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Vietnam Today

Know the setting

Released at: 09:23, 28/04/2015

Know the setting

Americans doing business in Vietnam and encountering communication problems or misunderstandings would do well to research Vietnamese culture before embarking on any business venture.

by Minh Tien & Minh Tuyet

Most businesspeople, when considering business opportunities in a foreign country, would look at Hofstede’s cultural dimensions to foresee his or her difficulties, not only in competing with local competitors but also in integrating and getting along in a new business environment. If they did so, American businesspeople would have a better appreciation of the significant differences between Vietnam and the US in various regards, such as individualism, indulgence, or long-term orientation, for instance.

Vietnam is a country undergoing rapid change. Only about 30 per cent of the population are older than 30 and the rapid economic development the country has undergone over the last three decades means that young Vietnamese lead very different lives to those of their parents and grandparents. 

Mr. Sesto Vecchi, Managing Partner of Russin & Vecchi and Member of the Board of Governors at the American Chamber of Commerce in Vietnam, practiced law in Vietnam from 1966 to 1975 and can’t deny the greater ability of foreigners to do business in Vietnam since “doi moi” (renovation) was introduced in 1986, yet restrictions - many of them either harmful to Vietnam or simply unnecessary - remain.
 
“Slow-cooked” vs. “fast food”

“I think that some American companies assume that Vietnamese consumers aspire to be American or want American products and culture, and that just isn’t true,” said Mr. Chris Freund, the American Founder and Partner of Mekong Capital. “Vietnamese tastes and aspirations are more influenced by Korean culture and other Asia cultures. The only area where the US stands out as the best in the minds of Vietnamese is university-level education.” The saying “your network is your net worth” might be encouraging to Western readers in creating their own networks, but it sounds a touch negative in Vietnam, where there is a Confucian orientation towards connections and relationships being crucial to successful business ventures, as before Vietnamese do business the first things they look at are trust and relationships, which most foreigners realize after doing business in the country for a while. 

A major challenge for American companies entering Vietnam is that they have to develop relationships and networks before they can get anywhere. This is naturally quite time consuming. But, however much Americans may dislike “wasting” too much time socializing with their Vietnamese business associates, no one should arrive in Vietnam if they are not prepared to take the time to do it properly. The Vietnamese have a saying that goes: “If you want good tasting food, then boil it well,” and JW Robinson said exactly the same about doing business in Vietnam in his book of the same title, which was published in 1995. The saying highlights the differences between Vietnam’s “slow-cook” business culture and the American “fast-food” business culture, where time is money and meetings are for getting down to business.

To walk into a business meeting in Vietnam, open books and start talking about how much can be profited from a project is simply not an option. Vietnamese, especially in the north, place great importance on developing a relationship, preferably over a nice dinner, by talking about family and other matters that Americans perceive as totally unrelated to business. Meetings in Vietnam are generally relaxed affairs, but small talk is also used to establish a sense of familiarity and the relative status of the participants. As Vietnam is a very hierarchical society, Vietnamese in general feel uncomfortable if they do not know the status of the people with whom they interact. “American investors and many foreign investors in general now realize that they need political relationships in order to be successful in Vietnam, but they sometimes unfortunately pick the wrong partners,” said Mr. Freund.

Practice slower, race faster

One implication of the Vietnamese focus on relationships is that personal relations play a large role in maintaining agreements. Ten years ago, in contrast to the more universalistic Americans who would always think that “once managers are reassigned or leave the organization, a contract is subject to reinterpretation by their replacement”, the Vietnamese are particular in the way they regard the signing of a contract as an agreement to enter a business relationship, and the specifics are up for negotiation along the way. 
It is not the contract but the desire to treat one’s manager right that will make Vietnamese stay loyal to their agreement. Kevin Chambers had to recommend his American business fellows deal with this by keeping a stable representation in Vietnam and making sure to “keep frequent communications to discover problems or changes in the thinking of your Vietnamese partners”, in his book “Succeed in business: Vietnam - The essential guide for business and investment”.

For Vietnamese, negotiations are sometimes not based on contracts but by building relationships, from which develops the confidence to do business. Most Vietnamese entrepreneurs choose to sign a memorandum before the contract, because they need more time to build relationships and understand their partners better. For Americans, such memoranda are not especially valuable, because in their view all negotiations should be made towards signing a contract, as they use contracts as a form of legal protection. US law is also strong enough to defend the legality of the contract, so creating a close relationship is hardly necessary when doing business.

The different views on contracts is a good example of an area where communication between Vietnamese and American business partners can go terribly wrong, and more than that is the handling of conflicts and confrontation, as Vietnamese businesspeople always try to avoid these and maintain harmony. American businesses are often accused of being “materialistic”. “They try to see if there’s any hole in your business, and they’ll take over from you,” said one Vietnamese businessman who preferred to remain anonymous. “There are many cases where Americans have sued Vietnamese firms and they’ve had to close down. Vietnamese people rarely go to the court, but Americans are famous for it. Here you lose face if you have to go to court.” 

The sometimes negative perception of US firms makes it even more crucial for Americans doing business in Vietnam to take the time to build and maintain and even improve a personal relationship with their Vietnamese counterparts, and last but not least for Vietnamese managers to verbalize their expectations despite the value that is placed on not having to say too much, since Vietnam is a high-context culture and America low-context, in the sense that Americans are direct and have no problem with verbally spelling out what they want. Vietnamese culture, on the other hand, is high-context; non-verbal signals are important and to Vietnamese indirectness indicates respect for another person’s perceptiveness and intelligence. The direct approach of American managers might therefore give Vietnamese the impression that the Americans find them obtuse.   

It will take time for new American businesspeople in Vietnam to understand the “slow-cook” culture of the Vietnamese business community, but it is still faster to learn how to get used to all it entails than waiting for Vietnamese to change to adapt to a “fast-food” business style.

“I think US companies are very interested in Vietnam because it is such a large country, with 90 million people. It is fast growing and its macro-economic situation is good. I think the concern is that sometimes Vietnam is a difficult place to do business. It is bureaucratic and has intricate procedures. I think the work Vietnam has to do to improve its business climate is not for foreign companies to do but for domestic companies to do.”

Ms. Virginia B. Foote, President & CEO, Bay Global Strategies, LLC

“Having been in Vietnam since 1994, my biggest impression is how the growth can be so strong given how poorly managed most businesses are here in Vietnam. But in the last few years we are starting to see more examples of well-managed companies, who deliver very fast growth rates as a result.” 

Mr. Chris Freund, Founder and Partner of Mekong Capital

“To deal successfully with American business partners, Vietnamese companies should bear in mind several characteristics that are similar for American (and a number of other foreign) companies: transparency, a willingness to comply with the law, consistency, concern for employee safety, improvements in employee skills, and a sense of corporate social responsibility.”

Mr. Sesto Vecchi, Managing Partner of Russin & Vecchi, Member of the Board of Governors of the American Chamber of Commerce in Vietnam

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