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Family businesses have certain strengths

Released at: 23:18, 10/10/2014

Family businesses have certain strengths

Mr James Cooper, Senior Lecturer of Entrepreneurship under RMIT International Vietnam's Centre of Commerce and Management, spoke with VET's Tien Minh about the uniqueness of the private sector and the family business model in Vietnam.

by Minh Tien

The image of the private sector must be improved in Vietnam and the country is yet to have private enterprises of international standard. What can the private sector do to play a more meaningful role in promoting economic growth and integrating into the global economy?

It’s a lot to expect that Vietnam would have private organizations on par with international companies who have vast resources and experience in operating internationally at this stage of its economic transition and development. I don’t think anyone should be disappointed but rather should be pretty impressed with the leaps Vietnamese companies have taken in that direction.

The private sector is well on the way to playing a meaningful role but I believe they must get it right at home before they will get it right internationally. To that end, there is work to be done for businesses to move towards an identity that embraces more than profit as a reason for being in order to establish a brand and personality with social appeal. 

Before moving internationally Vietnamese businesses must ensure they have an appropriate appreciation and understanding of the specific cultural and business environment they intend to enter into. Moving towards this sort of appreciation means boards need to be vigilant to localized conditions. This, in turn, likely means seeking greater diversity in personnel and experience on boards supporting the development of strong policy guidelines to ensure the organizations are appropriately positioned while being compliant with local laws and market conditions.

In order to move towards integration internationally it is likely that businesses will need to embrace greater accountability and transparency to satisfy the post-global financial crisis world of organizational governance. It will be equally important that Vietnamese businesses retain their own unique identities and refrain from being seduced into duplicating foreign identities and becoming lost in the morass of globalization.

Do you think that Vietnam’s “brightest minds” are still reluctant to work at private enterprises as they think working for the State is more stable?  

No, I don’t believe that to be true. I believe that private enterprises are increasingly attractive to smart people and that those people will seek placements where their intelligence and capabilities are valued and rewarded. The younger generation of Vietnamese I encounter appear very willing and eager to find positions of relevance and have a strong sense of responsibility to build Vietnam. We see students with great aspirations to play a role in developing Vietnam through private enterprises and with a greater and growing appreciation of the value private enterprises bring to improving Vietnam.

Do you think that State-owned enterprises (SOEs) have significant advantages over private enterprises regarding national policies and regulations? How does the private sector compete against such advantages?

Any surviving enterprise will have advantages and strengths. All countries have various policy and regulations that impact upon the ways of doing business. It’s a matter of how you position yourself with regard to that. With clarity in policy and regulation any business can develop an understanding of their context and act appropriately. 

Private businesses have significant advantages over SOEs and, due to their abilities to respond to changes, find positions of relevance and customize very rapidly. 

Private businesses will also have advantages in forming meaningful relationships with their markets. They are able to build personality and character into their brands to facilitate a more meaningful and emotional connection. This means the relationships with stakeholders and markets builds loyalty that SOEs are likely to have trouble replicating. 

They must recognize that regulation and policy set minimum standards for compliance that shape and influence but do not determine behavior. There will always be opportunity to raise the bar. It would be a great shame to permit legalism to determine behavior. The law is just the stick whereas the opportunity and reward associated with being virtuous offer very powerful carrots.

Boards and the governance of private businesses play a role here in establishing the values underpinning the brands and the policy to guide decision making towards more aspirational objectives than mere compliance. I believe there is opportunity here but there is work to be done towards an appreciation of that.

The influence of the family-run businesses on Vietnam’s economy in the past and at present is undeniable. What are the advantages and disadvantages of the model in the context of global integration? How can the next generation of entrepreneurs step up? 

Family businesses are fantastic and play a huge role in economies all around the world. The Vietnamese situation with family businesses is comparable with most countries but there are some areas in which Vietnam is relatively unique.

Family businesses have some very real resources and capabilities available to them that are generally unavailable to non-family businesses. When done right these have the potential to deliver competitive advantages. The great thing here is that these resources and capabilities are often intangible, unique to particular families, and invisible to competitors, making them virtually impossible to duplicate. It is often these intangibles, however, that present the greatest challenge to family-owned businesses when it comes to succession from one generation to the next. Here, the frequent failure to plan appropriately for succession sadly results in the breaking of the family unit through conflict and failure in the business.

Unfortunately, the blame for succession failure is easily laid at the feet of the younger generation. I believe this to be unwarranted. It is essential that the older generation prepare the young but also recognize that they must get out of the way and permit the young to assume leadership. There is a great tendency for the older generation to appoint the young to positions and titles but pull strings from behind the scenes.

The younger generation are increasingly better prepared to take leadership positions and at RMIT in Vietnam we see enthusiasm and a willingness to contribute that would be the envy of other countries. The young these days are increasingly better educated and increasingly more aware of the world around them. There is huge opportunity to capitalize upon this will and determination and some serious consequences if we do not.

What should the government do to actively promote the private sector and family businesses in the economy?

All governments around the world need to do more to support entrepreneurship and family businesses as they power the economy and provide opportunities for the populace.
There are tried and tested measures around the world to facilitate relative ease in the raising of capital and regulating to encourage entrepreneurship, but it is also a matter of the Vietnamese people recognizing their own potential and aspiring to unfamiliar levels.

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