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Scaling A Business: How To Expand Your Business To Vietnam

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When it comes to scaling a business overseas, the lack of insight and market-centered resources are the most prominent reasons for failure. Achieving a positive response in your local market is a good sign, but it doesn’t guarantee that you will be able to replicate the same success overseas. After all, operating in a foreign market with its unique consumer demands, business regulations, and culture is a challenging feat that shouldn’t be underestimated.

We’ve previously covered the reasons Vietnam is the best destination for business expansion. Not only can you benefit from its booming consumer market, its strong and affordable labour force, but the country also makes for an excellent business environment. This article hopes to provide your business with the 101 guide to expanding overseas, particularly in a growing market like Vietnam.

 

Steps For Scaling Business Across Borders: Vietnam

Research Your Target Market

The first step in scaling a business abroad is the most challenging as you are faced with an unfamiliar cultural, political and economic environment. Hence, getting a broader understanding of your target country’s market will help you to determine the scope of your project and identify hidden challenges that could arise from your target market.

Depending on your objectives of venturing overseas, you need to profile your target market thoroughly:

From a consumer standpoint, you want to assess customer preferences and the potential scale of the customer base in Vietnam. This means understanding the motivations behind growing demands as well as their existing supplies. At the same time, their government regulations and culture will also tell you a thing or two about the ease of doing business in the industry.

From an operational perspective, Vietnam is also an excellent destination for low-cost tech operations. You would want to find the best local recruiters and networks to access the best talent. Understanding local salary standards and employment regulations are also a must for any new business. 

With a better understanding of your potential market, you would determine if the returns on this strategic move are worth the investment.

 

Learn Market Characteristics

Identifying The Right Location

Vietnam has seen soaring consumer confidence levels due to improvements to the overall economy and household income levels. In fact, a majority of consumers have noted an intention to increase their expenditure. However, as Vietnam is a large country with a vast population, it is worthwhile to dive further into the demands of each region. For example, lifestyle goods in Hanoi tend to be more popular, while sales of consumer electronics are soaring in Can Tho. 

 

Business Culture

Understanding business culture is also a crucial step when scailing a business overseas as it may not be as consistent across regions as one might expect. 

For one, Northern Vietnam has a different culture as compared to Southern Vietnam. Southern Vietnam is often perceived as relatively easy to connect with but often difficult to understand on a deeper level. On the other hand, Northern Vietnam seems to be more reserved at first encounter but often result in long-lasting connections. As a result, you may require a more thorough approach or work with a trusted local intermediary.

A good understanding of the local culture may provide you with a clearer perspective on whether your business will fit into the culture and dispel any false assumptions of the country. 

 

Labour Force

Vietnam’s labour is globally acclaimed for its tech capabilities. Hence many companies are confident in hiring developers across various applications. However, as remote working has become a norm across the globe, companies have also opted for a mixed approach to hiring. For example, to ensure alignment between the target market and home ground, workers from the country of origin often retain managerial positions. However, companies are also free to access Vietnam’s trustable network of managers and senior experts. Either way, there are plenty of options to choose from.

Understand The Processes Of Scaling A Business Overseas 

Expanding your business overseas is a high-risk investment. With that in mind, understanding the country’s business regulations and procedures will save you costly mistakes.

 

Set-up Procedures

In order to carry out business legally in Vietnam, you must register your business with the appropriate licensing authorities. Most companies need to register as a Limited Liability Company (LLC).  However, depending on the type of entity, your business will need various documents and processes to facilitate the setup. Hence, it is crucial to consider your business entity options before any further documentation. 

Furthermore, all documents are required to be translated into Vietnamese before being submitted to authorities. A hassle that many businesses prefer to outsource to a trusted professional.

 

Taxation

The Vietnamese tax system consists of the following: Corporate Income Tax (CIT); Personal Income Tax (PIT); Value Added Tax (VAT); Foreign Contractor Withholding Tax (FCWT); and other taxes.

Within each of these taxes, different rules of declaration and payment apply according to the industry you are in. Likewise, certain businesses may enjoy incentives that businesses in other industries don’t. Understanding these rules and benefits will ensure that your business complies with the country’s regulations and maximize profits as well.

 

Accounting

Understanding Vietnam’s set of accounting and bookkeeping is critical towards developing an efficient business strategy that ensures compliance while minimizing costs. Businesses are required by law to follow the Vietnamese Accounting Standards (VAS) in recording expenses and revenues. This includes employee salaries and office expenses. 

 

Find The Tight Partners And Team In Vietnam

Going into uncharted waters is a risk for any business. Hence, having localized knowledge is a crucial differentiator for companies that make it in the Vietnam market. It is the closest thing you can get to a home-court advantage as it allows you to customize your product and service to the very grain and enables you to leverage cost benefits unbeknownst to foreign players.

A good partner will help you to navigate the market successfully, from due diligence to setting up and finding the right people for the job. This brings us to an important point, looking for an excellent agency to aid you in the process.

 

Choosing The Right Business Development Agency For Overseas Expansion

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Deep Understanding Of The Local Market

While consumer reports, social media and news media can offer you an overarching understanding of your target market, nothing beats the first-hand local experience of a seasoned agency.

The more targeted the agency is in the region, the better. For one, a specialization in ASEAN will allow the agency to provide deep insights on consumers, business regulations, and culture. Furthermore, their experience will enable them to understand clients’ pain points and effectively identify hidden challenges stemming from differences between them and the market they wish to operate in.

These insights will make your financial projections more accurate and enable you to better position your product or service according to local needs.

A local branch and office within the country specialization is an excellent way to determine if the agency is well-versed in the field. Having a localized team and space indicates an accurate and regular flow of communications between clients and consumers. In addition, engaging such a team will help you overcome the geographical limitations of operating offshore and allow you to make timely decisions regardless.

 

Strong Networks To Local Resources

We’ve covered the many benefits of doing business in Vietnam, namely quality workers at affordable prices. However, how much you reap from these benefits depends highly on the networks you have access to. A seasoned agency will possess these networks or at least the experts that can access these networks. Tapping into local suppliers and the local labour market is integral for any business to take off; hence, you want to ensure that you can easily access those channels through the agency.

In other words, your selected partner should have a good understanding of the complexity and scope of scaling up. This is often indicative through a broad scope of detailed services from setting up to maintenance and future-proofing. And they should be more than willing to spend the time to help you determine if they are the right fit for your business.

 

Strong Portfolio

Insights and networks aside, a strong portfolio of helping clients expand into the target country is the most vital credential. Working with clients with similar goals and unique profiles will allow them to anticipate the possible challenges of scaling up a business abroad.

You can determine the competency of the agency by assessing its portfolio of clients and success stories. And if you see ongoing long-term relationships with their clients, it is a good sign that they offer quality service and that their clients are pleased with their service.

 

Making Your Decision

Scaling a business overseas is a big step. So reservations about your decisions are natural. At JDI, we have assisted countless companies in their efforts to enter the Vietnam market. Thanks to our experience with a broad portfolio of clients, we have amassed a vast amount of insight into the Vietnam market across many industries. 

Our strong local networks have also helped us seek out the best local talent for each business’s needs in a timely manner. 

If you think you have what it takes but are still unsure, or if you have more questions on how to scale up a small business, please contact us for a quick detailed consultancy.

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