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VIETNAM BUSINESS CULTURE

NBR CONSULTING
TABLE OF CONTENTS

Misperceptions
Vietnam Overview
Business Protocols Vietnam
Practices and Local Rules

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FOREIGN INVESTORS

Are often being assumed: But sometimes.


VIETNAM

Are often considered: Facts


Different meaning!
VIETNAM OVERVIEW

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VIETNAM OVERVIEW

Geography
Mainland Size: 331,690 km
Coastline: 3,260 km (ex. the islands)
People
Young population - 65% under 35 years old
Total workforce: ca 45 millions (of 92.7 millions)
Economy
High growth rates country in Asia
Member of ASEAN, AFTA, ASEM, APEC and WTO
EVFTA, AEC
One of most liberate economies in the Asia
HISTORY

4000 years history


1000 years under Chinese invasion: very poor
and working hard
30 years of wars against the French and the US
1975 full liberation: started building the
country
9 DEVELOPMENT MILESTONES

1975-1986: Centrally Planned Economy.


1986-1996: Doi Moi The economic reform to
the market economy. Archived 7,5% annual GDP
growth.
2000-2007: New Enterprise Law, new investment
law private sector emerges and grows
dramatically as the main engine for economic
development.
2007-today: Joined WTO in 2007, open economic
policy continues with FTAs (EU, Japan, AEC,
Korea, etc.
New and Young
VNS BUSINESS
COMMUNITY Dominant SOEs:
Political appointments and
lack of commercial knowledge
SOEs under pressure of privatization and reform
but very slow pace.

Growth below potential of private sector


Unfair treated (policy, capital investments, etc.)
SMEs with great potentials for growth (forecast 1,2
million private entities by 2020)

FDI
FDI Enterprises are growing (registered new &
increased investments of $20 billion in 2016)

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11 BUSINESS PROTOCOLS
MEETING PREPARATIONS

Identify right contacts


Official/formal letter requesting the meeting
Verify, before leaving your country, that you really will meet right
persons you need to meet
Prepare sufficient brochures, materials, business cards and
presentations in advance for your business trip
DRESS CODE

Dont dress too informal


Northern Vietnam: The best form of dress is a suit and tie
Southern Vietnam: a collard shirt with a tie is perfectly
acceptable (long or short sleeves) as the weather is hot in
the South.
The higher the position of the person you are meeting, the more
formal your dress should be.
Woman should wear a nice/proper business dress or a blouse
and skirt/pants. Always cover shoulders and bellies.
GREETINGS

The head of the delegation enters the meeting room first.


Handshakes are used upon meeting and departing. Handshakes
usually take place between same genders. Sometimes use both
handshakes to show your respect to your counterpart, especially
if they are older (left hand on top of right wrist)
Always wait for a woman to extend her hand, otherwise a short
nod is also relevant towards your contacts
NAMES

In Vietnam the family name


comes first, then the middle
name, then the given name.
The Vietnamese are usually
addressed by their given
names
BUSINESS CARDS

Should be exchanged at the first meetings (with both hands) to all


those attending a meeting. To study your hosts card and clarify his
position will be appreciated.

In meetings between large delegations business cards are only


exchanged between the most senior representatives.

When you address the host you should use his title and first name
(professor, chairman, Mr., Mrs., etc.).

Make sure that your host is informed about the positions of the
main persons in your delegation.

For entertaining use common sense and ordinary nice behavior.


SEATING

People are expected to sit in hierarchical order. Higher ranking


members sit nearest to their leader.
The two leaders sit face-to-face or side by side (often in state
offices) depending of the table arrangement.
MEETING DISCUSSIONS

Meetings are opened either by the host welcoming the guest or by the delegation
leader thanking the host for the meeting. Then the two parties introduce their
members.
The host and the delegation leader manage the discussion. The other members
participate when they are asked to do so by their leaders.
For the first meeting the Vietnamese side normally starts discussions with an
introduction about their company. Be prepared and be patient, it could take a long
time and should not be interrupted. Then you introduce yourself and your
company, before moving on to discussing the main purpose of the meeting.
The Vietnamese usually prefer going straight to the business point.
Be sure to ask if you dont understand any statements made.
DURING THE MEETING

Be clear and to the point, but behave politely, no negative attitude (anger,
impatient)
Follow formalities as local rules, especially Governmental authorities (business
meetings, ceremonies, events, etc.)
Specific, short and concrete - to the point
Do not interrupt the VNs side as it is not only impolite, but may cause
problems for your interpreter. Instead, note down points and raise them when
the other party has finished speaking.
Ensure good mutual understandings by using a good interpreter
Prepare to be very specific on prices and terms
AFTER THE MEETING

Make minutes of meeting try to get both parties to sign it


Follow up with letters agreeing on next activities,
Push ahead (2 steps forward one step back)
Use all opportunities for relation building with the right persons
USE OF INTERPRETERS

English is often used for discussion, however it is advisable to


bring your own interpreter.
Make sure that your interpreter is instructed to translate
everything correctly. This will sometimes give you greater insight
in the discussion than what is formally stated.
Bring your interpreter to meetings, even if they do not need to
interpret. This will give them a good understanding of the total
situation, and might give you valuable inputs to the coming
process
BODY LANGUAGE

Nodding and smiling while listening to the Vietnamese party is a


good way to demonstrate that you are listening.
The Vietnamese smile like us, but most commonly they smile
when they do not understand. As they are afraid of loosing face
they will not tell you when they do not understand, instead they
will smile. Such a smile is rarely accompanied by nods.
Remember - a smile can also mean an apology in Vietnam.
FACE VALUE

Vietnamese place a great deal of importance on saving face like many other Asian
countries
Foreign businesspeople tends to be rather straightforward, but this often causes
embarrassment and negotiations may end without a result.
If you do not understand your counterparts English, politely ask them to
repeat or clarify the points they made, rather than to say you dont understand
their English.
Never criticize an individual person in the presence of others.
To give a person credit in the presence of others is giving him face. The Vietnamese
are often using this technique.
The Vietnamese are a very proud people, and using small successes to give face is a
very good way to build relations and make friends.
YOUR PRACTICES & LOCAL RULES
BUSINESS ENTERTAINMENT

Meals
You will often be invited to join your Vietnamese counterparts for lunch or dinner.
Agree to such invitations. Vietnamese often like to discuss business when eating. It is a
part of making a deal, like going to Karaoke in Japan.
Some might try to make you drunk, so make sure you have good excuse for not
drinking too much.
The meal is the time to get to know each other personally and build trust and is
especially important for future business
Social communication
It is normal in Vietnam to ask personal questions like family age or incomes. Dont be
offended. If you do not want to answer, just smile and change the subject.
There are very few conversation subjects that are taboo in Vietnam. However, you
should avoid discussing politically sensitive matters in public or during interviews.
GIFTS

Vietnamese appreciate gifts given to show respect, understanding and appreciation. Not
necessarily expensive. Gifts are given to build personal relations, and to show that you
appreciate your partners.
Gifts are expected and should be given during first meetings, high ranking visits or at
special events, normally at the end of events.
No gifts should be given during signing ceremonies or during public appearances.
Don give a valuable gift to a person in the presence of others
It is not polite to open the gift when the giver is present
Gifts should be nicely wrapped. Do not use black wrapping (it is used for funerals)
WHAT GIFTS?

A book, picture or a pen with a motive from your country and/or your company is
OK
Flowers are OK when you are invited to peoples homes (all kinds, as long as they
are beautiful).
The value shows how much you respect your contacts
Practical or useable gifts are appreciated
No knives or scissors.
Promotion gifts might be necessary during seminars, exhibitions, etc... to get the
right participants.
Gifts to the top management: of certain value (watch, phone, pens...)
Gifts to friends: wine, whiskey, perfume...
Verify that your gifts are within your ethical standards!
PERSONAL NETWORK SOCIAL RELATIONS
Personal relations are the base for trust, and are vital for doing business in Vietnam
Build up your personal network by having regular meetings with business partners
and authorities both on official and non-official cases. Try to achieve meetings with
them whenever you are in Vietnam.
Hire local representatives/staff with an established network
Decisions in Vietnam are very hierarchical. The BOSS decides
The boss is ALWAYS a bottleneck.
You must always get access to the boss to make any decisions
Hierarchical levels are important;
Top manager relate with Vietnamese top manager
Mid manager with his opposite level
Project manager with opposite project management, etc.
VERBAL COMMUNICATION

Face to face meetings are crucial for important issues and building trust.
Phone calls tend to be brief and to the point only.
Some managers are still not familiar with the use of Internet and email, preferring
faxes instead. Make sure your requests are written clearly in the fax, and if it is
urgent then dont be afraid to say so.
Use contacts in Vietnam to ensure that faxes and emails are delivered to the right
persons at the earliest possible time.
NEGOTIATIONS

During negotiations, never let the other party loose face.


The Vietnamese are tough negotiators:
Hard to bargain prices be prepared
Less attention to quality
Little awareness of life cycle cost
You should behave similarly and be prepared to bargain on both price and conditions. Be patient
dont give away your bargains too early
Investigate the negotiators in advance to work out your strategy for negotiation
Use personal relations to influence
Use local staff/partners to understand what happens and why
Identify and establish channels that can solve problems
Yes does not mean yes
Avoid making questions that can be answered with Yes or No
Contract signatures
When negotiations are concluded the contract could be signed immediately if the decision maker is
present. For large contracts normally a ceremony will be organized.
THE NEGOTIATION PROCESS

Usually you can recognize who is the boss/chief negotiator.

The main task for the Vietnamese team is to clarify and prepare the contract conditions for
the decision maker.

Try to clarify the responsibilities of the negotiation team members. However, in reality they
probably have limited responsibility, and you might embarrass them by asking.

Make sure to establish different channels to be used during negotiations.

Decision maker to decision maker

Negotiation leader to negotiation leader

Technical manager to technical manager

All the time you should focus on improving your relations and understanding of your local
partners and their behaviour.
CONTRACT ENFORCEMENT

The Vietnamese side might consider the contractual conditions to be very


flexible. The contract is just the Certificate of marriage, but the daily life in
the marriage could still be very different.
Put yourself in a situation where you at all times can control the
contract/project.
The devil is in the details so focus on the details.
Be problem oriented and always look for solutions. It will not help you to be
very strict in your interpretation of contract articles.
Avoid arbitrations or court processes. Do your utmost to solve problems at
the lowest possible level. Lift them to the next level when necessary.
LOCAL RULES - INTERNATIONAL RULES

The Kings Law loses against the rules of the


village
Adapt to the local rules when joining the
new family
Local rules and practices are not always in line
with International rules and practices
Try to understand and adapt to the local
conditions and rules, but stay within your
approved CSR concept
Educate your local partners about the
development of the global market and
international trade (however, this takes time)

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YOUR BUSINESS OPERATIONS IN VN

Whatever you will do you should assume that the whole local community will know about it
Focus on CSR elements when appropriate

Social Accountability and Ethical behaviour Discrimination (Female equality


Anti-corruption perspective, etc.)
Conditions of Employment and fair salary Environment (pollution of the external
Work Environment: protected machines, environment, use of waste)
chemicals, dust, temperature Give similar attention towards selected sub-
Occupational Health and Safety suppliers
Child Labour (ILO standards) Support to local authorities (kindergartens,
health, poverty, charity funds, etc.)
CO-OPERATION WITH LOCAL PARTNERS

Establish a project office as soon as possible

Ask the VN partner to procure equipment not included in your contract to build trust and give the yard
some extra turnover

Involve your VN partner as much as possible in your daily operation

Recruiting staff. Make sure that you are in control of this process.Your key persons has to be selected by
yourself, including your interpreter. Make your own job specifications

Focus on people that have good English spoken skills and good attitude towards Western working
behaviour, and train them to achieve sufficient technical skills

However, make sure that your staff will be accepted by your VN partner, and try to cooperate as closely as
possible with your partner in the recruiting process.
CORRUPTION
Corruption is a problem in Vietnam like other developing
countries

Facilitation costs are popular to smooth the procedures:


Small payments or gifts

Local partners deal with local problems


Many companies use agents to handle difficult matters

The level of corruption ($) is lower than in most other countries

The VN Government have launched anti-corruption programs and


start to separate business operations from state bodies

The anti-corruption division reporting directly to the Party


Secretary Committee.

Say no to corruption it can/will backfire some day

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HOW TO AVOID CORRUPTION?

The main reason that many large Vietnamese companies prefer centralized
procurement is to limit the possibilities for corruption at their subsidiaries.
Make sure that you have 100% control of the procurement process.
Be aware that corruption might take place when hiring staff.
To avoid corruption, use any opportunities to strengthen relations and make long-
lasting friendship with VN partners.
ETHICAL BEHAVIOUR

Be an example for your local staff, and make sure that they follow your rules. (Talk
the talk and walk the walk).
The Vietnamese internal connections are very complicated. They will try to bring in
their family or friends if they have the chance.
Staff with high level connections will be difficult to manage for mid-managers with
lower connections.
As a foreigner you must assume to be watched at all times. Therefore, behave in such
a way that your actions can not be used against you.
Vietnamese workers have shown a strong willingness to learn. Therefore, give
positive and constructive feedback, and they will adapt and improve.