growing middle class. Tractus has worked with EDOs to assess these opportunities in sectors that include agriculture, textile and garments, electronics, and FMCG among other sectors.

Tractus Vietnam supports these organizations by utilizing our private sector knowledge and leveraging our years of experience in Vietnam working with local companies and government bodies. Tractus represents US, EU and Asian EDOs and IPAs of regions, states and provinces, and municipalities as well as industry trade associations to promote exports. We also provide sector analyses, trade show and trade mission support and representation for economic development and industry trade associations.

The Tractus economic development team also has significant experience undertaking technical assistance projects in Vietnam funded by multi-lateral organizations such as The World Bank, UNCTAD and others develop FDI attraction policies and strategies; benchmark the attractiveness of countries as destinations for FDI and undertake economic research and analysis.

Foreign Market Entry Process – Understanding the Basics of Market Entry Strategies

Market entry strategies can be quite complicated in international markets. Some understanding of international market dynamics, legal and regulatory requirements, economic landscape, and local market culture is required. As mentioned above, Vietnam is attractive for international market entry, it sits in a strategic location, has young demographics, and is rapidly expanding with a strong competitive advantage.

We have summarized some key points to consider for a Vietnamese market entry strategy.

There has been a marked increase in a sense of Corporate Social Responsibility for Vietnamese businesses. Consumers are beginning to expect companies to contribute to society in a positive way. This now includes sustainability and care for the environment. This is a key element to your market entry strategy. The domestic market in Vietnam can be unpredictable and volatile, despite being a brilliant opportunity. We therefore also provide risk management strategies for foreign companies wanting to start out in Vietnam.

Whenever you plan on entering foreign markets it is best to understand what you’re up against, both locally and in foreign markets. One thing that a Vietnamese market entry strategy cannot go without is digital transformation. There is also more to market entry than business. You also need cultural sensitivity when entering a new market in a foreign country.

Local partners can be great when it comes to maintaining a competitive advantage and assisting with local company business navigation. Understanding the local market and its relation to the foreign market is essential to success, and having a local company on your side to help with this is invaluable. Furthermore, understanding the legal and regulatory framework in Vietnam can be difficult. Vietnam is a socialist country and this needs to be kept in mind for joint ventures and market entry strategy plans.

At Tractus we understand that each business experience is different, and therefore strive to tailor our services to suit the unique circumstances of your company.