Coca Cola Vietnam Strategy

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Conclusion: the rising of GDP growth indicates that Vietnam’s economy will witness a significant change in the future. This will be the right time for Coca Cola to think about develop its business in Vietnam.

Economic freedom

Vietnam has gradually been transforming itself into a more open, more market-oriented economy and is beginning to enjoy the benefits of its steady but slow integration into the global commercial system. Reforms have included partial privatization of state-owned enterprises, liberalization of the trade and investment regimes, and modernization of the financial sector.

Rule of law

Corruption and graft blight all levels of Vietnam’s government and judiciary. Internal dissent and factionalism, bureaucratic rivalries, nepotism, vast corruption within the Communist Party, and a general lack of accountability ensure that many agencies are run as fiefdoms. Many state companies operate with little transparency. Private property rights are not strongly respected, and resolution of disputes can take years.

Property Rights: 15.0/100 scores

[pic 3]

Freedom from corruption: 31.0

Source: 2016 Index of Economic freedom – Heritage.org

Figure 3. Property Right scored of Vietnam compared to the world

Freedom from corruption: 31.0/100

[pic 4]

GOVERNMENTSOUS

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Source: 2016 Index of Economic freedom – Heritage.org

Figure 4. Freedom from corruption scored of Vietnam compared to the world

Conclusion: Coca Cola have to consider these issues important threats when doing business in Vietnam. The Company may face with some problems while working with the government and cannot be protected by property right law in Vietnam.

Regulatory efficiency

Despite ongoing reform efforts, the overall business regulatory framework lacks efficiency. Although no minimum capital is required, starting a business remains time-consuming. The labor market remains dominated by the public sector, but informal labor activity is considerable. The government has reduced pharmaceutical subsidies but maintains price controls and high subsidies for rice and other agricultural commodities.

Business freedom: 58.3/100[pic 5]

Source: 2016 Index of Economic freedom – Heritage.org

Figure 5. Business freedom scored of Vietnam compared to the world

Labor freedom: 62.6/100[pic 6]

Source: 2016 Index of Economic freedom – Heritage.org

Figure 6. Labor freedom scored of Vietnam compared to the world

Monetary freedom: 70.6/100

[pic 7]

Source: 2016 Index of Economic freedom – Heritage.org

Figure 7. Monetary freedom scored of Vietnam compared to the world

Conclusion: business regulatory framework lacks of efficiency as well as a great number of informal labors will make Coca Cola find it more difficult to operate in Vietnam.

Open market

Vietnam’s average tariff rate is 3.5 percent. Export taxes are imposed on several goods. The government screens foreign investment, and investment in some sectors of the economy is restricted. State-owned enterprises distort the economy. The financial sector continues to expand, and capital markets are evolving. Directed lending by state-owned commercial banks has been scaled back in recent years.

Trade freedom: 83.0/100[pic 8]

Source: 2016 Index of Economic freedom – Heritage.org

Figure 8. Trade freedom scored of Vietnam compared to the world

Investment freedom: 25.0/100[pic 9]

Source: 2016 Index of Economic freedom – Heritage.org

Figure 9. Investment freedom scored of Vietnam compared to the world

Financial freedom: 40.0/100[pic 10]

Source: 2016 Index of Economic freedom – Heritage.org

Figure 10. Financial freedom scored of Vietnam compared to the world

Conclusion: The restriction in investment in some sectors may have bad effects on Coca Cola business. However, the rising of capital market is a signal of Vietnam’s potential market.

Labor

Vietnam is now in a period of golden population structure – 60% of its population is working age. Vietnam benefits from having a young, well-educated and eager-to-learn population, which is another must-have for foreign investors.

For some investors, Vietnam’s cheap production makes it the ‘new China’. Labor costs are hovering at 50% of China’s, and some MNCs have already begun a southern migration.

Conclusion: Coca Cola can obviously take advantage of cheap and young labor in Vietnam to reduce its cost in production. However, having investment in training these talent resources, and making sure the investments go into the right talents continue to be the key challenges that investor’s should take into account in their strategy of developing business in the market.

Cultural Analysis (Hofstede Model)

Power Distance

This dimension deals with the fact that all individuals in societies are not equal – it expresses the attitude of the culture towards these inequalities amongst us. Power Distance is defined as the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally.

Vietnam scores high on this dimension (score of 70) which means that people accept a hierarchical order in which everybody has a place and which needs no further justification.