Case Study Description of Vietnam's Private Sector Development: Mr. Nam's Dilemma
In 2000, Vietnam passed the Enterprise Law to spur private sector development and facilitate its transition from a centrally-planned to a market economy. The Enterprise Law changed the paradigm for private business in Vietnam by making business registration a legal right, rather than a privilege. Between 2000-2005, the number of private enterprises increased by more than 100%, adding over 2.5 million jobs to Vietnam's labor market. Despite this success, Vietnam's private sector remained undercapitalized, having only 12 companies with over $33 million in total capital. This case study follows Mr. Nam, a successful Vietnamese furniture manufacturer trying to identify sources of funding to expand his firm, which was established under the Enterprise Law. In the past, Mr. Nam managed to finance business expansion from retained earning and informal credit, however continued expansion required Mr. Nam to identify "arm's length" financing. In this search, Mr. Nam encountered two fundamental problems. First, the banking sector, still under state influence, did not have strong incentives to lend to the private sector. Second, private banks and other sources of capital require Mr. Nam to submit his business to an independent audit, which would certainly uncover many business practices which were technically illegal - and essential to competitiveness. This case study encourages students to consider the social cost of weak regulatory environments, poorly designed economic laws, and the relationship between these conditions and the production of (undesirable) commercial norms. Instructors of development finance, small and medium enterprise finance, and legal and regulatory courses should find this case study useful. HKS Case Number 1812.0
Authors :: Eli Mazur, Nguyen Ngoc Bich, Lam Quynh Anh, Bui Van
Swot Analysis of "Vietnam's Private Sector Development: Mr. Nam's Dilemma" written by Eli Mazur, Nguyen Ngoc Bich, Lam Quynh Anh, Bui Van includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Nam Vietnam's facing as an external strategic factors. Some of the topics covered in Vietnam's Private Sector Development: Mr. Nam's Dilemma case study are - Strategic Management Strategies, Economic development, Economics, Financial management, Financial markets, Pricing, Regulation, Social responsibility and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Vietnam's Private Sector Development: Mr. Nam's Dilemma casestudy better are - – there is backlash against globalization, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, increasing energy prices,
central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Vietnam's Private Sector Development: Mr. Nam's Dilemma
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Vietnam's Private Sector Development: Mr. Nam's Dilemma case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nam Vietnam's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nam Vietnam's operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Vietnam's Private Sector Development: Mr. Nam's Dilemma can be done for the following purposes –
1. Strategic planning using facts provided in Vietnam's Private Sector Development: Mr. Nam's Dilemma case study
2. Improving business portfolio management of Nam Vietnam's
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nam Vietnam's
Strengths Vietnam's Private Sector Development: Mr. Nam's Dilemma | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nam Vietnam's in Vietnam's Private Sector Development: Mr. Nam's Dilemma Harvard Business Review case study are -
Organizational Resilience of Nam Vietnam's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Nam Vietnam's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Nam Vietnam's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Nam Vietnam's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Vietnam's Private Sector Development: Mr. Nam's Dilemma HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Nam Vietnam's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Nam Vietnam's is one of the most innovative firm in sector. Manager in Vietnam's Private Sector Development: Mr. Nam's Dilemma Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Nam Vietnam's is present in almost all the verticals within the industry. This has provided firm in Vietnam's Private Sector Development: Mr. Nam's Dilemma case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Effective Research and Development (R&D)
– Nam Vietnam's has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Vietnam's Private Sector Development: Mr. Nam's Dilemma - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Nam Vietnam's has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Sustainable margins compare to other players in Finance & Accounting industry
– Vietnam's Private Sector Development: Mr. Nam's Dilemma firm has clearly differentiated products in the market place. This has enabled Nam Vietnam's to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Nam Vietnam's to invest into research and development (R&D) and innovation.
Learning organization
- Nam Vietnam's is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Nam Vietnam's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Vietnam's Private Sector Development: Mr. Nam's Dilemma Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Nam Vietnam's in the sector have low bargaining power. Vietnam's Private Sector Development: Mr. Nam's Dilemma has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nam Vietnam's to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Nam Vietnam's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Vietnam's Private Sector Development: Mr. Nam's Dilemma Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses Vietnam's Private Sector Development: Mr. Nam's Dilemma | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Vietnam's Private Sector Development: Mr. Nam's Dilemma are -
High bargaining power of channel partners
– Because of the regulatory requirements, Eli Mazur, Nguyen Ngoc Bich, Lam Quynh Anh, Bui Van suggests that, Nam Vietnam's is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nam Vietnam's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Vietnam's Private Sector Development: Mr. Nam's Dilemma can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Nam Vietnam's needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Capital Spending Reduction
– Even during the low interest decade, Nam Vietnam's has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Products dominated business model
– Even though Nam Vietnam's has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Vietnam's Private Sector Development: Mr. Nam's Dilemma should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Vietnam's Private Sector Development: Mr. Nam's Dilemma, it seems that the employees of Nam Vietnam's don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow to strategic competitive environment developments
– As Vietnam's Private Sector Development: Mr. Nam's Dilemma HBR case study mentions - Nam Vietnam's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Nam Vietnam's has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Nam Vietnam's even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High cash cycle compare to competitors
Nam Vietnam's has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring
– The stress on hiring functional specialists at Nam Vietnam's has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Vietnam's Private Sector Development: Mr. Nam's Dilemma, in the dynamic environment Nam Vietnam's has struggled to respond to the nimble upstart competition. Nam Vietnam's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Vietnam's Private Sector Development: Mr. Nam's Dilemma | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Vietnam's Private Sector Development: Mr. Nam's Dilemma are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nam Vietnam's can use these opportunities to build new business models that can help the communities that Nam Vietnam's operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Buying journey improvements
– Nam Vietnam's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Vietnam's Private Sector Development: Mr. Nam's Dilemma suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nam Vietnam's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Vietnam's Private Sector Development: Mr. Nam's Dilemma, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Nam Vietnam's can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Leveraging digital technologies
– Nam Vietnam's can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nam Vietnam's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nam Vietnam's in the consumer business. Now Nam Vietnam's can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Nam Vietnam's to increase its market reach. Nam Vietnam's will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Learning at scale
– Online learning technologies has now opened space for Nam Vietnam's to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Nam Vietnam's to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nam Vietnam's to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Nam Vietnam's to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Nam Vietnam's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Nam Vietnam's can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Vietnam's Private Sector Development: Mr. Nam's Dilemma External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Vietnam's Private Sector Development: Mr. Nam's Dilemma are -
Regulatory challenges
– Nam Vietnam's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Vietnam's Private Sector Development: Mr. Nam's Dilemma, Nam Vietnam's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nam Vietnam's in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Consumer confidence and its impact on Nam Vietnam's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nam Vietnam's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Nam Vietnam's needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Nam Vietnam's is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Nam Vietnam's.
Stagnating economy with rate increase
– Nam Vietnam's can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nam Vietnam's can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Vietnam's Private Sector Development: Mr. Nam's Dilemma .
Environmental challenges
– Nam Vietnam's needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Nam Vietnam's can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Nam Vietnam's
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Nam Vietnam's.
Weighted SWOT Analysis of Vietnam's Private Sector Development: Mr. Nam's Dilemma Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Vietnam's Private Sector Development: Mr. Nam's Dilemma needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Vietnam's Private Sector Development: Mr. Nam's Dilemma is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Vietnam's Private Sector Development: Mr. Nam's Dilemma is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Vietnam's Private Sector Development: Mr. Nam's Dilemma is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Nam Vietnam's needs to make to build a sustainable competitive advantage.