Swot Analysis on Vietnamese Economy free essay sample

In recent years, globalization has become one of the most popular term involving in many business articles and speeches. Globalization has brought both advantages and disadvantages to the world in many aspects, from economy to culture. Along with the trend is the expansion of multinational company. Nowadays, it is common to see a company with operations in many countries. In order to penetrate to a new country, every entrepreneur should have a SWOT analysis about the country to know about its strengths, weaknesses, opportunities and threats. The analysis will help the entrepreneur to find a proper strategy for the company to operate in the new country. This SWOT report will analyze the strengths, weaknesses, opportunities and threats of Vietnamese economy. With the GDP increases steadily 7% per year, Vietnam is a noticeable country which offers investors from every countries lots of strengths and advantages that they could find attractive and useful for their business process. We will write a custom essay sample on Swot Analysis on Vietnamese Economy or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page When comes to the strength, location can be the first strong point that has greatly affected the Vietnamese economy. Generally, Vietnam locates in the south east Asia, in the middle of the Pacific Asia area. It is bordered by Laos to the north west, Cambodia to the south west, People’s Republic of China to the north and the east sea to the east. Due to its location, Vietnam can be considered as the common trading place of the whole area, in which many companies take as its transition. For instance, many Japanese and Korean companies take Vietnam as a stop point in their process delivering products to the more southern countries. It is all due to the central location of Vietnam. Therefore, a huge amount of money has been invested in Vietnam with the purpose of not only improving the conditions but also attracting more investors. Vietnam has become an open market and become more popular in the past decades. Many important business events of the whole area have been held in Vietnam recently. Furthermore, having approximately 3260 km of the border which meets the sea, Vietnam has the advantage of transportation and delivery. Heavy products such as cars, minerals, etc. can be much cheaper transported through the sea route than by planes. The low cost of delivery can lead to the decrease in the price of both imported and exported products. This is maybe one of the most attractive trait of Vietnam, which offers to investors the possibility to make profit from a small amount of capital invested. Natural resource is another strength of Vietnam. Located in the most eastern part, faced the Truong Son mountain to the west and the east sea to the east, Vietnam has the access to plenty kinds of resource, such as minerals, soil, wood, petroleum and gas complex, a diversity of animals, etc. With the tradition of thousand years of agriculture, Vietnam ranks second among the most exported rice countries in the world. This is due to not only the proper policies of Vietnamese government, but also because of the appropriate climates and terrain, which mostly includes deltas and low mountain. Besides, Vietnam also gains lots of money from exporting petroleum, sea species, coal, etc. Moreover, having the access to several kinds of resources means Vietnam can provide raw materials and producing ingredients itself. It can lead to the lower producing cost, due to the self-supply of raw materials. On the other hand, the profit from selling materials takes an important role in the economy. For instance, Vietnam not only can produce energy enough for the whole country but also enough to sell to other countries, such as Laos. . Thirdly, Vietnam ranks 13rd among the most populous countries in the world, which means it has a huge amount of working force. With 88 million people (2010) in a small area of 331,212 km? , the labor cost is extremely cheap and with the population density as high as in Vietnam, it is easy for companies to find employees. In 2009, the monthly minimum wage for a fulltime worker, working 8 hours per day, 7 days per week, required by the government is 730. 000 Vietnamese dong, which is equal to â‚ ¬26 at the current exchange rate. In comparison with the number in developed countries, â‚ ¬9 per hour in the UK for example, no wonder why big multinational companies all over the world have been trying to outsource to Vietnam. There are many factories along the country which are manufacturing final products for world top multinational companies. Nike, Adidas, Panasonic, Toyota, etc. , all place their factories in Vietnam. In fact, when one goes shopping in Europe, it is no surprised to see a product of a famous brand with the â€Å"Made in Vietnam† label printed on it . Moreover, according to some latest research, Vietnam has a young population. It can lead to a more effective working force, compared to countries which have an old population, such as Finland and Japan. In the last decades, the literacy rate of Vietnam has been increasing steadily, from 88% in 1989, 90% in 1999 to 93,5% in 2009. More people get a bachelor’s degree nowadays, which leads to the improvement in the worker’s skill. Offering not only a strong flow but an efficient working force, Vietnam has been attracting more investors every year. Having joined the World Trade Organization (WTO) in November 17, 2006 opens to Vietnam lots of advantages regarding the economy. According to the major principles, joining WTO brings Vietnam to the expansion of market and increase in exports. Especially in agriculture and textiles, WTO has set out various measures to gradually eliminate trade barriers of other countries on Vietnam. Moreover, joining the WTO can be the gate leads Vietnam to a more open market, which offers many possibility to attract foreign investors. WTO membership helps Vietnam get a perfect legal, more transparency and more attractive environment for direct investment by foreigners. WTO accession is also a very clear message about the commitment of the Vietnamese reform and create confidence for investors to put funds into the business in Vietnam. In addition, a more equal opportunities to access the market for other WTO members with transparent standards of the WTO, is also an important factor to attract foreign investment. However, Vietnam still has some weaknesses that must be managed properly in order to sustain it development steadily. Generally, the biggest weakness of Vietnam is the lack of capital. Although Vietnam has been attracting lots of investment from external sources, the capital, which is commonly provided by the government, is not enough for improving the condition of Vietnam. It leads to the lack of infrastructures and facilities. This could affect greatly to the possibility for investors to invest money in Vietnam, as they may have to pay more than the real business process will costs for upgrading the facilities. For instance, building a factory may not only cost the money to build the factory itself, but business man may have to pay extra fee to the authorities to get a connection of network, electronic and water, as not everywhere in Vietnam has electronic and water connection. However, the reason of the situation can also be the improper governance, which can leads to the improper policy. Despite of investing the available capital in the most optimal ways, in order to create more money, the government has chosen to invest the capital in others project which the profitability is less. In addition, Vietnamese policies have not focused on saving natural resources. In the recent years, forests have been cutting down, sea has been spoiled and tons of animals have been killed for private purposes. Moreover, in the most public way, other important sources, such as petroleum and coal have been over used. Scientists believe that if the Vietnamese government would not come up with any solutions, its natural resources will run out in 20 years. Having a long history associating with China, Vietnam gets effect easily from China. Specifically the recent corruption in China. According to the 2007 annual report of Transparency International (IT), 14% of Vietnamese population has to committed corruption, while in Finland, America, Denmark, Ireland, Netherland, Portugal, UK the rate is 2% and in Canada, Japan, Korea, Australia, France, Iceland, Sweden and Switzerland is 1%. This is also because of the weak governance of Vietnamese government that causes such a high rate of corruption. In long terms the situation can get worse and affect to many aspects of life. Another problem is the high rate of inflation in Vietnam recently. According to the Institution of Developing Economies (IDE-JETRO) in Japan, the inflation rate of Vietnam in 2008 is 8,1%, despite every measures to control it of the government. High rate of inflation leads to the increase in the cost to produce products, which means the investors will have to pay more in order to produce the same products. It can relatively raise the prices of selling products, which causes the decrease in demand of consumer. Thus, the lack of well educated worker is another problem that can affect to the producing cost. In 2009, Vietnamese government has announced that there are only 8,6 million people have been educated, among 88 million of population. In 8,6 million educated people, there are 4,7% graduated from high schools, 1,6% graduated from colleges, 4,2% completed their universities and only 0,2% gets there after graduated degree. This proves the serious lack of skilled workers in Vietnam. Finally, yet importantly, the huge amount of debts of Vietnam is an important point among the weaknesses Vietnam has to face. According to the Debt Maps calculated by The Economist (USA), in 2010 the specific debt of Vietnam is 50. 16. 438. 356 USD, takes 51,7% GDP. This indicates that the Vietnamese debt has increased largely from 106 USD per person in 2001 (26. 6% GDP) to 578,65 USD per person in 2010. This compares to other developed countries, such as Finland, Japan, is not much. However, experts believe that Vietnam can hardly pay the debts in the next 50 years, while the debts still increase each yea r. This huge amount of debts can lead to the lack of investment in infrastructure and facilities supported to the economic process. On the other hand, there are plenty of opportunities available for Vietnam. Especially after Vietnam has joined WTO in 2006. After joining WTO, Vietnam can have chances to improve the efficiency and competitiveness of the economy. By reducing taxes and non-tariff barriers, opening the services market, which is according to the WTO’s principles, the business environment of Vietnam will become more competitive. Regarding the situation, internal and external enterprises would have to raise their self-improvement, in order to meet the expectation and compete with other enterprises. The United Nations (UN) predicts that urbanization will continue to be the long term trend. By the early 2040s, the urban population will rise from 29% of the population to 50%. The rise in urban population will lead to the increase in demand of product and the taste of consumer. The opportunity of Vietnam becoming a potential business environment for external investors will relatively increase. Finally, yet importantly, the threat that possibly will occur can verify greatly as the world is changing day by day. Identifying threat can help the economists come up with the measures in order to prevent or manage it properly. Serious inflation and deficit situation in Vietnam may lead to the re-assessment process of some investors over Vietnamese economy. If the government focuses too much on stimulating growth of Vietnam and fails to root out inflationary pressure, it risks prolonging instability, which could lead to crisis. Another threat could be predicted may come from other developing countries and the BRICs, which refer to Brazil, Russia, India and China. The possibility that oversea enterprises will choose this group of countries for their business operation instead of Vietnam is the main threat that occurs. Other developing countries and especially the BRICs have the ability to provide other companies a strong flow of working force with much lower cost but higher working skill. Besides, understanding their strengths and weaknesses, these countries have come up with much open policy in order to attract investors invested in both business operation and infrastructures. In conclusion, the SWOT analysis has summary the four important factors of a country: strength, weakness, opportunity and threat. In this case, Vietnam has had a quite high developing rate in recent years, along with many achievements. By knowing their own strength and weakness, Vietnamese government has come up with many measures in order to sustain the advantages and limit the weakness of its economy. Thus, predicting the opportunities the world has to offer and the threat that can occur is one of the important step that Vietnamese authorities should put it much consideration. However, despite the weaknesses, Vietnam is still among one of the most developing countries in the last few decades.