ENTRY STRATEGY INTO VIETNAMESE ENVIRONMENTAL MARKET A CASE STUDY OF ALTECH ENVIRONMENT PTE LTD

A research study submitted in partial fulfillment of the requirements for the degree of Master in Business Administration

ENTRY STRATEGY INTO VIETNAMESE ENVIRONMENTAL MARKET A CASE STUDY OF ALTECH ENVIRONMENT PTE LTD by Dang Tran Bao Hanh A research study submitted in partial fulfillment of the requirements for the degree of Master in Business Administration Examination Committee Dr Do Ba Khang (Chairman) Dr Fredric W Swierczek Dr Lalit M Johri Nationality Previous degree Vietnamese Graduate Diploma in Business Administration SAV Program Scholarship Donor Government of Switzerland/ Swiss Agency Development and Cooperation (SAV program) Asian Institute of Technology School of Management Bangkok, Thailand April, 2000 i for Acknowledgment It is a rare pleasure for me to express my profound gratitude and thanks to Dr Do Ba Khang, advisor to this research, for his valuable guidance, explicit direction, and encouragement throughout this research I also want to give my sincere thanks to Dr Fred and Dr Johri for serving as members of the examination committee together with their constructive and useful advice My acknowledgements are due to Swiss - AIT - Vietnam Management Development Program and Swiss Government who gave me a great chance to participate in MBA study by providing financial support My special thanks also go to the management of Altech Pte Ltd Company, especially Mr Goh Boh Chung, for providing me helpful information and giving critical comments on this research My thanks are also extended to the companies and organizations in Vietnam for their help and cooperation during period of my data collection in Vietnam Thank all SAV5 members and those who have made my MBA study an unforgettable memory To all my lovely friends, I give my sincerest appreciation for their warm encouragement, friendship and help at all times, especially their motivation during my studying time I shall forever remain grateful to my beloved parents and my elder brother who want to see a constant progress in my life for their eternal love and enduring encouragement during my whole life ii Abstract Throughout the world, communities are confronted with evidence of environmental pollution A growing number of environmental problems are global in scope and face all communities Developing countries, including Vietnam, therefore have to cope with the dual problems of poverty and the consequences of environmental and natural resource degradation Development policies and strategies therefore need to be designed and implemented to both alleviate poverty and improve community living standards, and to protect the environment Besides that, Vietnam has adopted a policy strategy that encourages and is dependent upon foreign investment A crucial priority for the development plans of the Vietnamese government to the year 2020 is attracting and utilizing a significant infusion of foreign capital Coming form the demand of expansion business overseas, especially to developing countries such as Vietnam, Laos, Myanmar, a case study was undertaken to devise market entry strategy for a Singaporean company to enter the environment sector in Vietnam The study was conducted to examine the business in environment industry and to determine whether the industry is attractive for foreign companies to enter Vietnamese environmental market The company situation analysis was carried out to determine the strengths, weaknesses, opportunities and threats for Altech Company Moreover, the strategic audit withdrawn from company reports has helped further understand the current situation and strategic posture of the company Finally, various options for entering the market were analyzed and the choice of most suitable entry strategy was proposed with their advantages and disadvantages as the outcome of this research iii Table of contents ACKNOWLEDGMENT II ABSTRACT III LIST OF FIGURES VI CHAPTER INTRODUCTION 1.1 BACKGROUND .1 1.2 PROBLEM STATEMENT 1.3 OBJECTIVES 1.4 METHODOLOGY .2 Stage 1: Preliminary study of Vietnamese environmental market Stage 2: Company analysis .2 Stage 3: Action plan design .3 1.5 RESEARCH FRAMEWORK .3 1.6 STRUCTURE OF THE STUDY CHAPTER LITERATURE REVIEW .5 2.1 ENTRY STRATEGY 2.1.1 Entry strategy 2.1.2 Elements of Entry Strategies 2.1.3 Mode of Entry 2.1.4 Advantages and Disadvantages of each entry mode .11 2.2 DISCUSSION: PROBLEMS AND SOME EXTENSIONS OF THE STATE OF MARKET ENTRY THEORY 12 2.2.1 Introduction 12 2.2.2.Country of Origin-Specific Effects on the Market Entry Decision 12 2.2.2.1 Comparative Advantages 13 2.2.2.2 Cultural 13 2.2.2.3 Organisational and Institutional 14 2.2.2.4 Political-Economic 14 2.2.2.5 Governmental Strategy 15 2.3 ENVIRONMENTAL TECHNOLOGY INDUSTRY 16 2.3.1 An era of environmental awareness 16 2.3.2.Overview of environmental technology 17 CHAPTER 20 EXTERNAL ENVIRONMENT ANALYSIS 20 3.1 MACRO ENVIRONMENT ANALYSIS .20 3.1.1 Economic trends and outlook 20 3.1.2 General remarks on the regulatory environment 23 3.1.3 Major Political Issues affecting the business climate 24 3.2 ENVIRONMENTAL INDUSTRY 26 3.2.1 Background on Vietnam’s environment and its biological resources 26 iv 3.2.2 Environmental issues in Vietnam 27 3.2.3 Environmental management in Vietnam 28 3.2.3.1 Legal framework in environmental management in Vietnam 28 3.2.3.2 Institutional framework in environmental management in Vietnam 29 3.2.3.3 Environmental strategies and plans in Vietnam 30 CHAPTER 32 COMPANY SITUATION ANALYSIS .32 4.1 COMPANY PROFILE 32 4.1.1 History 32 4.1.2 Background of Business 32 4.1.3 Scope of activities-Product and services .33 4.2 STRATEGIC AUDIT OF ALTECH PTE LTD 34 4.2.1 Altech’s vision 34 4.2.2 Altech’s business strategy 34 4.2.3 Altech’s corporate objectives 35 4.3 PERFORMANCE 35 4.3.1 Projects performed 35 4.3.2 Financial data .36 4.4 STRATEGIC MANAGERS .38 4.5 MAIN CHARACTERISTICS OF THE TOP MANAGEMENT 38 4.6 ALTECH’S ORGANIZATION STRUCTURE 39 4.7 INTERNAL AND EXTERNAL ENVIRONMENT: STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT) ANALYSIS .40 4.7.1 Internal environment 40 4.7.1.1 Strengths of Altech 40 4.7.1.2 Weaknesses of Altech 41 4.7.2 External Environment 42 4.7.2.1 Opportunities for Altech 42 4.7.2.2 Threats for Altech 44 4.7.3 Altech’s competitive advantage 44 4.8 TOWS MATRIX 45 WO Strategy 46 ST Strategy 46 WT Strategy 46 CHAPTER 47 PROFILES OF MAIN COMPETITORS IN VIETNAM .47 5.1 CHI MEI INTERNATIONAL TECHNOLOGY CO.,LTD 47 5.1.1 Company background and philosophy 47 5.1.2 Overview of Chi Mei International Technology Co.,Ltd 48 5.1.3 Overview of Chi Mei Entech Co., ltd 48 5.1.4 International Technology corporation (IT Corp.) .49 5.1.5 Goals 49 5.1.6 Scopes of services 50 5.1.7 Business expansion and market entry 51 5.1.8 Market Entry Mode .51 5.2 SALCON LIMITED 51 5.2.1 Salcon Pte Ltd: Overview 51 5.2.2 Company background 52 5.2.3 Scope of activities 52 5.3 OTHER CONSTRUCTION COMPANIES DEALING IN ENVIRONMENTAL INDUSTRY 56 v 5.3.1 Construction Company 56 5.3.1.1 Investment and Construction Development Company (INVESCO) 56 5.3.1.2 Water construction company limited (WACO) 58 5.3.1.3 Viet Chau Construction Co.,ltd 59 5.3.2 Treatment technique company-P&G Engineering Pte Ltd 60 CHAPTER 62 DESIGN OF ACTION PLAN .62 6.1 PHASE I : SET UP REPRESENTATIVE OFFICE IN HOCHI MINH CITY .62 6.1.1.Objectives .62 6.1.2 Activities 62 6.1.3 Duration 62 6.1.4 Human resources 63 6.1.5 Budget 63 6.1.6 Advantages 63 6.1.7 Challenges 63 6.2 PHASE 2: SET UP A BUSINESS ENTITY 64 6.2.1 Alternative 1: Joint venture with local companies .64 6.2.2 Alternative 2: Altech’s wholly-owned company 65 REFERENCES .66 LIST OF FIGURES Figure Description Pag e 2.1 Elements of in International market entry strategies 2.2 Factors in entry mode decision 13 4.1 The projected sales and profit for 2000 to 2005 43 4.2 Chart on projected turnover and profit before tax form 2000-2005 43 vi Chapter Introduction 1.1 Background Issues of environmental pollution increase day by day Many countries are concerned with this matter, and try to sustain the environment from the damage There is an increasing awareness in both the municipal and industrial sectors on the importance of the water and the environment Legislation is continually imposed to control the quality of supply water and wastewater that is discharged Awareness is slowly but surely being placed on contamination of soil/groundwater on land used by industries This trend will continue in the Asian region until standards are compatible with or exceed present U.S and European standards In the pursuit of ISO 14000 accreditation, increasingly more companies are looking at the responsible discharge of wastes from their manufacturing facilities In order to minimize the wastage and high costs of disposal, an emerging market in resource and recycling is also made available to companies like Altech Environment Altech Environment Pte Ltd is a specialist environmental engineering company in the fields of water and wastewater treatment, contaminated soil/groundwater remediation, air pollution control and resource recovery and recycling It possesses expertise and experience in water recycling, heavy metals recovery, composting, biogas-from-waste generation etc which all contribute to waste minimization and resource recovery This research work aims to provide some information about environmental market in Vietnam to countries which are attracted by this potential market from the perspective of entry strategy in general; and to give some recommendations on the most suitable entry strategy for Altech Environmental Pte Ltd in particular 1.2 Problem statement This research is dealt with these two following problems:  What are the business environments trends in Vietnam for the environment industry?  What kind of entry strategy should be adapted by the Altech Environmental Pte Ltd in order to expand its business into Vietnam Environmental market? 1.3 Objectives The overall goal of this study is to help the Altech Pte Ltd with the most appropriate entry strategy when entering Vietnamese environmental technology market The study also help to provide the management of Altech Pte Ltd a business environment in Vietnam through:  the macro environment in Vietnam, involving its politics, legal, culture and economy  the environmental sectors in Vietnam  the advantages and disadvantages of various international entry strategies The study of external environment, competitive advantages of the company, its strengths and weaknesses, opportunities and threats is also conducted to come up with the best alternatives Then, an action plan for Altech Environmental Pte Ltd is designed 1.4 Methodology This research is conducted in stages: Stage 1: Preliminary study of Vietnamese environmental market A preliminary study of Vietnamese environmental market was carried out to understand the external and internal environment conditions such as the political, economical, social, business:  economic trends and outlook  general remarks on the regulatory environment  major political issues affecting the business climate  background on Vietnam’s environment  environmental issues in Vietnam  environmental management in Vietnam The above details were obtained through reports from UNDP, from European commission, the socio-economical statistical (1998-1999) and through interviews with Mr Tran Nguyen Hien, Vice Director of the Management Department of the Department of Science, Technology and Environment Stage 2: Company analysis A comprehensive study was carried out in Altech Pte Ltd and a strategic audit of the company was conducted The study included the  Overview of Company  Technology capabilities of the company  Organizational strengths, weaknesses, opportunities and threats along with its competitive advantage and core competencies The company’s analysis was done based on the information to be collected during personal discussions with the respective company’s Project Directors: Mr Goh Boh Chung and based on the information of the company’s business plan Stage 3: Action plan design Following company analysis and a study of market environment, the identification and evaluation of various strategic options are suggested to Altech 1.5 Research Framework Literature Review Environment: Economic - Industry: Policies Political factors Socio factors - Segmenta - s Market: l Companie - Competiti - Strategies - - s - Structur e Deman d on - Potentia - tion Company profiles: Capabili ty Segme nt Resour Share ces Alternatives Entry Strategies Action Plan Design 1.6 Structure of the study Chapter 1: Presents the research background, targeted problems, research methodology, research framework and limitation of the study Chapter 2: Introduces the literature review of relative previous researches and theories Chapter 3: External environment analysis Chapter 4: Internal environment analysis Chapter 5: Profile of competitors in Vietnam Chapter 6: Designing action plan for strategic choice  No of Engineers/Draftman: Mechanical: 28 Environmental:5, chemical: 15 Electrical: 6, civil:  Sales engineer:  Finance.accounts.store/administration/clerical staff: 33  Bankers: The Standard Chatered bank, bank of America, Commerz bank AG, Royal bank of Canada, Deutshce bank, ABN-AMRO Bank, Keppel bank of Singapore Ltd, United Overseas Bank 5.2.2 Company background Salcon Pte Ltd is incorporated in Singapore in 1980 Salcon was awarded the ISO 9001: 1994 certification in April 1996 Salcon’s principal field of activities involved:  Design construction, erection, commissioning and packaging of water and waste treatment plant system  Construction of palm oil mills on a turnkey basis  Engineering procurement and construction of industrial plant, mechanical, electrical and civil engineering works  Represents some of the most reputable equipment and material manufacturers for pumps, steam turbines, boilers, decanters, drinking water pipe, refractory bricks and monolithic, etc Salcon has the resources, capability and a team of highly qualified personnel committed to excellence with the united goal of providing high standard of engineering services Its strength lies with its qualified professionals, engineers of various disciplines such as civil, public health, chemical, mechanical, and electrical engineering A high standard of technical expertise is maintained through regular in-house training, on the job and off-the-job training Salcon and its network of subsidiaries, associated and related companies in Australia, china, Germany, Hongkong, Indonesia, Malaysia, Phillipines, thailand, United States of america and Vietnam could satisfy the engineering needs worldwide within our field of activities Salcon offers advanced technology and products developed within the company and by its subsidiary and associated companies It also has technical and representation, arrangement with well-known organizations located in Western Europe Canada and the United States of America 5.2.3 Scope of activities A Water Treatment: Salcon has the state of art technical know-how to custom design water treatment plant on turnkey vadid to meet the specific requirements of its client 52 Process and Engineering Capabilities:  Coagulation  Flocculation  Clarification  Filtration  Reverse Osmosis  Ion exchange  Degasification  Sterilisation Applications:  Raw water pretreatment  Potable water  Industrial process water  Brackish water desalination  Seawater desalination  Water softening  Boiler feed water  Condensate polishing  Ultra pure water  Water reclamation Industries:  Municipal  Petrochemical  Power Plant  Steel Industries  Pulp and paper 53  Electronic  Food and beverage  Hotel and resort  Pharmaceutical  Textile  Metal Fishing  Palm Oil Mill  Palm oil refinery B Waste water treatment Salcon has the capability to design and construct on turnkey basis for industrial waste Water and Sewage Treatment Plant to meet the specific requirements of its clients MUNICIPAL WASTE WATER TREATMENT: Process and Engineering:  Screening  Sedimentation  Aeration process  Nitrification Denitrification and Phosphate elimination  Combined biological treatment  Activated sludge process  Sludge thickening  Sludge dewatering by continuous centrifuge, filter press or belt filter  Tertiary treatment Applications:  Treatment for municipal sewage and combined sewage/industrial waste  Removal of organic, minerals, solid particles, toxic waster and other hazardous waste INDUSTRIAL WASTE WATER TREATMENT Process and Engineering Capabilities: 54  PH adjustment  Flocculation/Clarification  Filtration  Activated carbon absorption  Dissolved Air Flotation (DAF)  Differential Flow System (DFS)  Rotating Biological Contractor (RBC)  Sequence Batch Reactor (SBR)  Membrane separation process  Ion exchange  Oxidation/reduction  Neutralisation  Sludge thickening/Dewatering Applications:  Waste water pretreatment  Removal of suspended solids, organic or inorganic  Removal of toxic chemicals and other hazardous wastes  Removal of heavy metals  Waste water reclamation Industries:  Municipal  Petrochemical  Power Plant  Steel industries  Pulp and paper  Electronic 55  Food and beverage  Hotel and resort  Pharmaceutical  Textile  Metal finishing  Palm oil mill and refinery  Aircraft industries 5.3 Other construction companies dealing in environmental industry Besides the above two big companies that specialized in environmental industry, in Vietnam, there are not so much companies that just operate in the environmental field because, as we mentioned earlier, this field has not been growing and attracted companies to focus only on it This also shows that this is not such a big market that can bring profit enough to the company The most part of Vietnamese construction companies is able to bid and perform the work, then they can have their own team to this or subcontract to others Normally, a project of environment protection consists of two parts: “hard” which is the concrete work and the “treatment technique” which is the equipment or/and technique used in the treatment process The concrete work such as building a pipeline, tank as a case for holding equipment normally is done by the construction company, this is just as a civil work Then the rest will be performed by other suppliers chosen by either the construction company or the owner, depending on the negotiation term 5.3.1 Construction Company 5.3.1.1 Investment and Construction Development Company (INVESCO) Background: The Company is a member of Hanoi Construction Corporation Personnel: CLASSIFICATION Planning & scheduling engineers Structural Engineers Architechs Civil Engineers M&E Engineers Quality Control & quality insurance Administrators Sub-total Technicians Workers TOTAL 56 NUMBER 15 40 20 18 18 22 59 192 120 3,500 3,812 Organization structure: There are many enterprises under the company Under the Board of Directors there are Technical department, planning and investment dept., organizational labour and inspection dept., administration dept., auditing dept., financial-accounting dept Under the management of BOD, there are five construction enterprises, under which there are construction units numbering from to Scope of services:  Turnkey (design and build contract) - Making investment project - Project design - Construction - Handing over to the client  Construction contracts - Building projects - Industrial projects - Civil and infrastructure - Electric net work and transformer station  Consulting services - Making project - Project design - Project management - Consultation for tender  Real estate Track records The Company has undertaken numerous construction projects throughout the country with high quality: Norfolk Mansion, P.D.D Commercial Tower, Office & Apartment “National Maritime Bureau”, Indochine Park Tower, Vijco saLes centre, office and dormitory, Saigon Water Park, Cultural Centre-Ben Thanh Theatre, Mercedes-Benz vehicle plant, Sporting Shoes Nike Plant, Charoen Pokphand Vietnam factory, Unique gas & petrochemicals plant, Fuji film & Camera factory Moreover, they have executed water supplied factory Luong yen and Phap van Due to the fact that, in the completion of the projects, the procedures must 57 consist of the environmental impact assessment report These projects in which INVESCO is considered as a main contractor, and therefore, they have to deal with environmental technology either by itself or subcontracting to others Form their records of accomplishment, we can see that INVESCO also is a big construction company that Altech have to consider when entering Vietnamese market 5.3.1.2 Water construction company limited (WACO) Company: Waco Limited is located at 54/5 Au co street, District Tan Binh, founded in 1992 with the legal capital of 4.5 billion VND Scope of services of the company is the bid of construction project and being the supplier of equipment for water supply project, water and wastewater treatment Form the time of foundation, WACO has operated with two main functions: trading and construction Thanks to the traditional relationship with well-known manufacturer of water equipment over the world, WACO has rapidly become the main distributor and big equipment supplier in Vietnam for many water projects Now, the company has expanded the relationship to some other nationwide manufacturers On performing water projects: with man experiences and the long history of company’s development, Company has gained its reputation through completion many small and big projects at the high level of quality and reliability This success could be illustrated through the fact that WACO has been chosen to participate in many supply water, waste treatment, environmental projects, whose capital from ODA, World Bank, ADB, over Vietnam Company is increasingly developing itself in scope of activities and technology capability Company incorporated and is incorporating with some companies in UK, USA, Canada, Malaysia in the application of the new technology to the treatment of various water source such as underground water, salt water Company has completed some projects with low investment, high economic efficiency, limited the use of chemical and account for least surface, therefore, suitable to the construction condition of Vietnam Product-services: Company is operating in form of the package tender of water projects: from the design, plan, to the supply of material and perform the project Besides, Company supplies consultancy service in industry, introduce new products, new technology to local clients Company trades a variety of products of many capacities, which provided by well-known manufacturers, with ISO9001 standard Each product is sold with the 12-month guaranty card together with clear guideline Besides the trading of water equipment, Company is also bidding for construction project, building water and waster water treatment system Track record:  Construct and erect equipment for upgrading water supply network (ADB project-1998) 58  Underground water treatment plant Cai Rang (Cantho water supply company-1998)  Upgrade pipelines for water supply in HCMC (ADB-1998)  Supply of wastewater pump (1998)  Others (more than 40 projects from 1992-1998) 5.3.1.3 Viet Chau Construction Co.,ltd Background: Viet Chau Construction Co., Ltd was formed in 1990 in Ho chi Minh city as a construction company specialized in manufacturing and installation of high quality aluminum doors and windows, and interior decoration A new environmental works division was created in September of 1997 (???) Business expansion Reason??? Human resource: A new environmental works division was created and directed by:  Mr Tran Van Bay – President/Director  Duong Minh Duc – Project director – with 15 years of experiences working in the USA in designing, project management, general construction, and pollution control  Tran An Nhan, PhD – Technical Advisor – former research engineer of Electricite de France (Paris)  Eddie Mahan – Technical Advisor – with 35 years of experiences working in the USA in engineering, project management, general construction, and pollution control  Mai Thanh Toan, Eng – Environmental advisor –with 25 years of experiences in water supply/treatment, and pollution control  Tran Tuan Long, m.S – Environmental expert – with 10 years of experiences in pollution control Scope of activities:  Environmental impact assessment  Water treatment and supply for industrial facilities, hospitals, hotels, housing subdivisions, and apartment complexes  Wastewater treatment for industrial facilities, hospitals, and housing subdivisions  Air emission control for industrial facilities 59  Solid waste disposal for industrial facilities  Noise control for industrial facilities, hotels and hospitals  Civil and industrial construction 5.3.2 Treatment technique company-P&G Engineering Pte Ltd The Company: P&G Engineering was established in 1979 when two of its four founding partners were trained in the field of plastic fabrication by a specialist from canning, England During the company initial period of operation its main business was in the area of fabrication, servicing and maintenance of electro-plating lines P&G is today a 200-strong corporation established for its expertise beyond plastic fabrication The company maintains a team of professionals whose expertise spans such diverse fields as high quality plastic fabrication, environmental engineering and industrial automation In 1985, the company ventured into the business of environmental engineering providing complete design and commissioning of pollution control equipment and system In 1998, the electro-plating business was further expanded when the company secured contract for manufacturing of electro-plating systems for a internationally known Swiss company The same year the company was converted to Private Limited status In line with its commitment to continually up-grade its operation both in terms of technology and quality, the company had invested substantially in highly advanced plastic fabricating machinery form Germany and at the same time entered into technical tie-up with internationally renown specialist companies in area of environmental engineering and automated equipment In its diversification strategy, P&G will constantly maintain its commitments in service and quality they believe in providing to customers Environmental engineering For many years P&G Engineering has been involved in the field of waste air purification, effluent treatment, recovery of valuable material and safe handling of polluting or toxic substances The company designs, manufactures and assembles corrosion-resistant plastics equipment used in air ventilation, clean air engineering and the construction of tanks and piping, In addition, P&G Engineering supplies the KCH standardized fanx which P&G Engineering manufactures under license form Keramchemie GmbH KCH series of exhaust fans broke new ground in the field of highly efficient plastic fan with its revolutionary design that offers unsurpassed price/performance ratio Also, the company’s association with KCH GmbH of Germany, provides it with the latest technology in environmental engineering to undertake complete plant design and construction 60 P&G Engineering has a team of experienced engineers available to provide advice and recommend solution to problems in the field of environmental engineering Business expansion P&G is a joint venture between P&G Singapore and P&G Cananda The parent company is in Canada and the Company in Singapore to manage the operation In order to expand their business, P&G enter Vietnam In this mean time, they are in form of a Representative office, acting as a technological equipment supplier All the equipment are manufactured by P&G Singapore, India and Indonesia Because Singapore is famous of cleanliness, P&G can take advantage of this to marketing for itself in Vietnam P&G used their own manufactured equipment, therefore, the price for the environmental projection is cheaper than others of technology form Canada, or European 61 Chapter Design of action plan There are two options for initiating a commercial presence in Vietnam A legal entity can be established by applying for either a representative office license or foreign investment project license, under Vietnam’s Foreign Investment Law The representative office is a logical first step for foreign investors to take in order to determine the potential of the market and practicality of making investment in Vietnam There are four types of foreign investment licenses available in Vietnam: the Business Cooperation Contract (BCC), the joint-venture (JV), the 100% Foreign owned corporation (100% FOE) and the Build-Operate-Transfer (BOT Project) After conducting SWOT analysis, there are some suggestions for Altech company for entering Vietnamese market 6.1 Phase I : Set up representative office in HoChi Minh city 6.1.1.Objectives - To explore the potential market and the risk of doing business there - To built an awareness of Altech’s in the market as well as the relationships customers and the local authorities - To build reputation 6.1.2 Activities - Participate in bidding for environment projects - Learn the regulations and the cultures of customers, cultures of doing business in Vietnam - Build relationships with the local authorities and associations such as Service of Industry, Service of Science, Technology and Environment, Service of Planning and Investment, Association of Traders & Industrialists, FOSCO, etc - Hire and train local staff to act as business developers, who then together with knowledge of doing business in Vietnam, the relationship with local authorities and the perceived technical knowledge can help to enhance the performance of the representative office 6.1.3 Duration Estimated duration: years 62 6.1.4 Human resources One director and two engineers who are expatriates from Altech headquarter, of which one have a good knowledge and experience in marketing One local engineer also with knowledge in marketing and have experiences in environmental projects Two secretaries who are local people: one for office operations, and another for project operations Both must be knowledgeable in laws and regulations 6.1.5 Budget - Sunk cost : license) Fee for opening representative office USD$5,000 (fee for a rep.office Furniture: US$20,000 Office’s machine (photocopier/fax/tel): USD$5,000 Computer/printer: US$ 3,000 Decoration/misc.: US$5,000 ⇒ Total: US$ 38,000 - Operation cost: Hiring office : US$1,500/month Office supplies (stationery/newspaper/misc): $US 500/month Salary (Vietnamese staff): US$1,200 Telephone/internet: US$ 1,000 Accommodation (foreigner): US$ 1,200 - Total: US$ 6,400 - Average bidding cost: Tender package price is from US$300-US$2,000 (depend on the project size) 6.1.6 Advantages - The most easiest form - Exempt form corporate tax and auditing requirements - Procedure to establish a rep office is relatively straightforward 6.1.7 Challenges - Representative office is the most restricted form, is strictly prohibited from engaging in any revenue-generating activities, such as trading, rendering professional services, revenue collection 63 - The legal environment is not stable - Quite new company in Vietnam, not yet gain reputation - Bidding regulations and cultures in Vietnam (complex and not official) 6.2 Phase 2: Set up a Business entity Herebelow are two alternatives that could be selected after years, depending on the situation especially legal conditions and at that time 6.2.1 Alternative 1: Joint venture with local companies Advantage: - The current regulations in Vietnam give favor to joint venture rather than a wholly-owned company - Can make use of relationships of the local partners, which typically the state-owned enterprise (SOE) in Vietnam - Take advantage of an established Vietnamese partner in finding way through a poorly understood administrative environment - JV can apply for new license or undergo liquidation upon the expiration of the JV license (20-40 years) - Reduce risk of investment and appropriate for Altech’s shortage of capital Disadvantage: - Technology transfer can reduce the competitive advantages of Altech’s know-how - Knowledge inventory of the partner in environmental projects may reduce the effectiveness of the business Human resources: - The staff of the representative office will be the trainers in the venture because they are the ones who know most in Vietnam’s current business environment - Additional expatriates: project manager (1), project engineer (3), technical adviser (1), finance manager (1) - The remaining personnel will be local people Training and development: 64 - Train the trainers Those trainers will train the customer according to requirements of each type of environmental project - Train technical skills for the local personnel which are specialized in the environmental business - Equip engineers with industry characteristics in Vietnam Public relations: Considerable in Vietnam culture - Increase relationships - Support for social activities toward environmental conservation Tactics: - Counseling in ISO 14000 to customers and potential customers to build relationships - Initially, try to win environmental projects of the government or local authorities in order to create the image of Altech’s technology to potential customers (which are business) 6.2.2 Alternative 2: Altech’s wholly-owned company Advantage: - Recently become more popular as investors have learned 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http://www.env.gov.sg/circle/index.html http://www.tdb.gov.sg/singbiz 66 ... conducted in stages: Stage 1: Preliminary study of Vietnamese environmental market A preliminary study of Vietnamese environmental market was carried out to understand the external and internal environment. .. dishwater, as well as a variety of chemicals if it comes from an industrial or commercial area It also carried microorganisms that may cause disease and organic material that can damage lakes and streams... became a member of the Association of Southeast Asian Nations (ASEAN) and, thereby, of the ASEAN Free Trade Area (AFTA), and signed a memorandum of understanding for 25 commercial cooperation