Entry modes of European firms in Vietnam

Daniel Simonet

doi:10.5195/emaj.2012.27

Abstract

Purpose: The purpose of the paper is to explore the entry modes of EU firms setting up operations in Vietnam. Design/methodology/approach: we use a case study approach on Haymarket, Cadbury, Creative Education, Fairchild, Aventis and Artemisinin and Farming International using interviews from managerial professionals in Vietnam. Findings: Despite the fact that Vietnam has been opening up for more than 20 years, licensing is the preferred entry mode because of the risks involved in venturing with local firms; that preference signals a low level commitment and a high perception of risk and state interference. In line with Vietnam transition to state - rather than private market - capitalism, a foreign company opting for a joint-venture will do so with a state-owned rather than privately-owned company. The choice of a subsidiary can be explained by the lack of trust in partners and institutions, not by improvement in the socio-political environment.Limitations: In determining the entry mode strategy, the paper focuses on the Uppsala school’s “psychic distance” (e.g. cultural distance, lack of trust) rather than on firm-specific advantages (Rugman, 1980; 2006).Key-words: international entry mode; emerging markets; subsidiary; joint-venture; India; Vietnam

Highlights

Company size and ExperienceBargaining power affects firms differently, and depends on both company size and experience
This journal is published by the University Library System of the University of Pittsburgh as part of its D-Scribe Digital Publishing Program, and is cosponsored by the University of Pittsburgh Press
Dealing with private actors usually involves a variety of participants with different levels of power which the foreign firm can played against one another to extract better contracting terms: in the Vietnamese industrial equipment industry for instance, exclusive distribution agreements are limited to a period of 2 to 3 years (Tuang and Stringer, 2008), which enables foreign suppliers to shift to an alternative distributor should the need arise

Summary

Company size and Experience

Bargaining power affects firms differently, and depends on both company size and experience. P7: A large and experienced entrant will prefer a wholly-owned subsidiary (i.e. internalization) over a low-equity entry mode when entering an newly-emerging market. This relationship does not appear uniform in Asia. Other large single-brand firm with significant international experience such as apparel retailers (e.g. Diesel, Tommy Hilfiger, Esprit, Louis Vuitton, FCUK, Lee Cooper, Escada, Guess, Dunhill, and Mango), mass-retailers (e.g. Marks & Spencer, Debenhams, ) and fast-food company (e.g. Pizza Hut) entered the Indian market though the franchise routevii. In contrast to India, will the large and experienced entrants of our case group adopt a wholly-owned subsidiary (i.e. internalization) when entering Vietnam?

Asset specificity and capability Matching

Agglomeration Effect

VIII. Discussion

The time horizon issue

Findings

Conclusion