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Business model for expanding into Vietnam
For long-term business success in Vietnam, you need a comprehensive distribution network, including partnerships with Vietnamese distributors. It is important to deepen your understanding of sales partners and consumer markets, and to select the right business model.
Foreign companies need to determine the most suitable business model based on their requirements and functions, including the products and services they offer, target markets, capital requirements, costs, quality control, and operational flexibility.
Foreign companies generally start their business in three ways.
Business model for entering Vietnam
- representative office;
- Service Company (Limited Liability Company)
- Trading Company (Limited Liability Company)
It is necessary to select the most suitable business model for investors, and to manage the goals and operations according to each model.
In this section, we introduce these definitions and characteristics.
Business model ① Representative office
Representative office in Vietnamlowest cost to set upIt's the simplest possible business model. Representative offices are mainly used for the following purposes:
- Point of contact with parent company
- Maintaining relationships with Vietnamese distributors
- quality management
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A representative office usually has its ownIt is prohibited to generate profits and enter into direct contracts.A representative office does not have legal status and can only enter into contracts with the parent company, and has a role as a coordinating function for promoting business in Vietnam. A representative office can hire employees, but is limited to renting out one office only.
A representative office is suitable for deepening the understanding of the Vietnamese market and acting as a point of contact with the parent company. With no special capital requirements, representative offices can enter at a low cost.
Although representative offices are relatively easy to set up and operate, they are very limited in scope of operations as they cannot issue invoices or sign contracts. However, this has the advantage of reducing the operational burden associated with accounting and taxes, and keeping operating costs low.
Despite the restrictions, it is not uncommon for foreign investors to choose representative offices as they can keep costs low, understand the market and coordinate activities with existing distributors.
Business Model ② Limited Liability Company
Unlike a representative office, a foreign limited liability company (Limited Liability Company) can carry on business activities and issue local invoices in Vietnamese Dong (VND). Investor liability is limited to invested assets only and may employ local staff directly. However, under the limited liability company model, shares cannot be issued.
companiesThere are no minimum capital requirements to form a limited liability company. However, based on the size and scope of the project, it should be ensured that the amount of capital is reasonable. Certain industries such as banking, real estate, and auditing have certain registered capital requirements.
There are two types of limited liability companies for the purpose of selling in Vietnam.
- service company
- trading company
service company
The definition of a service company isA legal entity that has the function of providing services to third partiesis.
Investors use this model for research activities, quality control, product development, design, and logistics services. It is the simplest form of incorporation as a limited liability company, with less stringent time and capital requirements for incorporation compared to trading and manufacturing companies.
Although a representative office is easier to set up, if the operation and costs of a representative office start to rise, it is advisable to convert to a service company. Service companies increase operational flexibility in doing business.
trading company
companies in VietnamEngaged in import and export activities in addition to domestic distribution (retail, wholesale, franchise)If you want to, the most common way is to set up a trading company. In general, setting up a trading company can strengthen the operational management of a foreign company in procurement, quality control and distribution.
Compared to representative offices and service companies, it is common to require more capital when investing as a trading company, as it requires import and export activities and close coordination with suppliers and distributors.
The application for a permit to set up a trading company takes four to six months from the date of submitting the application documents to the relevant authorities. Under the World Trade Organization (WTO),100% foreign companycan be established as
Points to note when expanding into Vietnam
In Vietnam, foreign products are generally highly regarded for their quality, safety and reliability. Brand awareness comes from word of mouth, the internet, market promotions and advertising.
Expansion into Hanoi, Vietnam
Trading companies that sell products related to Vietnam's infrastructure development, such as energy, aviation and telecommunications, focus on the area around Hanoi, where many of Vietnam's large state-owned enterprises are based. In addition, proximity to government authorities facilitates smoother government interactions and approval processes.
Tips for business success
Companies domiciled in Vietnam must provide product information in Vietnamese to local agents and distributors. Business success in Vietnam requires more practical measures.
Due to Vietnam's rapidly growing economy, local agents and distributors in Vietnam often carry multiple brands. Therefore, foreign-affiliated companies can keep up with changes and developments in the local market through good relationships with local agents.
Investment in Vietnam is Ho Chi Minh Suzuki Real Estate
We support rental and purchase of condominiums, offices and investment real estate, mainly in Ho Chi Minh, Vietnam.
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This website introduces the latest news articles on real estate, economy, travel, and events related to Vietnam.
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