Do a SWOT analysis of the Vietnam opportunity faced by American Rice

when it entered in 1994. What do you think that American Rice could
have done better?
Reasons for failing:

American Rice said Can Tho-based mill failed because it was given a
smaller export quota than it needed to break even
American Rice was overcharged by Vinafood II for land and equipment
leasing
Vietnamese said American Rice executives of mismanagement
regulations are unclear and liable to change from one month to the next
Vinafood II was responsible for the purchase and sell of rice to the jointventure allow them to benefit from selling its rice to the joint-venture
with a margin
American Rice has the sense of urgency and determination to move asap
into the Vietnamese market unhealthy decision making
American Rice lacked a long-term plan for its business in Vietnam, not
enough time to build up more local expertise and expand the company's
knowledge and understanding of the Vietnamese market beyond one
person.
Lack trust between American Rice and Vinafood which is essential in joint
ventures
Clash of major linguistic, cultural and administrative differences
Vietnam has poor legal protection, hostile joint-venture partners, heavy
bureaucracy and a deep-seated suspicion of capitalism and foreign
interests

Alleged benefits of joint venture:

increase competition in a state-dominated sector riddled with inefficiency

Better equipment, higher quality control and a reputation for reliability
help these firms fetch higher prices for Vietnamese rice, which should
ultimately help the nation's poverty-stricken paddy farmers
able to bring in overseas customers for Vietnamese rice
upgrading of facilities, invest in the most modern rice-processing
equipment in the country
Vietnamese companies would directly benefit from the inflow of more
efficient ways of running the rice commodity value chain
increase Vietnamese access to additional financial resources
provide local players direct access to the know-how and more expansive
network of the foreign JV partner
potential positive externalities: increase in productivity and income of
involved farmers, to increased competition among local rice processers
and a way to restock Vietnam's depleted foreign reserve

Why not 100% American Rice

lack of political certainty

inadequacies in the legal framework
expected long duration of the whole process to be finished
absence of a network that would be instrumental in staffing the new entity

Taking into consideration the major linguistic, cultural and administrative

differences between the two-parties this might have been too fast to build
a healthy foundation for mutual trust

1. Do you think that things would have worked out differently if

American Rice had chosen another partner for the joint venture?
Instead of partnering with Vinafood, which is the largest
government owned rice exporter in Vietnam, they chose a
privately owned rice exporters instead?
2. Do you think that Vietnam is the right market for American Rice?
Given that there are far too many cultural and managerial
differences between Vietnam and US? There is not enough trust.
Yes

No

rice = the Vietnams second

largest export item after oil
only regional food corporations
and provincial food companies
possess licences to export rice
(Vinafood belongs to these
three)
Vinafood II has concentrated on
higher quality Vietnamese rice
and has become Vietnams
largest rice exporter (over $00
million and 5-40% of Vietnams
total rice exports in 1)

predominantly low quality rice

exports (due to poor drying,
milling and seed)
frequent delays in filling
contracts
high shipping costs
Governments restricting export
measures
Corporate profits in Vietnam are
subject to 50% tax
Numerous cultural differences
exist between the Vietnamese
and Western invertors
negotiating style vs. legal
concepts
joint venture arrangements
include technical transfer as part
of a capital contribution

3. Should American Rice have entered the Vietnamese market using

another form of entry? Instead of majority owned Joint venture;
they could have considered minority owned joint venture?

Considering Vietnam is a communist republic, the fact that Vinafood II is

government owned can facilitate the arrangements.
On the other hand, regarding History, Americans and Vietnamese are not
best friends, and confidence will be hard to build between the two parts.
IRA is going to provide 55% of the capital + furnish machinery, equipment,
technology and some working capital + consulting competencies.

4. What do you think is the most important factor that caused the
failure of this joint venture?
5. Does American Rice have what it takes to be a successful
international competitor?
Yes
the combination of product and rice source diversity, coupled with
predominance of branded sales

huge resources and already strong export basement

first mover strategy to enter new markets
the companys reputation for selling high quality rice
6. Do you think that American Rice decision to move in so quickly
into the Vietnamese market is too opportunistic? Like there was
not enough planning done?