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American Rice, Inc. in Vietnam Case Study

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International Business
Case Study Report

American Rice, Inc. in Vietnam

Nov 30, 2015

1. Is Vietnam a suitable expansion location for American Rice?
No, Vietnam is not a suitable expansion location for American Rice and the reasons are as follow. * Long history of communist
Vietnam has long history of communist, strongly influenced by the Soviet Union. In other words, possibilities of the government intervene the agricultural industry might exist, when that sector plays a leading role in the Vietnam economy. Even though there was an effort to renovate Vietnam’s economy; "Doi Moi", a country with turbulent history is not used to the competitive market system enough.

* Political instability and uncertainties in the legal system
This is one of the most important reasons why Vietnam is not a suitable expansion location for American Rice. As stated in the case, the new laws which partially aimed to reassure foreign investors were not supported with appropriate related regulations and enforcement structure. It was perceived to be weak and confusing. It would not be a good option to operate business where the security is uncertain.

* Low price of Vietnam rice
Determinants of rice quality were type, color, odor, cooking qualities, and the proportion of broken grains to whole grains. Another factor which influences the price of rice is the country of origin. Rice from the United States traded at a premium while the rest, including Vietnamese rice was discounted. The way customers perceive Vietnam grown product and low quality product due to prevalence of pests, diseases and poorly designed equipment might hurt the image of US rice.

* Others
- Numerous cultural differences exist between the Vietnamese and Western investors
- Frequent delays in filling contracts
- High shipping costs

However, there are some positive aspects in Vietnam.

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