Vietnam Market Entry Guide 2024: Strategic Insights for Japanese Businesses Expanding Overseas

Vietnam is rapidly gaining attention as a leading alternative to China for Japanese companies seeking overseas expansion — often referred to as the “Post-China” destination.

Many business leaders are now asking:

• What are the strategic advantages of expanding into Vietnam?

• How can Japanese companies avoid common pitfalls in the Vietnamese market?

In this article, we’ll explore the current state and growing appeal of Vietnam’s business environment. Backed by practical insights, this guide outlines the key factors and foundational knowledge Japanese businesses should understand when considering entry into the Vietnamese market.

Whether you’re preparing for international growth or assessing your next investment destination, this guide is essential reading for 2024 and beyond.

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Essential Market Data for Doing Business in Vietnam

Let’s begin with a quick overview of Vietnam’s key economic and demographic information to better understand the local business landscape.

Key Facts About Vietnam's Market

Reference: Ministry of Foreign Affairs of Japan

Vietnam, officially known as the Socialist Republic of Vietnam, has its capital in Hanoi, located in the northern part of the country. Meanwhile, the most commercially developed city, Ho Chi Minh City, lies in the south. The nation is geographically long and narrow, stretching from north to south.

Interestingly, more than half of the population resides in rural areas rather than in major urban centers. Historically, Vietnam was recognized as an agricultural powerhouse, thanks to its abundant water resources and warm climate.

However, in recent years, the share of agriculture, forestry, and fisheries in the country’s GDP has been steadily declining. In its place, sectors such as services, construction, and mining have been gaining prominence, reflecting the country’s ongoing economic diversification and modernization.

Vietnam’s Economic Outlook and Key Advantages for Market Entry

Vietnam presents a highly attractive market for foreign businesses, thanks to its ongoing economic development and favorable population dynamics. In this section, we’ll explore the latest economic conditions and the major advantages Japanese companies can expect when expanding into Vietnam.

Consistent Economic Growth with Promising Market Potential

Vietnam ranks as the third most populous country in ASEAN, with a youthful demographic — an average age of just 31. In 2022, the population stood at approximately 99.5 million, and by September 2023, it had already surpassed the 100 million mark. As wages gradually rise, the country’s middle and upper classes are expected to expand, further enhancing Vietnam’s appeal as a consumption-driven market.

The country’s GDP growth rate has consistently exceeded 7%, signaling stable and robust economic expansion. Much of this progress can be attributed to the Doi Moi policy introduced in the 1980s, which marked Vietnam’s shift to a liberalized economy. The policy encouraged trade liberalization and deregulation, fostering a more productive business environment.

Strategic Location in Southeast Asia

Vietnam’s geographic location offers a significant advantage. Situated in the heart of Southeast Asia, it provides easy maritime access to ASEAN countries and Indochina, and convenient overland access to China. Amid rising geopolitical and operational risks associated with doing business in China, Vietnam has emerged as a compelling “China Plus One” alternative.

Numerous businesses with existing operations in China are now considering Vietnam for diversification, further reinforcing its status as a regional manufacturing and logistics hub.

Abundant and High-Quality Human Resources

Vietnam is widely recognized for its cost-effective yet high-quality labor force. The population is known for its strong work ethic, rooted in Confucian values, and boasts a high literacy rate. In addition, Vietnam has a high number of female entrepreneurs, and the female labor participation rate is notably strong.

Due to its vibrant textile industry, manual dexterity is common among both men and women, and the workforce possesses a solid foundation of technical skills. The younger generation also demonstrates high digital literacy and a strong sense of ambition — an ideal match for tech and development roles.

Strong Affinity Toward Japan

Japan and Vietnam maintain a stable and cooperative political and economic relationship, which facilitates Japanese business expansion. Former Prime Minister Phan Van Khai was a known Japanophile, and in 2016, Japanese was introduced as the first foreign language in elementary schools across Vietnam.

Japanese products and brands enjoy a high level of trust and demand. For instance, Honda motorcycles have been beloved in Vietnam for over 50 years. Convenience store giant Lawson has even established a local training center in Vietnam to provide education and pre-departure training for students aspiring to study in Japan.

This deep familiarity and positive sentiment toward Japanese culture and products make Vietnam a receptive market for Japanese businesses looking to grow in Southeast Asia.

Key Challenges to Consider Before Expanding Your Business into Vietnam

While Vietnam presents many advantages for business expansion, it’s essential to be aware of a few key challenges that companies often encounter. Two of the most notable issues are:

• Underdeveloped transportation infrastructure

• Difficulty securing and retaining skilled talent

Let’s explore these in more detail.

1. Underdeveloped Transportation Infrastructure

Vietnam has a rich agricultural history, but its rapid economic growth has outpaced infrastructure development — particularly in the transportation sector. The country’s primary mode of transportation is motorcycles, which can lead to frequent traffic congestion and a higher risk of accidents in urban centers.

In rural areas, where more than half the population resides, the lack of well-developed transportation systems has created a visible economic divide between rural and urban regions. These logistical inefficiencies can impact supply chains, distribution, and operational scalability for foreign businesses entering the Vietnamese market.

2. Talent Acquisition and Workforce Retention

As Vietnam has gained global attention as a promising business hub, competition for skilled labor — especially in IT and specialized technical fields — has intensified. As a result, wages for highly qualified candidates have been rising steadily in recent years.

Even after successful recruitment, retaining top talent is a significant challenge. Career mobility and salary expectations among the younger generation are high. According to recent statistics, Vietnam’s average annual turnover rate is around 20%, and approximately 74% of workers in their 20s have already switched jobs at least once.

3. Cultural and Managerial Gaps

Another key consideration is the difference in work culture and employee expectations. Although Vietnam is widely considered a Japan-friendly country, it’s important not to assume that business norms align with those in Japan or other countries.

Understanding local customs, communication styles, and workplace values is crucial to building trust, fostering collaboration, and reducing employee attrition. Failing to adapt management strategies to align with local cultural values can result in friction, miscommunication, and workforce instability.

These challenges shouldn’t discourage entry into the Vietnamese market—but they should serve as a reminder that success depends on proactive preparation, localization, and a strong understanding of the local environment.

Common Reasons Why Japanese Companies Fail in Vietnam

When Japanese companies fail to succeed in Vietnam, certain patterns often emerge. Below are the most common reasons:

• Lack of respect for local culture

• Overly controlling (micromanagement) leadership

• Failure to offer competitive compensation

These issues align closely with the previously discussed challenges and are important to understand when evaluating market entry risks.

1. Lack of Respect for Local Culture

Enforcing Japanese culture or language without sensitivity to local norms can lead to distrust and dissatisfaction among local employees. Companies that fail to show respect for Vietnamese culture often miss out on valuable talent and business opportunities.

In Vietnam, communication — both internal and personal — is highly valued. To build successful business relationships, it is crucial to demonstrate a willingness to understand and adapt to local customs and mindsets.

This cultural consideration should also extend beyond internal management to how services and products are designed and marketed for the local audience.

2. Micromanagement

Micromanagement refers to excessive oversight of employees — demanding detailed reports or constantly monitoring their activities. While this style was historically common in Japanese companies, it often clashes with the cultural preferences in Vietnam.

Vietnamese workers tend to value freedom and place high importance on personal time and family life. Business practices considered normal in Japan can be perceived as overly controlling or stifling in Vietnam, leading to high employee turnover.

Effective management in Vietnam requires open communication, listening to feedback, and finding mutual compromises rather than imposing rigid Japanese-style systems.

3. Lack of Competitive Compensation

Japanese companies are sometimes perceived as offering compensation structures that don’t align with local expectations or market standards. One common criticism is the slow pace of salary increases and promotions.

In Vietnam, talented individuals are often promoted to leadership roles based on ability—not age or tenure. In contrast, the seniority-based promotion system typical in Japan can lead to frustration among younger employees.

With Vietnam’s central bank interest rates at around 5%, cost of living pressures are also rising. If wages don’t keep pace, companies risk losing employees to competitors offering better terms.

Young, ambitious Vietnamese professionals are in high demand, and without proper incentives, they are likely to be recruited by other firms offering more competitive packages.

Frequently Asked Questions (FAQ)

To wrap up, here are some common questions businesses often ask when considering expansion into Vietnam. Related articles are also included for further insight.

Planning to Expand into Vietnam? The Digital X Is Your Trusted Partner

Successfully entering the Vietnamese market requires more than just a solid business model — it demands a deep understanding of local culture, consumer behavior, and the country’s rapidly evolving economic landscape.

Comprehensive market research before entry can make the difference between a successful launch and a costly setback.

At The Digital X, we specialize in digital marketing strategy and international expansion. Our team provides end-to-end support, including localization, language adaptation, and strategic execution — tailored to the Vietnamese market.

If you’re considering expanding your business into Vietnam, we’re here to help. Contact us today to explore how we can support your success.