Marketing strategy for FDI consulting services of investconsult group HCM branch

SOLVAY BUSINESS SCHOOL MASTER IN MANAGEMENT PROGRAM MMVCFB 6 MARKETING STRATEGY FOR FDI CONSULTING SERVICES OF INVESTCONSULT GROUP – HCMC BRANCH THESIS TUTOR : Assoc.. 59 CHAPTER 3 MAR

SOLVAY BUSINESS SCHOOL

MASTER IN MANAGEMENT PROGRAM (MMVCFB 6)

MARKETING STRATEGY FOR FDI CONSULTING SERVICES OF INVESTCONSULT GROUP – HCMC BRANCH

THESIS TUTOR : Assoc Pro Dr NGUYEN DONG PHONG

MASTER IN MANAGEMENT THESIS

Ho Chi Minh City

2007

WARRANT STATEMENT

This is my original work All data and results stated in the thesis are completely true

ACKNOWLEDGEMENT

My deepest gratitude goes to my husband for his understanding, patience and support throughout the MBA program and especially during these last months of research and writing, when he had to take care of my kids and carry the family burden share of my parts

Special thanks to Associate Professor Doctor Nguyen Dong Phong, advisor of the

research for his advice, guidance and encouragement throughout the research study

Many thanks to the Open University – Solvay Business School program professors and officers, who have helped me with all their kindness and warmest assistance during the course

Many thanks to InvestConsult Group and to my colleagues who always support and give me valuable assistance and relevant data in the research Many thanks to my colleagues at Vision & Associate and FISC and to clients of InvestConsult-HCM, who shared with me time and information for the relevant interviews

Finally, many thanks also to all the professors, participants, friends and specially to

my loved, without them this research would not have been possible

TABLE OF CONTENTS

CONTENTS PAGE

ACKNOWLEDGMENT (i)

TABLE OF CONTENTS (ii)

ABBREVIATIONS (viii)

LIST OF FIGURES AND TABLES (ix)

INTRODUCTION 1 PROBLEM CONTEXT 1

2 OBJECTIVES OF RESEARCH STUDY 2

3 SCOPE AND LIMITATION OF RESEARCH STUDY 2

4 METHODOLOGY 3

5 RESEARCH FRAMEWORK 4

6 STRUCTURE OF THE STUDY 5

CHAPTER 1 OVERVIEW ON SERVICE MARKETING AND THE MARKET OF FDI CONSULTANCY SERVICES IN VIETNAM 1.1 AN INTRODUCTION TO SERVICES 7

1.1.1 Definition of Service 7

1.1.2 Characteristics of services and their marketing implications 7

1.1.3 Role of services in economy 9

1.1.4 Services in the development of enterprises 10

1.2 AN INTRODUCTION OF SERVICE MARKETING 11

1.3 FDI CONSULTANCY MARKET IN VIETNAM 14

1.3.1 FDI consultancy service providers 15

1.3.2 Sketching out consumers of FDI consultancy services in Vietnam 17

1.3.3 FDI statistics in Vietnam 19

1.4 EXPERIENCE OF SOME COMPANIES IN PROVIDING FDI CONSULTANCY SERVICES IN VIETNAM 21

1.4.1 Success experience 21

1.4.2 Failing experience 22

1.4.3 Lesson learned from success and failing experience 23

SUMMARY 24

CHAPTER 2 INTRODUCTION OF INVESTCONSULT GROUP – HCMC BRANCH AND ITS FDI CONSULTANCY SERVICES 2.1 HISTORY AND DEVELOPMENT OF INVESTCONSULT GROUP 26

2.1.1 Establishment history 26

2.1.2 Vision and mission 27

2.1.3 Organization structure 27

2.2 MAIN SERVICES OF INVESTCONSULT GROUP 28

2.2.1 Legal services 29

2.2.2 Intellectual property services 31

2.2.3 Investment project consultancy 33

2.2.4 Market research 34

2.3 FDI CONSULTANCY SERVICES OF INVESTCONSULT-HCM 35

2.3.1 Evaluation of the results on providing FDI consultancy services of InvestConsult-HCM for the last three years 35

2.3.1.1 Business results of InvestConsult-HCM for the last three years 35 2.3.1.2 Total new FDI projects to which InvestConsult-HCM rendered consultancy services for the last three years 37

2.3.1.3 Evaluation of clients on FDI consultancy services of InvestConsult-HCM 38

2.3.2 Process for implementing FDI consultancy services of InvestConsult -HCM 46

2.3.3 Marketing activities of InvestConsult-HCM to the FDI consultancy market 49

2.3.3.1Market survey 49

2.3.3.2 Promotion activities of InvestConsult-HCM 50

2.3.3.3Expanding channels to attract more potential clients 53

2.3.4 Marketing organization at InvestConsult-HCM 54

2.3.5 SWOT Analysis on InvestConsult-HCM 55

2.3.5.1 Strengths 56

2.3.5.2 Weakness 57

2.3.5.3 Opportunities 57

2.3.5.4 Threats 58

SUMMARY 59

CHAPTER 3 MARKETING STRATEGY FOR FDI CONSULTANCY SERVICES OF INVESTCONSULT GROUP – HCMC BRANCH 3.1 DEVELOPMENT TREND OF THE FDI CONSULTANCY MARKET IN VIETNAM 61

3.2 OBJECTIVES OF THE MARKETING STRATEGY FOR FDI CONSULTANCY SERVICES OF INVESTCONSULT-HCM 63

3.3 MARKETING-MIX STRATEGY FOR FDI CONSULTANCY SERVICES OF INVESTCONSULT-HCM 64

3.3.1 Products 64

3.3.1.1Product categorization 65

3.3.1.2 Branding and differentiation 66

3.3.2 Pricing 68

3.3.2.1 Flexible policy in pricing 68

3.3.2.2 Special considerations of FDI consultancy service pricing 69

3.3.2.3 Relationship pricing 71

3.3.3 Place 72

3.3.3.1 Location 73

3.3.3.2 Channels 73

3.3.4 Promotion 75

3.3.4.1 Advertising 76

3.3.4.2 Personal selling 78

3.3.4.3 Sales promotion 80

3.3.4.4 Public Relations 81

3.3.4.5 The associate environment and the networking 81

3.3.5 People 84

3.3.5.1 Differing roles of people 84

3.3.5.2 Internal marketing 86

3.3.5.3 Training 87

3.3.6 Process 89

3.3.7 Physical evidence 90

3.4 SOME SPECIFIC SOLUTIONS FOR IMPLEMENTING THE MARKETING STRATEGY FOR FDI CONSULTANCY SERVICES OF INVESTCONSULT-HCM 91

3.4.1 Marketing organization of InvestConsult-HCM 92

3.4.2 Improving FDI promotion activities 95

3.4.3 Policy for human resource 96

SUMMARY 98

CHAPTER 4 CONCLUSION AND RECOMMENDATION 4.1 CONCLUSION 100

4.2 RECOMMENDATIONS 101

4.2.1 Having marketing approach to FDI attraction 101

4.2.2 Recognizing the role of consultancy companies in FDI attraction 102

4.2.3 Setting up a database system available to foreign investors and business community 103

4.3 RECOMMENDATIONS FOR NEXT STUDIES 103

ANNEX A SURVEY QUESTIONNAIRE 105

ANNEX B SURVEY RESULTS 111

REFERENCES 118

ASEAN Association of South East Asia Nations

Inco-HCM or

InvestConsult-HCM InvestConsult Group – HCMC Branch

SCCI State Committee of Co-operation and Investment (now MPI)

SWOT Strengths, Weaknesses, Opportunities, Threats

USBTA US-Vietnam Bilateral Trade Agreement

US or USA United States of America

USD/ US Dollar Official Currency of the United States of America

LIST OF FIGURES AND TABLES

Figure 1.1: GDP structures of Vietnam in 2005 and 2006 9

Figure 1.2: Elements in a service encounter 12

Figure 1.3: Three types of marketing in service industry 13

Figure 1.4: FDI Statistics in Vietnam for the period 2001- 2006 .19

Figure 2.1: Organization Chart of InvestConsult Group .28

Figure 2.2: Business results of InvestConsult Group for the last 03 years .36

Figure 2.3: FDI projects to which InvestConsult-HCM rendered consultancy services 37

Figure 2.4: Statistical record of clients’ statements of InvestConsult-HCM 39

Figure 2.5: Statistical record of clients’ level of satisfaction 42

Figure 2.6: Statistical record of elements encouraging clients to use InvestConsult-HCM’s services 43

Figure 2.7: Statistic opinion of clients about InvestConsult-HCM’s personnel 44 Figure 2.8: Statistic opinion of clients on recommending InvestConsult-HCM’s services to others 45

Figure 2.9: Process for a foreign investor to get an investment license for its project 47

Figure 2.10: Normal process for implementing FDI consultancy services 48

Figure 2.11: The current channels of InvestConsult-HCM 53

Figure 3.1: The product surround concept 67

Figure 3.2: Suggestion on expansion of InvestConsult-HCM’s channels .75

Figure 3.3: Statistic record of on clients’ request of further information .76

Table 3.1: Personal contact function in services 79

Figure 3.4: Employees influence on clients .85

Figure 3.5: Marketing position in InvestConsult-HCM .93

Figure 3.6: Organization chart (new) of InvestConsult-HCM 94

1 PROBLEM CONTEXT

Vietnam has been in the process of full international integration and development All resources are mobilized for the industrialization and modernization of the country

During the last 20 years since the promulgation of the Law on Foreign Investment

in Vietnam (1987), foreign direct investment (FDI) has had reached many important achievements and played an important role in eco-socio development of the country Vietnam has benefited from FDI inflows, which bring into the country not only capital, but also modern technology, new industries, management skills, know-how, create additional employment and budget revenues

The investment environment of Vietnam has become more attractive in the eyes of foreign investors How to attract more FDI inflow for serving the integration and development process of the country is not only an important task of the government but also the concern of many Vietnamese people and entrepreneurs

InvestConsult Group is a leading local consulting company whose history is closely linked with the implementation of the “Doi Moi” process of the country After nearly 18 years of practicing, especially consulting to FDI projects and foreign investors, InvestConsult Group has actively contributed its part in attracting FDI inflow into Vietnam and effectively assisted foreign investors in their investment activities In fact, InvestConsult Group has applied partly the marketing concept in formulating its marketing and operation policies, i.e.: to balance three considerations: company profit, client want and public interest

Marketing is considered as a useful and important tool for InvestConsult Group to compete and develop in such a competitive FDI consultancy market In addition, the company leaders also wish to link their business career to the development and prosperity of all staff, as well as of the country, actively contribute their part into

the common destiny of Vietnam Marketing strategy for FDI consultancy services, mainly concentrating to foreign investors, could help the company to target at the two main points: to enhance its services and business and to increase the FDI inflow into Vietnam

2 OBJECTIVES OF RESEARCH STUDY

The objectives of the research study are described as follows

Firstly, to review the literature on services marketing and to overview the FDI consultancy service market in Vietnam, together with some success and failure experience of FDI consultancy service providers

Secondly, to introduce about InvestConsult-HCM, its services and to access the current marketing activities of the company on FDI consultancy services during the last three years

Thirdly, to suggest the marketing-mix strategy for FDI consultancy services of InvestConsult-HCM based on using the literature on services marketing and understanding the internal/ external environment of the company

Finally, to give some solutions and recommendations on how to get more FDI inflow into Vietnam

3 SCOPE AND LIMITATION OF RESEARCH STUDY

This research will concentrate on the marketing strategy for FDI consultancy services of InvestConsult-HCM after Vietnam becomes the 150th member of the World Trade Organization (WTO) by end 2006

InvestConsult Group is located in both the North and the South of Vietnam, with the head office and the InvestConsult Development Research Institute in Hanoi and the branch in HCMC This research will focus on the marketing activities of the HCMC Branch only

InvestConsult Group has provided a wide range of services to both foreign and local enterprises in Vietnam, with both pre-license and post-license administrative

procedures and consulting This research focuses on the FDI consultancy services only, i.e consultancy services to foreign investors until they obtain investment licenses/ certificates to officially start their investment and business in Vietnam

Finally, this research is for the new business situation where there are many things changed and need to be changed in the investment environment of the country after Vietnam becomes the 150th member of WTO

Reference papers, international research papers, publications, related studies… were used as valuable inputs for the research

Field survey and interview

In the second half of 2006, the author (as the group leader) and colleagues in InvestConsult-HCM did a survey to find out the clients perception and satisfaction towards the services of the company The results and feedback from this survey could hopefully help to improve the clients’ understanding on the services of the company and will have better recommendations for the leaders to formulate the marketing strategy of the company Questionnaire was sent to 90 clients who have used services of InvestConsult-HCM at least 03 times and/or for at least 02 years, but only 42 fulfilled Questionnaire have been returned Primary data was processed

by SPSS software to become secondary data This research just used partly the results of the survey, focusing on FDI consultancy services only

In-depth interviews were also held with 02 similar local service providers (Vision

& Associates and FISC) in order to obtain some valuable information on the issues

in study

5 RESEARCH FRAMEWORK

Objectives of study

- Literature reviews on services

and service marketing

- Overview on FDI consultancy

market in Vietnam

- Success and failing experience

of some FDI consultancy service

providers in Vietnam

- Introduction of Investconsult Group – HCMC Branch and its services

- Current marketing activities of Investconsult Group – HCMC Branch in FDI consultancy services

- SWOT analysis on Investconsult Group – HCMC Branch

Marketing-mix strategy for FDI consultancy services of InvestConsult Group – HCMC Branch

Conclusion and Recommendations

6 STRUCTURE OF THE STUDY

The thesis includes the following key parts:

• Introduction

• Chapter 1: Overview on service marketing and the market of FDI consultancy services in Vietnam

• Chapter 2: Introduction of InvestConsult-HCM and its FDI consultancy services

• Chapter 3: Marketing strategy for FDI consultancy services of HCM

InvestConsult-• Chapter 4: Conclusion and Recommendations

• Annexes

CHAPTER 1

OVERVIEW ON SERVICE MARKETING AND

1.1 An introduction to services

1.1.1 Definition of Service

1.1.2 Characteristics of services and their marketing implications

1.1.3 Role of services in economy

1.1.4 Services in the development of enterprises

1.2 An introduction of service marketing

1.3 FDI consultancy market in Vietnam

1.3.1 FDI consultancy service providers

1.3.2 Sketching out consumers of FDI consultancy services in Vietnam 1.3.3 FDI statistics in Vietnam

1.4 Experience of some companies in providing FDI consultancy services in Vietnam

1.4.1 Success experience

1.4.2 Failing experience

1.4.3 Lesson learned from success and failing experience

SUMMARY

There are many definitions of what constitutes a service In the simplest term,

services are deeds, processes and performance Philip Kotler defines that ‘service is

any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything Its production may or may not be tied to a physical product 1 ’

1.1.2 CHARACTERISTICS OF SERVICES AND THEIR MARKETING IMPLICATIONS

Services have four major characteristics that greatly affect the design of marketing programs

(a) Intangibility

Being one of the four characteristics that distinguish goods from services, intangibility is the primary source from which the other three characteristics emerge Services are defined as performance, deeds and efforts, whereas goods are defined as objects, devices and things As the result of their intangibility, services cannot be seen, felt, tasted or touched in the same manner as physical goods can be sensed To reduce uncertainty, buyers will look for signs or evidence of the service quality They will draw inferences about service quality from the place, people, equipment, communication materials, symbols and prices that they see Therefore, the service provider’s task is to “manage the evidence”, to “tangibilize the intangible” Whereas product marketers are challenged to add abstract ideas,

1 Philip Kotler (1994), Marketing Management, Prentice-Hall International, 8th edition

service marketers are challenged to put physical evidence and image on their abstract offers

(b) Inseparability

One of the most intriguing characteristics of the service experience involves the concept of inseparability Inseparability reflects the interconnection among the service provider, the customer involved in receiving the service, and other customers sharing the same experience Unlike the good manufacturer, who may seldom see an actual customer while producing the goods in a secluded factory, service providers are often in constant contact with their customers and must construct their service operation with the customer's physical presence in mind This interaction between customer and service provider defines a critical incident Critical incident represents the greatest opportunity for both gains and losses in regard to customer satisfaction and retention

(c) Heterogeneity

One of the most frequently stressed differences between goods and services

is heterogeneity – the variation in the consistency from one service transaction to the next Service encounters occur in real time, and consumers are already involved

in the factory, so if something goes wrong during the service process, it is too late

to institute quality-control measures before the service reaches the customers Indeed, the customer may be part of the quality problem

(d) Perishability

The fourth and unique characteristic that distinguishes goods from services

is perishability Perishability refers to the fact that services cannot be saved, their unused capacity cannot be reserved, and they cannot be inventoried Unlike goods that can be stored and sold at a later date, services that are not sold when they become available cease to exist

1.1.3 ROLE OF SERVICES IN ECONOMY

The service sector has increased dramatically in importance, both internationally and in Vietnam Services permeate every aspect of our lives A number of demographic, social, economic and political changes will continue to fuel the growth of the service sector

In Vietnam, the service sector has developed and played an important role in the economic growth However, the economic structure has slowly shifted, and the service sector is now relatively backward and less competitive The service sector now accounts for less than 40% of GDP, much lower than the average of 50% in low income countries and 71% in developed economies2

Figure 1.1: GDP structure of Vietnam in 2005 and 2006

Source: General Department of Statistics

The role of services in Vietnam has often superseded their economic importance in terms of their social role by serving as a tool to alleviate poverty (housing, transportation) and providing for the basic needs (communication, health care, education, sanitation) for the population at large This resulted in the regulatory and business environment where the government assumed the leading role in providing these services A number of dynamic factors has been increasingly shaping policies

Ariculture, Forestry and Fishing Industry and Construction Services

GDP Structure in 2006 (current price)

on services at the national level, some of them being internal (e.g economic recovery and efficiency considerations) and other external (increasing international competition or regional integration and multilateral negotiations on services) Among these factors, trade has come to play an increasingly prominent tool as a vehicle for growth and development

Indeed, in the last eighteen years, Vietnam has implemented many reform measures

in the services sector under the “Doi Moi” policy launched in 1986 The program, meaning “change and newness”, underlies the Government’s economic reform towards a “market economy with socialist direction” This has resulted in a series

of changes of legislative, regulatory and administrative regimes of service activities

in the country This has also brought many market liberalization measures in the services sector required by the reform process with the purpose of increasing the competition of service providers, moving towards a more market-oriented services economy for the country and enhancing the capacity of its economy to achieve higher and sustainable rates of economic growth which would eventually lead to better living conditions of their citizens and reduce the incidence of poverty

1.1.4 SERVICES IN THE DEVELOPMENT OF ENTERPRISES

In order to be successful in starting and developing business, the entrepreneurs obviously engage business development services, including consultancy services

According to a research paper of the Vietnam Chamber of Commerce and Industry (VCCI), the GTZ-SME Promotion Project and SwissContact, the business development services market of Vietnam valued about 27 million US Dollars (by 2002), with the annual growth rate of about 10% The business development services market of Vietnam is just at the step of “take-off” with insufficient perception from both supply and demand The two biggest cities of Vietnam, i.e Ha Noi and HCMC, hold about 90% market share of business development services, of which 60% expenditures to business development services are from entrepreneurs from HCMC, and mainly from FDI companies

Perceptions among the general local population and among important subgroups, including local entrepreneurs and government officials, regarding the position and importance of services are neither sufficient nor accurate People have not recognized the role and importance of services, especially regarding consulting services In fact, almost all of Vietnamese entrepreneurs have not yet had a habit to engage professional services, especially consultancy services Vietnamese entrepreneurs obtain much of what they need from staff or personal connections and consider it unnecessary to buy professional services, no matter what benefits the services could bring to them or how common or essential the services are to conducting their business

In contrary, foreign investors, especially from industrialized countries, wish to outsource and contract out the services to improve their business performance through the use of external resources, knowledges and skills to supplement their internal resources Such clients are interested in employing consulting services to prevent any potential risks during their survey, investment and doing business in Vietnam, especially when the legal framework in Vietnam is still insufficient and less protective in the eyes of foreign investors

There are many definitions of marketing According to the American Marketing

Association, marketing is the process of planning and implementing the price

conception, the promotion and distribution of ideas, goods and services allowing for exchanges consistent with the individual and organizational goals Philip Kotler

defines that marketing is a social and managerial process by which individuals and

groups obtain what they need and want through creating, offering and exchanging

products of value with others 3

Marketing thinking developed initially in connection with selling physical products Yet one of the major mega trends has been the phenomenal growth of services

3 Philip Kotler (1994), Marketing Management, Prentice-Hall International, 8th edition, Page 6

Furthermore, service is distinguished with a physical product basing on its intangibility, its inseparability, its variability and its perishability Therefore, service businesses are more difficult to be managed using a traditional marketing approach The service business is a system of elements (see Figure 1.2)4 Consider

a customer visiting a bank to get a loan (service X) The customer sees other customers waiting for this and other services The customer also sees a physical environment consisting of a building, interior, equipment, and furniture In addition, the customer sees contact personnel and deals with the loan officer All this is visible to the customer Not visible is a whole “backroom” production process and organization system that supports the visible service business Thus, the service outcome is influenced by a host of variable elements

Figure 1.2: Elements in a Service Encounter

Advertising Billing and payment Sales calls Media stories Word-of-mouth comments Random exposures to personnel and facilities Market research studies Not visible to customer Visible to customer

Contact personnel

Other customers

Customer A

Service X

Other services The Service Business as a System

Elements in a Service Encounter

Direct interactions

Secondary interactions

In view of this complexity, Gronroos has argued that service marketing required not only external marketing but also internal and interactive marketing (see Figure 1.3)

4 Philip Kotler (1994), Marketing Management, Prentice-Hall International, 8th edition

Figure 1.3: Three types of marketing in service industry

External marketing described the normal work done by the company to prepare, price, distribute and promote the service to customers Internal marketing describes the work done by the company to train and motivate its employees to serve customers well Interactive marketing describes the employees’ skills in serving the clients The client judges service quality not only the aspect of its technical quality but also by its functional quality

In fact, there are some services where the customers cannot judge the technical quality even after they received the services Since services are generally higher in experience and credence qualities, consumers feel more risk in their purchase That has several consequences First, service consumers generally rely on word of mouth than on service-firm advertising Second, they rely heavily on price, personnel, and physical cues to judge the service quality Third, they are highly loyal to the service provider when satisfied

The dynamics of most service markets have changed; low level of competition has given way to vigorous and intense competition In this competitive market place, marketing has become a key differentiator between corporate success and failure Therefore, the companies in service sector have recognized the important role of

Interactive Marketing

Internal Marketing

External Marketing

Three types of Marketing in Service Industries

Company

marketing in respect of their business as well as in identifying their business strategy and targeted objectives In addition, the increase in competition of service business also requires the more precise in service marketing

Market is one of the core concepts of marketing Originally, the term market stood for the place where buyers and sellers gathered to exchange their goods, such as a village square Economists use the term market to refer to a collection of buyers

and sellers who transact over particular product or product class; hence the housing market, the grain market, and so on Marketers, however, see the sellers as

constituting the industry and the buyers as constituting the market A market

consists of all the potential customers sharing a particular need or want who might

be willing and able to engage in exchange to satisfy that need or want5

As mentioned above, based on the concepts of marketing, the market consists of all the potential customers sharing a particular need or want who might be willing and able to engage in exchange of something to satisfy that need or want In other words, the FDI consultancy market consists of foreign investors who did – do – will invest in Vietnam

On 29 December 1987, the National Assembly of the Socialist Republic of Vietnam for the first time promulgated the Law on Foreign Investment in Vietnam (“Law on FDI”), one of the first concrete steps towards implementing the economic renovation and reform strategy of Vietnam (implementing the “Doi Moi” policy) After the first year of implementing the Law on FDI (i.e 1988), a modest number

of only 37 FDI projects were issued investment licenses6 In fact, foreign investors, when investing and doing business in Vietnam, did have the demand to engage consultancy services in Vietnam, since the legal framework for FDI in Vietnam was still insufficiently developed and the administrative procedures were complicated and not transparent at that time Seeing this actual demand, some

5 Philip Kotler (1994), Marketing Management, Prentice-Hall International, 8th edition, Page 11

6 Yearly statistic 2001, Hanoi

ministries and branches had initiated to set up their own centers/ offices to support and provide consultancy services to foreign investors in some FDI projects where such ministries and branches directly manage or had certain connections The Law

on FDI had opened up the opportunity for the first consultancy businesses to be set

up and operate in Vietnam in the modern time

1.3.1 FDI CONSULTANCY SERVICE PROVIDERS

On 14 April 1990, the State Committee for Co-operation and Investment (now the Ministry of Planning and Investment- MPI) issued the Regulations on management

of FDI consultancy services, subject to which FDI consultancy service organizations could be formally set up in Vietnam, provided that such organizations had to be set up and sponsored by a ministerial-level body or a provincial people’s committee and be issued a professional license by the SCCI7 Based on such

Regulation, the first 6 companies were set up to provide FDI consultancy services,

The said six companies had shared the FDI consultancy market for several years,

by taking the advantages from their sponsor authorities (i.e providing services to FDI projects which were mainly related to the management of their sponsor authorities)

With the promulgation of Decree No 42/CP dated 8 July 1995, the Government allowed foreign law firms also to provide consultancy services in Vietnam Despite

of some limitations in practice in Vietnam (i.e foreign law firms could only consult clients in foreign/ international laws and were not allowed to advise on Vietnam’s laws), the participation of foreign law firms as well as the co-operation between them and local consultancy companies brought more room for foreign investors in selecting and using professional consultants Furthermore, the investment wave in the period of 1994-1997 also brought up good opportunities for developing the FDI consultancy market in Vietnam

On 19 April 1997, MPI issued the Regulations on practicing in FDI consultancy services that replaced the former one, subject to which Vietnamese enterprises providing FDI consultancy services were required to have professional certificate in

FDI consultancy issued by the MPI Before that, the promulgation of the Law on

Companies in 1991 (as amended in 1994) had resulted in the establishment of many local consultancy companies The market, therefore, became more active and competitive, and required professional activities of service providers

The Law on Enterprises was passed in 1999 and the Government was determined in moving out many sub-permits, including the professional certificate in FDI consultancy Those have given more opportunities to (foreign and domestic) consultancy companies, law firms to be set up and to compete in providing consultancy services to foreign investors in Vietnam In addition, the Ordinance on Lawyers in 2001 has also allowed foreign law firms to give legal advices and provide legal services, to recruit Vietnamese lawyers to advise on Vietnamese laws and regulations

Nowadays, the FDI consultancy market in Vietnam is considered at the “take-off” process and expected to develop even faster in future, when Vietnam becomes an attractive destination in the eyes of the foreign investors’ community

1.3.2 SKETCHING OUT CONSUMERS OF FDI CONSULTANCY SERVICES IN

VIETNAM

The FDI consultancy market in Vietnam consists of foreign investors who did – do – will invest in Vietnam Foreign investors, from different countries and territories, shall have different resources and different cultural characteristics in doing investment and in using FDI consultancy services in Vietnam For the time being, investors from 76 countries and territories have invested in Vietnam, and the top ten of which are: Taiwan, Singapore, Korea, Japan, Hong Kong (China), British Virgin Islands, France, the USA, the Netherlands and Malaysia Asia is still the most significant source of FDI capital The main investing economies are: Singapore, Taiwan, Korea, Hong Kong (China) and Japan Outside of Asia, France, the Netherlands and the United Kingdom are among the most important investors After the signing of the US-Vietnam Bilateral Trade Agreement (USBTA), investment from U.S companies into Vietnam has increased steadily It is worth noting that only about 80 of the 500 biggest multinational corporations in the world have established a presence in Vietnam, compared to roughly 400 in China

As per a research of the Vietnam Development Forum (VDF) and the National Economic University in 2005, the consumers of FDI consultancy services in Vietnam could be sketched as follows:

- Investors from EU, the USA and Australia are interested in hi-tech industry and service sectors (i.e telecommunication, banking, insurance, education, tourism, health care, hotel and other services) In practice, it is not easy for foreign investors

to obtain investment license for projects in these business fields in Vietnam In addition, investors from EU, the USA and Australia and/or investors from 500 biggest multinational corporations in the world are usually from highly

industrialized countries In an increasingly complex and dynamic environment as prevailing in industrialized countries, businesses (and organizations in general) have to focus on their core area of competence in order to remain competitive and effective This means developing effective working relationships with a range of external service providers who can do a specific task

• better/more competently

• cheaper/at lower cost, and/or

• with higher credibility towards internal and external stakeholders than the enterprise/organization itself

In other words, investors from EU, the USA and Australia and/or biggest multinational corporations in the world always use professional consulting services for their business in Vietnam They prefer reputable and professional service providers and normally use one world-wide law firm for their world-wide business However, because of the difficulty and the sensitiveness in applying for investment licenses in Vietnam, they usually use in parallel one local reputable consulting firm for the local issues

- Investors from Japan, Singapore, Hong Kong, Malaysia are mainly interested in electric and electronic industries, mechanical industry, heavy industry, real estate, construction, infrastructure Therefore, they do concern about the current infrastructure, human resource, market potentiality They also need to outsource professional services Except for investors from 500 biggest multinational corporations in the world, they usually engage local professional consulting service providers who also have strong liaison with the governmental authorities

- Investors from Taiwan, Korea, China are mainly interested in small manufacturing industries like garment, shoe, foods processing where they need a lot of unskilled workers and it does not require big investment capital They are

sensitive in pricing issue They usually engage professional consulting services only when facing to some problems/ difficulties They tend to use consultants who offer cheaper prices

In addition, foreign investors when doing business in Vietnam always look for and recruit local experts since the initial steps of their investment process In fact, they could find out excellent and experienced personnel who also are fine purchasers of FDI consultancy services because they know well at the same time the conception and the demand of the foreign investors and acknowledge the capacity and performance of the consultancy companies Moreover, such knowledge is recognized by the foreign investors, who let them, in most cases, free in outsourcing the counsels and then choosing the consultants in Vietnam

1.3.3 FDI STATISTICS IN VIETNAM

Figure 1.4: FDI Statistics in Vietnam for the period 2001- 2006

Obviously, the starting and developing of the FDI consultancy market of Vietnam have been from the actual demand of foreign investors in Vietnam The market shall be more developed while Vietnam has drawn more attention from foreign

0 2,000 4,000 6,000 8,000 10,000 12,000

0 100 200 300 400 500 600 700 800 900 1,000

Registered Capital (mil USD) No of Projects

(est.)

Source: MPI

investors, while more and more foreign investors have chosen Vietnam as their investment destination Foreign investors are the targeted clients of FDI consultancy companies

Vietnam is now possessing very favorable conditions, as international investors, institutions and mass media all talk about Vietnam as an attractive destination The

media has created the phrase “the second wave of foreign investment” (after the

first wave in the middle of 1990s) and this has been repeated constantly for the last couple of months The second wave of foreign investment in Vietnam began actually with the visit and investment by business people from Japan, the USA, Korea and other countries The projects of Intel (to build its largest chip assembly and test facility in Saigon Hi-Tech Park with the total investment capital of 01 billion US Dollars) or that of POSCO (to build a steel mill in Ba Ria – Vung Tau Province with the total investment capital of 1.2 billion US Dollars) have contributed in the fact that the total FDI capital into Vietnam in the year 2006 hits a new record high of US$10.2 billion, the largest ever since 1988

For the time being, there have been more than 6,800 FDI projects in operation and with the total registered capital of more than 60 billion US Dollars, out of which implemented takes up over 36 billion US Dollars8 The FDI consultancy market in Vietnam seems to be potential In addition, with the competitive advantages of relatively cheap labour costs and good skills of workers, a significant size of the local market, the political stability, the high and stable economic growth, the high determination of the Government in international integration and development, and the advation of community, Vietnam has become an attractive destination of foreign investment Hence, the FDI consultancy market will obviously further develop However, the competition shall be higher In addition, foreign investors have had their habit and experience in using outsourcing professional services, such could become opportunity and challenge to service providers in Vietnam

8 Source: The Ministry of Planning and Investment

1.4 EXPERIENCE OF SOME COMPANIES IN PROVIDING FDI

CONSULTANCY SERVICES IN VIETNAM

1.4.1 SUCCESS EXPERIENCE

In 1999, Mr Pham Nghiem Xuan Bac, one of the principal founders of InvestConsult Group, and some other senior managers resigned from InvestConsult and set up their owned business – Vision & Associates From the beginning Vision

& Associates has provided the services similar to those of InvestConsult, especially the FDI consultancy services In year 2000, Vision & Associates expanded its business to HCMC They have adopted the organization structure of partners, similar to those of the other foreign law firms and consultancy organizations

With 10 persons at the beginning in a small office in Hanoi, Vision & Associates has grew up fast with some remarkable achievements and became now one of the reputable service providers in the FDI consultancy market Their success has been from the following elements:

- When starting its business in the same market, Vision & Associates took up

a significant number of existing InvestConsult’s clients, who preferred to keep the long-term relationship with some key personnel who have had servicing them;

- The staff who came out from InvestConsult to work for Vision & Associates

were quite senior and already had experience in advising foreign investors Vision & Associates also acknowledged that people are the most important factor ensuring the company’s long term success Therefore, Vision & Associates places special emphasis on human resources development by recruiting and training talented young lawyers and consultants They have continuously invested in people, thus, the company has the ability to anticipate changes and look to the future;

- They set up a strategic relationship with Deacons (an international law firm,

based in Hongkong, Japan, Australia and New Zealand) When Deacons closed its business in Vietnam in 2006, Vision & Associates took up most of the staff and business links of Deacons in Vietnam and has successfully inherited and explored the networks of Deacons for its business in Vietnam

1.4.2 FAILING EXPERIENCE

FISC was the first FDI consultancy company established in Vietnam in early 1988 FISC used to be the market leader in the FDI consultancy market since its establishment until early half of 1990s, because of the following main reasons:

- The owner of FISC is the Ministry of External Economic Affairs (now the

Ministry of Trade) This Ministry used to play the role of an initial contactor with foreign investors when they started looking for investment opportunities in Vietnam At that time they also acted as the licensing authority for FDI projects in Vietnam (before this role was transferred to the State Committee of Cooperation and Investment) Therefore, such natural competitive advantages seemed to be in the past of FISC only

- The director of FISC was Dr Pham Khac Chi, who graduated from Europe

and was from the reputable and powerful family Pham Khac of Vietnam In addition to the name of the Ministry of External Economic Affairs backward, Dr Chi’s network with other relevant ministries and governmental authorities made FISC’s service delivery process smoothly and successfully

However, with the weakness in corporate management and with the pay-off policy

of a state owned company, FISC had their internal problems Since 1992, many good staff left the company to joint to other foreign companies with the much more attractive salary and income scheme Some stayed at the company but had no motivation and usually had some private arrangements with clients in consideration

of something other than the salary from FISC Some resigned and set up their own

business and of course took up the existing clients and networks of FISC The death

of Dr Chi in 1997 seemed to put FISC at the end of its glorious time In 2002, FISC was sold to its employees and become a private joint stock company Now, the core services of FISC is just relating to visa arrangement for foreign and local people, and consulting simple business cases The brand-name FISC is just in memory of some investors The FDI consultancy market has developed to a new level without FISC

1.4.3 LESSON LEARNED FROM SUCCESS AND FAILING EXPERIENCE

The elements of “people” and “networks” could partly explain the success of Vision & Associate so far as well as the success of FISC during its glorious time Those could also explain why FISC could not maintain the position of a market leader in FDI consultancy market

Having good networks seems to be the key element of success in the first few years

of implementing the Law on FDI Some main reasons were the red-tape involved in the licensing process: investors have to liaise with so many central and local authorities/ departments, criteria for approving a project were not clear and transparent, Government authorities interfered much in the commercial terms of the

projects Nowadays, the quality of service and reliability of the firm has became the more important factor

In addition, fair competition is an obvious trend of a market oriented economy, which requires that each company must have a vision and a medium to long term strategy for its business in such a competitive market

ı SUMMARY

In Vietnam, the service sector has developed and played an important role in the economic growth Enterprises also need to engage services (including consultancy services) in order to be successful in starting and developing their business Service business is more difficult to manage using a traditional marketing approach because of its intangibility, its inseparability, its variability and its perishability FDI consultancy is a very special service business in Vietnam The FDI consultancy market of Vietnam has been born and developed together with the implementation of the “Doi Moi” process and open door policy of the country, where consists of foreign investors who did – do – will invest in Vietnam The FDI consultancy market of Vietnam is also up and down in line with the FDI inflow into Vietnam with some success and failure experience of FDI consultancy service providers After nearly 20 years since the initial Law on FDI was promulgated by end 1987, the market is still considered at the “take-off” process and expected to develop even faster in future, when Vietnam becomes an attractive destination in the eyes of the foreign investor community

2.2.2 Intellectual property services

2.2.3 Investment project consultancy

2.2.4 Market research

2.3 FDI consultancy services of InvestConsult-HCM

2.3.1 Evaluation of the results on providing FDI consultancy services of InvestConsult-HCM for the last three years

2.3.2 Process for implementing FDI consultancy services of HCM

InvestConsult-2.3.3 Marketing activities of InvestConsult-HCM to the FDI consultancy market

2.3.4 Marketing organization at InvestConsult-HCM

2.3.5 SWOT Analysis on InvestConsult-HCM

SUMMARY

The history of InvestConsult Group is closely linked with the implementation of the

“Doi Moi” process of the country Ideas for establishment of a professional consulting company in Vietnam emerged in 1987 when Mr Nguyen Tran Bat (Chairman and General Director of the Group now) joined the establishment of the Bureau for Promotion and Development of Intellectual Property Activities in Vietnam, being the predecessor of Investment & Intellectual Property Consultancy Company (INVESTIP) which is under the management of the State Committee of Science and Technology (Ministry of Science and Technology now)

Two years later, in 1989, under the sponsorship of Vietnam’s National Center for Scientific Research, Mr Bat, together with some other colleagues, established the Investment Consultancy and Technology Transfer Company (InvestConsult Ltd), expanded and changed the business activities to focus on providing foreign investment consulting services This made InvestConsult one of the very first companies in Vietnam to provide consulting services in this field

With nearly 18 years of development, InvestConsult Group nowadays has become a group of leading professional consulting companies in Vietnam with multi-industries services such as investment consultancy, business law, intellectual property, development, business management, financial advisory service, administrative service, etc InvestConsult Group has 220 full-time staffs and more than 100 collaborators working in Hanoi Office (Head Office), Ho Chi Minh City Office (HCMC Branch), Can Tho Office (Branch)

The Branch in Ho Chi Minh City was established in late 1989 to provide consultancy services for foreign investment, especially for those projects in the Southern Region and with a view to develop and consolidate InvestConsult’s position in such a strategically located city of Ho Chi Minh- the investment and commercial hub of the country With more than 60 staffs who are lawyers and experienced consultants in various fields of legal consultancy, economics, finance, technology, trading and business management, the Branch in Ho Chi Minh City has contributed greatly to the success and growth of InvestConsult Group until now

2.1.2 VISION AND MIS ION

With its mission of being creative and a target for sustainable development, InvestConsult Group’s founders set the goal to build InvestConsult Group a professional and prestigious consultancy group in Vietnam and step-by-step crossing the Vietnam’s borders to become an international consultancy group, while to actively contribute its efforts in renovating and developing the country

2.1.3 ORGANIZATION STRUCTURE

InvestConsult Group has its head office in Ha Noi that manages the Northern Region The Branch in Ho Chi Minh City manages the Southern Region (from Thua Thien - Hue province southwards to the Mekong Delta provinces) The InvestConsult Development Research Institute – a member of the group - conducts studies on strategic issues such as Vietnam’s development, economy, society, legal issues, globalization and the Group’s development and expansion

The head office has a total of 07 subsidiaries/ departments providing consultancy services for the business community in the Northern Region The HCMC Branch manages 02 subsidiaries and 04 departments, including an office in Can Tho City,

to provide consultancy services for investors and enterprises in the Southern Region of Vietnam

Figure 2.1: Organization Chart of InvestConsult Group

S urc : Inv stCo sul Gro p

2.2 MAIN SERVICES OF INVESTCONSULT GROUP

InvestConsult Group has made great contributions to the growing number of both foreign and local invested firms in Vietnam InvestConsult Group assists its clients with both pre-license and post-license administrative procedures However, the added value of InvestConsult lies in its advices to the clients InvestConsult equips its clients with basic, but essential knowledge on the legal framework, provides its clients with analysis on different business options, helps its clients to select the most appropriate investment forms & structures, etc InvestConsult Group does not only care about the establishment of a business, but more about its sustainable operation and development in the future When advising clients, InvestConsult always carefully analyzes the different aspects of each matter of the clients, based

InvestConsult Group Holding

InvestConsult Group

Head Office

InvestConsult Group HCMC Branch

Development Research Institute

InvestConsult

Investment

Promotion Ltd

InvestConsult Development Services Ltd.

InvestConsult

Financial

Consultancy

InvestConsult Communications Ltd.

InvestConsult Legal

Services Ltd

InvestConsult Intellectual Property Agency Ltd.

InvestConsult

Enforcement

Services Ltd

PR & International Relation Dept

InvestConsult South Legal

Information Services Ltd

Project Consulting Dept CanTho Office

Admin and Finance Dept