In the first post of this series, we focused on the importance of taking a local approach and committing to understand positioning when exploring the feasibility of new opportunities in Vietnam.
Considering Your Market Entry Model
Once you’ve done this, it’s vital to begin developing a plan for how your operations or projects could be set up and managed.
Will you set up your own legal entity in Vietnam, or will you be managing your projects in Vietnam from abroad? How will you choose, develop and manage the local partnerships required to develop your sales, distribution or production channels in-market?
The Decision Point
Creating a Local Entity:
While setting up a legal entity of your own in Vietnam brings significant advantages, it also carries drawbacks, and is not necessary for every business venture into the market.
Requiring capital investment, and an understanding of the complex compliance and licensing procedures your organization will be responsible to manage, this option is suitable for businesses who are ready to make large upfront investments in Vietnam, or are ready to commit to the market for the long run.
Some of the pros include:
- Complete ownership and control over your operations in Vietnam,
- Maximum oversight and minimal dependence on external partners,
- Allows for local invoicing and ownership of licensing,
- Flexible options are available, ranging from a Representative Office to a sole-owned Foreign-Invested Enterprise to a Joint Venture.
Some of the cons include:
- Set up time can take 6 months or more,
- Upfront capital investment is required,
- Requires a legal representative who is a resident in Vietnam,
- Complex and cumbersome compliance requirements,
- Requires a holistic understanding of Vietnam’s legal system
Managing from Abroad – Establishing Local Partnerships
For businesses exploring sourcing opportunities, it may not be necessary to establish a local entity at all.
For other businesses, such as those looking to test the waters for their product, service or production in Vietnam, it may be wise to consider alternative models before making a full commitment.
Instead of setting up a legal entity, your company abroad can formalize local partnerships. The local partner may use their local corporate entity as a sales, marketing and distribution channel on your behalf. The same goes for manufacturing projects.
The main consideration here, however, is the significant trust required in the local partner(s).
The pros of this approach include:
- Lower upfront cost,
- Can be established quickly,
- Allows for sales or production activities to be managed via the partner,
- Most local licensing, compliance and operational aspects are the responsibility of the partner,
The cons can include:
- Little or less direct control over local activities,
- Risk of dependence on the local partner,
- Potential difficulties in ending partnership should it be necessary.
The Bottom Line
It’s crucial to begin considering which market entry model makes the most sense for your business from the early steps of your explorations, based on a clear understanding of your short and long term strategy and objectives.
The Herbers Agency is here to be your trusted partner in Vietnam – providing you with the benefits of being your market representative and helping you find and develop relationships with the right stakeholders.
We can help you define and execute the model that makes sense for your business – and much more.
Contact us today to begin your Vietnam journey!
We look forward to sharing our next installments of the Navigating Vietnam: The First Steps Series. Stay tuned for our latest posts on The Herbers Agency Insight Page and our LinkedIn Page.
Our next post in the series will focus on adapting to culture, bridging barriers and building relationships in Vietnam.
