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Uncommon connections

Released at: 07:35, 24/03/2014

Uncommon connections

Ms Napaporn Ratanasaenghirun, Managing Director of 3M Vietnam, tells VET's Hai Bang about the contribution of foreign-invested enterprises to Vietnam and how 3M is looking to address the health of the planet thanks to its technology and innovation.

by Hai Bang

Ms Napaporn Ratanasaenghirun, Managing Director of 3M Vietnam

3M was one of the very first US-based companies to enter Vietnam after the US trade embargo was lifted in 1994. Can you give us an overview of 3M Vietnam’s journey over the last ten years?

As soon as the US lifted its trade embargo on Vietnam in 1994 a number of American companies headed for the country by either setting up a factory or a representative office. Among the trailblazers, 3M quietly penetrated into the Vietnamese market by opening a representative office in Ho Chi Minh City in November 1994, which later became its head office in 1996 when it officially established a full company entity in the country and opened a factory.

In 2005 3M Vietnam then established a representative office in Hanoi as part of it penetrating deeper into the northern market. It has recorded sustainable annual growth of 25 per cent on average for the last three years. In 2009, during the economic downturn, 3M Vietnam still maintained its business status quo and did not lay-off any employees, then recorded 40 per cent growth in 2010.

Can you tell us about 3M Vietnam’s business performance in 2013?

Thanks to a strong relationship between 3M and other business partners, our results in 2013 fortunately turned out to be quite good compared to the severe effects of the economic downturn. In terms of revenue, the company achieved annual growth of 25 per cent. Of special note, the fourth quarter concluded a very successful year for 3M Vietnam, when we generated broad-based, profitable sales growth across the portfolio. In particular, 3M Vietnam is internally ranked as a growing subsidiary and 3M has committed to long-term investment in the country.

What factors lie behind 3M’s success in Vietnam?

3M encourages all of its employees to be risk-taking and persistent. In today’s fast-paced, pressure-packed business climate, many companies take a very short-term approach to new product development pipelines. Because innovation does not occur to a set timeline, 3M takes a different path - the principles that its former CEO, William L. McKnight, instilled in the company. Mr McKnight believed in hiring the right people, tolerating mistakes and giving employees freedom to explore, in order to foster a culture of innovation. 3M has put the McKnight Principles into practice by encouraging employees to dedicate a significant portion of their time to projects and research that go beyond their core responsibilities. Although it may take years for such innovative “tinkering” to bear fruit, the results of 3M’s storied 15 per cent culture have been truly remarkable (that is, encouraging people to spend 15 per cent of their daily working time on generating new ideas for new market penetration).

In addition, 3M creates uncommon connections with access to multiple 3M technologies, called diverse technologies. Imagine dental technology applied to car parts, or non-woven technology incorporated into kitchen cleaning tools and respirators. 3M has also pioneered unique ways to migrate its micro-replication, adhesives and a multitude of other technologies to develop innovative solutions to everyday problems. While such innovation often yields end-user products, 3M’s rich pool of technology is also incorporated into a vast array of solutions developed by external partners, making their products more innovative and their businesses more successful.

3M has focused much of its investment in research and development (R&D). Can you elaborate on this strategy?

The never-ending innovation at 3M is always inspired. I believe that what is driving this company in terms of return for us is the investment in R&D, and every time we do it we know that we have a competitive advantage. Innovation has, indeed, been the hallmark of 3M’s growth, reflecting a culture of shared ideas and 46 core technology platforms. 3M invests substantially in R&D to fuel the innovation pipeline. In January 2010 the 3M Vietnam Customer Technical Center was set up for the 3M Technical Team, the foundation of 3M Vietnam’s R&D, to introduce 3M products and technologies, conduct product modification and development, solutions development and demonstration, and deliver product/application development and training to customers and business channels.

Consequently, the robust networking between the 3M Vietnam Technical Team and the regional/global team and technical forum, with more than 11,000 engineers and scientists, helps identify the best solutions for customers and keeps the team updated with market demands and enhances expertise to serve the requirements of the local market in the industrial, electronics and energy, consumer, healthcare, and safety and graphics business fields. It is also a place where universities, MBA students, engineers in transportation, telecommunications, power utilities and institutions, and doctors and dentists from hospitals and healthcare service providers are welcome to visit, learn, and exchange knowledge on how 3M’s technologies can be applied in Vietnam. More than 200 such visits have been made each year, for a total of 2,000 visitors.

Companies now pay much attention to “green business activities” as part of their sustainable development. How has this been materialised at 3M Vietnam?

Sustainability has been a part of 3M’s corporate fabric for decades. As an early adopter of many of the elements of a Corporate Sustainability Programme, 3M is perhaps best known for integrating environmental and business concerns in the 1970s through the 3P (Pollution Prevention Pays) Program.

Recently, we’re looking to address the health of our planet by identifying how 3M technology and innovation can make a difference in five key sustainability challenge areas: scarce raw materials; water; energy and climate change; education and employment; and health and safety. These are all areas of great concern as populations expand, especially in major cities around the world. At 3M Vietnam, we’re very excited to take what our local 3Mers have done and deliver even greater value to our customers and society. We all have to do our part to drive environmental stewardship, social responsibility and 3M’s economic success.

What are your thoughts on the contributions made by foreign-invested enterprises (FIEs) to Vietnam’s economy?

Vietnam joined the WTO in 2007, in a move that has brought about far-reaching changes that have been to the benefit of foreign investors and have increased the country’s appeal as an investment destination. Its strongest annual performance in terms of foreign direct investment (FDI) was achieved in 2008, when inflows approached $9.6 billion. Since then FDI flows have weakened, averaging $8 billion a year in 2009-12 amid global economic weakness and a serious bout of domestic macro-economic instability featuring rapid inflation, a property bubble and, eventually, a sharp slowdown in GDP growth in 2012. 

Vietnam has received less FDI than most of its South-east Asian neighbours and the impact of foreign investment in the country has been less marked, with little technology transfer occurring between foreign firms and domestic joint-venture partners. Nevertheless, in recent years the output of foreign-invested enterprises has grown strongly. For example, between January and June 2013, FDI-financed firms were responsible for over 60 per cent of Vietnam’s exports of $11.6 billion worth of mobile phones and spare parts and $5.7 billion worth of computers. Reflecting buoyant growth in FDI in hotel, restaurant and property ventures, Vietnam’s cityscapes, particularly in the south of the country, are changing rapidly.

There is a view that Vietnam lacks the environment for technology transfer between FIEs and local enterprises. Do you agree? How can 3M’s technology be applied in Vietnam?

One of the Vietnamese government’s prime targets in luring FDI is to attract high technology from FIEs. However, whether FIEs have transferred technology and to what level remains a question. In principle, foreign investors take responsibility for the technologies they utilise for their investment projects in Vietnam. Advantages such as low-cost labour and materials for enterprises are becoming gradually limited. Enterprises will then have no choice but to invest much more in improving technology in order to enhance their competitiveness. As a result, technology transfer will help increase business profits but it cannot be implemented by enterprises themselves and requires more help from the government.

On the other hand, Vietnam lacked a good environment for technology transfer between FIEs and local enterprises due to macro-economic instability. Such instability prompted enterprises and investors to boost speculation activities, which would help them both lessen risks and rake in profits swiftly, rather than implement long-term investment activities. Meanwhile, technology transfer needs a stable macro-economic climate, in which enterprises feel secure in investing into bettering technology and staff quality to enhance their competitiveness. Therefore, the Vietnamese Government need to persistently pursue macro-economic stability if it wants the technology transfer process between FIEs and local enterprises to be implemented quickly and effectively.

What is 3M Vietnam’s business strategy for the next five years?

3M Vietnam continues its momentum by targeting 25 - 30 per cent annual growth for the next five years. Its business strategy is aligned to the parent company’s direction with local execution - Think globally act locally is the way. For example, leading market segments have been identified as a key focus for business growth in Vietnam, investing in new production equipment to increase productivity and efficiency with competitive products, investing in employee training and development, and investing in hiring and retaining the right talent, among other things. We must be the first choice for customers.

Looking ahead, the 2014 - 2018 growth plan for 3M Vietnam and its long-term commitment in Vietnam will definitely continue to contribute valuable innovations to the country and investing in local talent for local growth is a must. 3M Vietnam was one of the very first US-based companies to enter Vietnam after US trade embargo was lifted, and this was the first stepping stone for 3M to bring sustainable added value to Vietnam regardless of the challenges of doing business in such an emerging country.

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