Vietnam is one of the fastest-growing economies in Southeast Asia, with a young population, a large domestic market, and a strategic location for trade and investment. However, doing business in Vietnam as a foreigner can also pose some challenges, such as cultural differences, legal barriers, and bureaucratic procedures. Here are some tips to help you succeed in the Vietnamese market.
Understand the culture and etiquette.
Vietnam has a rich and diverse culture, influenced by various historical and regional factors. Some aspects of Vietnamese culture that may affect your business interactions include:
- Respect for hierarchy and seniority. Vietnamese people tend to defer to elders and superiors, and expect the same from others. You should address people by their titles and surnames, and avoid using first names unless invited to do so. You should also greet and thank the most senior person first in a meeting or a negotiation.
- Indirect communication and saving face. Vietnamese people tend to avoid direct confrontation and criticism, and use subtle hints and gestures to convey their opinions and feelings. You should also be careful not to cause embarrassment or loss of face to your counterparts, by being polite, humble, and tactful. You should also avoid showing anger or frustration, as this may be seen as rude or aggressive.
- Relationship-oriented business style. Vietnamese people value personal relationships and trust in business dealings, and prefer to work with people they know and like. You should invest time and effort in building rapport and goodwill with your potential partners, by showing interest in their backgrounds, families, hobbies, etc. You should also follow up regularly and maintain contact with them.
Know the legal framework and regulations.
Vietnam has a complex and evolving legal system, which can sometimes be inconsistent or unclear. Some of the legal aspects that may affect your business activities include:
- Business registration and licensing. Foreign investors need to obtain various permits and approvals from different authorities to set up and operate a business in Vietnam. Depending on the type and scope of your business, you may need to register with the Ministry of Planning and Investment, the Department of Industry and Trade, the Department of Labor, Invalids and Social Affairs, etc. You may also need to obtain specific licenses for certain sectors or activities, such as banking, telecommunications, education, health care, etc.
- Taxation and accounting. Foreign investors are subject to various taxes in Vietnam, such as corporate income tax, value-added tax, personal income tax, withholding tax, etc. The tax rates and incentives may vary depending on the type and location of your business. You also need to comply with the Vietnamese accounting standards and practices, which may differ from those in your home country.
- Intellectual property rights protection. Vietnam has joined several international treaties and conventions on intellectual property rights protection, such as the Paris Convention, the Berne Convention, the TRIPS Agreement, etc. However, the enforcement of these rights is still weak and inconsistent in Vietnam. You should take proactive measures to protect your trademarks, patents, copyrights, trade secrets, etc., such as registering them with the relevant authorities,
- Dispute resolution mechanisms. Vietnam has a civil law system based on codes and statutes rather than precedents or case law. The judicial system consists of four levels: district courts, provincial courts, appellate courts (or Supreme People’s Court), and specialized courts (such as administrative courts or economic courts). However, the courts are often understaffed, underfunded, inexperienced, or influenced by political or social factors. Therefore, many foreign investors prefer to use alternative dispute resolution mechanisms, such as arbitration or mediation, to settle their disputes with local parties.
Contact Global Business Services LLC (GBS), a professional business and legal services company that is preferred by most foreign investors in Vietnam, if you need any support.
Adapt to the local market conditions and preferences.
Vietnam has a dynamic and diverse market, with different opportunities and challenges in different regions and sectors. You should conduct thorough market research and analysis to identify your target customers, competitors, suppliers, distributors, etc., and tailor your products or services to meet their needs and expectations.
Some of the factors that may affect your market entry and expansion strategies include Infrastructure development and quality. Vietnam has made significant progress in improving its infrastructure in recent years, such as roads, railways, ports, airports, power grids, water supply, etc.
However, there are still gaps and bottlenecks in some areas or regions, which may affect your logistics or operations. You should assess the infrastructure conditions and costs in your target locations, and plan accordingly.
Consumer behavior and preferences. Vietnamese consumers are becoming more sophisticated and demanding, as their incomes and living standards rise. They are also influenced by various factors, such as culture, tradition, religion, education, media, etc., in their purchasing decisions. You should understand the consumer segments and trends in your target market, and offer products or services that are affordable, quality, innovative, and customized.
Competition and cooperation. Vietnam has a competitive and open market, with many domestic and foreign players in various sectors and segments. You should be aware of your strengths and weaknesses, as well as those of your rivals, and devise effective marketing and pricing strategies. You should also seek opportunities for cooperation or partnership with local firms, which can help you access resources, networks, or markets.