Business Environment in Vietnam and the Opportunities Available For the International Companies to Establish Business There: A Case Study on Intel Locating To Ho Chi Minh

Introduction

Investment in foreign nations remains a critical option for the particular investors. The objectives of any venture significantly influence the decision. Most countries invest in other states in an attempt to maximize their profits. And, international diversification of the enterprise activities is the best way to accomplish maximum benefits despite the risks involved.  Most countries have recognized the importance of allowing international investors in their countries. This essay explores the business environment in Vietnam and the opportunities available for the international companies to establish a business in this country using a case study on Intel locating to ho chi minh.

Vietnam allowed investors into the country back in 1987, and after few years it turned into an alternative for China nations to outsource basic factory operations. The slow growth of the China’s economy since 2011 plus its deliberate change from low-value export manufacturing have made Vietnam remain competitive in areas for making furniture, and auto parts. The value-added production has led to the development of the cities like Ho Chi Minh making it appear attractive for various business transactions. According to PwC (2016), the labor costs in Ho Chi Minh City are relatively low compared to other nations like China. Vietnam inhabits about 90 million and has a rapidly shifting economy that presents substantial business opportunities (Nguyen & Rose 2009). Importantly, Vietnam has placed technology at the heart of its growth and development targets. This way, the management teams of the Intel Vietnam perceives their investment and the entire technology ecosystem in Vietnam as a progress to raise the nation’s value string.

Intel refers to an American multinational company and technology company that is the world’s biggest and greatly valued semiconductor chip makers quantified by its revenue generation. It has generated x86 microprocessors series located in several personal computers (PCs). Intel has diversified its supply for the computer system manufacturers like Dell, Lenovo, HP, and Apple. Vietnam has grown highly striking to the international venture due to unending opportunities (Cavusgil, Ghauri & Akcal 2012). Intel has recognized the demand for high-tech communication and computing devices and opened its semiconductor factory in Ho Chi Minh City. It remains the only biggest American investment in Vietnam. It has the intentions of adding more Intel products in the nation.  . The company will add and improve more brands to the real computing commodities in Vietnam like the chip systems and the central processing units (CPUs).  Like so, Vietnam recognizes that Intel Corporation will boost its strategy to build an advanced manufacturing base afar its production in garments and some first working assembly lines (Nguyen & Rose 2009).

Vietnam participates in the Trans-Pacific Partnership that includes 12-state free-trade agreement. So, this allows Vietnam to ship a variety of goods without tariff charges to the nations that comprise two-fifths of the global trade. Notably, this is one of the driving forces for the international corporations like Intel to invest in Ho Chi Minh as the Vietnam provides excellent opportunities to the exports and imports of different products. Ho Chi Minh town in Vietnam contributes significantly to the nation’s economic growth and offers a profound atmosphere for high-tech investments like Intel’s (Tran & Nørlund 2015). Vietnam’s primary competitors from either China or the Southeast Asia have not joined the treaty that leaves Vietnam as the greatest beneficiary from the accord, thus, attracting international investments. Ideally, the trade deal is a strategy that Vietnam uses to improve its value chain as a center for low-cost manufacturing that makes most of its cities like Ho Chi Minh attractive for high investments. Vietnam is also striving hard to ease the investment and tax policies, advance its infrastructure and push other deals while seeking to strategize itself ahead of the neighboring competitors like Cambodia and Myanmar. Ho Chi Minh City has upgraded transport infrastructure making it a Vietnam’s financial hub that attracts more investors

Vietnam’s is ranked 55th globally developed economic country. It is approximated to shift from $186 billion now to about $450 billion. In fact, the tremendous growth of Vietnam’s economy creates profound business opportunities as it shows the capacity for the citizens to purchase the produced products. The economic development also ensures constant growth of the country’s infrastructure and education sector that is essential for international business growth within the country (Raghunath & Rose 2017). Vietnam’s economic growth ranges between 5% to 10% annually since it permitted the foreign ventures. The situation puts it a more competitive destination for direct investments from overseas.

Additionally, Vietnam plans to enter a separate free-trade accord by 2018 with the European Union (EU) beside it participating in the trade deal. The agreement entails the lowering of the tariffs on several commodities to the nation’s biggest export markets. On top, the Vietnamese bureaucrats are finalizing the regulations to allow the foreign investors to completely own some of the locally listed firms to entice the overseas investors further (Nguyen & Rose 2009). To date, nearly half of the 50 by market capitalization companies in Vietnam have attained about 49% ownership limit as allowed by the old foreign ownership limits (Tran & Nørlund 2015). In turn, this makes the abroad fund managers eager to invest in the Vietnam cities. In fact, Ho Chi Minh City remains the most attracting place where substantial investors showed enormous interest in investing in 2013. The city had a 20% stock exchange rise with 2013. The Intel Company is, therefore, optimistic to invest in Ho Chi Minh City whose economic growth seems to expand. What’s more, Intel operations remain a bright field in Ho Chi Minh City since substantial students require hi-tech computers and reduced internet traffic to conduct advanced research. The locating of Intel ensured the training of approximately 1100 Vietnam employees on the best ways to handle the new and complex products introduced to the market. The foreign direct investments include those by nations like Japan, South Korea, and Taiwan that contribute to about a fifth of the GDP of the Vietnamese. In fact, the success of such firms attracts other companies like Intel to venture into Vietnam.

Intel purposes to reinforce the growth and the utilization of the advanced technology and to boost the level of information technology usage in Vietnam (PwC 2016). The Vietnam sector of investment and planning, therefore, accepted the Intel Corp plan to start a $605 million chip assembly industry in Ho Chi Minh City. Consequently, this allows Intel to invest in a semiconductor facility that will provide improved computer equipment in Vietnam. The licensing of the Intel business is because Vietnam rules have allowed overseas investors to put up important business within the country (Ralph 2015). In fact, the size of the firm would become a critical turning point for the Vietnam’s economy. The fact that Vietnam has become a great exporter of the foods and textiles instills confidence in the Corporations planning to invest considerably in the country. Vietnam believes that allowing investors to invest successfully in the country is an explicit move to attract more overseas investors. For example, more investors would be interested in operating with the Intel in generating computers and other relevant accessories from Vietnam.

The population demonstrates that Vietnam has adequate human resources to satisfy Intel’s demand. Ho Chi Minh City offers an excellent location for Intel operation and is strategic for the distribution of the products to other cities. Most other international companies like Samsung and Microsoft have moved to Vietnam due to the presence of cheap labor and strategies location being a gateway for the Southeast Asian region (Ralph 2015). The relocation of a portion of the Intel production in Malaysia to Vietnam aimed at cutting back the labor costs. The plan would cause a layoff of approximately 600 Malaysian employees at the Intel plant. Besides, Ho Chi Minh City offers an excellent opportunity for the manufacturing and sale of the motherboards and other computer accessories as the city prioritizes the expansion of new technologies products from different areas that will serve the market and offer various trendy consumer electronic goods. The strategy is also part of its efforts to increase the manufacturing of Intel’s products across the Southeast Asian. Relocating to their facility to Ho Chi Minh City would reinforce its competitive advantage in assembling the essential PC components.

Intel have confidence that the new plant in Ho Chi Minh City would contribute to the firm’s strong global supply chain and ensure the improved provision of job opportunities in Vietnam (Ralph 2015). The Intel plant created an increased tech ecosystem deal in testing, assembly, and design facilities. The completion of Intel operations will provide extensive employment in the high-tech industries and produce top export income for the nation.

Vietnam has a profound business etiquette and culture where most people use English in the major cities that are essential for trading with the international (Ralph 2015). And, business cards have become an important ritual for the Vietnamese enterprise and translating of Vietnamese written documents for the overseas and other Vietnamese colleagues. The Intel executives receive proper treatment just like the high-ranked diplomats from various countries will utilize significantly less engineering prowess compared to the demand in its chip factories in the U.S. since it will not make chips. In Vietnam, it will concentrate on assembling chips into chipsets and testing their functionality. Though the Intel investment in Ho Chi Minh City is still new, it’s already transforming Vietnam through the creation of other new investments from various global giants. The Vietnam government is allowing the Intel Corporation unprecedented access to eminent ranking administrators in the country’s increasingly capitalistic nature.

Conclusion

The essay demonstrates that Ho Chi Minh City, Vietnam is an excellent area for the Intel Corp to strategize its plan to reinforce the nation’s efforts to develop its high tech profile. The Intel industry will boost the development of IT programs and provide meaningful jobs for increased economic growth. Intel considered Vietnam’s infrastructure, the young labor force and the developing education system in relocating its facility. The Trans-Pacific Partnership is significant as Vietnam continues to campaign for more overseas investors into the country. The essay shows that Vietnam has recently focused on attracting more foreign investors through their appropriate trade legislations, progressive infrastructure expansion and culture for overseas investments.

 

 

References

Cavusgil, S.T., Ghauri, P.N. and Akcal, A.A., 2012. Doing business in emerging markets. Sage.

Nguyen, T.V. and Rose, J., 2009. Building trust—Evidence from Vietnamese entrepreneurs. Journal of Business Venturing, 24(2), pp.165-182.

PwC July 2016. 5th Edition, Doing business in Vietnam.

Raghunath, S. and Rose, E.L., 2017. International Business in the Context of Emerging Markets. In International Business Strategy (pp. 1-14). Palgrave Macmillan UK.

Ralph J., October 8 2015. Vietnam growing more attractive to foreign investment, including tech.

Tran, A.N. and Nørlund, I., 2015. Globalization, industrialization, and labor markets in Vietnam. Journal of the Asia Pacific Economy, 20(1), pp.143-163.

Leave a Reply

Contact Us At

Subscribe

Join our mailing list today and benefit from our free ebooks, daily deals, and discount