Need for an appropriate international business strategy to expand into the global market
English - Ngày đăng : 15:13, 22/08/2023
Overcoming barriers
To implement an international business strategy, Vietnamese logistics enterprises need to overcome several barriers to penetrate the international logistics market. Firstly, there is the barrier of financial capacity. To penetrate the international logistics market, companies must have strong financial resources. The cost of market research, establishing companies, branches, or representative offices abroad requires significant capital for business expansion. Especially if logistics companies want to invest in infrastructure such as seaports, ICDs, warehouses, the capital requirement is even greater. This is a major barrier, resulting in very few Vietnamese logistics enterprises being able to execute an international business strategy through market expansion based on geographic areas, as over 90% of Vietnamese logistics enterprises are small or micro-sized.
Secondly, there is the barrier of legal framework. This is a barrier that Vietnamese logistics enterprises find difficult to overcome when implementing an international business strategy. Different countries have different legal regulations related to logistics activities. Vietnamese logistics enterprises mostly lack experience in this field, so they are hesitant to expand their logistics service activities to new markets abroad. In particular, some countries erect numerous technical barriers to restrict the participation of foreign enterprises in their logistics market through regulations on minimum capital requirements, technology, and strict environmental regulations.
High-quality human resources pose a significant challenge for logistics enterprises when expanding into regional and global markets. Developing business through strategic market expansion requires an appropriate workforce, especially in terms of language proficiency, international business experience, and understanding of local markets. This is a barrier that many Vietnamese logistics enterprises currently face, as the logistics industry in Vietnam has limited quality human resources in terms of training. Of course, when expanding operations abroad, many enterprises still use local human resources, a high-level management team, and key personnel who are mostly from the parent company. The reason is that this high-level management team and key personnel have a clear understanding of the company’s goals, strategies, and culture, enabling them to sustain and develop the business in new markets.
Market factors are also a notable barrier. As a newly entering enterprise, wanting to expand into foreign markets requires a significant amount of time and cost to understand the market, market segments where the company has strengths, competitors’ business practices, and customers to build a suitable business strategy.
Finding a separate path
Despite facing numerous barriers, in the context of enterprise globalization, businesses still need to develop appropriate market development strategies to survive and thrive. Vietnamese logistics enterprises not only compete domestically with foreign competitors but also need to “bring their weapons to fight on foreign turf” to gain market share and compete on an equal footing with external rivals.
To overcome the weakness in financial capacity, Vietnamese logistics enterprises can expand into foreign markets through non-investment forms of cooperation, such as signing Memorandums of Understanding (MOUs), Cooperation Agreements, or Agency Agreements to provide logistics services to partners. This type of cooperation does not require significant financial investment and profit sharing is based on specific contracts, creating a win-win solution. Currently, many foreign logistics companies provide services to Vietnamese customers in this way. Similarly, Vietnamese logistics enterprises can also provide similar services to foreign customers through their partners abroad.
To successfully implement an international business strategy, Vietnamese logistics enterprises need to thoroughly understand the legal regulations of the countries where they want to expand their business. Useful sources of information that logistics enterprises should refer to include Vietnam’s trade missions abroad and industry associations such as the Shipowners’ Association, Logistics Association, and Transport Association, both domestically and internationally. Customers and partners are also important sources of information that support logistics enterprises before deciding to expand into the international market.
When implementing an international business strategy through geographical expansion, logistics enterprises should start from nearby markets and gradually expand to distant ones to minimize risks. In the short term, potential markets such as Laos, Cambodia, and Myanmar are suitable for Vietnamese logistics enterprises given their current capabilities. These markets are close to Vietnam, share borders, or can be accessed through multimodal transport via road, sea, and river connections between ASEAN countries. Additionally, there are bilateral and multilateral agreements on transport among these countries, making legal regulations relatively clear and transparent.
When expanding into the international market, logistics enterprises need to focus on market segments where they have strengths in order to succeed. For the aforementioned regional markets, it is necessary to develop strengths in areas such as warehouses, road transport, and distribution activities in industrial parks, or differentiated services such as oversized and overweight cargo transportation and handling to increase the chances of success.
(*) FSB Institute of Management and Technology – FPT University