Answer to Question #206451 in Management for jessie

Question

3)     You have been recently appointed as a manager for a local Multinational high-tech company that has expressed interest to join the influx of foreign manufacturers to invest in Vietnam, who is now hoping to become a major hub for high-tech manufacturing. For global manufacturers such as the company this over-reliance on China has become more precarious in the wake of the U.S. trade war, pandemic-related supply chain disruptions and higher costs.

Decide on which of the two wholly owned entry methods greenfield or acquisition, that you would recommend to the company. Explain your reasons by providing facts from the Vietnam market to support your choice of entry method.

Answer 1

As the manager for local multinational high tech company I would recommend greenfield entry method. Greenfield entry method can also be refered to as Foreign Direct Investment. Foreign Direct Investment can offer the local multinational high tech company an opportunity to expand their businesses beyond their low growing or stable home market to new foreign market in Vietnam. The local multinational high tech company must identify the secular trends in Vietnam and whether their product lines can match what the targeted market in Vietnam is demanding. Vietnam as the targeted market, is a country with a young population, and with a growing purchasing power in urban areas and a retail market at 16% rate per year. Therefore, high tech company should recognize a structural change in Vietnam’s economy by keenly observing how the local retailers are adjusting to the greenfield entry method.

The multinational high tech company can set the greenfield strategy by buying goods directly from the producers and due to their big size, they have more bargaining power with their suppliers. Thus, allowing them to control their input quality and prices so they can provide high quality products at an attractive and transparent price. They can price their products lower than the lowest price in the market as compared to other competitors.

Another greenfield strategy that the high tech company can implement is to facilitate their customer’s purchase activity by providing a wide variety of products to satisfy the consumers' demands. The company can also take advantage of improvements in Vietnam’s infrastructure to help them implement a mordern distribution system such as logistics companies to help in the delivery of their products therefore, readily accessible service to their customers.