Developing groups on a global scale

08:00 | 07/05/2021
Private conglomerates have been making a splash in recent times, with big names like Vingroup, Masan Group, and Nova Group starting to turn heads outside the country. Van Dong and Minh Tam from Viet Dragon Securities look into the country’s current situation and point out the pros and cons facing Vietnamese groups on the way to reaching regional and global status.
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Developing groups on a global scale, illustration photo

The coronavirus pandemic left huge devastating impacts on the global economy in 2020, yet the growth prospects for 2021 remain uncertain, including that for top global economies. Production, investment, and trade activities on a global scale are forecast to continue in the doldrums amid current complication, rising tension between key economies, geopolitical risks, and natural disasters.

Amid these mounting hardships of the global economy, with early and drastic responses from the government, Vietnam and a few other nations were deemed as fairly successful in containing the pandemic. The country has therefore emerged as a safe and attractive destination to international investors who are targeting new emerging markets. Foreign equity investors from Singapore, Thailand, South Korea, and Japan are keenly on the lookout for promising mergers and acquisitions (M&A) in the Vietnamese market.

Until now, Vietnam has been succeeding in maintaining growth momentum which is forecast to linger in the medium and long term by virtue of the government’s rational management. When many other countries are struggling with the health crisis, Vietnam is showcasing as a nation with stable political standing, constantly improved business environment, well-controlled inflation, increasingly number of major free trade agreements, and growing appeal in the eyes of international investors.

In addition, the country is a stage of golden demographics, with people’s improved standards of living leading to burgeoning demands for investment and consumption.

In this situation, local groups can take some actions to grasp development opportunities and master their fates. Corporate governance always presents new challenges forcing business executives to improve management expertise and change their mindsets about markets, as well as redesign business models for future success.

With core competencies and competitive advantages accumulated after years of operating in the market and thorough understanding of it, scores of local players took initiative in venturing into new fields or acquiring businesses with similar values to create a complete ecosystem with diversified products, reputable brands, and unified and preeminent services in favour of customers.

Some notable cases to date include Masan Group, which has grown into a leading retail and consumer goods conglomerate in Vietnam in the wake of a raft of typical M&A deals in the market; and REE Corporation redefining itself under a group model with four separate segments of operations.

In industrial production, Hoa Phat Group and Truong Hai Auto Corporation have posted impressive business results, while Viettel and FPT are among the top players in ICT and in high-tech agriculture The Pan Group and TTC Group are leaving their mark.

More than that, aside with building sector-based value chains, companies aspire to grow into multi-field groups with the capacity to share their customer resources like in the cases of Nova Group, SonKim Group, and DOJI Group.

During the process of realising their ambitions, Vietnamese companies are resorting to diverse methods such as hiring outside consulting units to building up plans and transfers, or by acquiring or merging with a well-established corporate entity with a firm market base, business know-how, and operating systems.

The reality shows that a slew of local players are pursuing and materialising the strategy of building multi-field, multi-sector groups. Besides successful businesses that were taking proper steps towards building a complete ecosystem, a few groups have caught failures as their investment strategies lack concentration and preparation of necessary resources for developing under the group model.

Multiple challenges exist in the process companies rising into top of the industry economic groups. In a legal aspect, a group is not a type of business – it is an assemblage of companies in which the parent company injects capital into subsidiaries and member units to take control in strategy, branding, technology, market, or profit.

In a governance aspect, with quick augmentation in capital and personnel, the parent company is mandated to arrange operation and take control of member companies to ensure smooth operation of the whole system. Abiding to diverse operating principles represents mighty challenges to business executives in designing business spearheads and ensures interest balance among member companies in the group.

As for governance reporting mechanisms, with augmentation in scale and human resources, business groups need to build up a professional and inclusive governance system on a digital platform.

Along with the vision that Vietnam seeks to grow into a powerful and prosperous nation by 2045, the government is advocating the development of powerful local private economic groups to reach a global scale. For their part, local groups must craft well-conceived development strategies and cultivate their inner strengths to bridge over challenges in the new decade, avail themselves of valued opportunities in the market, and grow increasingly mighty.

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