American involvement in Vietnam, part II: prospects for U.S. business in a new era

Business Horizons, March-April, 1995 by Clifford J. Shultz, II, William J. Ardrey, IV, Anthony Pecotich

The desire for Western products and the affinity for Western images indicates that some U.S. firms have product lines perfectly positioned to exploit current Vietnamese market conditions. Not surprisingly, many firms have moved swiftly to leverage such competitive advantages. PepsiCola, for example, began production within hours of the announcement of the ending of the embargo. More than 40 million cases of soft drinks are already sold annually in Vietnam, a figure that is expected to increase fivefold within the next decade; such packaged consumer goods, the easiest Western goods to purchase, are relatively inexpensive.

An increased interest in marketing and consumer behavior has led the government to compile databases to track consumer spending and foreign companies to employ market research firms to measure purchase patterns. The segmentation schema mentioned earlier will segment even further. Consumer behavior will continue to be influenced by returning Viet Kieu (overseas Vietnamese), interaction with tourists and expatriates, and general information diffusion from television and periodicals. If Vietnam's economy manages to grow faster than its population, prospects for a modern consumer market are good.

Export Market

Like many Asian economies, Vietnam's governmental policy and tax code favor foreign businesses that set up to export. Imports of equipment, for example, are free of tariff and tax, and the seafood industry is an excellent illustration of the country's ability to build a healthy, valueadded export industry. Petroleum, agricultural products, and minerals are good illustrations as well. Basic low-tech and labor-intensive manufactured goods, such as shoes and textiles, soon will be.

An important benefit of lifting the embargo has been Vietnam's integration into the world economy. Exports for all of 1993 saw Vietnam increasing coffee exports by 25 percent, tea by 30 percent, sea products by 22 percent, and garments by 22 percent. As one of the world's poorest economies, the newly embargo-free Vietnam will be entitled to favorable quotas on its exports to the developed world.

The Multilateral Aid Market

Every businessperson and government official seems quick to point out Vietnam's inadequate infrastructure. Although the Australians are busy upgrading the international telephone system, Vietnam badly needs new roads, power plants, ports, transmission lines, and other investments in Infrastructure. More than $2 billion is slated for investment in one project alone to build a major North-South highway. Ten American companies have already registered intentions to bid for two sections of this contract, and American companies that have established some sort of operation in Vietnam clearly have an opportunity to capitalize on the good will fostered by the recent warming of relations between the U.S. and Vietnamese governments. General contracting and heavy equipment companies, for example, are natural suppliers.

Some observers have suggested that many East and Southeast Asian brands have become so firmly entrenched in the market that it will be difficult to acquire significant market share in many industries. Ironically, says Nick J. Freeman (1993), U.S. business now needs Vietnam more than Vietnam needs U.S. business. Despite the absence of Americans from the Vietnamese market and the resultant successful efforts by other nations to fill the vacuum created by that absence, American companies still enjoy very good brand image in Vietnam. Coca-Cola, for example, has been smuggled into Vietnam for years and never really left the country. Its advertising slogan in Vietnamese is Vui Mung Gap Lai Cac Ban, ("Good to See You Again"), in contrast to the newer Pepsi publicity blitz that declares PepsiCola Su Lua Cbon Cua The He Moi ("the Choice of a New Generation"). Furthermore, a can of soda, for which a Vietnamese would pay anywhere from 30 cents to a dollar, is equivalent to an American spending about $15 per can--a pretty strong indicator of brand image and customer loyalty.