Cultural Environment Comparison Vietnam and U.S.A

 
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Cultural Environment Comparison Vietnam and U.S.A

Current issues and trends in Vietnam that may affect possible generic corporate entry into that country

Political unrest

The Vietnam political system has been recently affected by unrest following the proposals to create special economic zones in the country. The US citizens were arrested in connection to unrest, many being student who had participated in the street protest. The American nationals are often treated with suspicion of espionage, which makes them a targeted of government harassment. The country is dominated by issues of human rights abuse and muzzling free media. Behind the unrests are also challenges over property ownership, which has seen business, mostly foreign loss their properties (“Property disputes are Vietnam’s biggest political problem”, 2018).  This has threatened the FDI in the country, including those interested in the IT sector.

Protectionism-economic

The Vietnam economy partly operates are a free market, though laced with some protectionist policies to cushion the local industries against unhealthy competition from the foreign business firms. The current political system under President has implemented several measures aimed at protecting the Vietnamese business from foreign competition and to improve the country’s exports (Johnson, 2018). One of the sectors that are heavily affected is the IT industry. Foreign corporations in these areas will pay extra in tariffs to trade in Vietnam. The Vietnamese government this year passed a law to police the internet use. The new law requires that internet companies store their Vietnam-based users’ data on servers located in the country. The law also sets out strong punishment for companies that may violate its provision (Hookway, 2018). Consequently, this threatens foreign IT firms that intend to do business in Vietnam.

Inflation

Vietnam is struggling with the problem of inflation; the country is struggling to address the problem of high-interest rate and increased prices of commodities and services. The local currency is weak, doing badly in the international financial market. The FDI inflows in the country are threatened by its financial instability, which makes a prospective investor avoid it (Gray, 2018). The ability of investors to make profits is affected by exchange rates, cost of living, and the general economic strength of the country. Vietnam is a weak economy that is suffering from inflation, hence not a suitable place for FID.

Recommendations

The FDI strategic options available for the IT Corporation include diverting it investments to foreign countries that provide a better environment for investment. Foreign investors go where the environment is suitable for business and avoid where the conditions are unfavorable.

The other option is to accept the tough conditions and accept to set up business in Vietnam. This will call for consideration of how the company will balance profit-making and making its products and services affordable in the market to ensure that the company does not lose competitive advantage. The US remains a stable economy with a sound political system that guarantees peace and rule of the law, making it a suitable place to do business for a long time. The FDI in the IT sector can work if the foreign firm works on its cost of production to compensate for the imposed tariffs.

The IT firm can wait for the change of the political leadership with a hope that the new administration would improve the environment for foreign investors and also reduce the uncertainties in the market.

 

 

References

Gray, H. (2018). Turbulence and order in economic development: Institutions and economic transformation in Tanzania and Vietnam. Oxford, United Kingdom: Oxford University Press.

Hookway, J. (2018). Vietnam Tightens Grip on Internet With Data-Storage Law. Retrieved from https://www.wsj.com/articles/vietnam-tightens-grip-on-internet-with-data-storage-law-1528799753

Property disputes are Vietnam’s biggest political problem. (2018). Retrieved from https://www.economist.com/asia/2017/06/15/property-disputes-are-vietnams-biggest-political-problem

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