Managing the Global Environment: Analysis of the Vietnamese Market for Clothes Manufacturer

Table of Contents

Situation

1. Introduction

2. National Culture- Vietnam – Implications on working life

3. Macro-Environment of the Vietnamese market
3.1Recommended Market Entry Strategy

4. Ethical and Environmental Issues
4.1 Ethical Issues
4.2 Impacts of the Vietnam War

5. Conclusion and Recommendations

6. Bibliography

Appendix: Code of Conduct

Situation: ‘ Qubo’, an Italian clothing company, which produces casual wear of medium quality, wants to expand its international operations to Vietnam. The country is, with a population of 84.9 million and a GDP growth rate of 7.1%, an emerging Southeast Asian economy with a high potential of successful foreign trade. (The Economist, 2006, p110) ‘CODE Management consultancy’ was asked to analyse the Vietnamese culture, the environment and ethical issues which might occur in the new location.

1. Introduction

Nowadays, we live in a world of global business where “markets are larger, more complex, and more closely integrated than ever before” (Walker et al, 2003, p.2).

Globalization is defined by Morrison (2002, p. 374) as “multidimensional processes which are leading to broader and deeper integration between countries and peoples”, providing new opportunities but also uncertainties. It can be pointed out that large corporations appear as the driving force behind this development as the opening of markets allow them to produce and operate in foreign countries. This emergence results in an interrelation or linkage of economic, social, cultural and technological factors in our ‘borderless, global marketplace’ (Morrison, 2002).

It can be assumed that considerations of cultural differences became of more importance within the last decades and the continuously changing business environment. The horizon of business operations has widened up and many large organizations are not rooted anymore in one country or society but operate truly global. “Global business has forged a network of linkages around the world that binds us all – countries, institutions, and individuals – much closer than ever before.” (Czinkota et al, 2001, p.11)

According to Bolisani and Scarso (1996), “global competition urges firms not only to develop a strong commercial presence in the world market, but also to assume an international configuration with regard to operations.” Facing today’s challenges in competition, especially the clothing industry is confronted by high incidence of labour costs which caused shift of production away from the advanced towards low-wage countries. Porter (1989) argues that “the rationale of global strategy stand on the competitive advantages it assures,” which is why in the early 1990s, substantial new competitive arrangements came up.

In order to successfully expand manufacturing of ‘Qubo’ to Vietnam, the following report will deal with cross-cultural and environmental issues of Vietnam facing the company. Additionally the market will be analysed and possible management challenges as well as ethical issues will be outlined, guaranteeing ‘Qubo’ a successful market entry.

2. National Culture - Vietnam – Implications on Working life

Although there is no standard definition of culture, it can be defined as “the system of shared beliefs, values, customs, behaviours, and artifacts that the members of society use to cope with their world and with one another, and that are transmitted from generation to generation through learning”.
(www.umanitoba.ca)

Thus, culture itself becomes a more relevant factor when working in an organization operating outside the domestic market faced by new management challenges. According to of Hofstede (1980) and Hapden-Turner and Trompenaars (1994, cited by Morden, 2004, p. 303) “cultural interpretation and adaptation are a necessary prerequisite to the comparative and cross-cultural understanding of national and international management practice”. Misunderstandings or wrong assumptions according to cultural differences can cause serious consequences for organizations. In order to avoid those sometimes far-reaching impacts, there should be a certain awareness when operating internationally as “in this era of globalization the increasing interdependence of the world’s economies, national culture is paradoxically becoming more, rather than less, important” (Zagorsek et al, 2004). When an organization declares itself as a truly multinational one, it should value and utilize cultural diversity rather than just containing it. This way it can create competitive advantage. (Schneider and Barsoux, 2003)

Geert Hofstede’s theory of cultural dimension is based upon an analysis of on the following main areas: power distance, uncertainty avoidance, individualism and masculinity (Gannon and Newman, 2002). With applying this theory, different categories can be evaluated which affect the work environment in a national culture and its values. Schneider and Barsoux (2003, p.1) argue that “culture is a powerful undercurrent in international business” and “can undermine or propel business success.” Hofstede’s cultural dimensions are of particular importance when considering working with nations from different cultural backgrounds. Thus, in order to give suitable recommendations to the organisation, Hofstede’s model will be applied on Vietnam, as it outlines a significant link between national and organisational culture.

According to Hofstede (1980, 2001), Vietnam differs remarkably from the European nations. It shows a relatively high level of power distance, which indicates the degree of equality, inequality and power between people in a social and status sense. There exists hierarchical structures in Vietnamese companies and the employees show a high level respect towards their boss is (Ngoc, 2004). Morrison (2004) therefore suggests a more “autocratic or paternalistic” management style because the Vietnamese like to be led rather the work independently. Therefore, even though there the Vietnamese are highly motivated to learn, problems might occur as it is difficult to develop an effective exchange of information between the subordinate and the boss. (Ngoc, 2004)

Individualism identifies to what extent a society reinforces individual or collective achievement. (Morrison, 2004) Vietnam has a low individualism ranking and is therefore a more collectivist culture with close bonds between individuals. They concentrate more on the group and interpersonal contact, rather than emphasising their self-reliance and independence as personal goals. These cultures put high stress on collectives where the focus on social norms and group goals. Moreover, it can be said that “individuals are seen as embedded in a universe of relationships” (Lebra, 1984, cited by Azevedo et al 2002) .” Inter-relationships between people are highly influenced by concepts of ‘honor’, ‘obligation’, and ‘duty’ in a way that is no longer true in the more individualistic and free-wheeling West. Kindship plays a very important role in rural Vietnam and it can be said that, whereas other Eastern cultures, like China, value family over clan, the Vietnamese culture values clan over family. (www.webster.edu) Ngoc (2004) also states that it becomes difficult to reach active communications within cross-cultural teams. An effective information exchange as well as the support of one another within the working process is hardly before the Vietnamese have not gained trust in the group they are working in.

Uncertainty Avoidance focuses on the level of tolerance for uncertainty and ambiguity Vietnam puts a mediocre emphasis on uncertainty as the Vietnamese are more open-minded towards unstructured situations. Furthermore, they have less rules and regulations as most European nations. (www.geert-hofstede.com)

Masculinity and femininity is explained by Morden (2004, p. 36) as “the extent to which the dominant values in society are masculine (assertive, acquisitive, or competitive) rather than feminine (caring, serving; concerned with people, the quality of life or the environment)”. The Vietnamese have an extraordinary high masculinity ranking which indicates a “high degree of gender differentiation” (Robie et al, 2005) where males dominate the society and managerial structures whereas females are being monitored by males.

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