Vietnam’s new brand building arena
Vietnam’s new brand building arena
40 years ago, Vietnam was one of the poorest countries in the world – and it has come a long way since then. Now it is a “velocity” market: one of the rapidly growing, technologically-empowered economies included in Ogilvy’s V12 report.
Thanks to trade liberalisation and an investment in human and physical capital, there has never been a better time to do business in Vietnam.
Vietnam is a highl-attractive target for foreign investment
Vietnam has risen in the World Economic Forum’s Global Competitiveness Report and the World Bank’s Ease of Doing Business rankings.
The Vietnamese government has also signed a number of bilateral and regional free trade agreements. This will stand the country’s economy in good stead, allowing it to tap into global lucrative consumer markets and bring in foreign investment. Previously centred around manufacturing, foreign direct investment (FDI) is now diversifying, most recently favouring the real estate market thanks to newly relaxed property ownership laws.
Vietnam is a manufacturing hub
Tariffs and rising labour costs in China, driven by the Made in China 2025 plan to climb the manufacturing value chain, have resulted in low-cost manufacturers shifting production to other countries such as India and Vietnam. As a result, Vietnam has become a low-cost manufacturing hub, with productivity increasing by 36 per cent between 2006 and 2017.
Since 2010, global electronics brands including Intel and Samsung have invested more than $18 billion in setting up facilities and building partnerships in Vietnam. Vietnam is also one of five nations responsible for 51 per cent of global growth in textiles and apparel exports, an area of consistent future growth, according to predictions by McKinsey. These key manufacturing sectors look set to continue attracting foreign investment.
Local entrepreneurs have a global perspective
The phenomenon of the returning diaspora has brought a wealth of skills back into Vietnam. Overseas Vietnamese have a global mindset and Western education, combined with local language. While perceptions around them and their stories are not always positive, this fusion of Eastern and Western thinking has led to exciting new contributions to the spheres of food, art, music, and fashion, helping connect Vietnam to the rest of the world.
Automation and Artificial Intelligence will drive growth – but also bring challenges
Increased mechanisation has the potential to boost productivity in Vietnam’s manufacturing industry in the short term, without negatively affecting job growth. There are also considerable untapped opportunities in agriculture (which accounts for almost 20 per cent of Vietnam’s GDP), especially around precision farming, automation, and data-powered solutions.
However, according to the International Labour Organization, more than half of all workers in Vietnam, Cambodia, Indonesia, the Philippines, and Thailand will be at risk of displacement during the more advanced stages of automation over the next two decades. It will be necessary for Vietnam to retrain and up-skill its workforce.
The Vietnamese government has already invested heavily in human capital and infrastructure ahead of this anticipated industrial revolution, with a focus on education and enabling affordable, widespread internet access to ensure that its rapidly growing young population is equipped for what is to come.
Digital readiness is a priority for Vietnamese entrepreneurs
The private sector is growing Vietnam’s IT scene, and Vietnamese telecom companies are enthusiastically welcoming international partners in order to accelerate development.
Vietnam is currently a regional leader in cybersecurity, with a cybersecurity adoption rate of 88 per cent, higher than the ASEAN average. The government recently issued a new digital privacy bill which will make the region stronger, and the Ministry of Information and Communications is to implement a framework to reduce system vulnerability by 2020.
Perceptions around digital readiness are largely positive in Vietnam. According to Cisco’s research, Vietnamese businesses and IT leaders are more confident in their digital transformation strategies than their counterparts in other countries, and a large number are considering upgrading their infrastructures in order to enhance their own cybersecurity position.
This proactive approach to digital transformation is present both in multinationals and smaller entities. Businesses in Vietnam are keenly working to leverage the cloud and automation.
There is a demand for big retailers
A rising local demand makes Vietnam a strong choice for retail investment; international retailers like Lotte and AEON have dedicated considerable resources towards improving the “big retail” concept, resulting in hypermarkets which are perceived as equal parts shopping and entertainment, complete with a strong range of promotions, and imported products.
Shopping frequency and average spending are both on the up, however, 53 per cent of Vietnamese shoppers are still waiting to be engaged, according to Kantar’s research.
A lack of brand building in Vietnam presents a huge opportunity
Vietnam is one of the world’s largest agricultural exporters, and yet foreign consumers are unlikely to know that what they are buying originates from Vietnam, because products are often exported without branded packaging.
Small and medium-d enterprises in Vietnam need much greater awareness of the importance of a brand as an intangible asset and a core component in creating business value. As Vietnam becomes increasingly internationally integrated, businesses will face more competition than ever before – and potential brand disputes.
Local entrepreneurs, and exporters especially, must make brand-building a priority from the very start. Practically speaking, this begins with registering trademarks both domestically and internationally; in developed nations, trademark-intensive industries contribute approximately 50 per cent to the GDP, while in developing countries this is closer to 25 per cent.
With automation and transformation knocking on Vietnam’s door and international competition heating up manufacturing and exports, it is more important than ever to make brands matter.
