Businesses urged to anticipate difficulties in penetrating US market

Vietnamese businesses, especially small and medium-sized ones, have relied primarily on outsourcing work which is not suitable for the US market. They find it difficult to seek direct partners as American businesses have not required other countries to do outsourcing.

Big market, tough competition

It is obvious that the US is a big market and plays an important role in the world. Many nations have attached great importance to penetrating this market with a variety of strategies and tactics, which means there is fierce competition.

In recent years, the US has been the number one export market for Vietnam. Hoang Van Dung, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI) said that last year, total two-way trade between Vietnam and the US reached more than US$18 billion, of which Vietnam’s exports to the US were US$14 billion (making up 24 percent of Vietnam’s total export turnover).

Garments and textiles took the lead with a total turnover of US$6 billion, followed by seafood, footwear, wood products, coffee, and crude oil. However, Vietnamese exports make up just below 0.4 percent of the US’s total imports.

Vietnam’s key exports are raw materials or commodities which depend to a great extent on imported materials and face tough competition from China and India.

Nguyen Duy Khien, head of the American Market Department under the Ministry of Industry and Trade (MoIT) said that many nations in the world have done business with the US for a long time while Vietnam has only normalized its trade ties with the US since the US-Vietnam Bilateral Trade Agreement went into effect in 2001.

In fact, due to their small scale, outdated technologies and quality of goods, Vietnamese businesses often have to export their goods through a broker.

Mr Khien said that the American businesses that want to do business in Vietnam are very big. They want to seek major partners which can provide a stable source of products in both quality and quantity, and ensure on-time delivery.

He added that some US businesses import pepper products every year from other nations but they have never directly imported pepper from Vietnam, despite its high quality.

Many Vietnamese businesses have also relied on outsourcing work which is not suitable for the US market. Therefore, they will find it difficult to seek direct partners as American businesses have not asked other countries to do outsourcing.

Businesses should anticipate difficulties trying to penetrate the US market

As a crowded and multi-racial nation with an annual income of more than US$47,000 per capita and GDP reaching US$14,200 billion last year, the US is a large potential market for Vietnam.

Narrowing the production gap will strengthen US import activities. The US tends to diversify its supply sources to avoid risks, which should provide good opportunities for Vietnamese businesses.

However, Mr Khien said that to penetrate the American market, Vietnamese businesses should carefully select their market segment and identify competitive products. The US market often has strict requirements for product quality and according to Vietnamese businesses operating in the market, Vietnam can select the average and middle range segment to penetrate the market.

For example, it is difficult to compete with Italy if Vietnamese businesses choose to produce high quality footwear. It is also very tough to compete with China if they select only cheap products with large volume. For businesses which can only get involved in doing outsourcing work, it will be a waste of time and money to choose American partners, said Mr Khien.

Vietnamese SMEs should anticipate their capacity and cooperate with major businesses to export goods to the US market. Mr Khien said that there are very few leather and footwear businesses in the US, so if Vietnamese businesses can meet the strict requirements for design and materials, US partners will seek ways to cooperate.

Mr Khien also said it is a fact that some Vietnamese businesses have had an abundant source of orders from the US while others cannot find partners. He was also wondering why Vietnamese businesses can do good outsourcing work but find it difficult to cooperate with each other. It is obvious that penetrating the US market is very difficult for Vietnamese SMEs which are not strong enough to seek foreign partners. The Government expressed hope that corporations and groups can play a leading role to help these businesses.

According to many experts, Vietnamese businesses should be actively using different channels to penetrate the market. Businesses can take part in prestigious trade fairs and exhibitions to introduce their potential to foreign partners, especially for partners in developed countries like the US or get involved in e-commerce for convenience and to save costs. – VOV

Tags: Vietnam companies, Vietnam enterprises, Vietnam SMEs