Harvard Case - After the BRICs: Choosing from Other Emerging Markets
"After the BRICs: Choosing from Other Emerging Markets" Harvard business case study is written by Allen H. Kupetz, Gary Haberland. It deals with the challenges in the field of General Management. The case study is 6 page(s) long and it was first published on : Jan 25, 2013
At Fern Fort University, we recommend that the company, facing the need to diversify its portfolio beyond the BRICs, should prioritize Vietnam as its next emerging market. This recommendation is based on a thorough analysis of Vietnam's economic growth potential, its strategic alignment with the company's core competencies, and the favorable business environment it offers. We suggest a phased approach to market entry, starting with a pilot project in the manufacturing sector, followed by strategic partnerships and gradual expansion into other sectors. This strategy will allow the company to leverage its existing strengths, mitigate risks, and capitalize on Vietnam's burgeoning market opportunities.
2. Background
The case study focuses on a multinational corporation (MNC) seeking to expand its operations beyond the BRICs (Brazil, Russia, India, and China) into new emerging markets. The company is looking for a location with strong economic growth potential, a favorable business environment, and a skilled workforce. The case study presents several potential candidates, including Vietnam, Indonesia, and the Philippines.
The main protagonists are the company's senior management team, responsible for evaluating the potential of each emerging market and making a strategic decision. They are faced with the challenge of balancing potential risks and rewards, considering factors such as political stability, infrastructure development, and cultural differences.
3. Analysis of the Case Study
To analyze the case study, we employed a framework combining Porter's Five Forces to assess the competitive landscape and SWOT analysis to evaluate the strengths, weaknesses, opportunities, and threats associated with each potential market.
Porter's Five Forces Analysis:
- Threat of new entrants: Vietnam's market is relatively open to foreign investment, but there are existing barriers to entry, such as complex regulations and potential cultural challenges.
- Bargaining power of buyers: Vietnam's growing middle class is driving demand for goods and services, but the market is also highly competitive, giving buyers some bargaining power.
- Bargaining power of suppliers: Vietnam's manufacturing sector relies heavily on imported raw materials, making suppliers relatively powerful.
- Threat of substitute products: Vietnam's market is increasingly exposed to competition from regional and global players, posing a threat from substitute products.
- Competitive rivalry: Vietnam's market is characterized by intense competition, particularly in the manufacturing and consumer goods sectors.
SWOT Analysis:
Strengths:
- Strong economic growth: Vietnam boasts a robust economy with a high GDP growth rate and a young, rapidly growing population.
- Favorable business environment: Vietnam has implemented pro-business policies, including tax incentives and streamlined regulations, making it attractive for foreign investment.
- Skilled workforce: Vietnam has a large and relatively skilled workforce, particularly in the manufacturing sector, providing access to a competitive labor pool.
- Strategic location: Vietnam's location in Southeast Asia provides access to a large and growing regional market.
Weaknesses:
- Infrastructure limitations: Vietnam's infrastructure, particularly in transportation and logistics, still lags behind other emerging markets.
- Political instability: While Vietnam has enjoyed political stability in recent years, potential political risks remain a concern for investors.
- Corruption: Corruption remains a challenge in Vietnam, although the government is making efforts to address it.
Opportunities:
- Growing consumer market: Vietnam's rising middle class is driving demand for consumer goods and services, creating significant market opportunities.
- Technological advancements: Vietnam is embracing technology and digitalization, offering opportunities for innovation and growth in various sectors.
- Free trade agreements: Vietnam's participation in free trade agreements, such as the Trans-Pacific Partnership (TPP), provides access to new markets and reduces trade barriers.
Threats:
- Global economic uncertainty: Global economic instability can impact Vietnam's growth prospects and investment sentiment.
- Competition from other emerging markets: Vietnam faces competition from other emerging markets in Southeast Asia, such as Indonesia and the Philippines.
- Environmental concerns: Vietnam's rapid economic growth has raised concerns about environmental sustainability and pollution.
4. Recommendations
Based on the analysis, we recommend a phased approach to market entry in Vietnam:
Phase 1: Pilot Project in Manufacturing (Year 1-2):
- Establish a manufacturing facility: Leverage the company's existing manufacturing expertise and establish a pilot facility in a special economic zone (SEZ) to benefit from tax incentives and infrastructure support.
- Focus on local sourcing and partnerships: Collaborate with local suppliers to source raw materials and components, contributing to local economic development and mitigating supply chain risks.
- Develop a local workforce: Invest in training and development programs to build a skilled workforce, ensuring long-term sustainability and minimizing reliance on expatriate staff.
- Monitor and evaluate performance: Regularly assess the pilot project's performance, identifying areas for improvement and adapting the strategy based on market feedback.
Phase 2: Strategic Partnerships and Expansion (Year 3-5):
- Expand into new sectors: Explore opportunities in sectors with high growth potential, such as consumer goods, technology, and healthcare, leveraging existing expertise and building new capabilities.
- Form strategic partnerships: Collaborate with local businesses and organizations to gain market access, leverage local knowledge, and build brand recognition.
- Develop a comprehensive marketing strategy: Tailor marketing campaigns to the Vietnamese market, considering cultural nuances and consumer preferences.
- Invest in technology and digitalization: Embrace digital technologies to streamline operations, enhance efficiency, and reach a wider customer base.
Phase 3: Sustainable Growth and Market Leadership (Year 5 onwards):
- Establish a strong corporate social responsibility (CSR) program: Contribute to local communities, promoting environmental sustainability and ethical business practices, building a positive brand image.
- Develop a long-term growth strategy: Identify new opportunities and challenges, adapting the strategy to the evolving market landscape.
- Invest in innovation and product development: Continuously innovate and develop new products and services to meet the evolving needs of Vietnamese consumers.
- Foster a strong organizational culture: Promote diversity and inclusion, empowering employees and fostering a culture of collaboration and innovation.
5. Basis of Recommendations
This recommendation considers the following factors:
- Core competencies and consistency with mission: The company's manufacturing expertise and commitment to sustainable growth align well with Vietnam's economic development strategy and its focus on attracting foreign investment.
- External customers and internal clients: Vietnam's growing middle class presents a significant market opportunity for the company's products and services, while the pilot project will provide valuable experience for internal teams.
- Competitors: While the market is competitive, the company's focus on innovation and building strong local partnerships will differentiate it from competitors.
- Attractiveness - quantitative measures: Vietnam's high GDP growth rate, favorable business environment, and skilled workforce make it an attractive investment destination.
6. Conclusion
Vietnam offers a compelling opportunity for the company to expand its operations beyond the BRICs. By adopting a phased approach to market entry, leveraging its existing strengths, and adapting to the local context, the company can capitalize on Vietnam's growth potential and establish a strong foothold in this emerging market.
7. Discussion
Other alternatives considered include Indonesia and the Philippines. However, Vietnam's stronger economic fundamentals, more favorable business environment, and skilled workforce make it a more attractive option.
Risks and Key Assumptions:
- Political instability: Political instability could disrupt business operations and create uncertainty for investors.
- Infrastructure limitations: Limited infrastructure could hinder logistics and increase transportation costs.
- Corruption: Corruption could create challenges for businesses, leading to increased costs and delays.
Options Grid:
| Option | Strengths | Weaknesses | Risks |
|---|---|---|---|
| Vietnam | Strong economic growth, favorable business environment, skilled workforce, strategic location | Infrastructure limitations, political instability, corruption | Political instability, infrastructure limitations, corruption |
| Indonesia | Large population, abundant natural resources, growing middle class | Political instability, corruption, infrastructure limitations | Political instability, corruption, infrastructure limitations |
| Philippines | Strong English proficiency, growing middle class, favorable business environment | Political instability, natural disasters, corruption | Political instability, natural disasters, corruption |
8. Next Steps
- Conduct a detailed market research: Gather comprehensive data on the Vietnamese market, including consumer preferences, competitive landscape, and regulatory environment.
- Identify potential partners: Establish contact with local businesses and organizations to explore potential partnerships and collaborations.
- Develop a detailed business plan: Outline the company's strategy for market entry, including investment requirements, operational plans, and financial projections.
- Secure necessary approvals: Obtain the required permits and licenses to operate in Vietnam.
- Establish a local team: Recruit and train a team of local professionals to manage operations and build relationships with stakeholders.
By taking these steps, the company can effectively navigate the complexities of entering the Vietnamese market and position itself for long-term success.
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Case Description
A U.S. medical device manufacturer is operating in more than 40 international markets, including its most recent entries in the BRIC markets. The company president is now ready to look to new emerging markets for revenue growth. This time a more advanced "post-BRIC" analysis is needed to determine which market to enter next. Because the capital investment and risk associated with entering a new market is high, making the right market selection is critical.
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