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, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models,
increasing energy prices, challanges to central banks by blockchain based private currencies, 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 -
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Nam Vietnam's are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
High brand equity
– Nam Vietnam's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nam Vietnam's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
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.
Successful track record of launching new products
– Nam Vietnam's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nam Vietnam's has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Nam Vietnam's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nam Vietnam's has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Operational resilience
– The operational resilience strategy in the Vietnam's Private Sector Development: Mr. Nam's Dilemma Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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 -
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.
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.
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.
Aligning sales with marketing
– It come across in the case study Vietnam's Private Sector Development: Mr. Nam's Dilemma that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Vietnam's Private Sector Development: Mr. Nam's Dilemma can leverage the sales team experience to cultivate customer relationships as Nam Vietnam's is planning to shift buying processes online.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Vietnam's Private Sector Development: Mr. Nam's Dilemma HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Nam Vietnam's has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Nam Vietnam's is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Nam Vietnam's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nam Vietnam's to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Vietnam's Private Sector Development: Mr. Nam's Dilemma has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nam Vietnam's 's lucrative customers.
Lack of clear differentiation of Nam Vietnam's products
– To increase the profitability and margins on the products, Nam Vietnam's needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
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.
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 -
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nam Vietnam's can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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.
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.
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.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nam Vietnam's is facing challenges because of the dominance of functional experts in the organization. Vietnam's Private Sector Development: Mr. Nam's Dilemma case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nam Vietnam's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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 -
High dependence on third party suppliers
– Nam Vietnam's high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Nam Vietnam's will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
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.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Nam Vietnam's in the Finance & Accounting sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Nam Vietnam's has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Nam Vietnam's needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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 .
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.
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.
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.
