Private sector small businesses in retail and manufacturing are not demonstrating an ability to effectively compete in the international marketplace, says Dinh Thi My Loan, chair of the Vietnam Retailers Association.

The signs of the problem have been visible for some time, said Ms Loan at a recent roundtable in Hanoi.

Virtually all the growth in retail sales and jobs created in the economy over the last few years were in the foreign sector, which is a sure sign that the domestic sector is not nurturing its ability to contend.

Role of management in tackling competitiveness

Management is the art and science of getting things done, said Ms Loan, noting that if there are shortfalls in the ability to compete, then surely the quality of management is the root cause of the problem.

Business leaders are always pointing the finger at someone else saying they are hampered by such things as government-created constraints, the tax code, high import tariffs, non-tariff trade barriers of other countries, and complicated laws and regulations, among a host of other excuses.

But they never accept any blame or responsibility for the problem nor exhibit the kind of enterprising ‘can-do’ management attitude that is fundamentally necessary for success.

As a result, businesses have invested less in shared resources of the country such as pools of skilled labour, supplier networks, an educated populace, and the physical and technical infrastructure on which the country’s competitiveness ultimately depends, said Ms Loan.

Lack of innovation that can cope with competition

Almost all small and large business managers in the country across all sectors and segments are overly focused on short term sales, said Ms Loan.  If they are innovating— it is only with respect to efficiency and cost reduction.

Cost saving innovations in and of themselves will never lead to the country becoming competitive in the national or international marketplaces, Ms Loan underscored.

The domestic private sector needs game changing value added innovation of the kind that transforms the economy and leads to productivity and economic growth across a broad spectrum of industries, resulting in higher incomes for Vietnamese workers.

Ecommerce is a prime example of the innovation needed. It plays a pivotal role in economic growth and yet Vietnamese business leaders, of large and small companies alike, have outright flatly refused or failed to drive innovation through ecommerce.

What is required, said Ms Loan, is for chief executives and small business owners to embrace an ethos of imagination, exploration, experiment and discovery in their workplaces of the type that can lead to high corporate dynamism and international competitiveness.

Simply creating start-up incubators and improving worker training as many suggest would not result in greater competitiveness, said Ms Loan, nothing that these are symptoms of the problem rather than the root cause of the lack of competitiveness.

If the overall strategy of business executives and small business owners is short-sighted and ill conceived, more talent won’t help— as it will end up being directed in the wrong direction, not redressing competitiveness.

Missing in action: the customer

Business executives universally fail to understand that the fundamental shift in the Vietnam economy over the past few years is the change in the balance of power in the marketplace from the seller to customer.

This shift flows directly from globalization and free trade deals such as the ASEAN Economic Community.

If Vietnamese business leaders don’t change their ways and adapt to the new consumer oriented marketplace, their current customers will most surely vanish and their businesses die.

In the past, being just a tad bit cheaper in the selling price may have been enough to get by in Vietnam, but those days are gone forever. Now to survive, retailers and manufacturers must excel with their customers on a national as well as international basis in many cases.

To become competitive, business leaders and small business owners must first go back to the basics and start with understanding what a business is and its purpose. There is only one business purpose— and that is to create a customer.

Only by focusing creatively on delivering a product with high added value to customers will Vietnamese business leaders and small business owners learn to become competitive with their foreign counterparts, Ms Loan concludes.

VOV