The value-chain concept is useful in international business because it helps clarify what activities are performed where in the world. For instance, exporting firms perform most “upstream” value-chain activities (R&D and production) in the home market and most “downstream” activities (marketing and after-sales service) abroad. Each value-adding activity in the firm’s value chain is subject to internationalization; that is, it can be performed abroad instead of at home. Companies have considerable latitude regarding where in the world they locate or configure key value-adding activities. The most typical reasons for locating value-chain activities in particular countries are to reduce the costs of R&D and production or to gain closer access to customers. Through offshoring, the firm relocates a major value-chain activity by establishing a factory or other subsidiary abroad. A related trend is global outsourcing, in which the firm delegates performance of a value-adding activity to an external supplier or contractor located abroad. Globalization allows firms to relocate key value-adding activities to the most advantageous locations around the world.
2-Since the late 1970s, China’s rise as a “world factory” has been attributed to the strategic coupling of local assets, particularly low-cost labor in coastal regions such as the Pearl River Delta (PRD) and Yangtze River Delta (YRD), in Global Production Networks (GPNs) driven by transnational corporations’ cross-border investment. Yang (2016). It has caused labor-intensive industrial enterprises to relocate from coastal China to lower-cost places such as interior China and neighboring Southeast Asian countries. Although much research has been done on TNC internal movement from coastal to inland China, less has been done on cross-border industrial relocation from China to Southeast Asian countries. The key factors to be considered in making the country selection in the production process can be determine by some of the aspects.
- Financial stability
- Location of the vendor
- Well established supplier, customer base, and reference site
- Accreditation and awards
- Reliable and quick after-sale support
Financial stability is recommended that one initially consider the software provider’s financial viability or stability. This ensures that the service provider is trustworthy. Knowing that the software seller will be in business for the foreseeable future is also reassuring. Failure to check this while picking a vendor may result in the selection of an insolvent and bankrupt supplier, resulting in failed software support and difficulty in reconfiguring or fixing faults. Location of the vendor is another important issue to consider when choosing software or a vendor is location. It is preferable to choose a dealer from one’s own country. This is just for the purpose of having quicker or more readily available access to customer service help for a speedy response. Local support enables a faster and more responsive reaction in the event of a technical or local demand. In terms of accessibility, choosing foreign merchants proved tough. It will be tough to obtain advanced support from the supplier in the event of an incident. Well established supplier, customer base, and reference site is yet another factor to consider while selecting a software company. Because it is a sign of confidence and quality products, a well-established provider with a well-established customer base is chosen. Customers who are satisfied act as a reference site, sharing their success experiences. A seller without a customer base or a reference site is extremely unsafe, as it suggests that the product is either defective or new to the market with a lot of flaws. Accreditation and awards- It’s also a good idea to see if the supplier’s software has won any awards. This will be a sign of the software’s ability to accomplish its goal. Inquire if the supplier’s software has won any industry awards or if they are a member of any professional or business organization or body. Purchasing an approved product is quite safe because regulatory authorities ensure that the program meets specified requirements. Choosing a provider with no awards or accreditation may result in the purchase of poor software. Because software is so important, it should be purchased from a reputable vendor. Reliable and quick after-sale support- It is critical to evaluate or inquire about a software vendor’s after-sale customer assistance while making a purchasing decision. A vendor with a well-established after-sale service network ensures that customers get the most out of their purchases. If the company has established customer care contact, such as phone lines and emails, any issues that arise after the transaction will be addressed quickly. Choosing a provider with bad after-sale customer service will be extremely annoying if an issue emerges that requires immediate attention. If no technical staff from the provider is available to assist the customer in setting up the software, the launch may fail. Bag (2012).
Bag, S. (2012). Review of supplier selection models: Key success factors and blueprint of supply chain excellence. Journal of Supply Chain Management Systems, 1(1), 56-62. Retrieved from https://www.proquest.com/scholarly-journals/review-supplier-selection-models-key-success/docview/1490538729/se-2?accountid=35796
Yang, C. (2016). Relocating labour-intensive manufacturing firms from china to southeast asia: A preliminary investigation. Bandung: Journal of the Global South, 3(1), 1-13. doi: http://dx.doi.org/10.1186/s40728-016
3-Step 1: Determine which manufacturing pieces should be relocated.
Companies should approach Vietnam with a clear idea of the type of production they want to do there. Most businesses choose an alternate site because of its cheaper costs and suitability for primary production and assembly.
Those interested in more complicated manufacturing operations should comprehensively examine Vietnam’s labor force, sourcing networks, and infrastructure to determine that this production is viable.
Step 2: Decide on an entry strategy.
Vietnam offers various market entrance alternatives; we’ve included the most prevalent corporate structure options for US investors below.
Office of the Representative
A representative office (RO) is a low-cost entry point for businesses interested in learning more about the Vietnamese market. As a result, this is one of the most popular options for newcomers to the Vietnamese market, and it frequently precedes a more significant presence in the nation. ROs are currently allowed to engage in the following activities:
Conducting market research;
Serving as a liaison office for its parent firm; and
promoting its head office’s operations through meetings and other actions that lead to future business.
The Ministry of Planning and Investment (MPI) in Vietnam does not yet stipulate the minimum capital requirement for ROs. While the MPI does not specify capital requirements, businesses must demonstrate that their capital contributions are adequate to finance their operations’ activities. As a result, potential investors should expect to contribute at least $10,000 to support their activities (Raghunathan, Soundarapandian & Tyagi, 2020). In six to eight weeks, ROs can be set up.
a subsidiary office
A branch office (BO) can carry out business operations in Vietnam within the parent firm’s scope. A parent firm must have conducted business in its home country for at least five years to establish a BO (Bag, 2012). BOs are only available in particular service industries, such as finance and banking. BOs can recruit employees directly, making contracting between the parent business and Vietnamese enterprises easier and functioning similarly to a liaison office.
BOs can rent offices, lease or buy the equipment and facilities they need for operations, and hire local and international personnel.
Remit earnings to a foreign country;
Purchase and sell products, as well as engage in commercial operations, as required by license;
Create departments that reflect the parent firm, such as accounting, marketing, and human resources.
The BO will require an establishment license as well as a seal with the parent company’s name. The BO will also need to hire a Vietnamese-born branch manager (Daisy & Khurana, 2016).
Foreign firms may choose management from their own country, but they must first get a work permit in Vietnam before being recruited as a BO manager.
After the firm provides all of the required papers, the Ministry of Industry and Trade authorizes the BO’s registration, which generally takes 20 working days.
a company that foreigners entirely control
In Vietnam, a 100 percent foreign-owned company (FOE) might have the following forms:
Due to their lower liability and capital requirements, limited liability corporations (LLCs) are the most popular type of investment for international investors.
Single-member LLCs with just one owner and multiple-member LLCs, which have more than one shareholder, are the two types of LLCs. Depending on the needs of a particular investment, these owners might be private persons or corporations.
On average, the setup time for a 100 percent FOE is two to four months.
A joint venture (JV) is a business collaboration between two or more firms or people for a specified purpose. JVs are not a one-of-a-kind corporate structure; participants often form an LLC for basic JVs and a joint-stock company (JSC) if they want to list Vietnam’s stock markets.
The JSC structure is necessary for investors acquiring interests in state-owned businesses listed on Vietnam’s stock markets. Foreign investors might choose to participate in joint ventures as a majority (more than 50% ownership) or minority (less than 50% ownership) shareholder when entering the Vietnamese market (Raghunathan, Soundarapandian & Tyagi, 2020).
JVs must have the same amount of capital as 100 percent FOEs. Unconditional industries are exempt from mandatory capital requirements (Bag, 2012). In many situations, however, Vietnam’s MPI imposes industry-specific capital requirements.
When analyzing the capital needs for JVs in Vietnam, the percentage of ownership, and hence the amount of capital provided, is the most relevant statistic to utilize. Currently, legislative rules mandate a 30 percent foreign participation floor for JVs and a cap in some conditional industries (Daisy & Khurana, 2016). On an industry-by-industry basis, the government also requires minimum contributions for domestic investors. It takes two to four months to set up a JV.
Collaboration between the public and commercial sectors
A public-private partnership (PPP) collaborates between a foreign or local company and the government to complete critical infrastructure projects. As a result of the diminished role of state-owned companies, expanding population, and increasing urbanization, Vietnamese authorities are vigorously seeking PPPs for a range of infrastructure projects. Build-Transfer-Operate (BTO), Build-Transfer (BT), Build-Operate-Transfer (BOT), Build-Own-Operate (BOO), and Build, Transfer, and Lease are the five kinds of PPPs (BTL).
Acquisitions and mergers
For international investors wanting to start a business in Vietnam, mergers and acquisitions (M&As) are becoming increasingly attractive. Investors can benefit from pre-existing access to consumers, locations, and distribution channels as a result of an M&A (Gopalakrishnan, Guilbault & Ojha, 2017). This local expertise can be crucial to successful operations in Vietnam’s dynamic but quickly changing investment climate.
Investors that are having trouble breaking into the Vietnamese market may discover that the M&A path offers a unique answer to several issues.
Investors must assess the benefits and drawbacks of merging or purchasing a company to determine whether it is a good fit for their business plan. A merger occurs when two firms unite to establish a single entity by transferring assets, rights, liabilities, and interests to the merged entity, thereby connecting the two businesses.
Acquisitions necessitate a change in ownership and might take the form of existing share purchases or the addition of additional shares, but they can also include the purchase of assets (Gopalakrishnan, Guilbault & Ojha, 2017). Liability for non-public corporations is mainly based on failure to comply with the agreement’s requirements.
Investors considering this path should be aware of the legal framework for mergers and acquisitions, as well as the procedures and constraints that come with them.
Step 3: Determine the best investment location.
The majority of Vietnam’s foreign investment and industrial activity is concentrated in three key economic regions (KERs). Each KER has its own set of manufacturing circumstances, allowing for a variety of investment options (Daisy & Khurana, 2016). Therefore, companies should understand each zone, the provinces that make up that zone, and the industrial activity areas.
Bag, S. (2012). Review of supplier selection models: Key success factors and blueprint of supply chain excellence. Journal of Supply Chain Management Systems, 1(1), 56-62. Retrieved from https://www.proquest.com/scholarly-journals/review…
Daisy, M. J., & Khurana, R. (2016). A framework to study vendors’ contribution in a client vendor relationship in information technology service outsourcing in india. Benchmarking, 23(2), 338-358. doi:http://dx.doi.org/10.1108/BIJ-04-2014-0029
Gopalakrishnan, S., Guilbault, M., & Ojha, A. K. (2017). A view from the vendor’s side: Factors that determine satisfaction. South Asian Journal of Business Studies, 6(3), 214-228. Retrieved from https://www.proquest.com/scholarly-journals/view-v…
Raghunathan, K., Soundarapandian, R. K., & Tyagi, S. K. (2020). Solving cloud vendor selection problem using intuitionistic fuzzy decision framework. Neural Computing & Applications, 32(2), 589-602. doi:http://dx.doi.org/10.1007/s00521-018-3648-1