There are many ways for a company to expand its business operations in a new market, particularly an emerging market like Vietnam. One of these is called FDI, or foreign direct investment, which means a company invests overseas by either setting up a subsidiary, acquiring shares of a foreign company, or through a merger or joint venture.
FDI gives giant players an opportunity to expand their businesses beyond their low-growth or stable home market to new foreign markets. Many foreign markets are emerging markets with high growth potential, or are experiencing structural change in their cultures and economies. In order to become a successful FDI, foreign companies must identify secular trends in their target markets, and whether their product lines can match what the new market is demanding.
Let’s look at one example of how a giant European food retailer successfully entered an emerging Southeast Asian market by capturing an emerging trend in that country. Nearly 15 years ago, the Vietnam retail market began changing from the traditional street market-based model to the more modern supermarket model.
Metro Cash & Carry quickly saw and exploited that trend. Metro Cash & Carry, a segment of Metro AG from Germany, is known as the worldwide leader in self-service wholesale. It’s business strategy is to focus mainly on professional customers such as hotels, restaurants and small and mid-size retailers… rather than individual consumers.
Metro entered Vietnam in 2002 and this proved to be good timing. At that time, like now, Vietnam was a country with a young population, growing purchasing power in urban areas and a retail market growing at a 16% per year pace.
