[Cafebiz] – With terrible devastation, Covid-19 has caused numerous Vietnamese businesses to not die and have ‘serious injuries’, businesses with 5,000 to 7,000 workers also have to close. According to Mr. Nguyen Thanh Tan – BrainMark’s Chief Strategy Officer, only businesses with a sustainable business model – with a domestic market – with a stable cash flow, that business can survive and develop.
The economy of Vietnam and the world is going through a very special period, when the Covid-19 pandemic creates unpredictable effects. No need for specific statistics, we just go around of the streets, we will see clearly how difficult businesses are, reflected through the beautiful premises previously reserved by brands, fallow completely now.
BrainMark is a member of BrainGroup, which is a business specializing in consulting – training businesses in the field of Management System Development, BSC-KPI, Human Resources, Sales, Marketing, Brand, etc. Typical customers of BrainMark such as Phu My Hung, Dong Tam, Long Thanh, Lam Son, Quang Ngai Sugar-Cane, Unilever, FPT, VNG, Acecook, Ajnomoto, Duy Tan Plastic, Phat Dat, Hau Giang Pharmaceutical, etc.
As a person who had over 20 years working in the business consulting industry, Mr. Nguyen Thanh Tan – Chief Strategy Officer of BrainMark clearly feels those bad movements of the Vietnamese economy. In addition to working at BrainMark, Mr. Tan was an independent member of the Board of Directors of many companies, including Phat Phat Real Estate Company.
According to this consultant, from the beginning of the year until now, the number of Vietnamese business “go out” a lot – especially in the export field. Accordingly, it is possible that groups or large businesses will not be wiped completely out like startups or SMEs, but they are also damage quite a lot. Only a fast-turning business just can survive while Covid-19 are happening, that business wants to grow, they must have a sustainable business model and a good cash flow to meet.
Can you share a little bit about coping strategies of Vietnamese businesses to overcome the Covid-19 pandemic, after the first outbreak and in the second?
Mr. Nguyen Thanh Tan: The first peak wave of the epidemic period came very suddenly and indeed Vietnamese businesses do not know how to respond, because it hits companies that have products served for markets that affected by the pandemic.
For example, during that time, the companies which I consulted had markets in Europe, America, and India; Cash flow was almost stopped instantaneous. That means the business sold out without earning money, the cash flow was zero and forced to close immediately, thousands of workers had to stop working at the factory within the month. I haven’t even mentioned the first affected industries such as tourism, aviation.
There are manufacturing companies with large numbers of workers, from 5,000 to 7,000 people, but still have to close because there is no cash flow. With Covid-19, they chose export markets, it took time to change to a market that was not influenced by Covid-19. Especially suppliers that specialize in supplying large corporations – one or lots of customers, but there is only 1 market.
There was a certain furniture company that ran in just two markets, and these two markets were stopped, so they did not have the resources to take care of 5,000 to 7,000 workers, and force to close.
However, if the business turns faster, and they have new products to the domestic market or another market, they can maintain a part of the production scale. For example, there are three factories, two of them were closed, they still have one.
How products of that business are, whether they are flexible to meet some other markets or not , which is an important lesson after the first climax of Covid-19 in Vietnam.
The second lesson after the end of Covid-19 that most businesses have learned that if a business has an R&D department, which is a strong market and product research department, they can handle. That means they produce a part by meeting the domestic market.
In addition, there are some companies that having a sustainable business model, having a domestic market, and the cash flow can be saved, that company can survive and grow. Companies with too much loan or company cash flow depend on the market is too much; then when the market ‘ends’, the company also ends.
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Looking at the number and structure of export businesses in Vietnam, businesses that has enough the same conditions as you said do not seem to be many. For example, to businesses only process each shoe sole, how to sell it to the domestic market?
Mr. Nguyen Thanh Tan: Yes, quite many export business had closed their factories and have not had the chance to come back.
Companies that only produce 1 part for a product must be flexible and invest in a certain line to sell products to domestic brands. However, capturing the domestic market is not easy and it can’t be done in a short time.
There is a very large shoe export company that specialized in outsourcing to large foreign companies for many years. However, the owners’ biggest dream is to have a domestic shoes brand. Three years ago, this boss tried once, but failed. In 2019, he was determined to do it again, when that project was done, Covid-19 happened, and that project failed again.
That means, if we back to the domestic market, but the market is too new, customers have not recognized their brand yet, and Covid-19 happened, stores cannot maintain it, so they must close. Obviously, domestic branding is not easy, even without Covid-19 is also a big challenge!
As a supplier long time ago, some products were completed and placed on the container for exporting to foreign countries. Domestic business must be more detailed, must understand consumers’ insight, branding, distribution, store system, sales management.
Although domestic business is harder than outsourcing for export, it makes business model more sustainable. The domestic market is also quite potential with more than 100 million people, large purchasing power.
Through this Covid-19 period, business owners will learn lessons that is how to balance the market, not to put all eggs in a basket. If businesses’ ability is good, they should take a part of resources to invest in the domestic market in some aspects. Because at present, only the domestic market can help Vietnamese business survive in Covid-19.
Vậy theo anh, một mô hình kinh doanh như thế nào sẽ đứng vững cả trong lúc trời quang mây tạnh lẫn thời bão giông như Covid-19?
In your opinion, how will a business model sustain both in good condition and in trouble times like Covid-19?
The first is to clarify the vision of the business in a good condition. Covid was something which happens very suddenly and unpredictablely, it was a global crisis. If we have made clear who my customers are, how to invest, which ones are the main ones, side ones, how are the side ones help the main ones grow; Any business that has such a vision, they’re being quite good now.
Because if the main business breaks, there is still a side one, it is still possible to maintain the business up to 30% – 40%. If we are the owner of a business with 300-400 staffs, with sales of about 300 to 400 billion, why don’t think that we should take a portion of resources to create a complete product for the domestic market location or open chain stores or product some chain stores in Vietnam!
This method makes our model more balanced, if the foreign market has problems, the domestic market will support and vice versa.
Mr. Nguyen Thanh Tan is receiving the delegation of Minh Hieu Hung Yen Company.
After Covid-19, the management mindset of businesses is also different, we don’t have to work for showing up, or chasing the profits on regardless, there must be many business plans for businesses to develop sustainably in case of the fluctuations of the domestic and foreign market?
Mr. Nguyen Thanh Tan: Businesses must create real values exactly, thinking clearly, which one brings short-term and long-term profits. Flexibility has to start getting higher. Leadership must be flexible, improvised thinking – faster transition. The pandemic happened very quickly, after Da Nang had first patient case, just about 7 days later, many things started to stop that’s why we have to make shift quickly!
The second is flexibility in human resource conversion policies. It isn’t possible that we can let the staff quit the job immediately. It hasn’t mention business ethics yet, the way we treat staffs will affect the income and lives of their families. From the beginning we had to think about it and if something happened, we had to deal with it – how to change our staff. That is also an important lesson which we have to learn.
Many people believed that startups and SMEs have more advantages than big corporations during the pandemic because they have lots of businesses or better flexible ability. However, there are also opponents that large groups are the last survivors because they have great resources after years of accumulation. How about your opinion?
Mr. Nguyen Thanh Tan: In general, there are two kinds of managements in Vietnam. The first is the conservative kind – typically people who have been too successful in an industry in the past, their conservatism is very high. For those who are weak and too conservative in business, focus on only one industry, if that industry has problems, they will in trouble very hard.
Smaller business owners who invest in multiple industries have high flexibility and fast conversion; If this industry stops, they will focus on developing the remaining industries. That is also an advantage!
However, that conclusion just true at a time in high market volatility. In peacetime, if we invest in multiple industries, we may have difficulties because of resource scattering. It means our vision is out of goals, we are doing this well, and we see a new opportunity coming and ignoring the old – not completely letting go but reducing investment. After all, we don’t have any strong industries, all industries are weak. Any structure that gets this one will lose the other at a certain time.
Can you share more specifically the effects of Covid-19 on big groups?
Mr. Nguyen Thanh Tan: Covid-19 which can bring a good opportunity for a small group of companies, but is a huge risky problem for groups.
Groups in Vietnam are affected heavily. I have just got one news that is the real estate investment group, consumer goods and tourism, the other seafoods; When Covid arrived, the seafood products and the tourism stopped, forcing the group to minimized and they let a lot of staffs quit and cut the travel industry that means ‘hibernation’ to minimize cash flow, then cut consumer goods, even though their sales were nearly 700 billion VND.
At present, that group has only the real estate can survive because the real estate is sold to the domestic market.
Thus, even before Covid-19, business must have a vision, assuming that when one market is completely broken, the other market can still exist.
Thank you!
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