Tesco in Vietnam
Pros
There are a number of pros to entering the Vietnamese market. First, this is a market where there are few competitors. The main competitor, Big C, is a Thai company that entered Vietnam by buying Carrefour's stores as it exited Southeast Asia[footnoteRef:1]. While many other markets in the region have multiple competitors, Vietnam really only has one. With only one major competitor, and an underdeveloped market for modern grocery distribution, Vietnam represents an opportunity to gain early mover advantage in a promising market. The familiarity with Southeast Asia will help the company to work quickly to establish itself in the Vietnamese market. Furthermore, it is easier on the logistics than either of Indonesia or Philippines, the two other major opportunities in Southeast Asia. Those are archipelagos, whereas Vietnam presents an easy market logistically, close to suppliers, and can be served with only a couple of warehouses. So while there are some challenges to entering the Vietnamese market, there are a lot of good reasons to pursue this market above the other options. This will help make the market entry that much easier. There will be pushback from this established competitor, especially since it is a Vietnamese company, but ultimately any market should have room for multiple different competitors. Further, Tesco has a lot of experience at running hypermarkets, which should allow it to hit the ground running and be a strong competitor. [1: "Exit Carrefour." The Economist. The Economist Newspaper, 23 Sept. 2010.]
In terms of the market, the Vietnamese market is a promising Southeast Asian market. Vietnam is a large market, with 89.7 million people[footnoteRef:2], but market entry can be concentrated in the two largest cities of Hanoi and Saigon (Ho Chi Minh City) initially. With just these two bases, and maybe a third in Hue in the middle of the country, Tesco can serve most of the country's population. Moreover, Vietnamese shopping characteristics are similar to those in other Southeast Asian countries, and this will allow Tesco to enter the market with a lower degree of difficult, given how familiar it already is with operating in the region. The country's transportation infrastructure is reasonably good. The roads are in fairly good condition, though those around Ho Chi Minh City in particular are chronically choked with traffic. [2: CIA World Factbook (2015). Vietnam Central Intelligence Agency.]
Vietnam's government is encouraging foreign direct investment, which Tesco's arrival would be. In addition, the population structure of Vietnam is in the so-called "golden structure" of 60%+ working age. With that demographic structure, Vietnam is likely to experience strong economic growth for the foreseeable future, and there are signs of that already. With favorable government and demographic conditions, Vietnam is a good market to build a base, and has already become foreign direct investment success story[footnoteRef:3]. [3: Nguyen, T. (2014). Why foreign investment in Vietnam is booming. World Economic Forum.]
Cons
There are a number of challenges associated with entering the Vietnamese market. The first is that Vietnam is relatively poor compared with the other markets in which Tesco operates. It is much poorer than Thailand or Malaysia. The only other country with a GDP so low in which Tesco presently operates is India[footnoteRef:4], but India has a massive middle class while Vietnam does not. Even if the average Vietnamese wants to shop at a Tesco, they might not be able to afford to. Overcoming this challenge will be a matter of adjusting the product mix, and locating stores in those areas that can support them -- Ho Chi Minh City in particular has a concentration of wealth. [4: CIA World Factbook (2015). Vietnam Central Intelligence Agency.]
Another knock on Vietnam is that while Southeast Asia in general is an attractive region, Vietnam might not actually be the best market to enter in the region. The company is already the number one retailer in Southeast Asia, but the company's own data shows that Indonesia and the Philippines have larger populations, comparable economies, and much more significant modern grocery sales. Indonesia has ?36 billion in modern sales, Philippines ?11 billion, and Vietnam only ?4 billion[footnoteRef:5]. Those other two countries, of course, are archipelagos so serving those markets would come at a much higher cost than serving Vietnam, with its relatively good transportation infrastructure. [5: Mcllwee, Laurie. "Tesco in Asia -- Key Messages." (n.d.): n. pag. Web. 7 Apr. 2015. ]
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