top of page

4 Key Methods for Entering the Vietnamese Market: A Guide for Solopreneurs and SMEs

Writer's picture: Nhi HongNhi Hong

Updated: Jan 17

Vietnam, with its rapidly growing economy and tech-savvy population, presents a compelling market opportunity for foreign solopreneurs and SMEs. However, navigating its complexities can be challenging.

At SOSP Consulting Group, we understand the potential rewards and hurdles involved in entering this market.

This guide explores various market entry strategies for Vietnam, outlining their advantages, disadvantages, and key considerations. It's designed to assist businesses seeking to expand beyond domestic boundaries and capitalize on the growth potential offered by Vietnam's emerging market.

1. Market Entry Strategies

There are various market entry strategies, each with its unique advantages and disadvantages. Common approaches include:

  • Exporting

  • Licensing & Franchising

  • Joint Ventures & Strategic Alliances

  • Wholly-Owned Subsidiaries

For many sectors, especially retail items, digital export via online marketplaces is a popular starting point for solopreneurs and SMEs. Brands often begin by selling on platforms like Amazon, Shopee, or Lazada to reach international customers. As their business grows, they may expand by establishing a subsidiary in the target market.

Note: The specific industries and sectors suitable for each market entry strategy may vary depending on your business model, target market, and competitive landscape. Conducting thorough market research is crucial to identify the most promising opportunities.

Let's explore these strategies in more detail.

1.1. Exporting

A low-risk starting point for SME businesses, especially those with limited resources, exporting is often the initial step into the Vietnamese market.

Popular export sectors include:

  • Consumer Goods: Cosmetics, apparel, footwear, home decor, electronics, food and beverages

Manufacturing: Automotive components, machinery, textiles, furniture, plastics

1.1.1. Indirect Export

This method involves utilizing intermediaries such as export agents or trading companies to penetrate the market. It's an excellent option for businesses new to international trade or those with limited resources.

Advantages:

  • Low investment and minimal risk

  • Access to intermediaries' market knowledge and networks

  • Simplified logistics and paperwork

Disadvantages:

  • Limited control over marketing and distribution

  • Lower profit margins due to intermediary fees

  • Reduced direct contact with end customers

1.1.2. Direct Export

Establishing direct sales channels through local distributors or your own sales team allows for more control over your market presence.

Advantages:

  • Greater control over marketing and sales strategies

  • Higher profit margins

  • Direct relationship with customers

Disadvantages:

  • Requires more resources and market knowledge

  • Increased responsibility for logistics and regulatory compliance

  • Potential language and cultural barriers

1.1.3. Digital Export

Utilizing e-commerce platforms and online marketplaces to reach Vietnamese consumers directly is an increasingly popular option, especially for consumer goods.

Advantages:

  • Wide market reach with minimal physical presence

  • Lower overhead costs

  • Ability to gather direct customer data and feedback

Disadvantages:

  • Intense competition in the digital space

  • Challenges in building brand trust online

  • Potential issues with cross-border payments and shipping

1.2. Licensing and Franchising

These strategies allow you to expand your brand presence in Vietnam while leveraging local partners' expertise and resources.

Popular sectors include:

  • Retail: Fashion brands, restaurants, cafes, convenience stores

  • Services: Education, healthcare, fitness, beauty, consulting

1.2.1. Licensing

Granting a Vietnamese company the rights to use your intellectual property, such as trademarks, patents, or proprietary technology.

Advantages:

  • Low investment and quick market entry

  • Leverages local partner's market knowledge

  • Potential for passive income through royalties

Disadvantages:

  • Limited control over licensee's operations

  • Risk of intellectual property infringement

  • Potential for brand damage if licensee underperforms

1.2.2. Franchising

Replicating your business model through a franchise agreement with local partners, allowing them to operate under your brand name.

Advantages:

  • Rapid market expansion with local partners' investment

  • Standardized operations and brand consistency

  • Local partners' understanding of cultural nuances

Disadvantages:

  • Requires significant effort in partner selection and training

  • Ongoing support and quality control challenges

  • Potential for franchise relationship conflicts


1.3. Joint Ventures and Partnerships

Collaborating with Vietnamese companies can provide valuable local insights and shared resources.

Popular sectors include:

  • Technology: Software development, IT services, e-commerce

  • Infrastructure: Construction, energy, transportation

  • Manufacturing: Heavy industries, chemicals, pharmaceuticals

1.3.1. Strategic Alliances

Forming partnerships with Vietnamese companies to share resources, expertise, and risks without creating a new legal entity.

Advantages:

  • Shared risks and resources

  • Access to partner's local network and market knowledge

  • Flexibility in partnership terms

Disadvantages:

  • Potential for misaligned goals and strategies

  • Challenges in protecting intellectual property

  • Limited control over joint operations

1.3.2. Joint Ventures

Creating a new entity jointly owned by your company and a Vietnamese partner, combining resources and expertise.

Advantages:

  • Shared investment and risk

  • Combined strengths of both partners

  • Easier access to local resources and government relations

Disadvantages:

  • Complex negotiations and setup process

  • Potential for management conflicts

  • Challenges in profit sharing and decision-making

 

1.4. Wholly-Owned Subsidiaries

A high-commitment strategy offering full control, wholly-owned subsidiaries are ideal for businesses seeking long-term market presence and significant growth.

Popular sectors include:

  • Manufacturing: Automotive, electronics, pharmaceuticals

  • Services: Banking, finance, insurance, logistics, real estate, retail, F&B, consulting

  • Technology: R&D, software development, IT services

1.4.1. Greenfield Investment (new business registration)

Establishing a new subsidiary from the ground up, building your operations from scratch.

Advantages:

  • Full control over operations and strategy

  • Potential for higher long-term returns

  • Ability to build company culture from the start

Disadvantages:

  • High initial investment and risk

  • Longer time to market entry

  • Challenges in navigating local regulations and business practices

 

1.4.2. Acquisition

Purchasing an existing Vietnamese company to gain immediate market presence and established operations.

Advantages:

  • Immediate market presence and customer base

  • Existing operational infrastructure and workforce

  • Potential for rapid growth and market share gain

Disadvantages:

  • High upfront costs

  • Challenges in integrating different company cultures

  • Potential for hidden liabilities or operational issues

 

Summary of 4 key methods:


2. Case Studies: FDI Companies Successfully Entering the Vietnamese Market

2.1. Lego (Denmark)

Sector: Manufacturing (Toys)

Entry Mode: Direct Investment (Greenfield)

Overview: Lego is establishing a $1 billion carbon-neutral factory in Binh Duong province, set to begin production in 2024. This investment, the largest by a Danish company in Vietnam, aims to create over 1,400 jobs while contributing to sustainable industrial development.

2.2. SHEIN (China)

Sector: E-commerce (Fashion)

Entry Mode: Indirect Export (E-commerce)

Overview: SHEIN, a global B2C e-commerce platform founded in 2008, has revolutionized fashion retail. Offering affordable, trendy products to customers in over 150 countries, SHEIN's success stems from its digital-first model, cutting-edge technology, and rapid response to fashion trends.


2.3. Kien Guru (Vietnam/Indonesia)

Sector: Education Technology (EdTech)

Entry Mode: Mergers & Acquisitions (M&A)

Overview: Kien Guru, established through Ruangguru's acquisition of MClass, launched in 2019 to provide personalized learning experiences for Vietnamese students. The platform leverages MClass's existing content and user base to offer interactive courses, tutoring services, and localized educational materials.

These examples illustrate how companies from various countries have successfully entered the Vietnamese market using different strategies, including greenfield investments, e-commerce, and mergers and acquisitions.


3. Selecting the Optimal Entry Mode

Choosing the most suitable market entry strategy for your business requires careful consideration of several key factors. Each approach offers unique advantages and challenges, and the best choice will depend on your specific business goals, resources, and risk tolerance. Consider the following aspects when making your decision:

  • Resource Commitment: Assess the financial and human resources required for each entry mode. Evaluate your budget and team capacity to determine the most feasible option.

  • Risk Exposure: Consider potential risks associated with each method, such as market fluctuations, cultural challenges, or political instability. Determine your risk tolerance and mitigation strategies.

  • Control Level: Decide on the degree of control you desire over your Vietnamese operations. Some strategies offer greater autonomy, while others involve collaboration or shared decision-making.

  • Profit Potential: Analyze the potential profitability of each mode based on market size, competition, and cost factors. Consider both short-term and long-term financial projections.

  • Target Market Characteristics: Understand the demographic factors of your target customers, cultural preferences, key factors influencing the consumer behavior.

  • Competition: Identify competitors, analyze their strengths and weaknesses, and develop a competitive advantage. Assess barriers to entry and position your business for success.

By carefully weighing these factors against your business objectives and capabilities, you can select the most appropriate market entry strategy for your venture in Vietnam.


Conclusion


At SOSP Consulting Group, we specialize in helping FDI companies enter and operate sustainably in the Vietnam market. Our expertise spans across various entry strategies and operational models, ensuring that your business can thrive in this dynamic environment.

For entrepreneurs and SMEs planning to establish their companies in Vietnam, we offer an agile and cost-saving approach by leveraging technology and digitalization. This modern strategy can significantly streamline your market entry process and enhance your operational efficiency.


Ready to Take the Next Step?

Discover how our innovative, technology-driven solutions can support your business expansion into Vietnam. Contact us today to explore how we can tailor our services to your specific needs and goals. Let's work together to turn your Vietnamese market aspirations into reality!


Contact SOSP Consulting Group:

Take the first step towards your successful entry into the Vietnamese market.

Reach out now!

2 views0 comments

Commenti

Valutazione 0 stelle su 5.
Non ci sono ancora valutazioni

Aggiungi una valutazione

Rep. Office: L17-11, 17th floor, Vincom Center Buildings, 72 Le Thanh Ton Street, Ben Nghe Ward, District 1, HCMC, Vietnam

Headquarters: 3F, 126 Nguyen Thi Minh Khai Street, Vo Thi Sau Ward, District 3, HCMC, Vietnam

  • brand-goodfirms.254x256
  • LinkedIn
  • Facebook
  • Whatsapp

A proud member of 

a85bd14c-61fc-480f-8442-82cce25c343b.webp
Send Us a Message

Thank you for choosing SOSP Consulting Group.

©2024 by SOSP Consulting Group. All rights reserved.

bottom of page