Introduction
Holden Ltd is an automaker company that engineers, designs and manufactures engines and vehicles (Grant 2004, P. 6). These products are produced for Australian domestic sales and other export markets. Holden Ltd is a subsidiary company of General Motors (a US based company). As a matter of fact, the company is in charge of GM brands in New Zealand and Australia (Grant 2004, P. 15). The company is a significant commercial enterprise because it produces more that 691 vehicles in a single day.
On the other hand, it has developed and maintained good standards to make work and business as a whole more efficient (Blackburn 2010, p. 15). In recent years, there has been a decline in sales of large cars in Australia and this has forced the company to venture in international markets (McDonald 2009, p. 12). This is aimed at increasing profitability. It’s against this backdrop that the company has considered doing business in Vietnam. This will be done by opening a new branch in the country.
National business environment of Vietnam
The county’s business environment has been becoming friendlier as time goes by. This can be demonstrated by various efforts that the government has initiated to improve its business environment and attract investments. For instance, the government has been promoting the emergence of a strong private sector to enhance growth and development (Vision 2010, p. 9).
Many investment climate reforms have been instituted and this has seen authorities and companies compete to attract investments in the country. Generally speaking, the country’s business environment is characterized by various aspects. These include a lot of rent seeking, unstable property rights and on the other hand high levels of informality (Vision 2010, p.159). The country has had a good industrial policy aimed at increasing foreign investments.
Vietnam has a good economic climate. This is because its economic growth rates can only be rivaled by China in the region. Poverty reduction has been successful as time goes by and now stands at 16% of the population. For instance, its economic growth rate has quickened to 6.5% in 2010 (General statistics office of Vietnam 2010, p. 14). This has been aided by the fact they the county is switching from agriculture to full industrialization. The economy has been expanding because of high industrial output and a vibrant service sector.
It will therefore be wise for the company to invest in the county because of the governments’ goodwill to increase investments (Gover 2009, p. 13). On the other hand, the economy is growing significantly and needs to be taped into as the country moves to industrialization. Increased industrialization means that there will be a lot of commercial activities and this implies that the company can make more sales.
As much as the country might exhibit positive economic aspects, there is need to enhance its infrastructure framework for sustainability. As a matter of fact, the company will be forced to more cautious as it expands to areas other than major urban centers (HSBC 2010, p. 17). Although this is a reality, the government is in a major drive to attract investments in infrastructure and this is expected to improve as time goes by.
The political environment plays an important role in determining a country’s investment and business climate (Do 2006, p. 3). There is a new political leadership that is determined to come up with good market reforms that will stabilize the business environment. In recent years, the country has had a stable political environment. The current administration is business friendly and on the other hand determined to encourage investments in the country coupled with good policy making (HSBC 2010, p. 17).
So long as the political environment is stable, there will be no threats to the continuity of the country’s economical policies. The county’s foreign policy is aimed at encouraging more friendly partnerships in business and investments. This implies that the company will be safe from any political instability threats. As far as this environment is concerned, there are no negative implications to company’s continuity and operations (Gover 2009, p. 13).
The country has a very unique social business environment that needs to be well mastered for effective and efficient business operations. For instance, it has a reasonably well educated population. On the other hand, the country has a relatively cheap labor force. This means that the company will not incur a lot of labor costs (this is economical in a business perspective).
Housing space and accommodation are also well guaranteed and supplied. Most buildings have met international standards and are available for rent at cheap prices (Vision 2010, p. 9).
This means that as far as housing is concerned, the company should not worry as this will be taken care of. International and local travel is well developed as there are a large number of airlines with business operations in the country (Brown 2010, p. 21). As for land travel, there are a large number of buses and trains that are mostly used within the country. This means that the company will not have problems navigating and advancing its operations in the country (Brown 2010, p. 26).
On the other hand, the country’s communication network has been advanced to cater for increased market demand. Electronic and English communication is common in the country. By mastering this, the company will be able to understand the market well and carry out its operations without any problems (Vision 2010, p. 28).
Vietnam is said to have an incomplete legal system that needs to be reviewed. After seeing this as a hindrance to the success of businesses and investments in the country, the government is currently reviewing its legal system to make it more effective. For instance, the legal process is slow and might not attend to pressing issues with urgency (Vision 2010, p. 28).
There is a general policy that all businesses go through state administration and this might be compromised with vested interests. In addition, there are a lot of bureaucratic barriers that need to be looked at (HSBC 2010, p. 17). This will be tricky for the company as it will need partnerships for sustainability. This is necessary because the company will have to pass through legal processes in the course of doing business in the country.
As far as environmental factors are concerned, the government has put in place tight environmental measures to protect and conserve the country’s environment. All companies are therefore expected to comply as far as environmental conservation is concerned. On the other hand, the country’s climate is as complex as its topography (Vision 2010, p. 28).
There are also a number of environmental issues in relation to pollution that need to be addressed. To be on the safe side, the company must come up with environmentally friendly products. On the other hand, the country needs to come up with environmentally friendly requirements that will improve market accessibility.
Cultural issues
Australia has a highly skilled and multilingual workforce that the company is used to. The society on the other hand does not like any form of differentiation. This means that mutual respect is highly preferred in any case. People don’t pay much attention to academic qualifications or business success (Cybolink 2008, p. 31). There is a high preference for privacy which demands a lot of caution when dealing with different people. In Australia, people value openness. This is in relation to how business and daily lives are conducted.
Punctuality is highly valued when conducting any business meeting (Cybolink 2008, p. 34). In addition, business appointments must be scheduled one month in advance. People value space when conversing as one is not supposed to be close to the other person. These are some of the cultural issues that guide the way business operations are carried out in Australia. Since the company is expanding its operations to Vietnam, it is important to understand various cultural aspects that guide the way business is conducted in the country.
In Vietnam, presents are highly appreciated especially during holidays and this is not a common practice in Australia. This means that the company will be forced to adhere to such expectations from employees and business partners to create a good working relationship (Vision 2010, p. 28).
There is a lot of corruption in Vietnam and business partners are not always straightforward. The company needs to be prepared for such as this is the direct opposite of doing things in Australia where openness is highly advocated for as far as business is concerned.
Greetings are mostly done by shaking hands and this should at times consider the age. It implies that the company should always ensure that such issues are taken into consideration (Do 2006, p. 11). Business cards are highly valued in Vietnam (as a way of introducing an individual). In Australia, privacy is highly valued and things like business cards are not a necessity. Vietnamese workers believe in Superstition and symbols and need to be understood for a good working relationship (Do 2006, p. 13).
People do not show their feelings but they keep on smiling and this might be misunderstood unlike in Australia where openness is advocated for. This is enforced by a belief that one is not supposed to show any anger or aggression. The company might be used to scenarios where issues are negotiated in an open and direct manner and needs to adopt to this culture. This is because cultural issues shape the way an organization conducts its business (Cybolink 2008, p. 31).
What the government can do to promote Foreign Direct Investment
The government needs to come up with a vibrant foreign investment reform. In this case, it should be able to see beyond its protectionist beliefs that have continued to discourage foreign direct investments in the country. There is need to educate the population to change its perceptions about foreigners who come to invest in the country. Since there is poor infrastructure development in other towns apart from major urban centers, the government needs to increase investments in such areas.
This will attract direct foreign investments in other parts of the country. The country’s legal process should be completed and enhanced. In addition, bureaucratic processes are supposed to be reduced to give investors more confidence. The country has burdensome tariffs that can end up making production more expensive. The government should further reduce the profit remittance tax to encourage more investors.
More deregulation of banks should be enhanced to ensure that foreign investors have quick access to banks as a source of capital. There are some land clearance difficulties that need to be dealt with. This is because land is a factor of production and will determine the way investors rate a country. As much as the country is moving in the right direction to review its legal system, it should enhance the pace of promulgating legal documents.
Reference List
Blackburn, R., 2010. Holden appoints new boss. Australia: Fairfax Media. Web.
Brown, N., 2010. The long road to reform: An analysis of foreign investment reform in Vietnam. Web.
Cybolink., 2008. Australia: Australian business etiquette, manners, cross- cultural communication and Geert Hofstede Analysis. Web.
Do, Q, D., 2006. Business environment in Vietnam. Web.
General statistics office of Vietnam., 2010. Monthly statistical information. Web.
Gover, P., 2009. Pontiac pays the price. UK: Herald.
Grant, T., 2004. Holden Ltd. Michigan: Thomas Gale.
HSBC., 2010. Vietnam builds on economic growth. Web.
McDonald, N., 2009. Holden posts $70m loss in Australia. Melbourne: The Sun-Herald.
Vision., 2010. Doing business in Vietnam. Web.