Reference no: EM133047874

International Management.

1. What are two of the most promising aspects of Vietnam's country from a business perspective?

2. What aspects of the Vietnamese market do you think will specifically benefit IKEA?

3. What risks do you foresee that could stunt the development of Vietnam in the future?

4. Should someone recommend that IKEA change any component of its traditional business strategy when marketing to Vietnamese consumers?

****Refer To The Excerpt Below.

Vietnam

Located along the eastern side of the Indochinese peninsula, the Socialist Republic of Vietnam is a hilly and heavily forested country that, in recent years, has experienced rapid urbanization. The country boasts a long coastline along the Gulf of Thailand, Gulf of Tonkin, and the South China Sea, and it shares a physical border with China, Laos, and Cambodia. The tropical climate is noted for its monsoon season, spanning from May to September, and its dry season, spanning from October to March.

With roughly 97 million residents as of 2019, Vietnam is the world's 15th most populous country. About a third of the population now live in urban areas, which are clustered in the southern Mekong Delta and in the northern Red River Valley areas. Ho Chi Minh City is the largest city in Vietnam, containing about 10 percent of the country's population. Vietnam formally recognizes over 50 different ethnicities, although people of Kinh or Viet ethnicity make up the vast majority of the population (85.7 percent). Population growth is relatively stable at about 1 percent annually.

The Communist Party of Vietnam controls the government and, by law, is the only legal political party allowed to operate within Vietnam. The party holds a national congress every five years to chart the future course of the country and to formulate national policy. Although the party is officially dedicated to socialism, elements of capitalism have been increasingly embraced. The unicameral National Assembly of Vietnam, with 500 members, holds constitutional and legislative power in addition to the ability to elect the president and prime minister. Elections are held every five years

With a GDP of US$240 billion in 2018, Vietnam's economy is currently about half the size of Thailand. Per capita GDP stands at only US$2,500. The rate of growth, however, remains high; in 2018, the economy expanded by approximately 6.6 percent. Unemployment stands at just 2 percent, though wages remain low. Vietnam's economy is highly dependent on manufacturing exports, as many companies have shifted their outsourcing activities from China to Vietnam, where labor remains inexpensive.

Vietnam's young population, stable political system, commitment to sustainable growth, relatively low inflation, stable currency, strong FDI inflows, and strong manufacturing sector make it a promising emerging market that seems almost destined for long-term success. The government, however, acknowledges the need to spark a "second wave" of reforms, including reforming state-owned enterprises, reducing red tape, increasing transparency in the business and financial sectors, and reducing the level of nonperforming loans in the banking sector. As the Vietnamese government increasingly incorporates capitalist ideas into its socialist policies, the country's economic growth will likely continue to accelerate at a steady pace.

International Management Consultant

In 2019, IKEA announced plans to invest US$450 million to build a distribution warehouse and retail center in Hanoi. When completed, the warehouse will function as the primary supply center for IKEA's operations in Southeast Asia. Although disposable income in the country remains lower than in most countries in which IKEA operates, the company seems to be betting on the rapid emergence of the Vietnamese consumer class. IKEA focuses on selling furniture at a lower price point than its competitors, which could lead to success in Vietnam. Still, the company also requires its customers to assemble the furniture themselves. In 2019, the furniture and interior decoration market in Vietnam was estimated to be worth an annual US$2.5 billion.