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final report
1. Planray Oy
Research Project Report
Team VIETNAM
Team Members:
Tran Cong Tuong Thuy
Vu Thi Xuan Thu
Nguyen Thanh Trung
Dao Trung Dung
2. 1
Contents
Executive Summary....................................................................................... 2
Research Objective ....................................................................................... 3
1. Business Description
1.1.Company Description ............................................................................. 4
1.2.Industry Description............................................................................... 6
2. The Country
2.1. Overview of the Country ..................................................................... 6
2.1.1. PESTLE ........................................................................................... 7
2.2. Overview of the Market
2.2.1. Industry Analysis............................................................................ 15
2.2.2. Porter’s Five Forces ........................................................................ 16
2.3. Market Analysis
2.3.1. Rubber/Latex industry ................................................................... 20
2.3.2. Mining/ Mineral Processing Industry................................................ 21
2.3.3. Paper Industry .............................................................................. 22
2.3.4. Oil Refining Industry ...................................................................... 23
2.4. Competitor Analysis .......................................................................... 24
2.5.Strategic Opportunities ........................................................................ 26
3. Recommendation................................................................................... 28
Conclusion..................................................................................................... 30
Reference...................................................................................................... 31
Appendix ....................................................................................................... 35
3. 2
Executive Summary
Planray is based in Kajaani, Finland. The company specializes in producing trace heating equipments
and provides trace heating solution to each individual customer need. The two main products are
PlanControl and BlueTrace. Planray is currently interested in expanding its market overseas by direct
export
Vietnam lies in the South East Asia region. It is a fast growing emerging economy, with high
population and low GDP per capita. The population is heavily concentrated around major cities where
most of the economic activities are. Workers demand low wages but have low skill level. The
government owns a large portion of the economy, but policies have been passed to create a more
market-oriented economy. Recently, Vietnam joined WTO, which opened its market to international
competition. Vietnam’s law and regulation welcomes to exports and foreign investments.
In various industries such as rubber production, paper production, mining and mineral production, oil
refinery, traditional heating is proving ineffective or inappropriate due to new environmental laws
and international competition. This increases the demand for trace heating. This demand is
currently being satisfied by some large multinational companies, namely Autonics, Hertel, Tyco,
Thermon. Each of them are large and experienced though none of them have yet to dominate the
market so there is still space for new entrants. The trace heating market has low barriers to entry,
buyers have considerable power and choices but they are likely to lock onto one supplier to do all
their business. With Planray’s specialty in trace heating, getting into this market is possible given the
right strategies.
Due to the difference in language and culture, it is necessary for Planray to partner up with some
Vietnamese distributors at the start of their penetration campaign into the market. After that,
depends on the level of demand they face they can withdraw from the market, continue with the
distributors, or establish an office in Vietnam for themselves. The key to a successful firm in Vietnam
is to create connections with both the customers and the local authorities, as well as understanding
and respecting Vietnam’s business culture
4. 3
Research Objectives
The purpose of this research is to determine if Vietnam has a viable market for Planray’s trace
heating products and the best strategies to successfully penetrate the market.
To achieve this, we first analyze Vietnam’s economy as a whole, and the manufacturing industry
specifically. By doing this we hope to gauge the general level of economic activities and thus the
demand for goods and services in Vietnam, both currently and in the foreseeable future. We then
move on to find branches of the manufacturing industry that requires trace heating, identify
potential customers, where they are and how they are doing.
We then move on to make a list of competitors that are already in the market, their strengths,
weaknesses, partners and connections in Vietnamese market. This gives us a good idea of the
competition, and thus helps us evaluate the feasibility of Planray’s entry strategies.
We also look for possible partners and distributors that Planray can use to support their entrance,
how they can help Planray’s goals and what are their restrictions. We then compile strategies that we
think will give the best chance of a successful venture for Planray. We also include pointers on how to
conduct business in Vietnam.
Finally we give some general information about Vietnam’s technological standard and infrastructure
to ensure Planray products’ synergy with Vietnam’ system.
5. 4
1. Business Description
1.1. Company Description
Planray Oy is the number one trace heating control system manufacturer in Finland, located in the
city of Kajaani in the middle of Finland and the forests of Kainuu. The company’s core competency is
trace heating controllers and control systems, having a history that dates back to 1992. Their
experienced staff together and the swift production equipment are capable of providing a very
competent and flexible service. Planray products have been delivered to over 20 countries around
the world, and company’s international area network is always expanding.
Planray focuses on two main products in heating control area: PlanControl and BlueTrace.
PlanControl is a multi-channel control and monitoring system for industrial trace heating that can
manage up to thousands of heating circuits with EMR and SSR options. System includes one or
several trace heating control panels that can be controlled via network by the Process Manager
Software. The main features of PlanControl include:
_Solid state (SSR) and mechanical relay (EMR) control
_Pt-100 temperature sensor inputs
_Programmable I/O for alarms and special features: Load and Leakage current measuring.
Automatic heating circuit condition monitoring. Graphic temperature history ATEX approved
temperature limiter. User interface options: Mobile programming device, Touch screen and
Monitoring software
_Integration to automation system: I/O and ModBus
The smallest core inside PlanControl is TL6001, which captures the heating circuit temperature values
from Pt-100 sensor and carries them forward to the Ch32 control unit and on to the Pc or to a
designated automation architecture. Therefore, a single Ch32 control unit can be connected to the
inputs and output of 32 heating circuits with plug-in connectors directly to the device. PlanControl
uses the Planray Triac Unit which provides a wider range of use of any contemplated engineering
design or for cables already installed. PlanControl comes with others utilities like touch screen user
1
Temperature Limiter 600
6. 5
interface which can access all information about the heating circuit and communicate to other
systems with ChPanel as well as ChD hand-held display unit which can be modified easily any setting
by connect (connecting) to Ch32 control unit with a plug-in connector.
BlueTrace, on the other hand, is an intelligent Single-Point controller with All-in-One solution for
trace heating and can connect to automation system as well as can easily be installed individually or
in teams. The main features of BlueTrace include:
_1/2/3-phases @ 50A
_2 x Pt-100 temperature sensor input
_Programmable I/O for alarms and special features
_ATEX approved temperature limiter
_IP54 enclosure class
_User interface with backlit display
_2 x communication slots (Ethernet, Rs-485, ModBus, Profibus
_Integrated cooling plate and automatic fans extend controller lifetime
_BlueTrace units can share temperature information which saves in sensor costs
BlueTrace is an independent unit with many advantages for a multi circuit trace heating system
•Robust outdoor certificated enclosure
•Lots of coupling room
•No need for separate supply power transformer
•Circuit power calculator
•Save and Upload setting with software
•Quick start - input temperature set point, maximum current and start BluePID
control
Plug-and-Play
•Accurate Blue PID control algorithm
•Soft start to kill rush current when powering up cold self-regulating cables
•Two tempertature sensor inputs
Accurate and
Intelligent
control
•Two layer interface that separates normal functions from advanced settings
•Large display backlight
•No need for separate programming device or PDA
•Automatic circuit, sensor and controller condition monitoring
•Oversized cooling plate, Sturdy solid state relays, automatic fans can activate when
enclosure temperature rises and device overheat protection
Easy to use
and Extended
lifetime
7. 6
Planray’s products can be used and applied in almost every heavy industrial type: chemical industry,
chocolate factory, steel, paper, mine, oil, etc… Planray’s mission therefore is to create practical
solutions that increase efficiency, save energy and make the daily work easier for company’s clients.
At the moment, company still has to sell the products through other companies, but in the near
(short –term??) future Planray wants to create a new era for its products: exporting directly and. As
the number one manufacturer of trace heating control system, Planray provides a fully after sale
service for every customer with a wide range of knowledge, plus the 24/7 customer care through
emails and telephones.
1.2. Industry Description
Planray is competing in the heat tracing industry. This industry is dominated by a few giant
multinational firms that export to satisfy worldwide demand. However, Planray’s specialization might
give their product an edge in quality that would help them secure a share of the world market.
2. The Country
2.1. Overview of the country
Vietnam lies in the South East Asia, stretches the length of the Indochinese Peninsula and covers a
surface area 329,310 square meters. China lies to the north, Laos and Cambodia to the west, and the
South China Sea to the east. For convenience, the country can be thought of as comprising three
unique areas: north, central, and south, each with its own major city: Hanoi, Da Nang, and Ho Chi
Minh City. Vietnam's climate is as complex as its topography. Although the country lies entirely within
the tropics, it experience enormous climatic variation. North Vietnam, like China, has two basic
seasons: a cold, humid winter and a warm, wet summer, temperature averaging around 220C. The
northern provinces of Central Vietnam share the climate of the North, while the southern provinces
share the tropical weather of the South. South Vietnam is generally warm, the hottest months being
March through May, when temperatures rise into the 30s 0C, followed by the April-October monsoon
season.
Vietnam has a population of nearly 90 millions. The demographic is quite young, with 50-60% below
the age of 35. Vietnamese GDP is around 124 billion USD, GNP is 32,7 billion USD, and GDP per capita
is 2,593 USD. This shows that Vietnam has a sizable economy, though mostly population-driven, and
8. 7
that much of the economic activities are foreign-directed. Consumer price index is 124.38%, and GDP
growth is 8.42%, one of the fastest growing in the world. In the past, much of the economic activities
were from primary sectors (agriculture, mining, fisheries), but recent industrialization trend has built
a promising manufacture sector. Key industries in this sector include value adding for agricultural
products, cigarette and tobacco, textiles, chemicals and electrical goods. Vietnam’s service sector is
still young, but growing fast in its contribution in GDP. The main service industry of the economy is
tourism. Government has been constraining towards industries, with state-own monopolies and
complicated red tape/corruption, but efforts were made in recent years to make procedures more
transparent and promote fair competition.
2.1.1. PESTLE
Political:
Vietnam is a One-party communist state, with growing sense of grass-roots democracy. Since the
government release of total economic control in 1986, Vietnam has thrived to create a market-
oriented economy. Foreign investment is encouraged, following Vietnam’s joining WTO. This
strengthens Vietnam's ability to maintain sturdy growth rates, and at the same time puts additional
pressure on the hybrid system of strong political controls and growing market influences. Vietnam
implemented the WTO Customs Valuation Agreement through the 2006 Customs Law and related regulations.
Major tax incentives was given to those wishing to invest in certain industries such as manufacturing,
high technology and training, or in remote areas that desperately need economic stimulus. On the
down side, the capacity of the government to deliver a large fiscal stimulus to the economy is limited
by a large trade deficit and low foreign exchange reserves. The main deterrents to trade and
investment are:
_the lack of a comprehensive and transparent legal system
_restricted land usage rights
_complex foreign investment laws
_continued corruption in infrastructure projects
_the poor state of the financial system
Taxation is quite low in Vietnam compared to Western countries. Corporation Income Tax is 28%
applicable to both domestic and foreign investment entity with effective from 1st January 2004.
Preferential CIT rates of 10%, 15% and 20% are available for investments in certain types of industries
9. 8
or designated locations encouraged by the local Government. Tax relief is also available for CIT
exemption and reduction. Income gained from the transfer of shares or capital contributed to a
foreign-invested enterprise that is going to be dissolved shall be corporate income taxable at the rate
of 28%.
Since joining WTO, the government’s position on international trade has seen more lenient. Import
duty rates are subject to type of goods imported and the special tariffs status of importing countries.
There are three categories of import duty rates: ordinary rates, preferential rates and special
preferential rates. Export duty rates are ranged from 0% to 45% and are applicable to a few items as
the local Government encourages export of goods. Forty five DTAs with other countries and forty
four of them are now effective to protect foreign entity from being subject to CIT in Vietnam. After
several adjustments, the 1998 amended law consists of 97 chapters and 6247 tariff lines (chapter 85
discussed about electrical machinery and equipment and parts thereof; sound recorders and
reproducers, television image and sound recorders and reproducers, and parts and accessories of
such articles). Goods that are not liable to tariffs include goods in transit, goods as humanitarian aid,
non-refundable aid, goods traded between non-tariff zones and foreign country and state-owned
exported oil. Preferential tariff tax rates are applicable for goods imported from countries, or groups
of countries which have bilateral trade agreement with Vietnam or have granted Most Favored
Nation (MFN) treatment to Vietnamese exports. Tariff for code 8537.10.91: NFN: 15, others: 22.5.
VAT rate for products in this category: 10%.
Economic:
Vietnam is a one of the fastest growing economies in South East Asia although still a relatively poor
country with a sizeable population and limited land resources. Currently, much of the labor force
(about 70 percent) is engaged in agricultural activities though agriculture now accounts for only 25
percent of Gross Domestic Product. Residents of urban areas are more likely to benefit from
Vietnam’s economic growth and have increasingly more disposable income and demand for imported
goods and foods. Consumer spending patterns may be tempered, however, by Vietnam’s persistent
high inflation rate
An average Vietnamese’s disposable income is about 85% of total income, and the propensity to save
is 15% of that. With GDP of 124 billion USD, growing at around 8% per year, purchasing power is high.
10. 9
Income distribution between the rich and poor is quite equal, though distribution between urban and
rural is high.
Vietnam’s credit market is new but growing rapidly. By the end of 2010, Vietnamese banking sector
consists of 101 banks and foreign bank branches. . However, only 11 out of 43 domestic banks (25.6%)
have chartered capital of VND5.000 billion and above. According to World Bank (WB), with this
composition, small banks account for a large proportion in the banking sector currently. Four largest
state-own banks hold 35.7% of ATMs of the whole sector. High non performing loans (NPL) ratio (5%),
small size, credit growth (32%) much higher than deposits (29%) and GDP growth (7-8%), and income
heavily depending on lending are key characteristics of the banking sector. Most banks have their
income heavily depend on lending activities with interest income/total income ratio of some banks
reaching above 90% in 2010.
Vietnam has a labor force of 46.5 million workers, around 45% of which are younger than 35 years of
age. The labor force is growing an average of 3.5 - 4% a year – faster than the average population
growth of 1.4%. Every year, 1.3-1.5 million new workers enter the market. The trend of shifting labor
from agriculture to industry and service continues although the pace remains slow. Although the
adult literacy rate is high – estimated at 93%, the number of professionally trained workers (including
university, junior college and vocational school graduates) is still small (only around 20% of the total
working population).Average wage per month of worker is USD. Unemployment rate varies between
2-3%
The benchmark interest rate in Vietnam was last reported at 9.00 percent. Historically, from 2003
until 2012, Vietnam Interest Rate averaged 8.41 Percent reaching an all time high of 14.00 Percent in
October of 2008 and a record low of 7.00 Percent in November of 2009. In Vietnam, interest rates
decisions are taken by The State Bank of Vietnam. The official interest rate is the Base Interest Rate.
This page includes a chart with historical data for Vietnam Interest Rate.
Inflation rate was place on loose watch by Vietnam central bank until recently, with economic growth
being the main target. However, recent economic upheaval has caused anxiety in this
macroeconomic policy. Thus central bank had to lower the inflation rate to 7% (Oct 2012) from 23%
(Jul 2012), sacrificing growth.
11. 10
Social:
Population growth rate in Vietnam has experienced a general decline in the 10 years. It was at nearly
1.5% in 2000 then strongly decreased to 1.04% in 2005. In the next 4 years, it was fairly steady at
around 1% and then slightly rose to the end of 2012 at 1.05%. This is mainly due to the government’s
effort to control the population, and the people’s changing awareness to have fewer children to raise
them better.
Vietnam has a young population. In 2000, 50% of the population was below 30, with the largest
groups from 5-19 years old (24 millions). This is probably the result of a baby boom 5 years in the past,
marking an era of strong economic and welfare growth. The split between male and female is pretty
equal. Over the years the population became older, with the baby boom generation reaching
productive age (>20). This would create a large labor market for the economy, given that this
generation is well-educated and with fairly high skill. Forecast shows that in 2020 Vietnam’s young
generation will be fairly high, but not high enough to be called a boom.
Vietnam has a fairly equal income distribution. The GINI index for Vietnam is 35.57 (with the scale
from 0 to 100), which is quite low compared to other countries such as US (40.8), China (42.5) UK (36).
This is partly due to the leadership of the Communist party, as well as the low disparity in skill level
between workers. Dividing the population into 5 income group, the share of income of each group
(from lowest to highest income) is 7.4%, 21.8%, 15.8%, 11.5%, 43.4%.
Education is one of the main focuses of Vietnam government. After 35 years since 1975, the illiterate
rate has been rapidly pushed down, while school enrollment rate continue to rise. Vietnam has a
compulsory education of 5 years (primary), with 94% of the population completing it, 1 million
children every year. However, the enrollment rate of secondary and tertiary education falls
drastically in comparison (62.5% and 9.7%).This is due to the drop out of many students to join
vocational school or the workforce. Because of this, workers in Vietnam have low skill level in general.
Education spending makes up for around 10% of government spending, and student-teacher ratio is
21.56, which suggest a fairly good educational infrastructure.
Vietnam is a country with many social trends. Health consciousness is on the rise among Vietnamese
people. Events such as the avian flu crisis and better health education are leading the Vietnamese to
become more health conscious. Healthy products, packaged products and modern retail channels
(which are seen as hygienic) are expected to grow as a result. Almost all Vietnamese have serious
attitudes and thoughts about their future and career. Their career choices are affected by their
12. 11
desires, families and society needs also. Nowadays, Vietnamese youngsters do not have so much
pressure in choosing their career as their senior generations so that they can follow their dreams.
Many are doing several jobs at a time. Vietnamese are quite hard-working, creative and responsible.
They work about 40 hours per week. They are usually punctual to important meetings but
sometimes be late to normal ones. In Vietnam, relationships have a great effect on employment
decisions. It happens because Vietnamese prefer to work with the ones they used to work with
(already have the harmony, familiarity, knowledge about each other strengths and weaknesses, etc).
They also prefer who are young, experienced, well-educated (a degree or master is normally required)
and enthusiastic.
HOFSTEDE
Power distance
People accept a hierarchical order in which everybody has a place and which needs no further
justification. Hierarchy in an organization is seen as reflecting inherent inequalities, centralization is
popular, subordinates expect to be told what to do and the ideal boss is a benevolent autocrat.
Challenges to the leadership are not well-received
Individualism/Collectivism
Vietnam has a collectivistic society. This is manifest in a close long-term commitment to the “member”
group. Loyalty in a collectivist culture is paramount and overrides most other societal rules and
regulations. Such a society fosters strong relationships, where everyone takes responsibility for fellow
members of their group. In collectivistic societies, offence leads to shame and loss of face.
Employer/employee relationships are perceived in moral terms (like a family link), hiring and
promotion take account of the employee’s in-group. Management is the management of groups.
Masculinity/Femininity
Vietnam is considered a feminine society. In feminine countries the focus is on “working in order to
live”, managers strive for consensus, people value equality, solidarity and quality in their working
lives. Conflicts are resolved by compromise and negotiation. Incentives such as free time and
flexibility are favored. Focus is on well-being, status is not shown. An effective manager is a
supportive one, and decision making is achieved through involvement.
13. 12
Uncertainty avoidance
Vietnam has a low preference for avoiding uncertainty. Low UAI societies maintain a more relaxed
attitude in which practice counts more than principles and deviance from the norm is more easily
tolerated. In societies exhibiting low UAI, people believe there should be no more rules than are
necessary and if they are ambiguous or do not work they should be abandoned or changed.
Schedules are flexible, hard work is undertaken when necessary but not for its own sake, precision
and punctuality do not come naturally, innovation is not seen as threatening.
Long term orientation
Vietnam: A long term orientation culture. Societies with a long-term orientation show an ability to
adapt traditions to a modern context i.e. pragmatism, a strong propensity to save and invest,
thriftiness, perseverance in achieving results and an overriding concern for respecting the demands
of virtue. The countries of South East Asia and the Far East are typically found at the long-term end of
this dimension.
Business facts:
Even though private businesses in Vietnam have dramatically increased in recent years, a great part
of Vietnamese businesses are still owned and controlled by the government or local authorities. In
the state owned enterprises conservatism is prevalent, and the top management often consists of
political appointees with limited commercial experience. The private business community constitutes
a broad range – from creative ‘amateurs’ to highly professional business managers.
As elsewhere a personal network is essential for doing business in Vietnam. In the initial phase of
market penetration it will in most cases be necessary with frequent visits to the partner (s). Apart
from potential partners the network will in most cases include key persons in the public
administration.
In situations where disagreements occur, the Vietnamese will often present their views in an indirect
non-confrontational manner. However, it is extremely important to ensure that contracts or other
commercial agreements do not contain unclear wording that may be subject to interpretation. It is
14. 13
often very time consuming and expensive to resolve situations, if they merge into an open conflict,
involving arbitration.
Technology
Vietnam has a slow technological advance pace, but very fast adaptation pace. This is due to the lack
of investment in R&D from both the government and firms, loose and unenforced patent laws. The
government in general has a very positive attitude toward technological innovations, and holds
numerous innovation contests throughout the country annually. However the prize is not attractive
enough and there is otherwise little incentive for research.
In contrast, technological adaptation is what pushing Vietnam technology growth. Instead of creating
new technologies, it is often the case that Vietnamese innovators take an already-invented
technology and modifies it to be more affordable, might sacrifice some quality specifications in the
process. Some Vietnamese firms even buy a production process from another country and have their
engineers study it and then replicate it.
Vietnamese firms are resistant to investment in general, such is the “sailing ship” effect. Therefore
pace of technological obsolescence is slow. However, since joining WTO, foreign competition force
domestic firm to invest to keep their technology up to date, increase the obsolescence pace to the
world’s level
Environment:
Vietnam Environment Protection Law was first passed in 1994, comprised of 55 clauses with the aim
to “improve government’s effectiveness and the responsibilities of local authorities, commercial
organizations, social organization as well as each individuals in protecting the environment, and thus
protecting the people’s welfare, assure the rights for each individual to live in a clean environment,
better serving the long-term growth of the nation, and contribute in global and regional environment
protection”. More than a decade of rapid growth and industrialization later, this law was deemed
unfit and lacking, and so was revised in 2005, comprised of 136 clauses. The 2005 version better
defined environmental goals and measurements, tighten conservative laws in production as well as
15. 14
civil sectors. It also introduced waste management environment restoration regulations. The
punishments for breaching regulations were also specified more carefully.
Vietnam has no separate waste disposal laws. Instead, it is incorporated into the environment
protection law, chapter 8. It has 5 subsections:
1. General regulation about was disposal
2. Dangerous waste management
3. Regular solid waste management
4. Waste management
5. Manage and control of exhaust, noise, vibration, light, radiation
The cost-saving and effective energy use law was introduced in 2010, at the peak of the energy
shortage. The fast growing economy has pushed energy demand up high, while energy supply still
depends on a handful of hydropower plants and smaller, local thermal-power plants. The result is
rotating planned blackouts and rising price of electricity. The law consists of 12 chapters, with 48
clauses. It defines the responsibilities of individuals to conserve and effectively use energy in
different sectors: industry, construction, transportation, agriculture, domestic, state-own sectors. It
also outlines means to conserve and use energy effectively
Despite the laws passed, the popular attitude towards the environment and conservation until
recently has been ignorance and nonchalant at best. Only a small portion of the population
understands the important of the environment and makes efforts to protect it. Recycle is an
unfamiliar concept and illegal garbage dumping is a common sight. Firms are often unaware of the
existent of environmental laws and have little regard for the environmental consequences of their
production. There have been hardly any reports of cases that violate the environment law. In recent
years, however, because of the pressure from international organizations, as well as hard-to-ignore
incidents, the Vietnamese people have become more and more aware of the deteriorating condition
of the environment. Restorative projects were started, and the law is strictly enforced.
Law
Vietnam has a loose labor law. Labor Code of Socialist Republic of Vietnam was introduced 1994,
revised in 2002. Unstable labor relations, bad working conditions, low wages, ineffective union
16. 15
system’s activities are still the main challenges. There are no collective labor agreements and
bargaining.
Competition Law was passed in 2004 and went into effect on July 1st 2005 applies to business
enterprises and professional and trade associations in Vietnam; foreign-invested enterprises (100%
owned and joint venture); overseas enterprises and associations with activities in Vietnam; public
utilities and state monopoly enterprises; and (in so far as certain anti-competitive measures are
proscribed for them) state administrative bodies. “Overseas enterprises” include foreign companies
with a commercial presence (such as branch or sales offices) and foreign contractors having an office
or otherwise doing business directly in Vietnam such as foreign construction contractors (but not
offshore contractors conducting cross-border activities). There are also regulations against:
_Unhealthy competitive practice
_Monopoly
_Economic Concentration
2.2. Overview of the market
2.2.1. Industry Analysis
Vietnam is a newly industrialized country. Started in the economic reform of 1977, post-war recovery
was the main objective and industrialization only took off in the late 1980s. Since then it has been a
steady climb. In the last 5 years Vietnamese industrial sectors have experience an annual growth of 7-
15%, and becoming one of the fastest growing in South-East Asia. This statistic, however, is not
distributed evenly, with the bias on commercial industries. Heavy industries such as steel maintain
growth, but are not competitive enough to be a core competency. The most prominent are machine
tools, automobile and air conditioners. Industrial growth accounts for about 50% of the GDP growth.
Until recently, much of these industries were state-own or otherwise closely regulated. In 2007,
Vietnam joined WTO, which drastically changed the aim of industrial policies. Open markets with
heavy competition forced Vietnamese government to equitize half of those firms (3000 in 6000), as
well as introducing new goals to raise competitiveness. Despite that, state-owned firms still fail to
compete on the open market.
Vietnamese workforce still suffers from a low skill level compared to countries in the region such as
Thailand or Malaysia, though the government has been making efforts to improve the situation by
17. 16
changing the education system to be more applicable. To make up for that, Vietnam boasts the
lowest labor wage in the region, averaging USD 150 a month, which is a huge drop from neighboring
countries (usually around USD 200 a month). Industrial-related technologies has seen rapid
progression from a pretty low post-war level, and with the help of regional giants, especially Japan,
Vietnam aims to achieve production technology on par with other main competitors in the year 2015.
With all these advantages, Vietnam proves to be an extremely attractive destination for FDI, and
recently attracted more FDI than China, adjusted by population. Industries tend to focus around big
cities like Ho Chi Minh City, Da Nang and Ha Noi, which creates congestion and pollution in these
areas, as well as skill and income inequality across the rest of the country.
As a mostly-tropical country, Vietnam’s need of heating is low in general. High average temperature
all year round means that there is no threat of freezing pipes and vessels. That being said, various
industries still require trace heating for their equipments and machinations. Recent changes in
environmental regulations and quality standards forces firms to switch from burning fossil fuels to
trace heating. Because of this, demand for trace heating in Vietnam is initially low but growing, and
domestic manufacturing of trace heating is scarce or even non-existent. In contrast, cooling system
(both automatic and manual) is in great demand across industries, from heavy steel plants to
telecommunication relay stations. Penetration into the cooling market might prove difficult due to
fierce competition from incumbents, both domestic and exports.
2.2.2. Porter’s Five Forces
Thread of new entrants:
Existing companies in the industry are giant, international tycoon with high volume production. This
let them enjoy the economies of scale, with falling marginal cost. They also have large funding for
R&D to improve their products and set up package of services whose costs might be too much for
new entrants to handle.
The current Law on Foreign Investments in Vietnam does not require a fixed minimum capital for a joint
venture company in general. However, the legal capital shall at least amount to 30% of the total investment
capital. It is suggested that the minimum registered capital should be no less than USD100,000 to be
approved easily and quickly. No available information about capital requirements for imports
Access to distribution channels will also be a challenge. The industry is concentrated with few
distribution channels, and firms usually make individual contracts with suppliers rather than via
agents (exception: Tyco). Establishing own channels will be costly
18. 17
There’re not many barriers from the government and legal system. Foreign investment is encouraged
and it is easy company and joint venture setup. However, foreign companies are forced to consider
Vietnamese citizen prior to foreigners in employment process. According to Vietnam’s Law on
Customs dated June 29, 2001, and relevant guidance, the customs documentation required for
imported goods basically include:
_customs declaration paper
_sales contract
_commercial invoice,
_goods packaging bills
_certificate of origin
Firms tend to lock on a supplier once they had a good deal with them. Vietnamese people tend to
maintain a business relationship if they have already established a personal relationship with their
business partners, provided that the business is not going terribly wrong. There are also penalty costs
for cutting short the agreement and investment costs in the older heating systems
Industry competitors:
Variety of companies existing in this field:
_Autonics of South Korea
_Hertel of Germany
_ Tyco of US (using agent Supermec)
_Thermon of Australia
These are several other competitors in this field, with multinational organizations, producing large
number of heating control systems which are sold in many parts of the world.
Due to the large scale of production, the competitors have lower cost of producing each individual
unit of trace heating. This allows them to be competitive on price, and can lower price as a strategy
to squeeze out smaller scale firms. Large scale production also gives their workers more experience,
which might lower the faulty rate and thus save cost from post-sale services
Customers tend to keep purchasing products and services from reputable and familiar brands of trace
heating companies. Competitors in this industry invested heavily in providing differentiated package
19. 18
of services and post-sale services, tailored to the need of each customer, with the aim to attract and
capture regular buyers.
Massive firms can afford to spend a lot on research to improve their product specifications, as well as
branching out to other industries or invest in other ventures to spread out the risk and thus increase
their survivability when the economic climate changes.
Trace heating is an industry dominated by a few large firms, and so there are few established
independent distributor. Each firm set up a distribution channel for themselves. Such a network can
be very costly if the amount of goods moved in it isn’t big. Some competitors also have the
geographic advantage of locating near Vietnam and thus enjoy the reduced logistic cost.
Vietnam business culture is not similar to those of the west. There had been many foreign firms
which failed to penetrate the market because they couldn’t to adjust. It’s therefore easier for eastern
heat tracing provider to do business with Vietnam, given the lack of Vietnamese heat tracing retailer.
Suppliers Power:
As it is Planray’s wish to only sell products in Vietnam and not producing them there, this section is
irrelevant
Buyers Power:
Mining, minerals, chemical and oil refinery industry plays an important role in Vietnam’s economy. In
the past, only state companies can join these sectors but after new campaign (Đổi Mới) in 1986,
more and more private companies have been joining these sectors. With the abundance in resources
and the introduction of new market-oriented policies, the number of objective companies (potential
customer) is high and has been growing.
New environment laws also mean that more producers will be switching to heat tracing, which
further expand the pool of potential customers.
The size of order varies greatly with the size of the company. Vietnamese industries tend to have one
giant state-own company, with a couple of large corporations, and then a lot of small private
companies.
Technology switching decisions are not usually made, since a lot of Vietnamese firms still have the
“sailing ship “mentality. However, if a decision is made, it is likely they will want to replace all of their
heating system with trace heating, so large orders are to be expected. Firms are also likely to want to
20. 19
spend less on post-sale services, especially maintenance and would rather fix the broken equipment
themselves than to pay for it from the original supplier.
Some giant trace heating corporations in the world have already established their presence in
Vietnam. Since trace heating is a market without much technical differentiation, competition will be
more on price and buyers will have a lot of options. Also, due to the ease of integration of trace
heating, switching cost will not be too large.
Because corruption and nepotism is quite common in Vietnamese firm, the choice of business
partner might be made not based on the merit of their product but rather their ability to lobby and
create personal relationships.
To sum it up, buyers in Vietnamese trace heating market have a lot of power over the choice of their
suppliers.
Substitutes: Fossil fuel heating
The main substitute to trace heating in Vietnam is fossil fuel heating. Fossil fuels include coals,
petroleum, natural gases. Various suppliers of various sizes are found in this industry. Firms can also
build their own systems since the technology is easy to access.
Trace heating is easy for maintenance and have better control over temperature. Fossil fuel heating,
on the other hand, is difficult to operate, and can have negative effect on the production process (e.g.
food processing).
Charcoal is cheaper and more abundant in Vietnam while electricity price is increasing these days.
There is no available information about prices of installing fossil fuel heating system and trace
heating system. So, all other things held equal, prices of fossil fuel heating can be cheaper.
Buyer switching costs: While trace heating is quite simple to integrate into a production process,
fossil fuel heating would be more difficult to do so. However, the technology and equipments for
fossil fuel heating is easy to find in Vietnam (it is not uncommon for technicians of a company to build
a system themselves), so the cost of acquiring might be low. The largest concern of switching costs is
the cost of penalty if a buyer wants to terminate its contract with its current trace heating system
supplier to switch to other substitutes.
Although both serve the same purpose, the technicalities between them are quite different. Trace
heating is easier to install, have better control over temperature, easier for maintenance,
21. 20
environmentally friendly and does not contaminate products. Fossil fuel heating, however, cannot
compare with trace heating in performance.
Users of trace heating are unlikely to substitute back to fossil fuel heating because they switched to
increase product quality/decrease CO2 emission, so unless their goal changes or electricity price rises
dramatically, firms will stay with trace heating.
To sum up, there are no substitutes of equal quality and performance as trace heating. However,
electricity price can be a problem as it is now rising in Vietnam.
2.3. Market Analysis:
As said, Vietnamese firms who were traditionally using more primitive means of heating currently
have the incentive to switch to trace heating. Because trace heating maximum temperature is only
around 5000C, only a portion of industries can apply it successfully. These include rubber/latex
production, mining, paper and oil refinery.
2.3.1. Rubber/Latex Industry:
The rubber industry has a long history in Vietnam. First introduced in 1878 by the French, Vietnam
proved to possess the suitable climate and soil for the rubber tree, and so it has become one of the
industries that received the technology and attention of the French colonists. Vietnam Rubber
Corporation was established in 1995 (became the Vietnam Rubber Industry Group in 2007) as a state-
own firm. The industry kept growing rapidly, with the goal of reaching 800,000 ha of rubber
plantation and 1, 2 million tons of latex products in 2015. In the process of making latex products
from rubber sap, the sap must be maintained from 980C to 1750C to remain in liquid form.
Traditionally this is done by melting rubber in a large container using charcoal and other fossil fuels.
However, the temperature is hard to control with this method, and over-heating causes rubber to
decompose and release toxic fume. Because of this, latex producers have been switching to trace
heating as it is more suited for this job.
Latex producers are often located near rubber plantations. These are located all through Vietnam:
South East (339.000 ha), Highlands (113.000 ha), Central North (41.500 ha) and Coastal of Central
Vietnam (6.500 ha). Among those, provinces such as Binh Duong, Binh Phuoc, Dong Nai (South East)
22. 21
are most popular for rubber productions. Those provinces are close to Ho Chi Minh City, and have a
concentration of new industrial parks, which all make a good location for latex factories.
Key players in this industry are Kymdan, Long Thanh Rubber:
Kymdan: Located in Northwest Cu Chi (Ho Chi Minh City), Kymdan has been manufacturing its
products for over 58 years. Kymdan’s core product is latex mattress. Its main factory is
108,163 m², with two affiliated factories (garment factory for export, furniture factory). In
2010, the company sale reaches 1,012 billion VND (around 48 million USD). Pride itself on the
superior quality resulting from hard work and ongoing research for 3 generations, Kymdan has
won numerous awards, both national and international. Currently, Kymdan mattresses are
available in 91 countries and regions throughout the world.
Long Thanh Rubber: Currently the largest producer of rubber band in Vietnam, Long Thanh
Rubber was founded in 1980 in Long Thanh City, Tay Ninh. The company’s main factory has 11
production lines, capable of turning out 30 tons of finished products per day (roughly 800 tons
a month), providing rubber band in many specifications, as well as bespoke production.
Guarantee to satisfy any demand. Their products were exported to countries all around the
world, including Japan, US, Korea, China, Singapore, Philippines, Turkey, Hong Kong and
Thailand.
2.3.2. Mining/Mineral Processing Industry:
Vietnam is rich in minerals. Various metals such as iron, chrome, manganese, titanium, bauxite, zinc,
copper, etc can be found in abundant deposits in the northern mountains and Tay Nguyen Plateau
(Highlands). The first mapping of mineral locations was done by the French colonists, who were also
responsible for establishing Vietnam’s first industrial mining operations. After gaining independence
in 1975, the mining and mineral processing industries were controlled by the state, and the General
Department of Mining and Geology was established. Over the years, policies were passed to create a
market-oriented economy, and this industry is open to firms registered with the government.
Nowadays, a lot of private firms are in the industry, but the largest is still the state-own Vinacomin
(Vietnam National Coal - Mineral Industries Group). The national product of the mining industry has
been rising steadily between 2005 and 2010, from 5,3 billion USD to 12 billon USD (of which metal is
0,6 million and 1,2 billion USD respectively), and the metal processing industries from 189 million
USD to 6,3 billion USD.
23. 22
Mining and mineral processing factories are located in provinces with rich mineral deposits. Northern
provinces such as Lao Cai, Thai Nguyen, Tuyen Quang, Lang son, Ha Giang, Cao Bang and Bac Can
attract miners of iron, titanium, manganese while Dak Lak, Lam Dong on the Tay Nguyen Plateau are
home to bauxite extractors. By estimation, Vietnam’s northern mountains could hold up to 213
million tons of iron, 4,8 million tons of titanium and 3,2 million tons of manganese, while The Tay
Nguyen Plateau might have 8 billion tons of bauxite.
Key players in this industry are Vinacomin, Cao Bang Mining and Metallurgical Joint Stock Company:
Vinacomin: Used to be state-own giant, Vinacomin was the first of its kind to be transformed
into an economic corporation as part of the privatization by the government. Although it is
technically a private firm, 100% of its equity is still held by the state. It is by far the largest
mining and mineral processing firm in Vietnam. The corporation also owns numerous
subsidiaries many other industries such as electricity, construction material, mechanical,
chemicals, etc. Similar to other state-own company in Vietnam, information online about
Vinacomin is limited.
Cao Bang Mining and Metallurgical Joint Stock Company (CB): Established in 1955, Cao Bang,
with the help of the Soviet Union, CB is the first metal mining and processing company in
Vietnam. At that time it possessed the most advance technology in South East Asia, with tin
being the core product. Over the year, the company continued to grow and branch out to
other industries such as electricity and construction. In 2005 the company went public, with
capital of around 40 million USD and 1348 employees. The cumulative product of the
company consists of:
_Commercial tin: 15225 tons
_Iron: 154662 tons
_Iron alloys: 21314 tons
_Electricity: 350000000Kwh
2.3.3. Paper Industry:
Paper production is one of the oldest industries in Vietnam. The first paper machine started
operation in 1912, with the capacity of 2500 tons per year. In the 1970s before the Bai Bang pulp and
paper mill was started, Vietnam’s annual paper production amount to 27000 tons. With the
24. 23
advantage of natural resources, it is thought that the paper industry would be one of Vietnam’s main
industries, both for domestic and export purposes. However, due to the slow rate of technological
advancement and low investment, Vietnam’s paper does not have the quality and low price to
compete. Currently Vietnam is exporting around 3 million tons of wood pulp (110-120 USD/ton),
while importing white paper pulp at 900-1100 USD/ton. In 2010 Vietnam’s paper production was
around 1.3 million tons and had to import 1.1 million tons to satisfy domestic demand. In response,
various Vietnamese firms in the market invested around 431 millions USD to expand production and
increase competitiveness. In paper pulp production, the thermo-mechanical or organocell pulp
production process involve keeping the wood pulp under moisture, pressure and heat around 100-
2000C, which is a good application for trace heating.
Since Vietnam’s forest coverage is spread across the country, paper factories are also located.
Provinces that are famous for paper production are Bac Ninh (northern), Quang Ngai, Lam Dong, Kon
Tum (central), Dong Nai, and Binh Duong (southern)
Key players in this industry are Vietnam Paper Corporation (Vinapaco), Tan Mai Joint Stock Co:
Vinapaco: Established in 1995 as a state-own company, Vinapaco was responsible for more
than 70% of the total domestic production of paper pulp and paper. Today, Vinapaco is
located in Ha Noi, consists of 28 subsidiaries, located across the country. With nearly 10000
employees, the company’s total production is 225000 tons of paper and 448000 tons of paper
pulp.
Tan Mai Joint Stock Co (TM): Established in 1958 and went public in 2006, TM is located in
Dong Nai province, southern Vietnam. After going public, the company has taken over various
paper producing firms and independent factories, further increase its production capabilities.
The company’s total equity is valued at nearly 500 million USD. Currently, TM can produce
90000 tons of paper pulp and 140000 tons of paper annually. The company is also investing in
technology improvements, bringing its production up to the ISO140000 environmental
standard.
2.3.4. Oil Refining Industry:
Vietnam is an oil-producing country. However, up till recently, it was only able to extract and sell
crude oil without refining, because of the lack in technology. The industry is monopolized by
PetroVietnam, a state-own company. In 2009, Dung Quat refinery was inaugurated and became the
25. 24
first oil refinery in Vietnam. An 8 billion USD project for Nghi Son Refinery is also in motion, with the
estimated operational time of 2014. Because of the high involvement of the government in this
industry, suppliers of components to the projects are selective (probably not only for the qualitative
but also political purposes), but it is a huge opportunity for the firm who win that contract.
2.4. Competitor Analysis:
The market size for trace heating in Vietnam is small while its geographical location is in the middle of
many high-tech countries that are familiar with cold climate (China, South Korea, Japan, Australia, etc)
so competition is fierce to say the least. Some of these competitors are:
Autonics Corporation: Established in 1977, is a leading company of sensors and controllers in Korea.
They produce over 5,000 items that are marketed in more than 100 countries worldwide. The
company’s main goal is to provide advanced and productive IA solutions to satisfy customer needs in
various fields of Industrial Automation, as well as contributes to the development of national
industries and human welfare. Their products are highly qualified, wide-ranged, reliable, achieved
through constant R&D efforts and quality management process.
Strength: Korean businesses have a strong presence in Vietnam, and their products, especially
those used in industry are quite highly regarded. Increasing FDI from Korea to Vietnam also
means some leniency towards Korean business when entering the market by the local
authorities. They have a wide range of products and a list of sister companies that together
can cater to any sort of industrial need. The manufacture process is outsourced to China,
which might drive down the price, as well as decreasing the distance to the Vietnamese
market.
Weakness: Business is of smaller size compared to competition, only around 900 employees,
which means less capable for economies of scale
Hertel: A global industrial services company. Their headquarters is based in Rotterdam, with primary
offices in Bahrain and Singapore. The company operations expand around the world including the
Middle East, North West Europe, Eastern Europe, Asia and Australia, with over 13,000 employees
worldwide. Their mission statement is to be the global brand of choice that sets the standard for
industrial construction and maintenance services, excel in safety, reliability and the strength to
perform. The company aims to deliver a wide variety of services complemented with additional
26. 25
specialism, safely and successfully, within budget and on time. An integrated approach, a
combination of services and onsite business improvement processes helps to generate savings and
reduce the total cost of ownership. Next to that, we strive to deliver an onsite service that will make
any customer feel taken care of.
Strength: Hertel is a giant company with 13,000 employees, which gives them ample size to
take advantage of economies of scale to have lower prices. They have been in the business for
over a century, which would give them such high level of experience, as well as a stellar
reputation. The company is involved in many high profile projects around the world (Princess
Amalia Wind farm, Isle of Grain LNG, etc), which is further proof of their fame.
Weakness: Their headquarter is far away from Vietnam, which might prove to be a logistic
problem.
Thermon: the only international heat tracing company completely dedicated to its industry. Since
1954, Thermon has concentrated its efforts exclusively on heat tracing, the external application of
heat to pipes, tanks and instrumentation. Today, Thermon continues to be an industry leader in the
specialized field of heat tracing technology. The vast knowledge base of Thermon’s employees,
combined with the most extensive line of heat tracing products and design tools available, optimizes
the customer’s “cost of ownership” by ensuring that all aspects of the application have been
considered.
Strength: Being the only one- product firm in the business, Thermon clearly aims to boost
their values through specialization. With an average size labor force, and nearly sixty years in
business specialization (at least in theory) will lower their cost as well as improve the quality
of their products.
Weakness: As a specialized firm, Thermon is left vulnerable to the changing economic climate.
Without the means of spreading the risk, it can face considerable difficulties if the trace
heating market is in turmoil
Tyco Thermal Control (acting through agent Supermec): a world leader in heat-tracing, fire &
performance wiring and sensing solutions for the oil & gas, power, food & beverage, chemical, water
and other process industries, as well as for the commercial and residential construction
markets. They have more than 2,000 employees in 56 countries and provide innovative solutions to
the most challenging heat-tracing, wiring, sensing, leak detection, specialty heating, temperature
measurement and floor-heating applications.
27. 26
Strength/Weakness: Same as Hertel
Although these competitors supply trace heating technologies in Vietnam, their first market
penetrating products are usually cooling system, since those are in high demand compared to heating.
Industrial importers in Vietnam also do not usually import trace heating equipments because of the
same reason, and Vietnamese firms which need trace heating usually make individual contracts with
the suppliers, found either through industrial expos held in major cities (HCM, Hanoi, Da Nang), or
the internet.
Without a developed cooling branch, Planray might find it difficult to penetrate Vietnamese market,
though their expertise and focus in heating compared to the competitor would give them an edge in
quality.
2.5. Strategic Opportunities:
Planray’s SWOT
Strength weaknesses Opportunities Threats
Specialize in trace
heating
Language barriers The development of
heavy industry:
mining, chemical
Many reputable
competitors
full control in
manufacturing
Low financial budget Recent openness of
Vietnam economy
Unstable exchange
currency
user friendly Easy to imitate low exit barriers Great difference in
culture
lack of business
relationship
Planray is a small but independent trace heating producer. Their specialization in the field gives them
the expertise and experience that would reflect well on their products. They also have full control of
manufacturing, which they can use to design trace heating solutions that are close fit to their
customers. Thus their product would be more user-friendly, making it desirable for customers.
28. 27
Being a smaller size company, Planray does not have the financial strength comparable to those of
their competitors. This might make investment and expansive decisions harder and more risky.
Planray is in an industry with relatively simple technology, so its products’ special specifications are
easy to be imitated and thus lose their edge. Being mostly a national firm, Planray also lacks the
experience dealing with international business (including language and culture) that might allow
them to easier penetrate markets in new countries.
Currently, Planray’s desire to enter Vietnam’s market is wise due to various changes in Vietnamese
economy and politics. Some main industries that require trace heating are now receiving investments
to expand, and the trend among businesses is to switch from traditional fossil fuel heating to trace
heating. The recent joining of WTO and decades of market-oriented policies has open Vietnam’s
market to international firms to compete more fairly. Vietnam’s capital requirements and business
regulations is also revised to be more favorable toward foreign firms
However, other heat tracing firms also see this opportunity. Many of the world’s giants in this
industry have already entered the market, putting up barriers to entry. Planray’s lack of experience
doing business in Vietnam will make it difficult for them to bridge the language and cultural
difference. They also do not have much business connection, with is crucial in Vietnam markets. The
unstable exchange rate of Vietnam will further hinder the efforts
29. 28
3. Recommendation
To successfully penetrate the Vietnam market, it is highly advisable that Planray finds a distributor in
the country. Currently there is no distributor specialized in trace heating in Vietnam, however, there
are plenty of distributors for imported industrial equipments. Without a distributor, Planray will be at
a terrible disadvantage, given the difference in business culture between the two countries. Language
barriers prove to be the first hurdle. Not many Vietnamese speaks Finnish, and even though English is
taught in school, it generally could not be used fluently in business context. The cultural difference
might also be a problem. Without understanding Vietnamese culture, it is quite common for foreign
business deals to go wrong because of unintentional offense. To smoothly carry out business in
Vietnam, it is very useful to have connections, both private and business. Without those, deals can
take longer to strike or even happen at all.
There are distributors of equipments for industries discussed above located in the three main parts of
Vietnam which Planray can contact:
RAITECH: Founded in 2006 by a group of experienced engineers, R.A.I Tech specialized in
consultancy, design, production, and assembly of automatic production processes for various
industries. The company is based in Ho Chi Minh City, southern Vietnam
VECOMTECH: a distributor of industrial equipment for research institutes, factories, education
& training, and testing service centers. VECOMTECH focus on providing equipment with the
best price, best quality and best customer support. The company is based in Ha Noi, northern
Vietnam
D.N Ltd: Based in Da Nang, central Vietnam
After this initial market penetration, various courses of action are available to Planray depending on
the gauged demand in Vietnam’s market:
30. 29
If the demand is too low, Planray can withdraw from the market, temporarily or permanently. This
scenario might be possible since although the current trend among Vietnamese firms is to switch
from fossil fuel heating to trace heating, they do have some resistance to change, and this would
slow down the rate at which they want to switch, creating low initial demand. If Planray thinks the
situation will be better in a few years, it is advisable to temporarily stop exporting to Vietnam to save
cost, else they can withdraw permanently. Since the company would not be investing much in the
initial penetration, barriers to exit should not be of much concern.
If the demand is adequate, Planray can continue the partnership with the aforementioned
distributors, all the while creating business connections in Vietnam. Business deals, especially with
giant state-own firms, are very lucrative, but hard to make without the right connections. Retaining
distributors keep Planray’s products known to firms that are interested, as well as creating a
relationship with Planray’s targeted customers. It is also advisable for the company to send
representatives to Vietnam’s various industrial and technology expos (more info can be obtained
from distributors).
If the demand is high, Planray can take another step forward and open an office in Vietnam,
bypassing the distributors entirely. This will further establish Planray’s image in the market, and
accommodate more accurate customer targeting that a distributors contracted with many firms
cannot provide. Hiring experienced Vietnamese employees for marketing and customer service will
help with the language and cultural barriers. By carrying out business on their own instead of a
distributor, Planray can also create closer, more personal relationships with its customers, which is
preferred among Vietnamese managers. Note that this step requires some significant sunk cost, so
the decision should be considered carefully.
The final note is about Vietnamese technical standards. Vietnam uses the metric system, single phase
220 volt 50Hz electricity and the most common socket is type A and C (though transformer and
adapter are widely available). If these are not the default production specifications of Planray, the
company should check with Vietnamese engineers to make sure the products are compatible with
the system.
31. 30
Conclusion
In recent years, Vietnam has taken steps to become an attractive market for trace heating. Fast
growing economy creates increasing demand. Industries that require trace heating is investing to
expand and upgrade their technology. Firms are looking for a new heating method to be able to
satisfy the environmental regulation and compete with foreign competition with better product
quality. Business law is also more accommodating for foreign businesses and reduces barriers to
entry, as well as barriers to exit.
The presence of other firms in this market is a hurdle to overcome. They are of larger size with
economies of scale and their own distribution channels and some even have a geographical
advantage. Vietnam firms’ resistance to change will also lower demand a bit initially, though market
forces is stronger and they will eventually have to switch their technology to trace heating. The
difference in culture and language also put Planray in a weak position as they have to try to break this
barrier in order to reach the customers and provide the close cut, user-friendly services that they
take pride in.
Therefore, to enter Vietnam’s market successfully, Planray should start by find some Vietnamese
distributors to carry their products. This will help them overcome some of the difference between
the two countries, as well as estimating Vietnam’s demand for their product without incurring any
substantial sunk cost. Then depends on the situation Planray can either expand or withdraw.
In conclusion, Planray’s ventures into Vietnam’s trace heating market will not be an easy one.
However, the promises of lucrative trade together with Planray’s competitive products outweigh the
difficulties and so would make this business decision profitable in the long run.
37. 36
Vietnam Population Statistics
Population Growth Rates
Country 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Vietnam 1.49 1.45 1.43 1.29 1.3 1.04 1.02 1 0.99 0.98 1.1 1.08 1.05
Population Demography
38. 37
Vietnam Economic Statistics
Viet Nam 2008 2009 2010
Total GDP (in
VND)
1,485,040,000.0 1,658,390,000.0 1,980,914,000.0
GDP by origin (in
VND)
1,130,385,920.0 1,260,376,400.0 1,468,410,591.0
GDP from Mining
and Quarrying (in
VND)
111,594,854.9 125,635,600.0 159,441,769.8
