University of Southern Denmark

Doing Business in Vietnam

Report From a Field Study Trip
Stentoft, Jan; Mikkelsen, Ole Stegmann

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2016

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Stentoft, J., & Mikkelsen, O. S. (Eds.) (2016). Doing Business in Vietnam: Report From a Field Study Trip.
Syddansk Universitet. Institut for Entreprenørskab og Relationsledelse.

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 DOING BUSINESS IN VIETNAM
-REPORT FROM A FIELD STUDY TRIP

STUDENT CONTRIBUTIONS:
CHRISTIAN ADELHARDT SARAH BEBE
KATHRINE DRANSFELDT DENNIS FREDERIKSEN
NIKOLINE MARKUSSEN NIKOLINE NÆSS
PATRICK PETERSEN ELENA SAVELYEVA
LASSE STENSGAARD RIKKE STRØGER

EDITED BY: JAN STENTOFT & OLE STEGMANN MIKKELSEN

 Doing Business in Vietnam:
Report from a Field Study Trip
 Doing Business in Vietnam:
Report from a Field Study Trip

Edited by:
Jan Stentoft
Ole Stegmann Mikkelsen

Department of Entrepreneurship and Relationship Management

University of Southern Denmark
2016

2
© The authors
ISBN: 978-87-91070-38-9

Department of Entrepreneurship and Relationship Management

University of Southern Denmark
Universitetsparken 1
DK-6000 Kolding
Denmark
www.sdu.dk
3
Table of Content

Indhold
Table of Content ................................................................................................................ 4
Introduction ........................................................................................................................ 8
Organizing the trip .......................................................................................................... 10
Travel plan ........................................................................................................................ 10
The thank yous ................................................................................................................. 10
Chapter 1 - Prologue: Why Study Business in Vietnam? 12
Abstract ............................................................................................................................. 12
Introduction ...................................................................................................................... 12
Chapter 2 - Vietnamese Culture 14
Abstract ............................................................................................................................. 14
Introduction ...................................................................................................................... 14
Structure of this Chapter ................................................................................................ 15
Research Questions ......................................................................................................... 15
Literature Review ............................................................................................................. 15
Hofstede ........................................................................................................................ 15
Fletcher and Fang......................................................................................................... 17
Empirical Findings........................................................................................................... 18
Hofstede ........................................................................................................................ 18
Power Distance ......................................................................................................... 18
Individualism ............................................................................................................. 19
Masculinity ................................................................................................................. 19
Uncertainty Avoidance ............................................................................................ 20
Pragmatism ................................................................................................................ 20
Indulgence.................................................................................................................. 20
Fletcher and Fang......................................................................................................... 21

4
 Conditions in Change .............................................................................................. 21
Religion and Philosophy .......................................................................................... 23
Strategy and Tactics .................................................................................................. 24
Theoretical Perspective on Vietnam ............................................................................. 25
Doing Business in Vietnam ............................................................................................ 26
Conclusion ........................................................................................................................ 27
Chapter 3 - When Relocating to Vietnam 29
Abstract ............................................................................................................................. 29
Introduction ...................................................................................................................... 29
Literature review .............................................................................................................. 30
Clarifications of concepts............................................................................................ 30
Offshoring ................................................................................................................. 30
Outsourcing ............................................................................................................... 31
Reasons for relocating ................................................................................................. 31
Drivers of relocating .................................................................................................... 32
Drivers of outsourcing ............................................................................................. 32
Drivers of offshoring ............................................................................................... 34
Obstacles of relocating ................................................................................................ 35
Obstacles of outsourcing ......................................................................................... 35
Obstacles of offshoring ........................................................................................... 36
Concluding remarks ..................................................................................................... 36
Methodology ..................................................................................................................... 37
Empirical findings ............................................................................................................ 37
Drivers of outsourcing and offshoring ..................................................................... 37
Most important drivers of outsourcing ................................................................. 38
Most important drivers of offshoring ................................................................... 40
Obstacles and problems attached to outsourcing and offshoring ........................ 41
Most important obstacles with outsourcing ......................................................... 41
Most important obstacles with offshoring ........................................................... 42

5
 The future ...................................................................................................................... 45
The growing middle class ........................................................................................ 46
Industries of national strategic interest ................................................................. 47
Conclusion ........................................................................................................................ 47
Chapter 4 - Leadership Across Cultures 49
Abstract ............................................................................................................................. 49
Introduction ...................................................................................................................... 49
Methodology ..................................................................................................................... 50
Literature review ........................................................................................................... 51
Collection of data ......................................................................................................... 51
Case study ...................................................................................................................... 52
Concept of Leadership .................................................................................................... 52
Management vs. Leadership ....................................................................................... 53
McGregor (Theory X, Theory Y) .............................................................................. 54
Theory X .................................................................................................................... 54
Theory Y .................................................................................................................... 55
Motivation ......................................................................................................................... 55
The definition of motivation ...................................................................................... 56
Maslow’s hierarchy of need ........................................................................................ 56
Leadership and motivation across cultures .................................................................. 57
Motivation among the Vietnamese ........................................................................... 57
Leadership styles in Vietnam and Denmark ............................................................ 59
Organizational Climate ................................................................................................... 61
Case study analysing: What did the data tell us? ......................................................... 63
Discussion of the seven climatic factors ...................................................................... 66
Fun facts ............................................................................................................................ 67
The 13th monthly salary ............................................................................................... 68
Days off ......................................................................................................................... 68
Laying off the employees ............................................................................................ 68

6
 Negotiations .................................................................................................................. 69
As a foreigner ................................................................................................................ 69
Conclusion ........................................................................................................................ 70
Chapter 5 - Epilogue: Learning and Reflection 71
Abstract ............................................................................................................................. 71
Introduction ...................................................................................................................... 71
Most Impressive Experiences ........................................................................................ 72
Application of Relevant Theories and Methods ......................................................... 73
Improved Competencies through Group Work ......................................................... 74
Better Understanding of Vietnamese Culture ............................................................. 75
Conclusion ........................................................................................................................ 77
Vietnamese Culture ...................................................................................................... 77
When relocating to Vietnam....................................................................................... 78
Leadership Across Cultures ........................................................................................ 79
References 80
About the Editors 82

7
PREFACE

Introduction
This book, entitled “Doing Business in Vietnam: Report from a Field Study Trip”,
contains the students’ answers to assignments related to a study trip to Vietnam in
the period of 5th October to 10th of October 2014. The study trip was part of the
optional subject ”International field studies” at Master of Science (M.Sc.) in
Business Administration, at the Department of Entrepreneurship and Relationship
Management, University of Southern Denmark, Kolding.
The purpose of the field study optional subject is, in general, to develop the
student’s skills to apply specific theories and analysis tools to a general philosophy
of science and methodological perspective in actual business problem areas.
Furthermore, the purpose is that the students acquire experience with the
requirements of international field studies regarding technical as well as social
competencies. The aim of the course is to train the students to conduct all phases
and facets within a smaller field study including the preparatory desk research part,
organization of the fieldwork and later follow-up analysis and reports.
In the present context, this field study aims to achieve a general knowledge as to
doing business and to outline challenges from a Western perspective that should be
taken into account, when trading with Vietnam. More specifically, the students
have examined fields of study within four topic areas:

1. Vietnamese Culture
2. Establishing and Start-Up of Enterprises
3. When Relocating to Vietnam
4. Leadership Across Cultures

The first topic of culture has been chosen because an understanding of cultural
differences is perceived as being the overriding success criteria for doing businesses
in Vietnam. The second topic is concerned with issues related to establish and start
up an enterprise in Vietnam. The third theme “when relocating to Vietnam has
been chosen in order to analyze the attractiveness of Vietnam as a business
destination. The last chapter is concerned with the important concept of
management and leadership issues when operation and enterprise in Denmark. The
8
themes of the four chapters are developed as a thematic sequence an enterprise is
passing from the initial thoughts through the actual implementation and operation.
The students have discussed theory and collected data related to the above four
topics. In order to be able to report the findings to the companies, it was necessary
to write the assignments in English. The students responsible for the four themes
of study trip are listed in Table 0. This book consist of only three chapters due lack
of fulfillment of requirements from one group.

Vietnamese Culture Establishing and When Relocating to Leadership Across

Start-Up of Enterprises Vietnam Cultures
 Kathrine Dransfeldt  Heidi Graarup Jensen  Nikoline Næss  Dennis Frederiksen
 Christian Adelhardt  Joachim Frank Hansen-  Nikoline Markussen  Elena Savelyeva
 Lasse Stensgaard Rasmussen  Rikke Strøger  Patrick Kuno Petersen
 Martin Strandgaard  Sara Bebe
Borgbjerg Pedersen
Table 0: Students divided into the four themes

The students are studying M.Sc. in Management and Leadership and M.Sc. in
International Business Development. The M.Sc. line in Management and
Leadership is structured around two central competence areas. The managing part
provides knowledge and tools for solving problems regarding SCM, operations
management and management accounting. The focus is on the roles and functions
in global supply chains and the basic operation systems and philosophies (Just-In-
Time, Lean, Agility etc.). The leadership part ensures understanding of and
competence in solving problems within leadership, organizational changes and
strategy development.
The M.Sc. line in International Business Development sets focus on the
interaction between organizations, be it private companies or public organizations.
Specifically, information on international business and market development is
communicated as well as insight into theories concerning companies’ international
business development, marketing and organization. Insight is gained into factors
that influence the organizational change processes of the companies and the
management of these processes. Whether the area is purchase or sale of products
or projects to be carried through in public environment, a number of different
employees will be involved in the interaction between two or more organizations.
The understanding of the interaction between individuals with different
professional and cultural background is considered the key to successful company
management.

9
 The M.Sc. line in Business Controlling develop a detailed insight into advanced
audit theories, audit methods and techniques that are applied in both national and
international oriented companies and their supply chains. The students obtain
business understanding in order to explore and exploit IT systems to control
activities and resource consumption in companies. Furthermore, the students
obtain operational problem solving tools within operations management and
management accounting that are useful when working with development oriented
issues of companies strategic development.

Organizing the trip

First of all it should be mentioned that the students planned this study trip
themselves. There has been a planning period of about 8 months with identifying,
contacting and setting up appointments with companies, fundraising, providing
communication about the study trip, organizing flights and hotels, transportation to
and from companies and sightseeing. In order to solve these tasks the students
organized into different working groups with a representative in a steering group.

Travel plan
The field study trip in 2014 included visits in Ho Chi Min City and Hanoi. The field
study trip began October 6th with a visit at Novo Nordisk where all groups of
students participated. In the afternoon all four groups visited A&W Fine Furniture
in Hi Chi Minh. In the evening of the first day, all groups obtained a presentation
from Gate To Asia. In the morning of day two, the students visited Thai Son S.P
Co. Ltd. In the afternoon the students visited Grundfos in Ho Chi Minh. In the
evening – elena restaurant. Day three was a traveling day with airplane from Ho
Chi Minh Hanoi. The first visit in Hanoi was at Danmon Asia Thursday morning.
In the afternoon the groups visited DK Engineering Ltd. In the evening the
students obtain a presentation from the non-profit organization supply chain
Vietnam (where the presentation took place). Friday morning all four groups
visited Khanh An Ceramic Company Limited.

The thank yous

Many persons have contributed to making this study trip possible. We will
therefore thank these people and organizations for their support (time, knowledge
and financial support). The persons and organizations are mentioned below.

10
  Funding
 Asian House, ØK
 Ole Kirks Fond
 The business economy staff-student committee, University of Southern
Denmark, Kolding

Companies and organizations that have been visited:

 Novo Nordisk, Finance, It & Logistics Manager Kristian Frederiksen and

Senior Finance Analyst Sidsel Riisgaard Møller
 A&W Fine Furniture, Managing Director Christian Da Silva Wendelbo
 Gate To Asia, Director Thomas Jakobsen
 Thai Son S.P. Co., Limited, Marketing Manager Chris Walker
 Grundfos Vietnam Co., Ltd, General Manager Nguyen Xuan Thang
 Vietnam Supply Chain, General Director Dr. Eckart Dutz
 The Danish Embassy in Vietnam, Hanoi, Commercial Counsellor Bo
Mønsted
 Danmon Asia, Sales Director Bjarne Petersen
 DK Engineering Ltd, Managing Director Klavs Bønnelykke Nielse
 HITC, Preben Hjortlund
 SmartOSC Product Manager Jonas Dinesen
 Khanh And Ceramics Company Ltd, CEO Le Thu Hang and Assistant
Nguyen Kim Hoa.

Finally, we would like to thank the students for a well-organized field study trip and
for their proactive learnings attitude. We certainly believe that this trip has given
the students a learning experience - technically, socially and culturally.

Best regards and hopefully enjoyable reading.

Kolding, August 2016

Jan Stentoft Ole Stegmann Mikkelsen

Professor, Ph.D. Assistant Professor, Ph.D.

11
CHAPTER 1

Prologue: Why study business in Vietnam?

Christopher Rajkumar

Abstract
This chapter aims to explain some of the reasons for considering doing business in Vietnam. The
chapter contains fact about Vietnam, information about the population, geography, history,
politics, religion, education, energy and culture in order to illustrate that there are many business
opportunities in Vietnam.

Introduction
Vietnam is a country located in Southeastern Asia bordering the Gulf of Thailand,
the Gulf of Tonkin, and the South China Sea. In general, the country's history has
been shaped by its position between China and India. Vietnam is officially known
in English as the "Socialist Republic of Vietnam". Vietnamese use two words "Viet
Nam" in their common usage, wherein Americans use a single word "Vietnam”.
Vietnam is bordered by ocean on the west and south, with China to the north, and
Cambodia and Laos to the west. Vietnam is almost the size of New Mexico
(329,560 sq. km); however, it is shaped in a long, narrow "S". Though many
western people still visualize Vietnam through the lens of war, it is, in reality, a
country filled with fascinating natural beauty and peaceful village life. More than
two decades have passed since Vietnam was officially united, and it has done a
remarkable job of healing its wounds. Today, this pleasant and graceful country is
an outstanding travel destination.
Vietnam is considered to be the world's 13th-most-populous country, and the
eighth-most-populous Asian country. Most Vietnamese live in the Red and
Mekong River deltas. Vietnam is located just to the north of the equator and has a
tropical monsoon climate. When compared to other languages, the Vietnamese
language has been influenced mostly by the Chinese language. Chinese was the
language used by government officials, scholars, and artists during the thousand
years that China ruled Vietnam; however, Vietnamese remained the popular
12
language in Vietnam. The Vietnamese sometimes practice several religions at the
same time (Confucianism, Buddhism, Christianity, Taoism and Cao Dai).
Vietnam has been applauded as a development success story. It maintains
diplomatic relations with 169 countries; it signed trade agreements with 80
countries; and exchanged most favored nation privileges with over 70 countries and
territories, namely those with high capital, industrial resources, and large markets
such as those found in the US, Japan, EU and the newly industrialized economies
of East Asia. Overall, it has been a reliable partner in the Asian region as well as the
world, and its economy has developed into an integral part of the global market.
Vietnam has also made significant progress in reducing poverty, and is working to
create jobs to meet the challenge of a labor force that is growing by more than one
million people every year. According to a recent report co-published by the
Government of Vietnam and the United Nations (September, 2015), Vietnam has
not only acquired universal primary education, but it also promotes gender equality
in education.
Hanoi is the capital of Vietnam wherein the ultimate decision may be made on
your business proposal. Throughout history, Hanoi was Vietnam’s capital in
various dynasties. Ho Chi Minh City (formerly Saigon) is a commercial hub, where
most businesses have their largest presence. Vietnam, a one-party Communist state,
has one of south-east Asia's fastest-growing economies and has set its sights on
becoming a developed nation by 2020. Vietnam is endowed with abundant natural
energy resources, including crude oil, coal, hydropower, goethermics, bio-energy
and solar energy, and nuclear energy. Vietnam has made major steps forward in its
commitments to regional and international economic integration. It is absolutely
one of the world’s most successful countries in terms of sustainable rapid
economic growth over the recent 10-year period, which is second only to China.
Vietnam government is at present setting out concrete actions to remove
obstacles to doing business in Vietnam, with a goal of increasing its attention to
improve the business environment within Vietnam.

13
CHAPTER 2

Vietnamese Culture

Christian Adelhardt, Kathrine Dransfeldt & Lasse Stensgaard Christensen

Abstract
The purpose of this chapter is to describe the culture of Vietnam. The focus is on how the
Vietnamese culture differentiates itself from that of the Western countries. The research questions
are based on the literature of Hofstede’s Six Cultural Dimensions and the Framework of Asian
Business Culture by Fletcher and Fang. This shows that working with Asian culture can either be
approached from an etic, the culture in general, or an emic, a more specific and qualitative,
approach and that the Western countries will do better by adjusting to the Vietnamese culture.

Introduction
The purpose of this chapter is to describe the culture of Vietnam, and pinpoint
how the culture of the external surroundings in the forthcoming chapters, is
embedded in the Vietnamese business culture. To pass on knowledge about how to
interact or do business with or within Vietnam, there is a cultural perspective of
how this can be done. To be able to give a full cultural perspective to the reader, it
requires a structure, and segmentation of the different findings. Therefore we have
chosen to involve a known and accepted theory, to guide through the different
aspects of business in Vietnam. However, doing business with different cultures
can prove to be quite a challenge, as there are no specific recipes on how to act in
different cultures.
In 1994, Hofstede wrote the article “The business of international business is
culture” (Hofstede, 1994). In a world of international business, many companies
are working together in different networks. Culture is an important variable,
especially when creating relations. Business often requires being present in several
countries. When doing this, companies often safeguard themselves with regard to
the laws they must abide, but often it is discovered that norms and traditions deeply

14
rooted in different cultures also play an important role when doing business. There
are no laws stating the norms of the culture, which makes it difficult to work with.
Creating a network is of great importance when working with companies in Asia,
due to commercial uncertainties created by the nature of the political system and
lack of rule of law (Fletcher and Fang, 2006).
Culture can be defined as “A pattern of shared basic assumptions that the group learned as
it solved its problems of external adaptation and internal integration that has worked well enough
to be considered valid and, therefore, to be taught to new members as the correct way to perceive,
think, and feel in relation to those problems” (Schein, 1985, p. 12). Hence, many cultures
are not aware of the aspects of their culture, as the basic assumptions are taken for
granted and seem logic to the group.

Structure of this Chapter

The structure of this chapter will take its starting point from two research
questions. Answering these questions requires a literature review to create
knowledge for the analysis. After this, the empirical findings will be analyzed in
regard to the theories of Hofstede and Fletcher and Fang. Lastly, the research
questions will be discussed before the conclusion.

Research Questions
In order to create an understanding of the cultural challenges, the purpose of this
chapter is to answer the following two questions:

1. How is the Vietnamese culture reflected in the theories of Hofstede and Fletcher and
Fang?
2. How should the Western companies approach and adjust to the Vietnamese culture?

Literature Review
Hofstede

Geert Hofstede is an acknowledged author in every way, whenever culture is the

topic. His studies leads back to 1980 and have recently been edited in
2010. Though these studies have been criticized, it is still used to compare in a
way, that creates a perspective no other author has been capable of doing.
Hofstede’s studies have been criticized that the analysis exclusively has been made
on one company, though in different countries. These studies have then been
adequate, where other authors fail to manage the broad perspective. The analysis
has been criticized for being outdated, which has been unraveled with the latest
15
edition in 2010. In Figure 2.1 is shown the six cultural dimensions of Hofstede for
Denmark and Vietnam.

80 74
70 70
70
60 57

50
40
40 35 35 Denmark
30
30 Vietnam
23
18 20
20 16

10
0
Power Individualism Masculinity Uncertainty Pragmatism Indulgence
Distance Avoidance

Figure 2.1: Hofstede’s Culture Dimensions for Denmark and Vietnam

Source: Hofstede (2014)

The six dimensions will be explained further in the section on empirical findings.
Hofstede’s six dimensions have been the subject of much practical use. The
dimensions give an understanding of the behaviour, not only in a society or
country, but in an organization as well. To act wisely, one must know, why and
how people react to decisions. Even more important, is to know what motivates
the individual to act. If a company knows the answer to these questions, and act on
the knowledge, a lot of problems are solved, before they appear. Hofstede’s
dimensions provide the opportunity to identify these issues in an easy and
straightforward manner. The purpose of this model is to provide an overview of
the cultural differences of Denmark and Vietnam. The following six dimensions
give the analysis a baseline of which two opposite poles of culture serves. As
shown, these are two very different cultures, which increase the complexity
significantly. In addition, the observations made with this research have created a
deeper understanding of the differences between the two countries. The culture of
Vietnam is built on a great heritage of historical nature. The different times leave
their marks on the cultural heritage, which affects the further generations, in both
positive and negative nature.
The Vietnamese cultural dimensions are based on Hofstede’s (2014) results, and
can in many ways be seen as the antithesis of the Danish. In order to understand
the different cultures, a deeper knowledge is required. Not only for Vietnam but
also for Denmark. Geert Hofstede has built 6 measurable points that explains the
16
culture. This is used to navigate when collaborating across these two cultures
(Hofstede, 2014).

Fletcher and Fang

Geert Hofstede’s dimensions are in general made from an etic and general survey
of culture divided by the frontiers of countries. The etic approach is more based on
quantitative analyses, giving a more general view of culture. At the same time the
comparative perspective of the dimensions are very “either/or” categorized, which
can be criticized in the Asian context, where a Yin Yang approach is applied. In our
research, we therefore also use the perspective from Richard Fletcher and Tony
Fang providing a more balanced and nuanced perspective on the Vietnamese
culture.
Richard Fletcher and Tony Fang have in several occasions made research of the
Asian culture and found that the traditional Western values cannot necessarily be
transferred as scale. Seen from their perspective, it does not make any sense to
analyze the Vietnamese culture deeply from any other approach than emic. Emic is
a qualitative approach with focus on interviews and case studies (Fletcher & Fang,
2006). Based on this, the findings from this research will be analyzed further on the
basis of Fletcher and Fang’s enlarged approach of culture in the emerging Asian
markets.
In this model Fletcher and Fang define three main categories to describe an Asian
culture from an emic perspective; Conditions in Change, Philosophy and Religion, and
Strategy and Tactics. For a business manager to comprehend the full context of an
Asian culture, it is necessary to describe these three spheres of the specific culture.
The Conditions of Change can be argued to be the most extensive to describe and
involves the prevailing conditions of the country and/or area by the culture. Here,
Fletcher and Fang list things as: the political ideology and its involvement in the
society, the present existing and the developing speed of technology, the
globalization impact on the society, now and in the future.
With Philosophy and Religion Fletcher and Fang refer to any kind of dominating
religious and/or philosophical view that can be generalized in the specific society.
An example of the Danish religious view would be Protestantism, and at the same
time a Grundtvigian philosophical view on the society.
The Strategy and Tactics of a society describes the cultural negotiation or bargaining
techniques. This could for example be based on a specific society’s need for
winning by subtlety rather than confrontation (Fletcher and Fang, 2006). The
model of Fletcher and Fang is shown in Figure 2.2:

17
 Conditions in 
Change

Philosophy 
Strategy 
and 
and Tactics
Religion 

Figure 2.2: The emic factors

Source: Fletcher & Fang (2006)

Empirical Findings
The empirical findings have been built in two sections from two different sources.
Regarding Hofstede, secondary sources have been used, as these are already
available online. The second part, regarding Fletcher and Fang, is the empirical
findings from semi-structured interviews conducted with 11 companies in Vietnam.

Hofstede

Power Distance
Power distance (PDI) expresses how the less powerful members of a society accept
and expect that power is distributed unequally. A fundamental issue in order to
understand power distance is how a society handles inequalities among people. A
society encompassing a large degree of power distance accepts a hierarchical order
in which everybody has a place. There are no further needs for justification. A
society with low power distance, people strive to equalize the distribution of power
and demand justification for inequalities of power.
Vietnam scores high with 70 points. This means that people accept a hierarchical
order. Centralization is common and hierarchy in organizations is seen as reflecting
inherent inequalities. Subordinates expect rules and guidelines. An ideal boss is
diplomatic and authoritarian. The power distance level measured in Denmark is
one of the lowest in the analysis from Geert Hofstede. Danish culture is influenced
by democracy. The Vietnamese society is opposite, including a very high level of
power distance. Leaders, politicians and people with money, have a high status in
Vietnam. In contrast to Vietnam, in Denmark power is decentralized and managers
rely on the team members and subordinates. Trust and respect can be earned
through experience.

18
Individualism
Individualism (IDV) can be defined as a preference for an informal social
framework. Individuals take care of themselves and their immediate families,
because it is expected of them. Collectivism, which is the counterpoint, represents a
formal framework in society. Individuals can expect their relatives to look after
them in exchange for unquestioning loyalty. The position of a society in which they
see themselves, can be measured in which way they define “I” or “we”.
Vietnam is indeed a collectivistic society. This causes extended, strong relations
and loyalty between individuals, resulting in a “group” mentality. People will often
give care in exchange for loyalty, to be a part of a society or group. It is of great
importance not to lose face, to the group or society. Management is the
management of groups. Observations made in the field study shows that the
Vietnamese are more likely to be loyal towards their own family or the group they
are a part of and not so much the society itself.
In comparison, Denmark, with a score of 74 is an individualistic society. There is
a high preference for a loosely knit social framework. It is relatively easy to start
doing business with the Danes. Direct communication, little use of small talk is
characteristic. Scoring only 20 points, Vietnam is at the very low end. Denmark
ranks highest amongst the EU27 countries in terms of employee autonomy
(Hofstede, 2014).

Masculinity
Masculinity (MAS) represents a preference in society for achieving, status,
materialism and assertiveness. This is causing competitiveness in the society.
Femininity shows a preference for cooperation, moderation, empathy, and quality
of life.
Both Vietnam and Denmark are considered as feminine societies. It is important
to keep the right balance between life and work. Vietnam has more focus on work,
and the developments in human rights are far behind that of the Danish. However,
this research has shown that even though the Vietnamese focus on their jobs, if
something were to happen to their family they would quit their job to help their
family.
There is a huge gap in Vietnam between white- and blue-collar workers. To
white-collar workers, involvement is important in order to motivate, as well as
responsibility is a symbol of status.

19
Uncertainty Avoidance
Uncertainty avoidance (UAI) expresses the degree to which the people in a society
feel uncomfortable with uncertainty. How do people cope with the unknown
aspects of the future? Some react with control, other let the future happen
undeterred. Countries containing strong UAI are often highly religious and behave
intolerant of abnormal behaviour. Weak UAI societies maintain a more relaxed
attitude in which practice counts for more than principles.
Both countries scores low, Vietnam scores 30 while Denmark scores 23. This is a
relatively low preference for avoiding uncertainty. Plans can quickly change.
Structure and predictability is not needed. Innovation is not a threat to either of the
countries. Denmark has a combination of high individualism and low uncertainty
avoidance, which Hofstede analyses as one of the reasons why innovation and
design is a driving force in this country.
With a score of 23 Denmark scores low on this dimension. This means that that
Danes do not need a lot of structure and predictability in their work life. Plans may
change overnight, new things pop up and the Danes seem fine with it. Curiosity is
encouraged from a young age.

Pragmatism
Pragmatism is based on the links to the historical aspects of the society, in order to
solve the problems of the future. Societies prioritize these two existential goals
differently.
A low scoring society would prefer to maintain traditions. All while viewing
societal change with suspicion. A high scoring culture would take a more pragmatic
approach, by encouraging efforts in modern education as a way to prepare for the
future. In a business context, this would often be referred to as short
term/normative versus long term/pragmatic thinking.
Vietnam is considered a pragmatic culture, scoring 57. People in pragmatic
societies tend to believe that truth is more of a contextual matter. As earlier
mentioned, Vietnamese adapt easily to changes as well as traditions.
Denmark is more of a normative society. Quick results and short term thinking is
often the solution, according to Hofstede.

Indulgence
Indulgence is a society that allows free gratification of basic and natural human
needs which is related to the quality of life. The opposite, Restraint stands for a
society that suppresses gratification of needs. This often regulates it by means of
strict social norms.

20
 A low score of 35 on this dimension indicates that the culture of Vietnam is
characterized as restrained. Pessimism is characteristic in low scoring countries.
Restrained societies do not consider leisure time as important as the Danish society
to set up a contrast. Denmark, scoring 70, is considered an indulgent country.

The etic dimensions of Hofstede have now been compared upon Denmark and
Vietnam, and the chapter will now continue to the emic approach to the
Vietnamese culture by looking at the model presented by Fletcher and Fang.

Fletcher and Fang

Conditions in Change
The first of the three forces describing Fletcher & Fang’s (2006) emic approach to
Asian culture is Conditions in Change.
In Vietnam, the main ideology is officially Communism. As Communism is well-
known for its centrally planned economy, it is worth mentioning that in Vietnam it
is moving towards a more liberal economy, which can be described in terms of a
socialistic market economy (FN-sambandet, 2011). This means that the
government supports international trade; however to some extent they are
protecting Vietnamese production. More companies mention, that it is harder to
get a Danish product to sell on the Vietnamese market, than it is to sell an all
Vietnamese product. Besides this, it has only been allowed for the past 30 years to
have a privately owned company, which means that the Vietnamese companies
have limited experience with privately owned business compared to many of the
countries they are working with.
The Vietnamese legal system is somewhat different compared to the Danish. In
Denmark one is used to that signatures and promises are binding. According to the
Danish Contracts Act, and normal acceptable business behaviour, an oral
agreement is as binding as a written agreement. In Vietnam the companies
experienced that this is not the case, and not even written contracts may be
complied to, as there is no neutral third party arbitrator or judge bring the issue to
as used to in Denmark.
This means that when working in Vietnam, adjustment to these issues is very
important. One of the interviewees describes how they are coping with this
uncertainty, when they are quoting their customers: “When it comes to quoting there is a
time limit to how long my quote is valid (…) I need to make sure that the price I am asking my
customer will be higher than the price I will pay to my supplier…”

21
 According to the company, adjusting to the country is far better than trying to
change it.
Intellectual property rights are practically non-existing, as everything is being
copied.
Corruption is described by some of the companies to be a part of the culture.
They do not all think of it as corruption, but more as a condition to do business.
As one of the interviewees mentioned “If people would stop giving them money, they would
probably stop asking.” The Government does take action and often arrest people for
corrupt behaviour, however, when it is knitted into the culture the way it is in
Vietnam, it will not change overnight.
Due to the development, Vietnam has undergone the past decade, it is often
expected that Vietnam will be the new China. China has moved further up the
Supply Chain, which means the salaries are relatively expensive compared to
Vietnam. However, currently, in Vietnam the production needs to be as simple as
possible to match the level of competence. Improving competencies through a
higher level of education is a focus area in Vietnam, but due to the low income, it
can be difficult to raise money for education.
All the changes Vietnam has experienced over the past few decades are changes
Denmark have experienced during generations. This means that the Danish
mentality has gradually adjusted to the changes caused by the development.
However, in Vietnam this is not the case. As often mentioned by the interviewed
companies, for the young, well-educated, English-speaking, Vietnamese people, it is
in many ways less complicated than for their older generations. In extension to this,
the young, well-educated Vietnamese person is more influenced by the
international environment than the older generation who rarely has access to the
internet.
Many international investors are financing labour and development in Vietnam.
This is both internally in Vietnam and also regarding export. This means growth
for the country, which is also creating a middle class in Vietnam, even though
Vietnam - due to Communism – until now has had a relatively fair distribution of
income. All of the interviewed mentioned, that the resources are currently being
focused on the larger cities, which has resulted in an increased urbanization. This
creates a larger difference in the lifestyle of the Vietnamese rice farmer and the
workers in the Vietnamese production worker in e.g. Ho Chi Minh City or Hanoi.
It also influences their mentality which is mainly short termed. Many young
Vietnamese people would rather work at Starbucks making money now than
getting an education to earn more money in the long run.
22
 The culture in Ho Chi Minh City is slightly different than that in Hanoi, which
can also be considered as some sort of leftover from the war, where the Soviet
Union and China supported North Vietnam, while other non-communist countries
supported the South Vietnam. When walking through the streets of both Hanoi
and Ho Chi Minh City, it is obvious that Ho Chi Minh City is more Western
minded than Hanoi (Gyldendal, 2014).

Religion and Philosophy

The second of the three forces describing Fletcher and Fang’s emic approach to
Asian culture is Religion and Philosophy.
Regarding religion and philosophy, the culture in Vietnam seems to have been
influenced by its Asian position, and only minor by the visitors or partners from
France, USA, Russia or others. Regarding religion, it is mostly said that the
Vietnamese people are not religious at all. This could, however, be a question of a
communication doctrine from the Communist state. But there is no doubt that,
none of the big world religions have any major consolidation in the country.
However there seems to be a widely use of Buddha figures in shops, homes and
other privately owned places. It is certain that the Vietnamese people are not
mostly atheists. Just by walking around the streets, it emerges that there are a many
rituals being performed that cannot be explained rationally. A good example is the
sacrificing happening mostly outside on the streets. It is a common belief that the
dead lives on, in another world, and if you want to give or send them something,
this can be done by burning it. Therefore it is common to see people and families
burning everything from fake money, small models of houses or other fake and real
goods. Both the Buddhist and the traditional religions are much centered about the
ancestors, which can be considered as the main beliefs in Vietnam, along with the
Buddhist influence.
In Vietnam the religion and the philosophy merges, and there is no doubt that the
Confucianism has had a significant influence and correlation with both the
Buddhist and traditional religion. The Confucianism gives the culture a bit of a
feudal view on life. Everyone needs to know, his or her own place i society, and
family is everything. Some could though say that this combination of Confucianism
and Buddhist ontology is what makes the Vietnamese such a strong labour force.
From the Confucianism, they know that they need to work hard, while influenced
from Buddhism they do not necessarily need economic wealth, as is often preferred
in Western countries. However, this was not a clear picture experienced, while
interviewing the companies in Vietnam. There is no doubt that it is the feudal and

23
Confucianistic culture and way of life that most people have inherited. However
today, the workers in this study, seems to be motivated to some degree by wealth
and artefacts such as e.g. new iPhones.

Strategy and Tactics

The third of the three forces describing Fletcher and Fang’s emic approach to
Asian culture is Strategy and Tactics.
In relation to Fletcher and Fang, the Vietnamese seem to behave short-sighted. In
other parts of the world, the main focus is often how to keep customers. It
naturally depends on the product, how the focus is kept. Though, for Vietnamese,
the main focus is not on keeping the customers, the concern is about earning
money. This is the case, when looking at the workers. If they are offered a small
amount of money, they have no affiliation to stay with their current job. It is a
tough challenge for many business owners to keep their personnel. As mentioned
by one of the companies, the short term thinking is a strategic challenge for
Western people, as well as it is a tactic for the Vietnamese. From a Western
perspective, this seems naive and unwise. However, from a Vietnamese perspective,
where commitment is non-existing, the main priority is to bring food to the table
for their family.
The strategies, which many often rely on, have been passed through generations.
This makes the business situation unpredictable. The level of trust in business is
low, compared to the Western world. This view is mainly seen from a street
business perspective. As shown through the Hofstede analysis, collectivism is
permitting the culture. If you have a cooking pan, you have a business. If you have
a cooking pan and a chair, you have a restaurant. Another example is given while
shopping in the streets of Ho Chi Minh City: A shoe was found interesting,
however there were dark spots on the fabric, which lead to that it was not
purchased. Later the same afternoon, another shoe salesman was asked about the
same type of shoe. The salesman drove away on his motorbike, and came back a
few minutes later, with a shoe looking remarkably like the shoe from the other
salesman. The shoe had clear odours from cleaning fluid, from spots where there
were dark spots on the fabric earlier – i.e. the same shoe appeared in another shop.
Though the competition is hard, the shops also work together.
From a more business to business perspective, the view is highly different. When
visiting the pottery business, uncommon discoveries were made. The owner of the
factory, producing mainly for the Danish Industrial Design industry, was clear in
her answer. Quality was the main focus, in order to maintain a strong relation to

24
their customers. The same answer came from another company, producing high
quality fashion products for the Danish consumers. Quality is their main priority, in
order to maintain customer relations.
It is also a well-known fact that business is only done with the boss. If your tactics
is, to meet a businessman or a highly placed worker, and expect business to be
settled, this will often fail. Many leaders prefer to make the big signings, which also
include the relations.
It is well known, that cheating and theft may occur while staying in Vietnam.
Vietnamese, despite in some ways relating to Buddhism in terms of karma, are not
allowed to treat fellow humans badly, though it may occur anyway. Though, it also
seems very important to avoid any unnecessary conflict.
In Figure 2.3 is summed up the discussion in Fletcher and Fang’s model on
Vietnam.

Conditions in change
Communistic, social 
gaps, corruption history 
of war. 

Philosophy and 
Strategy and tactics Change
Asian Confucianism  Immature business 
and a Buddhist  culture, short‐
influence  termed but in 
constant change 

Figure 2.3: Vietnamese version of Fletcher and Fang’s model

Source: Own adaption, based on Fletcher & Fang (2006)

Theoretical Perspective on Vietnam

The two approaches from Hofstede and Fletcher and Fang have many similarities,
although they have different perspectives. The purposes are the same. However,
Hofstede takes an overall stand, where Fletcher and Fang are more specific. This
makes it interesting, to view the same case from different angles. Many of the views
in both analyses are the same, however there is a huge difference in which layer of
the culture the focus is directed towards. There is, as mentioned, a huge gap
between rich and poor. Blue collar and white collar are not possible to compare,
25
unlike the Danish society. This only supports the importance of viewing the
situation from different perspectives. Worth noticing is that blue collar workers
often have assigned the values mentioned by Hofstede. White collar workers are
more often educated in the Western part of the world. The Western values are
modern and highly popular, and the Western values are a status symbol (Case A).
As described, the Vietnamese often have a short-termed way of thinking.
According to Hofstede, this is the case for Denmark, which is very opposed to
what this study trip has shown. The companies participating in this research have
all described a wish to work for the greater good of the company; however, this
was not their experience with regard to the Vietnamese workers. If so, this would
only be the case for the Vietnamese educated in the Western part of the world.
This is one of the areas where Hofstede and Fletcher and Fang are in difference.
Social inequity is not mentioned in Hofstede, which is important to have in mind.
Hofstede sees the Vietnamese culture, and benchmarks against a Western culture.
In countries with low social inequity, this also makes more sense. In many cultures
in Asia, there is a large gap, which is why Fletcher and Fang take this analysis to the
next level. The emic approach is used in order to create a wider understanding of
all the existing differences in the culture.
The speed of change in Asia at the moment is incredible. Change is made in a
speed, where Western countries no longer can follow. An incredible change is
characteristic for the large cities. The “Pudong” area of Ho Chi Minh City is
undergoing development. This creates a far more international looking city centre,
which makes the city much more attractive for international companies to settle in.

Doing Business in Vietnam

When working in Vietnam, or just doing business with a Vietnamese company,
there are some specific things to keep in mind. First of all, there is no “one-size-
fits-all” approach to cope with all situations, but this research has shown findings
that can give an indication of what to be aware of. First of all, it is important to
unlearn your norms and rethink your code of practice. What has been said, does
not count, unless the manager has signed and stamped an agreement. All the
companies agreed that it is not sufficient to talk to a sales representative, if the
manager believes otherwise.
This is a new country with a new culture, where corruption is considered to be a
part of the culture. This is exemplified in many ways - e.g. problems with getting
goods through customs if certain amounts are not being paid. To do business in
Vietnam it is essential to have considered how to cope with this “cultural element”.
26
 Most Vietnamese workers have been used to one-way communication from when
they were young. This means that evaluating things and giving feedback is not a
natural part of their culture, as they are often used to take orders and then
executing them. Their goal is to solve the task without questions. Therefore, one
must be absolutely sure that what has been said has also been understood. What
the Western countries are used to is not necessarily what will be experienced here.
The Vietnamese are loyal to their families, and if something were to happen to
their families, they would not be worried about their business.
Another thing that has proven important during this study is the importance of
networking. The Vietnamese do business in the networks they know and have
known for a long time. Here, they know what they are getting and these relations
can be hard to break, but if you break these bonds, they are not easily restored. To
have a chance at doing business, you need a network with a focus of close relations.
This will make a lot of situations easier.

Conclusion
The research presented in this chapter shows that Vietnam is a country with other
values than those of Western countries. The different cultural elements influence
how business is done, and therefore companies wanting to start up or do business
in Vietnam should acknowledge and understand this. The theories presented in this
chapter serve two purposes. Firstly, it gives a quick overview to look at some of the
already described cultural reviews, for example Hofstede’s dimensions. However, if
a business manager really wants to understand the Vietnamese culture, and why the
Vietnamese workers make one or another subtle choice, a more emic approach is
necessary. This is, however, costly in regard to time. But, by applying this emic
approach, a deeper understanding of the culture is reached. It therefore depends on
the wished level of analysis.
There is an enormous difference within the population. The gap in social
inequality is only getting larger, and while the white collar workers become rich
much faster than 10 years ago, the blue collar workers do not earn much more, in
order to keep labour costs down. This influences the culture, and also makes it
difficult to work in the different environments, as the culture is different between
blue and white collar workers (Case B).
Comparing Denmark and Vietnam, it is easy to conclude that there is a world of
difference. Even that the Vietnamese culture is open, agile and has a good
reputation it is, however, crucial to create networks, when doing business in
Vietnam. In these networks, it is evident to adapt to the culture. As described,
27
Vietnam is undergoing a lot of change and therefore the research presented in this
chapter may not be valid in a few years, due to the development.

28
CHAPTER 3

When relocating to Vietnam

Nikoline Markussen, Nikoline Næss & Rikke Strøger Hansen

Abstract
This chapter contains a literature study research drivers and obstacles when offshoring and
outsourcing. Afterwards eleven different Danish and Vietnamese companies established in
Vietnam are investigated based on semi-structured interviews. Through the interviews it was
found, that Danish companies often choose Vietnam because of their ability to handle small
batches and the fact that wage costs are low. Some of the obstacles found through the interviews are
that foreign companies have to be aware of the corruption and the Vietnamese’s approach towards
quality. Another thing to have in mind when establishing in Vietnam is the growing middle class
and the increasing urbanization. This creates some opportunities to sell Danish products/services
in Vietnam.

Introduction
Through the last decades the global inter-state trade has increased, and the global
marketplace is becoming smaller. This has forced businesses to focus much more
on productivity and cost reduction, and therefore investigate the opportunities of
outsourcing or offshoring to low-paid countries like Vietnam. But are costs and
productivity always the reason of outsourcing or offshoring? What about the
rapidly growing market in Vietnam, could that also be a reason for Danish
companies’ establishment in Vietnam? This leads to the following research
questions:

1. What are the drivers for relocating to Vietnam?

2. What are the main challenges when doing business in Vietnam?
3. How can Vietnam be an attractive market to sell Danish products/services?

The purpose of the research questions is to summarize main drivers and obstacles
when Danish companies want to do business in Vietnam and how Danish
companies can sell their products/services in Vietnam.

29
 From an outside point of view, establishing a company or outsourcing to Vietnam
seems to be a good opportunity for Danish companies to perform better and gain
some of the advantages associated with offshoring or outsourcing to a low-paid
country like Vietnam. Here the wages are low, the workforce is large and the
Vietnamese are good at handling small orders. But it also implies some challenges
because of the big differences in culture and how to do business. Also the
perception of quality is much different and the language can make it much more
difficult to offshore or outsource to Vietnam. Both the advantages and challenges
are further explored in the literature review.
This chapter concerns outsourcing and offshoring in which we have investigated
11 Danish and Vietnamese companies and their different experiences with
offshoring or outsourcing activities to Vietnam.
Firstly, the reader will be introduced to a theoretical framework that will be used
later in the chapter to investigate the specific advantages and problems faced by the
companies. This includes a presentation of the general drivers and obstacles when
offshoring and outsourcing.
Secondly, based on the findings from the companies, general thoughts on
outsourcing and offshoring challenges and drivers will be presented. This part
enlightens some of the challenges and drivers Danish companies might want to
take into account when choosing to outsource or offshore to Vietnam.

Literature review
In this section, an overview of the literature dealing with the globalization strategies
outsourcing and offshoring will be presented. The first section discusses definitions
and approaches to offshoring and outsourcing, which contributes to a basic
understanding of the terms. The second section deals with the advantages and
disadvantages of moving out the activities. And finally, the third section reviews the
drivers and obstacles of outsourcing and offshoring.

Clarifications of concepts
In this section, we want to clarify, what is meant by outsourcing and offshoring.
Both concepts are about relocating the production/activities, but the differences
are about who manages, controls and own the activities, when the
production/activities are relocated.

Offshoring
Offshoring is defined as a company that chooses to relocate the all or some of the
activities to another country, but still wants to keep the control, ownership, and
30
management. The company may establish a subsidiary in the new country (Arlbjørn
et al., 2013).

Outsourcing
In this chapter outsourcing is defined as a company that chooses to relocate all or
some of their activities to another country, so the activities prospectively are
managed by an external business partner, under their ownership, management and
control (Arlbjørn et al., 2013).

Reasons for relocating

The choice between outsourcing and offshoring influence the degree of control
and leadership and thereby the utilization of the potential and competitive
advantages by relocating the production. In Figure 3.1 is shown a methodology that
can assist companies in their decision-making within the context of globalization.
There are three possible strategies according to globalization. These are export,
outsourcing and offshoring.

Figure 3.1 - Thoughts about relocating

Source: Modified from Arlbjørn et al. (2013)

As shown in Figure 3.1, it is important for the company to be aware of its

competences and strengths. After the company has identified these competences, it
is possible to decide, whether it is beneficial to use a sourcing strategy or not. If it
is beneficial for the company to use a sourcing strategy, they have to decide
whether to outsource or offshore.
The choice between outsourcing and offshoring has an impact on which country
to choose. If the company chooses outsourcing, they lose some control as
mentioned. Therefore, it can be beneficial to choose a country, where the
credibility is high and there is a minimal risk of imitation, even though the wages
may be higher than in other countries (Arlbjørn et al., 2013).

31
 A well-known reason for relocating some activities, whether it is outsourcing or
offshoring is the possibility to take advantages of the different wages across
countries. For example activities, which require a major workforce, are often placed
in countries with low wages. In the same way, differences in productivity can be the
reason for relocating activities. Thereby the activities are allocated according to the
countries factor endowments and by which the countries utilize their comparative
advantages. Further, it gives the companies opportunities to exploit economies of
scale (Arlbjørn et al., 2013).
Another important reason to move out activities is to be closer to the end user of
the product/activity. It can be beneficial because of saved transport charges and
avoidance of import restrictions like duty and quota. If the product is not to be
sold in the country, where the production takes place, the company has to take into
account the transport charges according to the total costs and possible import
restrictions (Arlbjørn et al., 2013). Therefore, transport charges and import
restrictions can be both an advantage and a disadvantage.
In addition, you also have to be aware of the language and the culture within the
country - both the working and business culture. Also the legislation, traditions,
corruption and bureaucracy have to be taken into account, when the company
chooses to relocate their activities/production.

Drivers of relocating
The literature discusses a number of different drivers of outsourcing and
offshoring, respectively. This subsection is intended to provide an overview of
these drivers, as a help for the reader to better understand the findings in the later
sections.

Drivers of outsourcing
The main drivers of outsourcing are categorized into three overall factors;
Economic-, strategic- and environmental factors (Lau & Zhang, 2006).
The economic factor seeks to manage cash flow in reallocation of activities. For
example, the main focus is to improve profitability for the company and improve
efficiency in the activities.
The strategic factor seeks to improve the company’s overall performance. Among
other things, it focuses on achieving competitive advantage for the company,
improve business focus and increase responsiveness to market change (Lau &
Zhang, 2006).
The environmental factor, seeks to improve the company’s position in the
environment they operate. The primary focus is to gain global competitive
32
advantage, and increasing demand for new information more effectively and
economically (Lau & Zhang, 2006).
Common for these drivers are, that they can help organizations gain a competitive
advantage through cost reduction, improved responsiveness to changing business
environment and market demand (Lau & Zhang, 2006). Some of the drivers of
outsourcing are summarized in Table 3.1.

DRIVERS OF OUTSOURCING
Drivers Outcome
Improve profitability
Cost reduction Improve operation efficiency
Economical drivers

Add value to product

Improve cash flow
Cost saving
Increase efficiency

Make capital funds more available for core areas

Reduced capital investments
Improve return on assets

Acceleration of business process re- Improve performance

engineering Achieve competitive advantages
Improve business focus
Increase competitiveness
Strategic drivers

Focus on core competences

Leverage the firm’s skills and resources
Enhance customer satisfaction

Reduce constraints of organizations own

productive capacity

Flexibility enhancement Convert fixed costs to variable cost

Increase responsiveness to market change
Reduce risks

Meet increasing demand for new information

IT development systems and resources more efficiently and
Environmental drivers

economically

Globalization Help companies gain global competitive advantage

Enable partnering to improve service quality and

Capacity of supplier customer services and increase competitive
advantage
Table 3.1 – Drivers of outsourcing
Source: Modified from Lau & Zhang (2006)

33
Drivers of offshoring
The drivers of offshoring share some common characteristics with the outsourcing
drivers, but are in many ways not as risky according to control problems within
business areas. Costs in the initial phase are high, but the access to low labour costs
in the new location offset some of the high start-up costs. The low labour costs
represent one of the major drivers of offshoring. Some of the drivers of offshoring
are shown in Table 3.2.

DRIVERS OF OFFSHORING
Drivers Outcome
Improve profitability
Reduction of labour costs Improve operation efficiency
Economical drivers

Add value to product

Downsize the variable cost and increase its

Economy of scale probability

Minimize production costs

Tax benefits/subsidies Cost saving
Access to new markets Opportunity for expansion investments

Suppliers are often requested directly by major

customers with production sites abroad to
produce close to them.
Strategic drivers

Close to key customers

Transportation costs vicinity to already
relocated production capacity

Access to resources and/or

Increase competitiveness
capabilities

Access to better skilled workforce Qualified labour is more accessible

Economical drivers

Access to new
Gain competitive advantages
knowledge/technology

Table 3.2 – Drivers of offshoring

Source: Modified from Arlbjørn et al. (2013)

As with the drivers of outsourcing, offshoring can be a good cost leadership

strategy because it minimizes setup and other subsidiary costs to meet the needs of
an in-house employee. Other drivers of offshoring are the opportunities for better

34
availability of skilled people, and getting work done faster through a global talent
pool.

Obstacles of relocating

When companies relocate their activities, some problems can arise. These problems
will be identified in the following.

Obstacles of outsourcing
The literature makes it possible to identify the main problems and obstacles
associated with outsourcing. These problems are identified in table 3.3.

OBSTACLES AND PROBLEMS WITH

OUTSOURCING
Obstacles Impacts
Loss of core competencies
Loss of control
Risk of alienating customers
Loss of competitive advantage
Loss of critical skills
Increased number of competitors
Reduced responsiveness
Loss of flexibility
Risk of alienating customers

Failure to realize hidden costs of

Increased operating cost
contract

Concerning indecisiveness on which

Increased chances of failure
activities to outsource

Increased resistance to change

Fear of job loss
Lower staff morale

Inadequate capabilities of service Loss of competitive advantage

provider Loss of market share

Inadequate cost and benefit analysis Lower return on investments

systems Loss of competitive advantage
Table 3.3 – Obstacles and problems with outsourcing
Source: Modified from Lau & Zhang (2006)

Concerning problems with loss of control, loss of critical skills and loss of
flexibility the geographical distance problems are especially to be mentioned. Also
flexibility and the ability to respond fast to the market becomes an issue. Further
problems can arise with the suppliers and the workers who are to perform the work

35
in the outsourced destination, which can cause loss of market share and loss of
competitive advantage.

Obstacles of offshoring
The literature also identifies obstacles and problems with offshoring. Table 3.4 lists
some of these problems.

OBSTACLES AND PROBLEMS WITH OFFSHORING

Obstacles Impacts

The risk of not being able to transform tacit

Knowledge and Knowhow knowledge

Risk of losing knowhow or vital knowledge

Risk of not understanding each other’s

background and therefore each other’s way of
Ways of doing business doing business

Risk of not understanding each other’s language

Risk of bureaucracy
Governments and laws
Risk of corruption
Flexibility Risk of losing flexible workers

Risk of losing the short reaction time to changes

Reaction time
in the market

Costs Risk of unexpected costs

Table 3.4 - Obstacles and problems with offshoring
Source: Modified from Arlbjørn et al. (2013)

Government and laws is an area that can cause problems when offshoring. Here it
is identified that bureaucracy is a major factor in causing problems for companies -
it makes business processes difficult and time consuming. Likewise, corruption can
make the business processes difficult and time and cost consuming. Cultural
differences can also be a major problem when offshoring, there can be a lack in
understanding each other’s differences. This is associated with a risk of losing
knowledge and not being able to gain proper workers.

Concluding remarks
Whether the company chooses to outsource or offshore, they have to be aware of
the above-mentioned advantages and disadvantages. It can be beneficial to choose
offshoring instead of outsourcing as outsourcing can possess a risk of for example
imitation of the product or loss of control. Sometimes offshoring is the only
possibility if an organized market for the activity/production does not exist
36
(Arlbjørn et al., 2013). Therefore, the reason for offshoring is to protect knowledge
and control and thereby protect some of the core competences.
If the production consists of standard-products and the company wants to
relocate, it may be beneficial to use outsourcing because a subcontractor easily can
produce the product without any fear of imitation. Another reason for outsourcing
arises if there is doubt about the potential of offshoring, and therefore the best
solution may be to wait and see. Finally, some companies do not have other
possibilities because of the capital requirements when offshoring (Arlbjørn et al.,
2013).

Methodology
Information is collected in the empirical fieldwork of visiting 11 different
companies in Vietnam; this chapter is based on all of the visited companies. The
name of the visited companies will not appear in this chapter. It is chosen to obtain
anonymity for the visited companies. Each visit was estimated to last two hours.
On the visits, the agenda was to interview the company, to find answers to the
questions we seek to answer in this chapter. The timeframe further created
possibility for discussion and debate with the representative of the company. In the
companies where it was possible to see the production, the fieldwork has also
consisted of observing the production and the employees.
Despite of the different types of companies, similar finding occurred. The aim is
to find the most general answers from the companies, to make a general image of
why Vietnam is an interesting county to do business in. The empirical findings will
be compared to the literature review in which a theoretical frame is established.

Empirical findings
Based on the findings from the visited companies, this section addresses why a
company should outsource or offshore to Vietnam. It also addresses the challenges,
which the investigated companies have met according to their choice of
outsourcing or offshoring. Finally, the section investigates the possibilities of the
future and Vietnam as a market to sell Danish products/services.

Drivers of outsourcing and offshoring

As pointed out in the literature review, relocating to Asia in general and to Vietnam
in particular has some advantages. This section will be dealing with the drivers
experienced from the company cases compared with the findings in the literature
review.
37
 The structure in the next section follows the structure from table 3.1, which leads
to the following subjects: Economical drivers, Strategic drivers, Environmental
drivers

Most important drivers of outsourcing

Economical drivers
Economical drivers include in general factors like production cost and capital
investment that influence company expenses. The companies visited all mentioned
the low wages as a main driver for choosing Vietnam as an outsourcing destination.
Compared to the wage costs in Denmark or other Asian countries, companies can
easily incur cost savings by relocating some activities. As the literature indicated,
cost savings increase companies’ profitability and this reason appears in every
interview from the visited companies.
The literature also illustrates the possibility for reducing capital investment when
outsourcing. Several of visited companies confirmed this. Especially small
businesses use Vietnam because of the opportunity to order smaller batches.

Strategic drivers
The economical perspective is not the only driver for choosing outsourcing to
Vietnam. Outsourcing can also be a strategic tool that may affect the company’s
competitiveness and internal processes.
Several of the companies visited mentioned this as a key driver to relocate
activities to Vietnam. Danish products are labelled as high quality, and some
companies visited where aware of this. Since Vietnam does not have the technical
skills like China, they need to be especially focused on creating a high quality for
their customers. Some of the visited Vietnamese manufacturing companies
understood the importance to meet the partners' demands for quality and focus on
deliberate improvement. Vietnam’s production facilities are based on craftsmanship
and do not have the same standardized solutions such as China. This approach is
particularly suitable for small and medium-sized enterprises that demands smaller
batches. We met a Vietnamese company who understood the importance of high
quality, and that they had to evolve towards to meet the Danish customers demand.
However, this philosophy was far from the majority in the Vietnamese companies.

Environmental drivers
From an outsourcing perspective, the environmental drivers focuses on helping
companies gain a global competitive advantage. This section illustrates why the

38
Danish companies find the Vietnamese market attractive. The Free Trade
Agreement negotiation between EU and Vietnam will lead to reduced tariffs and
remove trade barriers, which strengthens Danish business opportunities for trade
with Vietnam. Several of the companies interviewed pointed out that the FTA will
make it easier to outsource to Vietnam.
This is also viewed in the political relationship between Denmark and Vietnam,
which has strengthened in the recent years (Erhvervs- og vækstministeriet, 2012).
The interviewed companies all pointed out that this effort from the Danish
government is extremely important because of the many challenges that include
presence in the Vietnamese market.
Vietnam is a socialist republic with a communist one-party system. The
Vietnamese people generally regard the Communist Party as the guarantor of the
country's freedom and independence - a loyalty that largely has its roots in
Vietnam’s turbulent history and struggle for independence. This has also made an
impact on how the Vietnamese accept foreign people – in general, the companies
described the Vietnamese culture as very friendly and welcoming.
As visiting both North and South Vietnam, we experienced that the Danish
people only lived in South Vietnam in Ho Chi Minh City. The majority of Danish
workers interviewed have lived in Vietnam for many years and some are even
married to a Vietnamese. They told us, that South Vietnam where more like
western cities and that most people coming from outside Vietnam where to settle
down here. And after visiting both cities, we could see the big difference ourselves.
North Vietnam is still suffering from the Vietnam War. People living in the old
quarter in Hanoi had a much more primitively lifestyle, and seemed much more
poorly than the south.
The Vietnamese living in Ho Chi Minh City appeared more open mind to the
Western approach. During our stay, we felt much more comfortable to walking
around in the city without feeling like a foreign. This where also shown in the
management, and we were surprised to see, that while Danish companies were
manage by Danish people in Ho Chi Minh City, only educated Vietnamese people
was responsible for the management in Hanoi.
Like the culture, the importance of Vietnam’s central location in Asia was clarified,
during the field study of Danish companies in Vietnam and was not found under
the theoretical perspectives of drivers. The Danish companies did also say that they
found it easier to talk about the failure of outcome with the Vietnamese in contrast
to other Asian countries.

39
Most important drivers of offshoring
Economical drivers
In a German study it was found that the most frequent factor for relocation
activities when offshoring are cost savings (Kinkel & Maloca, 2009). The
companies visited in Vietnam also had this as a trigger for relocating. Denmark has
a high offshoring propensity because of the high hourly labour cost in the home
country.
Some of the companies described how they were able to innovate and correct
errors more often than in Denmark, with costs still kept lower. This gives an
economical freedom and increase flexibility for companies relocating activities to
Vietnam. Besides the freedom to make corrections, relocating also allows time for
details. As visiting a furniture factory, they told that the relocation of production
gave them the possibility to overlock the inside of the cushion. This detail is not
seen by the costumer and is therefore skipped by many manufacturers. However,
because of the low labour costs this factory had the opportunity to make such
details, and raise the overall impression of quality.

Environmental and strategic drivers

The companies who offshore their production outside the home country, also
select the new location from a strategic reflection on the new country’s benefits.
Strategic and environmental drivers are discussed together in this section.
The interviewed companies, who have chosen to offshore parts of their activities
to Vietnam, explain that they have experienced the special importance in the
connection between Denmark and Vietnam.
All companies visited have found the process in obtaining license for operating in
Vietnam confusing and time-consuming. It is a massive paper work, which takes
place over a longer period. Several Danish companies received help from the
Danish embassy and lawyers, who facilitated the work. Despite this, over the past
several years there has been an increase in foreign investment, which has created
clusters spread throughout the country. By participating in clusters and networks,
companies are able to find new partners and participate in international
development-projects that each company cannot achieve on its own. This alone has
been a driver for one of the companies visited, where several of their partners were
already operating in Vietnam and therefore they had already built up a network in
Vietnam before moving there physically.
Because of the economic development, which was described in a previously
section, an opportunity to sell Danish products to the Vietnamese market arises.

40
Several of the major global business brands has become interested in Vietnam as an
export market, but it is only within the last year Vietnam has opened up for this
kind of business.

Obstacles and problems attached to outsourcing and offshoring

As pointed out in the literature review, outsourcing and offshoring can be related
to particular problems. The section below will be dealing with the problems
identified in the literature review and the most common problems will be
transferred to the problems identified in the field study.

Most important obstacles with outsourcing

Loss of control
Loss of control is a general finding in our field study and is attached to the concern
about the language, the geographical distance and the general way of
communicating. The language is a major barrier in obtaining good communication,
because communication takes place in a common language, which is not the main
language of any none of the involved partners. Several of the visited outsourcing
companies rely on translators, otherwise the communication between Denmark
and Vietnam is impossible, as English is not that widely spread in Vietnam,
especially not in the small cities and among elderly. This increases the risk that
information will get lost, or simply not understood, in translation.
Further it is only the CEO of the Vietnamese companies who is allowed to make
binding decisions and a contract or agreement is only binding when a formal
document has a certificate, and no verbally communication is binding. The system
is therefore static and with a significant lack of flexibility.
The geographical distance is a general problem as well. It is impossible for the
outsourcing company to have ‘hands on’ the assignment which may result in loss of
control.
Corruption is another way of losing control. Corruption is a normal part of doing
business in Vietnam among the police, the fire department, and the harbour master
and so on. Therefore, a company has to have a clear strategy of how it wishes to
handle corruption. A fact is that corruption exists, and is a major problem in
Vietnam. A visited company mentioned several episodes where a container could
be held back in the harbour, if they did not pay the harbour master directly.

Loss of critical skills

The price factor for Vietnamese is crucial. They have a minor focus on quality, and
therefore a gap in satisfaction of the quality arises. A lot of resources, both time,
41
money and man hours, have to be allocated to quality assurance and end control, to
make sure the quality of the product meets Danish standards. One of the visited
companies often experienced that received were not in adequate quality. For
example they ordered candle light holders, and when the company received them,
they all were in different heights. Therefore, for the future, the company had to
control every single order itself, to make sure the quality met the standards settled.
Another problem identified, which can cause loss of critical skills, is the lack of
education among Vietnamese workers. Many companies have to take on the
responsibility of educating their workers.

Inadequate capabilities of service provider

It may be difficult to find the right suppliers and partners, who satisfy the Danish
standards. This issue concerns relations and trust to the involved partners. Another
issue concerning providers is the lack of supporting industries, which means that
companies must import commodities from other countries to Vietnam for
production and export. This can be a long and difficult process. It is a major
concern whether you can trust your partner or not and a strong relation to the
service provider/partner is therefore important. Also the Vietnamese infrastructure
is poor, and a company is very dependent to be close to a harbour, to make export
possible. This criterion minimizes the chances of finding the right supplier.

Most important obstacles with offshoring

Knowledge and Knowhow
The field study pointed out a general problem in knowledge. The Danish
companies often have a lot of tacit or unspoken knowledge. This type of
knowledge was difficult to pass on to the Vietnamese workers. The Vietnamese
workers only perform the work which they are told. They do not question the work
processes or the given tasks, and therefore it is very important that all the necessary
knowledge is given to the workers in a manual, so they know exactly what to do. A
classic example of this was given by one of the visited companies, where an
employee was told to create a webpage. The employee created the webpage and
handed it in to the supervisor, but a major problem occurred when the supervisor
saw that the employee had not created an exit page at which to put credit card
information for payment. The supervisor confronted the employee about the
missing exit page. It turned out that the employee did simply not know of credit
card and therefore the exit page was not created. So what might seem very simple
and obligatory for Western people is not obligatory for a Vietnamese employee.

42
This is an example of how tacit knowledge can be difficult to pass on, and further
why it is important to create manuals for the workers.
Overall there is a lack of education among Vietnamese workers, which possess a
risk in losing knowhow. It is a general problem to find labour, with the necessary
knowhow in Vietnam. Even though some workers are educated, they still need to
be trained in the specific company. This is the main reason why many companies
have their own education or training programs. The education and training needs
to be obtained, to create the necessary amount of knowhow to resolve the tasks in
the company. One of the companies visited sent the workers to Denmark to
participate in special courses to gain the needed knowhow. The education of the
workers makes it important to keep the workers, therefore several methods are
used to motivate the employees to stay in their workplace, and this subject is
mentioned in the chapter about management.

Ways of doing business

Another empirical finding pointed out that there was major differences in the way
of doing business among Danish and Vietnamese companies. In the section about
drivers, it was mentioned that the required quality demand were met. But the focus
on quality will also be seen as an obstacle. A major part of the Vietnamese
companies have focus on price and a minor focus on quality. Some of the visited
companies have thus experienced that the Vietnamese workers do not understand
the importance of high quality, and do not prioritize this. Due to this, it is necessary
to perform quality assurance during the production, and not only at the end. This is
also linked to the trust issue. Trust in Vietnam is not given, and it is necessary to
work hard on relationships to gain trust. In Denmark this is more a given. The lack
of trust towards each other in Vietnam is also linked to the finding that you cannot
be sure of what is agreed, is done. One of the visited companies experienced that
they in the beginning had been too naïve in trusting their employees. They found
out, that several of the employees stole materials from the factory and sold them on
market in the city to earn some extra money. Therefore, they had to hire security
guards to check the employees when leaving the factory.
The bureaucratic and hierarchical structure of Vietnamese companies is a major
issue when doing business. A meeting with a supplier should be booked weeks in
advance and it is not possible to stop by for a chat – the process is highly
formalized. The process to reach an agreement is therefore slow and it takes a
significant amount of signatures and certifications before an agreement is binding.

43
 There is a general risk of not understanding each other. Often the communication
takes place in a common language, typically English, which is none of the involved
partners’ main language. Therefore, some information will get lost in translation
and can be a driver for creating conflicts, which also was identified in the section
about outsourcing. A visited company relied on translators, but they experienced
often problems with the translators, as they translated as the felt like, they could
not trust them, and it often caused problems because the information was not
transmitted right or to the right persons.

Governments and laws

In Vietnam, there are two major issues concerning governments and laws;
bureaucracy and corruption. There is a general lack of legal security. The
Vietnamese legislation possess’ many gaps, which makes some rules unclear and
difficult to follow.
Corruption is an everyday issue when doing business in Vietnam, and the
problem is only increasing, according to the visited companies. A company needs a
clear strategy that clarifies in which way they want to handle corruption. The field
study point out two ways of dealing with corruption. On one hand accepting, that
corruption is a part of the Vietnamese business game. This involves dealing directly
with the police, the fire department, the harbour master etc. On the other hand
there was a general resistance to corruption, here corruption is not accepted as a
part of the game, and there is a general way of trying to fight it. Either way,
corruption costs a lot of time and money and delays the business processes.
Similar to corruption, bureaucracy costs a lot of time, and therefore money. It
delays normal business processes enormously. According to the before mentioned
about bureaucracy within companies, the same problems are concerned when
talking about bureaucracy in term of the government and legislation. Simple
business processes are very slowly and demand a lot of formal signatures and
certifications. To speed up these simple process a bit, it is often necessary to
benefit from the embassy or a lawyer. When doing business in Vietnam, as a
foreigner, everything is registered in your personal passport, which means when
you do business in Vietnam your passport will quickly get a lot of stamps, and the
pages in the passport are therefore quickly filled, then you need to apply for a new
passport, which is very time and money consuming.

44
Costs
The empirical findings in the field study points out one major reason why a risk of
unexpected costs arises. This is concerned with the underdeveloped infrastructure
in Vietnam as we saw with outsourcing. This is both concerned in transporting
commodities from suppliers, and transporting finished products to the harbour for
export. Therefore, many of the visited companies were located near their
collaborative partners and suppliers. The main export in the field study takes place
from a harbour. Many of the visited companies were therefore located in the
southern Vietnam, where the access to the harbour was easier. The
underdevelopment of the infrastructure makes it very important to be geographical
located near the harbour, to decrease transportation costs. Likewise, it is important
to be located near the main suppliers, to minimize the transport time.
As before mentioned quality assurance and control is an important factor when
doing business with Vietnamese, this is also related with a risk of unexpected costs.
Many resources are allocated to control production and finished products. The
differences in the perception of quality mean that an extra amount of resources
needs to be allocated to quality assurance, which again can increase costs.

The future
This section will identify some of the opportunities that Vietnam will bring in the
future besides the drivers described in previous section.
The last twenty years, Vietnam has experienced an economic growth at six to
seven per cent per year, but a readjustment of the Vietnamese economy is
necessary, if the economic growth is to continue (Erhvervs- og vækstministeriet,
2012). Some of the visited companies told how Vietnam have to move away from
an export-driven economy based on low wages, to rebuild national industries,
which brings higher value to the products. This is due to the fact, that countries like
Indonesia and Cambodia becomes cost competitive to Vietnam.
Some of the visited companies also told how the education of the workers was
important to create higher value in the products. Affected by this, the government
has to improve the quality of education, since people still go to Europe or other
more acknowledge parts of the world, to get a high-level education. One of the
persons we met told that he had to go to USA to get his education, because the
level was not that high in Vietnam.

45
The growing middle class
The rise of the middle class in the big cities makes the internal consumption market
interesting, and creates breeding ground for a more home oriented consumption-
driven economy.
The fast growing population combined with the fact that more than half of the
population is under 30 years old points at both a strong and cheap workforce and a
rapidly growing consumer market. Traditional commerce is still dominating in
Vietnam, but in the cities new and modern trade areas – like supermarkets – grows.
There is a strong growth and great interest of western consumer goods.
The middle class also like products within IT and telecommunications. Many of
the consumers have smartphones and many of the consumers use the internet. This
makes advertising through internet possible. Many of the consumers only have a
minor room for living, so it is the scooter and what they wear, they use to show
their wealth.
However, there is still a significant difference in power of purchase between
urban area and area of land. The increasing power of purchase within the cities is
experienced through the increasing demand for products of high quality and
designed products (Erhvervs- og vækstministeriet, 2012). The growing middle class
and the upcoming of large and smart hotels in the big cities have for example
increased the demand for design and quality products. These hotels often ask for
total solutions, like interior design of the whole hotel including rooms, the hall, the
restaurant etc. At the hotels, which we stayed at, we experienced this on our own.
They were of high quality and looked more like western hotels than Vietnamese
hotels, and there was a significant contrast when walking out of the hotel into the
street. Also one of the visited companies told about this tendency, and how the
demand for their products have increased in Vietnam, even though they did not
start up in Vietnam, to sell their products down there.
The increasing income has increased travelling too. Through travelling, the
consumers explore the world outside Vietnam and may see what the Europeans for
example buy. This also increases the demand for Western and Danish design and
quality products.
The growing population and middle class and rapid urbanization, also creates major
environmental problems. Population growth creates enormous pressure on water
supply, sewerage and sanitation systems and waste collection. This pressure creates
opportunities for Danish companies within these sectors. The Danish government
also helps Danish companies by visualize Danish competencies and solutions
within these sectors. (Erhvervs- og vækstministeriet, 2012). The urbanization

46
further creates opportunities for products and counselling within the construction
industry like e.g. knowledge about how to build a metro and so on.

Industries of national strategic interest

As mentioned before, the Vietnamese market is characterized by high entry barriers
and complicated regulatory conditions within some sectors defined as being of
special national strategic interest. For example, it includes the energy sector, the
pharmaceutical industry and the food industry (Erhvervs- og vækstministeriet,
2012).
Because of this interest from the Vietnamese government within the
pharmaceutical industry, the competition is tough in this market. Inside this sector,
the Vietnamese government prioritizes Vietnamese produced products instead of
products produced by foreign companies.
Even though it is hard for Danish companies to sell their products within the
pharmaceutical industry, there is a large potential. The market for pharmaceutical
products is increasing. People are becoming more unhealthy because of their way
of living has changed a lot through the last twenty years. They have started to eat
junk food, drink more beer and use their scooters instead of their bikes to get
around.

Conclusion
The following section will include a conclusion of the general drivers and obstacles,
which the Danish companies encounter, and further an evaluation of the potential,
which Vietnam possess as a sourcing country.
In the empirical findings, we found these three most significant drivers:

 Compared to the wage costs in Denmark or other Asian countries,

companies can easily incur cost savings by relocating some activities to
Vietnam.
 Vietnam’s production facilities are based on craftsmanship and this approach
is particularly suitable for small and medium-sized enterprises that demands
smaller batches.
 The central location in Asia along with the Vietnamese friendly and
welcoming culture makes it more attractive moving to Vietnam for Danish
workers.

In the empirical findings we found these three most significant challenges:

47
  In Vietnam, we found lack of flexibility, which was attached to the low or
non-existing education among the Vietnamese workers.
 The major diversity in the culture and the long distance, create a linguistic
barrier and communication problems, where the time difference slows down
processes.
 Corruption was identified in the empirical findings. Some Danish companies
had experienced corruption to some degree when doing business, and
companies have to pay extra attention to this issue before relocating
activities.

When comparing the obstacles and problems with the drivers of relocating to
Vietnam, it indicates that Vietnam is an attractive sourcing opportunity for Danish
companies in some situations. An activity which require high education to perform
and processes high demands for technical facilities does not fit the Vietnamese
plants while more simplified production can benefit greatly when being relocated to
Vietnam.
In addition to the drivers, the last section about Vietnam’s future identified that
the development in the country creates new possibilities for the Danish companies.
The most important possibilities are mentioned below:

 The rise of the middle class in the larger cities and their way of living creates
a more consumption-driven demand and an opportunity to sell Danish
products/services in Vietnam e.g. design and pharmaceutical products.
 The urbanization creates new possibilities and potential for Danish
companies within the construction industry.

As Vietnam is still in a stage where the market potential is not fully utilized,
companies now have the opportunity to become one of the first on the market to
meet the needs of the customers, thus gaining the advantage of early market share.

48
CHAPTER 4

Leadership Across Cultures

Dennis Frederiksen, Elena Savelyeva, Patrick Petersen & Sarah Bebe

Abstract
The purpose of this chapter is to bring the cultural dimension to light through the study of the
influence of Vietnamese culture on leadership in Vietnam.
The empirical findings, which were collected during the field study in Vietnam through interviews
with 11 companies located in respectively Ho Chi Minh City (HCMC) and Hanoi will in this
chapter be discussed in respect to issues one should be aware of when operating a business in
Vietnam. It will be shown how knowledge about the Vietnamese culture can help to prevent a long
list of misunderstandings which arise especially in the beginning of leader’s period.

Introduction
The description of Danish and Vietnamese culture in the previous chapter has
shown that Danish and Vietnamese cultures are markedly different in many areas,
and all these aspects have an influence on how the Danish leaders can lead the
Vietnamese employees. This knowledge will be the basis for the further analysis of
Danish leaders’ leadership and motivation of Vietnamese employees.
The Vietnamese business culture is much more hierarchical when it comes to
foreign companies, which can be a discomfort for the Danish company leader’s
management style, when they choose to place their business in Vietnam. A
Vietnamese leader will often make decisions and offer very detailed orders that he
or she expects the employees to follow without question. In return, the employee
expects the manager to be an expert in the field and know what he does.
In Denmark there is a more dialogical approach to the workplace. This means
that the employee would approach the manager if the employee makes mistakes, or
if the employee perceives that the manager is wrong. When operating a business in
Vietnam, it is important that the Danish leaders take a position on the management
style they use in Vietnam.

49
 Knowledge about the Vietnamese culture can relieve many misunderstandings to
arise. This requires the Danish leader recognizes, that the culture is a factor that
should be taken into consideration in relation to the management and operations in
Vietnam.

“When in Rome, do as the Romans do” St. Ambrose (387 AD)1

The purpose of this chapter is to bring the cultural dimension to light through the
study of Vietnamese culture’s influence on leadership in Vietnam, which is done by
answering the following research-questions:

1. Where do the differences between Danish and Vietnamese leadership styles lie?
2. What impact does the Vietnamese culture have on the leader’s opportunity to motivate
ones employees?
3. How does the Vietnamese culture impact the firm’s internal organizational climate?

Methodology
This chapter starts with an introduction and the problem statement section. Then it
divides into two main sections: one section concerning the theories and describes
the theoretical framework for leadership, motivation and organizational climate;
another section is concerning the collected empirical data. Finally, the answers to
the research questions are summarized in the conclusion. The process of writing
this chapter is illustrated in Figure 4.1 below.

Problemstatement

Litterature review + 
theoretical framework

Analyzing of 
data

Concluding

Figure 4.1: The chapter outline

Source: Own creation

1 www.phrases.org.uk/bulletin_board/6/messages/571.htm

50
Literature review

The literature review contained a search for literature relevant to the research
quotations in order to discover the relevant theories and models for describing
known leadership styles and motivation factors. This means that the literature
review resulted in creating a theoretically framework for analyzing the empirical
study. The framework consists of McGregor’s X and Y theories (McGregor, 1960),
Kotter’s Leadership vs. Management approaches (Kotter, 2012), and Maslow’s
hierarchy of needs (Maslow, 1970) and Zammuto’s and Krakower’s seven climate
factors (Zammuto & Krakower, 1991).
Maslow’s hierarchy of needs is used to illustrate what motivates the Vietnamese
employees, while McGregor and Kotter’s theories are used to illustrate the
differences in leadership styles in Denmark and Vietnam. Maslow´s and
McGregor’s theories both belong to another historical time-period and not
currently useful in illustrating conditions in the Western companies. The
Vietnamese society has had a slower development resulting in that they still have
the same mindset, as the West had when the theories first were developed. Kotter’s
theory is chosen to support McGregor’s theory with a newer theory, which has the
same basic characteristics, and hence comparable. By illustrating the motivation
factors with Maslow’s theory these factors can be drawn into the comparison of the
two leadership theories.
To look into the effect and consequence of the leadership or management, we
chose the thoughts and theory of Zammuto & Krakower (1991), which, when used
correctly, should shed some light to how and why the applied management or
leadership style combined with the culture of the whole country, has some direct
effect on the organizational climate.

Collection of data

Prior to the visits an interview guide were prepared based on the literature review
and designed to ensure that the collected data was important for answering the
research quotations. A semi-structured approach has been used (Kvale, 1996, in
Haug 2013).
The empirical studies were conducted in Vietnam with the semi structured
interview guide. However, some questions were modified in Vietnam due adapt to
the interview process and other observations in Vietnam.
The collection of data was carried out over a period of four days, interviewing up
to three companies a day.

51
 It is important to have in mind that we have to be critically about the visits
outcome due to the fact that both observation and interview bias can occur. There
are two types of bias: interviewer bias and response bias. Interviewer bias is about
the bias created by the way the questions are asked, as the author may affect the
respondent's answers through formulations. Response bias is on the other hand,
when the respondent for instance comes with a more positive response than what
reality really is (Myers, 2013).

Case study
This multi case study consists of 11 interviews, that were all completed in Vietnam
with representatives from Danish and foreign companies or institutions. The
companies are all geographically located in the regions around Ho Chi Minh City
and Hanoi. Furthermore, the interviewed persons were at management and
executive-level. The companies’ interviews remain anonymous in this study. The
anonymity gives the companies in question more freedom to divulge sensitive
information critical to the study. This increases the reliability of the study and helps
increase the range of the use of the study. The case companies will be coded as case
company A, B, C, D, E, F, G, H, I, J and K.

Concept of Leadership
With the increasing level of globalization and internationalization, there are almost
no successful businesses that can escape the need to work across cultures. This
move towards a cross-cultural business environment makes it necessary to
understand how culture impacts the workplace and which issues to be aware of
when operating business overseas. Practice shows that some aspects of
management, leadership styles and methods, that works well in one culture are not
necessarily effective in another. The western ideas about who the right leaders are
what they really do and the way they do it is not shared worldwide. The way a
leader chooses to affect employees to achieve the company's objectives depends
largely on one’s cultural background.
Leadership can be defined as: “…the process of influencing people to direct their efforts
toward the achievement of some particular goal or goals” (Luthans & Doh, 2012, p. 625).
Leadership is very important in the study of international management, which
raises the question: What is the difference between being a manager and being a leader?

52
Management vs. Leadership

Most people suggest that leadership and management is the same thing, or at least
closely related, but in fact they are not. Kotter is a strong supporter of examining
the differences between management and leadership, and have made a significant
contribution to understanding how these two polarized types of leadership styles
truly differs from each other and how the two interrelate. He proposes that in a
changing world one cannot function without the other: “Managers promote stability
while leaders press for change, and only organizations that embrace sides of that contradiction can
thrive in turbulent times” (Kotter, 2001, p. 86).
Management means making quality decisions by themselves or through the help
of others. Good management brings a degree of order and consistency to key
dimensions like the quality and profitability of products. While leadership is a
question of defining a meaningful purpose and setting a direction in relation to the
organization’s purpose. Management i.e. is about coping with complexity;
leadership, by contrast, is about coping with change.
In the article “What Leaders Really Do” Kotter (2001) considers a simple military
analogy:
“A peacetime army can usually survive with good administration and management up and down
the hierarchy, coupled with good leadership concentrated at the very top. A wartime army, however,
needs competent leadership at all levels. No one yet has figured out how to manage people effectively
into battle; they must be led” (Kotter, 2001, p. 87).
Kotter's setup of difference between management and leadership is presented in
Table 4.1.

Management Leadership
Planning and budgeting: Setting a direction:
Setting targets or goals for the future Developing a vision of the future (often
(typically for the next month or year), the distant future) along with strategies for
establishing detailed steps for achieving producing the changes needed to achieve
those targets, and then allocating that vision.
resources to accomplish those plans.

Organizing and staffing: Aligning people:

Creating an organizational structure and Communicating the new direction to those
set of jobs for accomplishing plan who can create coalitions that understand
requirements, staffing the jobs with the vision and are committed to its
qualified individuals, communicating the achievement.
plan to those people, delegating
responsibility for carrying out the plan,

53
 and devising systems to monitor
implementation.
Controlling and problem solving: Motivating and inspiring:
Monitoring results versus the plan in Keeping people moving in the right
some detail, both formally and direction, despite major obstacles to
informally, by means of reports, change, by appealing to basic but often
meetings, and other tools; identifying untapped human needs, values, and
deviations; and then planning and emotions.
organizing to solve the problems.

Table 4.1 Management vs. Leadership

Source: Modified from Kotter (2001)

Therefore there can be concluded that management produces a degree of

predictability and order and has the potential to consistently produce the short-
term results expected by various stakeholders (e.g., for customers, always being on
time; for stockholders, being on budget). While leadership produces change, often to
a dramatic degree, and has the potential to produce extremely useful change (e.g.,
new products that customers want, new approaches to labour relations that help
make a firm more competitive) (Kotter, 2012).

McGregor (Theory X, Theory Y)

Theory X
The Theory X work with the managerial perception and assumption that
employees are lazy; that they want to avoid doing any work if they can, and that
they do not like to work. In other words: the top management believes that
employees should be constantly monitored and controlled and due to time-
consuming monitoring, there is a need for a hierarchical structure with a narrow
span of control at every level.
According to this theory employees will exhibit low levels of ambition without
the presence of attractive incentive programs and they will avoid responsibility
whenever they can.
Theory X managers are strongly dependent on the use of threats and coercion in
order to get their employees to comply with the rules and the organizational goals
are to be met. In organizations where this theory is practiced there may be a high
degree of mistrust, restrictive control, and a punitive atmosphere. Theory X
managers tend to believe that someone must ultimately be blamed, and they also
usually believe that employees’ only interest is their paychecks. When something
goes wrong managers will want to blame employees for the most part without

54
questioning whether the organization’s system, policies or the given employee’s
lack of training may be to blame.
A Theory X manager thinks that, from the viewpoint of employees, it is the job
of the manager to structure work and engage the employee.
In the bigger picture, one major flaw of this management style is that there will be
a much greater risk of causing diseconomies of scale (McGregor, 1960).

Theory Y
In this theory the managerial assumption is that employees are ambitious, self-
motivated and that they exert self-control. It is believed that employees enjoy their
mental and physical job duties. According to them work is as natural as play. They
possess the ability to solve problems creatively, but their talents are not utilized
optimally in most organizations.
Given the right conditions, Theory Y managers believe that employees will learn
to seek out and accept responsibility and to exercise self-control in accomplishing
the goals that they are committed to.
A Theory Y manager believes most people will want to carry out their jobs well,
given the right conditions. They believe that the satisfaction of doing a good job is
a strong motivation.
Many people interpret Theory Y as a positive set of beliefs about workers.
McGregor (1960) thinks that Theory Y managers are more likely than Theory X
managers to develop the climate of trust with employees required for employee
development. This would include managers communicating openly with
subordinates, minimizing the difference between superior-subordinate
relationships, creating a comfortable environment in which subordinates can
develop and use their abilities.
This environment would include sharing of decision making so that subordinates
have a say in decisions that influence them (McGregor, 1960).

Motivation
In the previous section two theories concerning management and leadership was
discussed in order to look at differences between Danish and Vietnamese
leadership styles. But a factor that was not included is motivation. The things that
motivate the employees have an indirect impact on the leadership style that is
necessary to obtain an effective workplace. Therefore this section will explain the
theoretical framework behind the concept of motivation and analyze this
framework based on the empirical study, which will provide the reader with an

55
insight in the differences in motivation factors between the Danish and the
Vietnamese employees.

The definition of motivation

Normally motivation theories are divided into two categories: content theories and
process theories. Content theories focus on which needs that exists, where the
process theories focuses on how the needs are motivated. In this chapter the focus
is on the content theories because the purpose is to find out needs the employees
have towards their jobs.
The word “motivation” comes from the Latin word “movere” that means “to
move something in a specific direction or towards a specific target”. There are
many types of motivations factors, but a way to create an overview is to divide
them into the internal motivations factors and the external motivation factors.
The internal motivation factors stem from the employees themselves and may be
a wish to develop them. These motivation factors can’t be controlled from external
persons. This means that leaders cannot control these factors.
The external motivation factors on the other hand are factors that are out of the
employee’s control, which means that certain external motivation factors can
motivate the employees but the employees cannot decide if these are available.
External motivation factors are things like salary, job security and working
conditions (Knærkegaard & Steenstrup, 2012).

Maslow’s hierarchy of need

When talking about needs it is impossible to ignore Abraham Maslow. In the

1930’s he developed his hierarchy of need where he uses the humans needs
structure to explain the dynamic behind people’s actions. The hierarchy of needs is
comparable with the building of a house; one must establish a foundation before
building the house. In the hierarchy of needs one must have the underlying need
fulfilled before moving upwards in the hierarchy.
The hierarchy of need consists of five levels of needs; Physical needs, Security
needs, Social needs, Ego needs and Self-realization needs. The physical needs, the
security needs and the social needs are so called deficiency needs. The deficiency
needs are needs that will dominate a human being if not fulfilled. For instance the
lack of enough food will overshadow every other need. In contrast to the
deficiency needs there are the growth needs that consist of the ego needs and the
self-realization needs. The growth needs are characterized by getting the person
who gets the need fulfilled to grow (Maslow, 1970).

56
Leadership and motivation across cultures
In the previous sections the theory behind leadership and motivation has been
explained. By combining these theories mentioned above, a solid foundation is
created for the analysis and reflection of the empirical data.
As mentioned in the chapter concerning culture, there are some main differences
between Denmark and Vietnam, which are also reflected in the basic features of
the enterprises, mentioned in table 4.2.

Denmark Vietnam

 Decentralized decision making  Centralized decision making

 Risk  Safety
 Individual rewards  Group rewards
 Informal procedures  Formal procedures
 High organizational loyalty  Low organizational loyalty
 Cooperation  Competition
 Long-term horizons  Short-term horizons
 Innovation  Stability
Table 4.2: Management approaches in Denmark and Vietnam
Source: Own modification complied from Luthans & Doh (2012, p. 110)

Motivation among the Vietnamese

When walking down the streets in HCMC or Hanoi – or any given Vietnamese city
for that matter – one cannot avoid seeing merchants everywhere. The merchants
can be a normal shop with silk, a guy sitting with a toothbrush shining people’s
shoes or people offering rides on their bikes.
Although the streets are full of merchants most of the environment is poor; waste
in the streets, buildings that are in need of renovation and people washing dishes in
the roadside. Vietnamese people are hardworking and trying to make money in all
ways possible.
The same focus on money is mentioned when talking with employers from the
businesses operating in Vietnam; the employees are likely to change jobs if they are
offered a higher salary elsewhere. The Vietnamese are short-sighted - they live in
the present and simply don’t think much about the future.
That the Vietnamese employees are driven by these extrinsic2 values can be
explained in the need theories.
This picture is very different from what is seen in for example Denmark. In the
Western countries the need for extrinsic values are not as relevant as in Vietnam.
Today it may be argued that the hierarchy of need can be turned around for in
Western countries, as fundamental needs are more or less fulfilled to a high degree,

2 Money, power, etc.

57
why focus and energy are moved towards so self-realization (Knærkegaard &
Steenstrup, 2012). This reverse hierarchy of need is illustrated in figure 4.2.

Figure 4.2: The Maslow hierarchy of need turned upside down

Source: Knærkegaard & Steenstrup (2012)

Although the original hierarchy of need is not as relevant for the Western countries
because of social evolution, it is still relevant in Vietnam. The reason is that
Vietnam is approximately 50 years behind in relation to business compared to
Western countries.
As mentioned Maslow’s hierarchy of need consists of 5 levels of needs, where
one level must be fulfilled before moving upwards in the hierarchy. The picture
that has been drawn of the Vietnamese in the start of this section shows that they
work hard to fulfil the physical needs. This also makes it more understandable that
they switch from one firm to another if this switch result in a higher salary.
When a Vietnamese have a job the physical need is fulfilled because the meals are
secured through the paycheck.
The next level in Maslow’s hierarchy of need is the security need. The basic point
in this level is that a human need to feel secure to thrive and develop. The
economic security is secured by having a job and the monthly paycheck, and the
social security is achieved through the family relations and the social events that is
an integrated part of the Vietnamese culture where the evenings are spent in clubs,
restaurants or similar places. The last thing Maslow mentions as a need in
fulfilment of the security need is security from the society. But this need for a
society that protects from hunger and crime is not something the Vietnamese have
experienced because it is a concept that only is practiced in the West and not in

58
Asia. Therefore the Vietnamese have fulfilled the security level through family and
nightlife.
When the security need level is fulfilled the focus is on the social needs – or the
need for human contact or the need for belonging to a group.
As mentioned in the chapter about culture, Vietnam is a collectivistic society,
where strong relations and loyalty between individuals results in a group mentality.
The field study revealed several indicators that showed that it is beneficial to use
this group mentality when doing business both in relation to rewards and to
sanction. This is done by making the individual Vietnamese feel responsible for the
whole team rather than just themselves. One example of this is by making quotas
on the manufacturing lines that triggers a bonus for the entire line if a target is
reached. This may sound as an easy solution but one must have in mind that such a
quota can lead to negative side effects such as a lag in quality standards. These side
effects are caused by the Vietnamese short-sightedness as mentioned earlier in this
section. This short-sightedness causes the Vietnamese to focus on obtaining the
bonus quota and therefore ignores the quality control. This means it can be
beneficial to install a separate quality control unit, to manage this task. In case of
reduced quality the group mentality can be used to apply a collective punishment,
which means the entire group is punished.

Leadership styles in Vietnam and Denmark

In the previous section it was clear that the Vietnamese is motivated by extrinsic
values. These motivation factors are different from the factors that motivate the
western employees. This means that the management approaches are also different
in Denmark compared to Vietnam.
Previously it was mentioned that McGregor divides leadership into Theory X and
Theory Y. However it is important to remember that these two categories are
extremes, which means that there are almost no clear X- or Y- executives, but one
will always lie closer to one extreme than the other. This becomes clear when
visiting businesses in Vietnam. All the employees are busy doing their jobs, and are
concentrated about this until it is time for a break. Their jobs are very formal
detailed which means that they have a simple task to do, and they do not ask
questions and are under almost constant quality control by their managers.
Through the field study interviews there has been drawn a picture of a Vietnamese
executive that needs to be consequent and controlling in their businesses process.
In other words; they need to act and be an authority figure to get the results

59
needed. These findings support the conclusion that the executives in Vietnam are
much closer to Theory X than to Theory Y.
The assumptions behind McGregor’s Theory X and Theory Y, is also seen in
Kotter´s leadership vs. management perspective, where the management behaviour
is different in ways of giving orders and feedbacks, their focus on effectiveness and
efficiency, and present or future visions. The discussion on McGregor’s and
Kotter’s theories is summarized in table 4.3.

Table 4.3: Management Preference According to different Typologies

Source: Burton & Obel (2004).

As it can be seen in table 4.3 McGregor’s Theory X contains the same fundamental
characteristics as Kotter’s Management approach, while Theory Y contains the
same characteristics as Leadership approach respectively. This means that the
Vietnamese executives at this point in time are Theory X oriented and working
from a management perspective.
The reason for this could be found in the industrialism. Vietnam has until now
focused on their technically skills rather than being a knowledge society like the
Western societies. This focus has only recently begun to swift towards knowledge,
which results in a need for more theory Y oriented executives and a leadership
perspective.
During the field study there were some indicators that support this. One of these
indicators was the issue that the companies meet concerning communication and
the way of thinking. The Theory Y executives will expect that the employee inform
the manager if he or she does not understand the task given or if the employee is
delayed in making the deadline. This is the normal procedure in the Western
societies, but because of the culture in Vietnam an employee will consider this as a
failure. This failure is in the Vietnamese culture known as “losing face”. The
60
consequence of this is that the executive have to act more controlling and therefore
more as a Theory X executive with a manager approach to secure a result from the
employees. To be able to swift from this state to the more Theory Y oriented and
leadership concerned the executive have to take the culture in consideration. As
mentioned before the Vietnamese are short-sighted. Therefore it would be a good
idea to create tasks with short timelines.
Furthermore the leadership approach gives the employees more freedom, and
believes that the employees are rationale people who want to contribute to the
companies bottom-line by doing ones job. This freedom means that the
formalization and standardization that is current controlling the jobs and the
employees are going to disappear in the future. The need for “how-to” manuals on
how to complete the tasks is high right now, because the Vietnamese people aren’t
freethinking and dutiful as the Western employees. But as the society in the future
evolves the executive’s approaches has to evolve with them. And maybe the
society’s evolution will be accelerated if the executives in the companies start their
evolution towards a Theory Y and leadership approach.

Organizational Climate
As a natural consequence of the mentioned management style above, is the climate
among the employees; in this chapter we will simply term it organizational climate. It
will be of importance to point out that the concept of an organizational climate
does not include rain, sun or wind, nor is it the company’s culture. To be sure of
the difference between these two things, we use Denison’s definition of the
concept: “Climate is the prevailing influence or environmental conditions characterizing a group
or period, atmosphere, the prevailing set of conditions” (Denison, 1996, p. 644).
Therefore it is extremely important to be aware of the fact, that the organizational
climate must never be seen as an absolute thing, but as something dynamic that is
ever shifting and in motion. This given, the climate in the organization would be an
approximate immeasurable entity and may be more subjective than objective.
To be more specific in our study we need to separate this from our collected data.
We chose to apply Zammuto & Krakower (1991) and their seven factors of
organizational climate. Other authors work in the same vein as Zammuto &
Krakower (1991), such as Koys & DeCotiis (1991), based on similar ideas and with
small differences. For example two mentioned both make use of seven factors,
looking into the psychological ideas of the individual in the organization and
looking at almost the same. In Table 4.4 is summarized the two set of climate

61
variables. In this chapter we have chosen to proceed with Zammuto & Krakower
(1991).

Koys and DeCotiis’ Zammuto and Krakower’s

climate variables climate variables
Autonomy Credibility
Cohesion Conflict
Trust/support Trust
Pressure Scapegoating
Recognition Morale
Fairness Equitable rewards
Innovation Resistance to change
Table 4.4: Climate variables
Source: Koys & DeCotiis (1991) and Zammuto & Krakower (1901)

Each of the above shown climate factors are weighed in respectively low, medium
and high in the original articles, which is why we chose the same methodology.
To make this section easier to read, there will be given a brief review, which
should be seen as a conceptual clarification.
Mutual trust (between employees without personnel responsibility):
This parameter refers to the degree of openness and honesty of the individuals in
the company. A company with, for example, a low degree of confidence will create
employees who do not share knowledge and fits its own box; In other words, it
builds its own silo, which in the long run will create an environment where fear is a
dominant part of daily life.
Conflict: Looks at whether there is an opposition to the decisions taken in the
organization and if the employee has a habit either to comply with the decision or
oppose and “fight back”. A company with a low degree of conflict will be a
company that will be balanced tending to harmonious, where cooperation is a
keyword, whereas the other way around will make it a company with more clashes
between the two parts.
Morale: This factor describes whether the company’s employees have a high or
low morale. The high morale appears where employees have a natural enthusiasm,
confidence, esteem and self-esteem. The low morale resulting from the reverse of
the above, can ultimately give employees a sense of lack of a common purpose and
value of each employee as well as the organization as a whole.
Fair rewards of employees: In an organization which has a “fair reward”, the most
important part is that the provided salary is given equitably and without bias. This
factor also include nepotism and whether or not the superior demands and return
favors or otherwise discriminate e.g. based on gender, race or religious belief.
62
 Resistance to change: The company or organization in which inertia is found to a
high degree will typically also have a high resistance to change. In such cases, a
sentence like “We do as usual simply because it works” will be found highly
embedded in the culture. Likewise, tension that builds up within the organization
between groups of employees or between management and employees may be
expected.
Leader credibility/trust in the leader: This factor describes whether employees have
confidence in the individual leader as well as the executive board. To get this factor
proper worked through, one must look at whether employees have natural and
mutual respect, inspiration and understanding of the decisions which are taken by
the individual leaders or directors.
The use of scapegoats: The seventh and final climate factor is building its foundation
on whether or not e.g. a leader in the organization is trying to find and hold an
individual singlehanded responsible for a part that the leader, partly or fully, has as
an area of own responsibility. However, it could also be individuals or groups using
scapegoats for blaming.
The following sections will contain the above mentioned concepts/factors in the
perspective of our collected data from the case study. This will be done due to the
complexity of the organizational climate. The following sections will furthermore
show the big picture of which organizational climate would be beneficial for the
Danes while they are establishing a business in Vietnam.

Case study analyzing: What did the data tell us?

In the previous section the seven climate measures where explained. These seven
climate factors are used to understand how the organization’s climate is affected by
these and what impact this would have on the company’s management and
leadership style.
In Table 4.5, we have summarized the data and findings, categorizing it to the fit
of the before mentioned seven climate factors.
It is important to make clear that we had data from 11 organizations, but only 9
of them had the data quality to be used in our analysis, which is why Case F and
Case G is not included in the table below.

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 An overview of the seven climate factors and the collected data

Mutual Fair Resistance to Leader

Case Conflict Morale Scapegoating
trust rewards change credibility

Case A High Low High High Low High Low

Case B Low Medium Low Low Medium Low Medium

Case C Low Medium Low Low Medium Low Low

Case D Low Medium Low Low Medium Low Medium

Case E High Low High High Low High Low

Case H High Low High Medium Medium High Low

Case I High Low High Medium Medium High Low

Case J High Low High Medium Medium High Low

Case K Low- Low Low- Low Low High Low

Medium Medium
Table 4.6: Summery of empirical findings
Source: Own development

As shown in Table 4.5 the level of confidence between employees without

personnel responsibility is quite high in more than half of the cases. This is
surprising, as we were constantly told that the Vietnamese people have little to no
confidence in other people others than their family or a close friend of the family.
It was not possible to identify a solid explanation of the gap between the common
perception of the Vietnamese people, both in the private sphere, as well as in the
business sphere and the findings in Table 4.5. However, it seems that they
somehow have a higher degree of mutual trust, when being part of an organization.
Two factors seem to be chained to each other and naturally correlated. In all cases
in which we had a low level of conflict it showed a high level of leader credibility
and where the one of them changed, the other would follow. In three cases we had
a medium conflict level which seemed to foster a lower level of leader credibility.
In total, the level of conflict in the case studies was low. Almost all respondents
talked about how the hierarchical thinking and respect for authorities dominated
the mindset of the Vietnamese and that the respect for authorities was preventing
the employees to express their own opinion, especially if it contradicts a superiors
opinion.
Going through the data looking into how morale was in the cases, distinctive
trends seems to appear: In the cases where the employees were able to express their

64
opinion without risking their job, e.g. anonymously through a box at the wall, the
level of morale would increase from low to medium or from medium to high. This
was not the situation amongst all the cases. In cases where the employees were not
able to express their opinion without risking their job a trend towards a low level
score was found in the question of the moral variable, as seen in Table 4.5
It further seems, from Table 4.5, that the level of leader credibility correlates with
the level of employee morale in the cases. This makes sense as the morale is a
natural consequence of management and leadership approach. Also a link between
leader credibility and the level of scapegoating can be deducted, as can a link
between mutual trust and the level of conflict in the organization.
In some of the case companies resistance to change and inertia were experienced
(case A & D). However, done correctly and with a firm hand it can be turned into
an advantageous change show case for the company (Case D). Also, the changes
that the Vietnamese sees as purposeful are easily implemented. A story linked to
this could be in our Case B, where the managing director tried to introduce
workbenches that had the ability to elevate to the proper height, for best working
condition, of the specific employee. At first they simply dismissed the idea of a
workbench instead of using the floor, as used to, but after some time with the
benches they found they had an improved work environment. At some point one
of the benches was worn out and could no longer elevate, causing the employee to
stop working (Case B, 2014). The managing director successfully imported the
Danish mentality to his normally hard working employees. Instead of shifting
workbenches to the height that could fit some of the others, the workstation just
stopped working – a rather unique find in the study.
Blaming inefficiency or break downs on the machinery, tools or hardware was not
that common in any of the cases, besides the story from Case B, and as seen in
Table 4.5, most of the cases is rated a low or medium level of scapegoating.
Generally speaking the data found that Vietnamese employees are not the ones
taking a greater level of initiative and even they recognize the responsibility for
failure for their own actions they do not seem to rat others out to any higher
ranking leader or co-worker.
The last factor was probably the one that was mostly controlled from the outside
world. In Vietnam the government controls the minimum wage, which guarantees
the employee a fair salary that keeps up with the level of inflation. In several cases,
the respondent points out that in some years the salary could increase as much as
20% pro anno, but most of the time it had a smaller increase. Nearly all the visited

65
organizations had a higher level of salary than the one determined by the
government.
A thing stumbled upon, while visiting Case B, was the staff turnover rate. The
respondent pointed out, that even though the government had a minimum wage,
and though the company had a higher wage plus some benefits like hot food in
canteen, the employees still had their focus on the basics: Money. More money
meant more to the family. In case B, they tried to retain people by bonuses,
birthday celebrations, special theme courses, but what really worked was the hard
cash. While looking towards the “bigger picture” in our European perspective, the
thoughts of nepotism didn’t even emerge in the minds of the employees. Again we
had a respondent at this question that came by when the microphone was turned
off, who wanted to come clean, but anonymous: Nepotism does exist, but not for
the normal minimum wage worker. It’s for the rich, it was told – In the public
sector money again seemed to be the primus motor. The respondent continued: if
you have the money and wanted another, higher ranking job, it was almost
common knowledge, that you simply have someone taking care of a promotion for
an amount of money. But again the respondent concluded: It’s not for the private
owned companies, but for the ones in the public sector.

Discussion of the seven climatic factors

After analyzing the seven climatic factors it is clear that trust is a central part of
establishing a good and productive organizational climate. The Vietnamese
employees in general do not fundamentally trust people that they are not blood
related to – not even their leaders. This means that they do not contribute with
their observations and suggestions to improve the workplace or the product
quality. However, by guaranteeing anonymity and full discretion, e.g. through a
whistle blower policy, the organization may be able to tap into this potential
resource and insure a higher level of morale. At the same time it makes the use of
scapegoats isolate, because a whistle-blower scheme will reveal the truth anyway.
Trust is a two side street. This means that the manager should be able to trust that
the employees are doing their jobs. But the employee should also be able to trust
the leader. The trust between the employee and the leader can be supported by a
fair reward of the employees. If the employees trust that they are paid the
minimum wage and for overtime and not simply used as cheap labour, this also
helps minimizing the conflicts. This type of trust also minimizes the resistance to
change because the employee trusts in the leader to do things to improve work
conditions.
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 But is it really so easy to summarize this? No, as many other factors have to be
taken into account and it is often a complex issue, which is not simple to solve.
Through the observations and interviews, it becomes clear that it really depends on
whether it is white colour or blue colour workers who primarily work in the
organization.
It seems like the white colour worker finds it easier to adopt Western values in
their organizational climate. Reasons for this may be found in their past, during
their education, as they are not unusually sent to the West to take a university
degree, as the Vietnamese education system is not perceived good enough. This
provides Western-educated Vietnamese employees with another view of work
values.
A really good example is a company that makes web shops for Western
companies. They have a female Vietnamese employee, who was given the task to
set up a small web shop. She did not make a check out phase, which made it
impossible for customers to pay. This is one of the simpler problems that
companies will encounter since the Vietnamese employee will not take
responsibility for the entire project, including the quality of the work she has
performed. While for people from the West it is obvious that the customer should
be able to pay, and therefore everything should be running before a project was
completed, it was the Vietnamese employees understanding to carry out only the
work she had been told.

Fun facts
As mentioned throughout this chapter, it is different to do business in Vietnam
compared to do business in Denmark. The cultural differences between Denmark
and Vietnam makes that even small things like meeting times and negotiations is
something one as a Danish leader should be aware is perceived differently in
Vietnam than normally accustomed to.
Through the field study interviews different facts were mentioned that a leader
should be aware of when doing business in Vietnam. These facts are summarized in
this section, as a form of “fun facts” to business leaders who want or already do
business with Vietnamese companies or running a business in Vietnam - and at the
same time answer the last question from the introduction: How should the
company set up in relation to Vietnamese culture?

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The 13th monthly salary

In Vietnam there is a tradition for the payment of a bonus called the “13th monthly
salary” around the Vietnamese New Year, which is a holiday celebrated on the
same day as the Chinese New Year.
Vietnamese cities are full of young people who have moved from the countryside
and into the city to study or to earn money for the family. For most young people,
the Vietnamese New Year is the only time during the year that they have enough
time off to travel home to their family and they use the 13th monthly salary on the
journey. While they are at home with the family something may happen that means
they will not return to work after the holiday. For example they may get married or
obtain a new job during the holiday. Therefore, a business owner should consider
himself lucky if all employees return after the holiday.

Days off
In addition to the Vietnamese New Year after which no guarantee exist that
employees will return, it can also be a challenge to get employees to come to work
Monday morning. This is due to that in the Vietnamese culture it is quite normal
that Sunday is used for weddings. Sunday is also the Vietnamese “go into town”
day, which means they go out to have a drink (or more). An opportunity to get
employees to show up at work Monday morning is to pay a part- bonus to the
employees who actually show up Monday morning (Case B, 2014).

Laying off the employees

The case companies experiences that it is not as easy as in Denmark to hire and fire
employees. Several issues must be taken into account. Not least the bureaucracy
around firing people. The way employees are protected is by the contract system.
In Vietnam there is concept called an indefinite contract. A definite contract can
only be signed for two periods. If the employee continues to work hereafter an
indefinite contract has to be signed (Case E, 2014). Hereafter the only thing the
leader can do, is to give warnings, and otherwise there has to occur a serious
violation of company policies. Case B (2014) has a section in their company
handbook that says that it is forbidden for the employees to fight each other. This
means that if employees then get in a fight, the employees involved are fired (Case
B, 2014). A definite contract may also turn indefinite if a new labour contract is not
signed within 30 days.

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Negotiations

Throughout the chapter it has been said that, there is much bureaucracy and
hierarchy in Vietnam, which also means a long distance from top to bottom. In
organizations like that it is the director and then all the others. This means that
there can only be negotiated with the Director, as it is he/she who decides
everything. In addition, patience in negotiations is a must (Case C, 2014).

As a foreigner
For a foreigner to come to Vietnam with the wish to start a business is not entirely
straightforward. This is because Vietnam, as previously mentioned, is very
bureaucratic. Upon arrival in Vietnam, one needs a residence permit, which can
easily take a month or two without the help of the Danish embassy. Additionally to
the residence permit, the setting up of a company means a large amount of
paperwork to just get a place to house the company. And all of these documents
runs in circles between official departments and makes everything very bureaucratic
and difficult. For instance a simple sales license must go through 17 units, all of
which must say yes before the license is granted (Case H, 2014).
Once the company is established, there are still things that foreigners have to be
aware of. For instance should the foreign employee want to visit a local business,
this visit must be announced with a formal letter 2 weeks prior. This is due to the
need to obtain permission from the authorities before the meeting is conducted
(Case H, 2014).

Passport
An ordinary passport consists of 32 pages and it is not possible to obtain a passport
with more pages or to add extra pages in a passport. This means that people with
much travel activity quickly get their passports filled with visas and admissions, and
have no other option than to order a new passport when the old passport is filled
(Danish Embassy, 2014). Much travel activity means therefore a frequent need for
a new passport. This is an important thing that a business owner should be aware
of as all the papers in the Vietnamese system are based on the passport. This means
that when getting a new passport, new papers are needed for everything. Not only
that this is complicated, it is also an expensive affair. The whole process from new
passport to new papers can easily cost around 15.000 DKK. (Case H, 2014).

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Conclusion
Concluding this chapter, we sum up with a short conclusion of the findings,
answering the questions mentioned in the introduction of this chapter. For the
reader’s convenience these are:

1. Where do the differences between Danish and Vietnamese leadership styles lie?
2. What impact does the Vietnamese culture have on the leaders opportunity to motivate ones
employees?
3. How does the Vietnamese culture impact the organizational climate?

To answer the two first, the difference between the Danish and the Vietnamese
leadership lies in that Vietnam is not suited, yet, for leadership generally speaking.
In most cases they seemed to be some years behind and still in the need of
management and a manager or director who tells what to do and what to think in
terms of work related activities. What really separates us from them would be the
lack of independent thinking and as a consequence the managers are harsher
compared to what we are used to in a Danish cultural context. As for the cultural
impact, it speaks the same language. The Vietnamese people do not raise questions
to why and when, but does what they are told. They do not get motivated by being
a part of the bigger picture and the managers are not “forced” to motivate like we
know and understand it, but instead they use control – the old style of
endorsement. And finally how does the Vietnamese culture impact on the
organizational climate? In short it seems correlated with the other findings in the
other two questions. The average Nguyen lives and brings the general doxa with
him to work. This meaning he have trust in his superiors as long as he is getting
paid. He will be productive on will not ask questions. He will mind his own
business and trying to be as efficient as all the others. Like we in Denmark had it
for half a century ago.

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CHAPTER 5

Epilogue: Learning and Reflection

Ole Stegmann Mikkelsen & Jan Stentoft

Abstract
This chapter concludes and summarizes on the process, the results, and the technical as well as
social learning elements for the students participating in this study trip. The chapter is based on the
students’ answers to an evaluating questionnaire survey. The chapter ends with extracting the
overall conclusions for the three themes of the field study trip.

Introduction
This chapter is a reflection on the course International Field Studies offered by the
Department of Entrepreneurship and Relationship Management at the University
of Southern Denmark in Kolding. In the course description, the objective of the
course is stated as:

”The aim of International Field Studies is to develop the students’ skills in applying specific
theories and approaches from a general ontological, epistemological, and methodological perspective
to a concrete business problem in a problem driven collaboration with other students. Furthermore,
the purpose is also for the students to obtain experience with the necessary technical, social, and
ethical competencies required in conducting international field work.”

In other words, the overall aim of the course is to develop the students’ skills in
conducting all phases of a smaller field study. This includes preparatory desk
research, organization of the field work, the completion of subsequent analyses and
writing up of reports.
In order to follow up on the stated purpose of the course the students were asked
to fill in a brief online questionnaire after returning home from Vietnam. The
questionnaire includes eight questions. Three were open ended questions allowing
the students to reflect and comment on their own experience and learning. The rest

71
of the questions were answered on a 7-point Likert scale (1 = low degree of
agreement and 7 = high degree). All enrolled students answered the eight
questions. The results of this survey are presented here as it is believed they can
offer learning to others outside the department in which the course is offered. For
example the results may be of interest to others in the process of planning or
executing similar courses. Furthermore, as the set-up of the course puts the
students in physical proximity to the core content of the theoretical studies it may
contribute to the continuous discussion on creating stimulating learning
environments, also in courses of longer duration.
The chapter is further on organized in short sections in which the students’
feedback on the most impressive experiences during the field trip is presented. The
chapter ends by presenting conclusions on the overall study trip and a brief
conclusion on the findings of the respective student chapters’.

Most Impressive Experiences

Firstly, the students were asked to reflect on and rank what they perceive as the
three most impressive experiences during the field study trip. The results are:

1. Experiencing the difference in the cultures between Vietnam and Denmark

2. The company visits. Visiting both Danish and Vietnamese companies gave a
much better understanding for business culture and culture in a broader
sense
3. The social aspect of being together and traveling with fellow students
The students were further asked to evaluate whether the course gave them a better
understanding of relevant theories to address and solve their research questions.
The results of this question are shown in Figure 5.1.

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Figure 5.1: Better Understanding of Relevant Theories and Methods

The average score is 5.54 on the seven point scale. With the average and the
distribution illustrated in figure 5.1, it can be concluded that the students finds that
they have indeed obtained a better understanding of relevant theories and methods
during the course.
Thus, the close presence with the subject matter in Vietnam has provided the
students with new understandings of theories and methods learned in Denmark,
and how to adjust these into another context. Hence, students should not only
learn the relevant theories, but must also understand the limitations of the theories
and how to apply the theories in practice.

Application of Relevant Theories and Methods

The students were also asked to evaluate to which degree they felt challenged in
using relevant theories and methods in order to address and solve their research
questions as formulated in their respective assignments. The result is illustrated in
Figure 5.2.

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Figure 5.2: Application of Relevant Theories and Methods

The average on 5.54 and the distribution in Figure 5.2 suggests that the students
feel they have been challenged in finding relevant theories to be used to address
and cover the research questions in their respective assignments (se chapter 2 to 4).
A general observation is that before the field study trip the group found themselves
to be relatively confident with their theory selection. However, their stay in
Vietnam with the interviews, observations and personal presence in the Vietnamese
culture provided them with a more nuanced view on relevant theories and methods
and how to apply them.

Improved Competencies through Group Work

The students were further asked to evaluate if participation in the course had
improved their competencies in conducting group work. Results to this question
are shown in Figure 5.3.

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Figure 5.3: Improved Social Competencies Through Group Work

The average score on this question is 5.38. From the answers it seems that most
students perceive that they have improved their social competencies with respect to
group work from a medium to a high degree. At the time of the evaluation the
students were back in Denmark and were still in the process of writing up their
assignments. Up to this point they have mainly been working with the theories and
methodologies for their assignment, and data analysis had just begun. Not all the
groups organized the work in the same way. Some groups worked very close
together in all aspects of the assignment, while others groups, on the other hand,
divided the work into sub-groups with specific responsibilities.

Better Understanding of Vietnamese Culture

The students were furthermore asked to reflect upon whether the field study trip
provided them with a better understanding of Vietnamese culture. The results are
shown in Figure 5.4.

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Figure 5.4: Better Understanding of the Vietnamese Culture

Given the distribution in Figure 5.4 (average 6.92) there is a significant indication
that the field study trip has provided the students with a much deeper insight into
the Vietnamese culture and society. The overall program was comprehensive and
packed with many company visits. The visited companies included cultural aspects
of doing business in Vietnamese in their presentations and discussions. This
provided the students with valuable first and second hand insights from people
actually living in the culture. Together with actually being in the cities of Ho Chi
Min City and Hanoi, this has provided the students much cultural learning and
understanding.

The Most Important Points of Cultural Learning

Finally, the students were asked what they perceived as the most giving cultural
learning from the field study trip. The question was open ended. The elements
most often mentioned are summarized in below bullets:

 The speed of change in Vietnam

 Communication: “yes” is not always a “yes”, it depends on who says “yes”
 Things are not black or white in Vietnam, but different shades of grey
 Culture is not just culture. Company cultures are very different
 The strong day to day focus of the Vietnamese workers

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Conclusion
Globalization is no more an option but a given. And with products sourced on one
continent, manufactured on a second and sold on a third the global economy
indeed becomes more complex.
The students have chosen the themes due to their practical relevance for the
present time. Vietnam has started to open up, and Western companies are
beginning to discuss the potential of Vietnam. Not only as a destination for low
cost country (LCC) sourcing, but more and more also in terms of location for
production and in terms of an emerging market with its relatively high population
and emerging middleclass. Therefore, offshoring and localization strategies were
considered as central themes to investigate during the field study trip. Due to the
increasing activity with Vietnamese companies and society, Vietnamese culture and
business culture as well as leadership across cultures were likewise considered
important to study.
Conclusions on the questions of each of the four themes are briefly provided in
the following.

Vietnamese Culture

Paying attention to cultural aspects when doing business in foreign countries is very
important. This is certainly also true when doing business in Vietnam. Companies
must pay attention and adapt to local customs, habits and traditions. Danish
companies face a number of challenges when doing business in Vietnam. In the
chapter on Vietnamese Culture the following questions guided the research:

1. How is the Vietnamese culture reflected in the theories of Hofstede and Fletcher and
Fang?
2. How should the Western companies approach and adjust to the Vietnamese culture?

Vietnamese behavior is a mix of old Vietnamese traditions and the economic and
political changes happening in the last decades. Vietnam is changing in a
challenging pace and is opening up towards Western countries. Networks are very
important. Vietnamese workers may seem very shortsighted, as their main priority
is to have food on the table, why they may change jobs often for a small raise in
salary.
Supervisors are requested to oversee the workers, who are doing what they are told
and often not much more. Also it is important to understand that yes is not always
a yes – it depends! When doing business in Vietnam companies should also pay

77
attention to the differences in cultural values between white collar and blue collar
workers. Blue collar workers are more founded in traditional Vietnamese cultural
values, while white collars are beginning to adapt some Western values which are
perceived as modern and popular. Also, due to the long distances from north to
south and not least the long influence from the West in the southern part of
Vietnam differences within the Vietnamese culture appears. When visiting both Ho
Chi Min city and Hanoi this was indeed experienced. In other words “no size fits
all” in Vietnam!

When relocating to Vietnam

The aim of this chapter has been to investigate and exemplify the main challenges
of the two globalization strategies outsourcing and offshoring to Vietnam. The aim
is to answer the following questions:

4. What are the drivers for relocating to Vietnam?

5. What are the main challenges when doing business in Vietnam?
6. How can Vietnam be an attractive market to sell Danish products/services?

Based on a review of literature and discussion with the visited companies it was
found that the first and foremost important driver of outsourcing and offshoring is
low cost in terms of wage. Also compared to many other Asian countries, such as
China, Vietnam has low wages. However, other drivers for outsourcing and
offshoring exist. For example, proximity to an emerging market found in the
emerging middle class.
However, both obstacles and barriers when outsourcing and offshoring to
Vietnam exist, which should be taken into account before a decision. Despite the
speed in changes, Vietnam is still a country based mostly upon high labour work
and lesser on technology. Supervisors need to be very observant and directive
towards the workers, who are not observant to quality in the way Western
companies are used to. The skills level is not high. Language is also a challenge as
English is not widely used. Further one must understand the hierarchy, and that
only high-ranking employees are allowed to make binding agreements. Verbal
agreements are not always seen as binding. Obviously companies must take into
account the culture when doing business in Vietnam, but also be observant on that
Vietnam is not one culture but many. Large differences in culture exist for example
between north and south in Vietnam. Also the IPR issues must be taken into

78
account. Lastly should be mentioned the vast public bureaucratic and not least the
degree of corruption, which companies has to deal with.

Leadership Across Cultures

The purpose of this chapter is to bring the cultural dimension to light through the
study of Vietnamese culture’s influence on leadership in Vietnam. The aim is to
answer the following questions:

4. Where do the differences between Danish and Vietnamese leadership styles lie?
5. What impact does the Vietnamese culture have on the leader’s opportunity to motivate
ones employees?
6. How does the Vietnamese culture impact the firm’s internal organizational climate?

The chapter differentiates between leadership and management. In the chapter it

was found that Vietnamese employees are to be managed and not lead. The
Vietnamese worker do not raise questions to why and when, but does what they are
told, and management are to control and not to motivate in the way Danish
companies and leaders are used to. In Denmark decisions are often decentralized
while in Vietnam they are centralized. Rewards in a Vietnamese context should be
based on the group and not the individual. Likewise should procedures be much
formalized? Also it was found that the average Vietnamese worker will be loyal as
long as he/she is payed a perceived fair wage. However, managers should be
surprised if the workers shift job if better payment is obtained, as the Vietnamese
worker is focused on getting the fundamental needs fulfilled. However, times are
changing, and especially white collar employees adapt more and more towards
Western company values and management style. Hence, companies conducting
business in Vietnam must foresee to adapt a dual governance structure – i.e. there
is no such thing as a “one size fits all” in Vietnam.

79
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About the Editors

Jan Stentoft, Ph.D., is a Professor in Supply Chain Management (SCM) at the

Department of Entrepreneurship and Relationship Management, University of
Southern Denmark, Kolding. His research and teaching areas are within SCM,
Supply Chain Innovation, Enterprise Resource Planning, and Corporate Social
Responsibility. He has practical industry experience from positions as Director
(Program Management Office) at LEGO Systems A/S, Axapta ERP Project
Manager at Gumlink A/S, and as management consultant in a wide number of
industrial enterprises from his own consulting practice.

Ole Stegmann Mikkelsen, Ph.D., is an Assistant Professor in Supply Chain

Management (SCM) at the Department of Entrepreneurship and Relationship
Management, University of Southern Denmark, Kolding. His research and teaching
areas are within SCM, Global Sourcing, Strategic Sourcing and Supply Chain
Innovation. He has published both national and international and has practical
industrial experience from positions as purchaser/planner from Milliken Denmark
A/S, and strategic Purchasing Consultant and Director (Group Procurement
Development and Support/finance) at Danfoss A/S.

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