Why Viet Kieus need to learn from their local counterparts [Business In Vietnam]

Adjusting your company to fit the local environment is key to having a successful operation overseas. This is a lesson that many overseas Vietnamese still need to embrace. The biggest mistake one can make is to disregard the locals and assume your methods are inherently superior. As many failed businesses in Vietnam have learned, it's often not about the "best" but rather the "best fit."

By on June 7, 2010 • Topics: Business & Tech

Ramen at McDonalds? Photo by Flickr User: Brandon Shigeta

A friend of mine from Bain and Co. sent over an article titled “Winning in Emerging Markets.” The article, written by Satish Shankar, provides 6 strategies on how to compete in emerging markets like Vietnam, India, and China.  The strategy that caught my eyes was “localize at every level.”  Adjusting your company to fit the local environment is key to having a successful operation overseas.  This is a lesson that many overseas Vietnamese still need to embrace.

First of all, what is localization? The idea is simple: adjust to fit the local environment.  This might include changing your product, price, place (distribution), or promotion strategies.  Take for example, McDonalds.  In the United States, McDonalds is a fast food, low price restaurant which serves up quick burgers and fries.  However, fly over to France, and McDonalds feels much more like a high-end, cafe-like environment.  Fly over to Hawaii and you’ll see new menu items like ramen, Portuguese Sausage / Eggs / Rice Plates, and taro pies.  McDonalds adjusts to the taste and preferences of the market it is trying to serve.  This understanding of the local environments has made McDonalds of the most internationally recognized brands in the world.

The biggest complaint about Viet Kieus: wanting to do everything their way.  More frankly, wanting to do everything the “American way.”  I had a chance to speak to a manager at a large manufacturing firm in Vietnam.  He tells me every year, ambitious businessmen from overseas arrive in Viet Nam wielding frameworks, models, best practices, et cetera from successful businesses in the States.  While trying to fit their Vietnam business in the predefined molds, these individuals completely ignore the local environment, preferences, and business practices.  For these businesses, things usually do not turn out well.

Mr. Shankar writes:

Homegrown competitors have several incumbent advantages, including consumer loyalty, lower costs, and sympathetic regulators. By taking the time to master local complexities, multinationals can gain a competitive edge. That often requires fundamental changes to the product offering.

It cannot be a one way exchange. In order to succeed, overseas Vietnamese businessmen must understand and adjust to their local environment.  Distinguish the different preferences.  Learn the local business practices. But most importantly, listen to their local counterparts.  The biggest mistake one can make is to disregard the locals and assume your methods are inherently superior.  As many failed businesses in Vietnam have learned, it’s often not about the “best” but rather the “best fit.”

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Note: I believe economic progress is one of the best ways to raise living standards in Vietnam.  As foreign companies invest in Vietnam, they bring jobs and advance training.  For this to happen, it is crucial to have mutual respect and understanding between overseas Vietnamese and the people living there.  I think in the 21st century, the best way to facilitate this dialog is through the internet and social media.  Through OneVietnam Network, we hope to facilitate this conversation in the future.

The Author: James Bao

James Bao is the co-founder and Executive Director of OneVietnam Network, a Ford Foundation funded project to inspire diaspora giving. Previously, James was a financial analyst covering the technology, telecommunications, and media space. James is an alumni of UC Berkeley with a degree in Business Administration. He was born in Da Lat, Viet Nam and grew up in the San Francisco Bay Area. Find James on OneVietnam.

  • http://facebook.com/profile.php?id=1366498373 Michael Cooper

    It's only common sense to learn about the nature of your target group and take their lifestyle into consideration. That being the reason a Vietnamese restaurant in the states, England, Austrailia, Germany, don't have all the same things on the menu, and the things with the same name taste different. Vietnam already has the "Lotteria" a Chinese chain of McDonald's like restaurants that offer a Fried chicken leg with every value meal. I believe in the economic progress of Vietnam, naturally. Although I don't think Capitalism and profit should take precedence over what is being offered only for selfish gain. I would say Vietnamese food is the healthiest of all Asian food and Fast Food should not be used to attain economic growth. Economic gain without concern for the welfare of the people is only an advance in profit without concern for the welfare of the populous. Let's help Vietnam grow with more than just an increase in money, let's help Vietnam reach the 20th Century without changing their Culture.

  • http://facebook.com/profile.php?id=1366498373 Michael Cooper

    I think what I want to say is, teach them how to advance what is already there, not introduce what they don't, only with profit in mind.

  • Michael

    you wrote: While trying to fit their Vietnam business in the predefined molds, these individuals completely ignore the local environment, preferences, and business practices. For these businesses, things usually do not turn out well.

    Does that mean bribery and corruption involvement in order to carry your business in Vietnam. That is a total wrogn way of thiking localization

    • http://www.onevietnam.org James H. Bao

      Hi Michael, I think we would both agree that bribery and corruption are both morally and economically unsound. It is the wrong way of thinking of localization, and I don’t suggest you think that way.

      Please see my example of how McDonalds localizes; it is a prime example. (If they didn’t understand the culture, they would do something crazy like sell only beef patties in India!).

  • http://facebook.com/profile.php?id=563139898 Kim Nguyen Browne

    Good article but not all Viet Kieu are American or do business the American way! ;O)However, like all countries & business/organisations you need to build relationships & quality is key, which is only just improving in Vietnam.

  • Viet Tran

    @Anh I agree, VK comes into Vietnam with that “I know best” attitude. I’m a VK myself and see this happen a lot…

    @Michael, really? No one was talking about corruption and politics and crap, and you just had to shove it in there? C’mon, be productive for a chance.

  • http://facebook.com/profile.php?id=667294232 Trúc Nguyen

    @MichaelCooper – AMEN.

  • http://facebook.com/profile.php?id=100000805702568 Calvin Hue Quach

    It's all corruption, even you build good relationships and everything. I don't trust the VN gov. period due to their taxation 600% three to five years after. My father lost everything in the mid 80's, he came back home to the U.S with nothing to gain!

  • http://facebook.com/profile.php?id=685124542 Phuong Vu

    Re-post?

  • http://facebook.com/profile.php?id=4920545 Ivy Le

    It would be AWESOME to start a business and raise kids in Vietnam, where kids are still allowed to be kids. BUT the Communist government makes a capitalist nervous. What kind of businesses are people starting over there? Do you have to have a Viet citizen as a partner?

  • http://facebook.com/profile.php?id=822642379 Lac An Huynh

    very good point..

  • http://facebook.com/profile.php?id=836750102 Anh-Minh Andy Do

    I think this article can also be generalized to Viet Kieu across the board, not just in business. I've seen too many VQ's who come to VN doing non-profit work or teaching work or other work, and they always think they know better than their local counterparts. It's an unnecessary arrogance.

  • http://facebook.com/profile.php?id=563139898 Kim Nguyen Browne

    I think every country has a certain degree of corruption. To be truthful, I found a Vietnamese Government official really helpful when I applied for a licence to take 40 kids from an orphange out. He was so kind that he told me 'welcome home', what to write in the letter, let my friend & I use his office computor, waited an hour for me after closing time so I could bring a confirmation letter back from the orphanage director & pushed my application letters through to te People Committee! I know of no Government official or office in London that would do that!

  • Huan Vo

    Vietnamese Americans whose interest in doing business and engaging in activities in Vietnam should spend time to do in-depth research about the culture and the way locals do businesses. Throwing in $$$ and apply their model of “success” in the States to Vietnam will be a suicidal step. Many VKs had, have will commit to this trap. Just be attentive and observing.
    Money or similar forms are instruments to “smoothen” and ease the business. It’s the Nature of doing Business in Vietnam and trust me, when your business grows to certain level, you will need it. it’s the fluid, the blood to carry on Business.

    Relationship + Networking + Resourcefulness + Humility + Understanding of the Culture are the keys.

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