In the Industry 4.0 era of Vietnam, digital transformation in foreign direct investment (FDI) is not just about business growth but also about building a sustainable, competitive economy with a forward-looking vision. This transformation aims to enhance operational efficiency and focuses on fostering innovation and adapting to global trends.
Table of Contents
Operational Characteristics of FDI Enterprises in Vietnam
Advantages
- Global expertise: FDI enterprises often possess deep insights into global technology trends and the most effective ways to apply them. This knowledge enables them to adopt and implement cutting-edge solutions swiftly, giving them a competitive edge in Vietnam’s growing market.
- Extensive networks: FDI companies typically maintain a broad network of partners and suppliers, facilitating collaboration and technology transfer. This extensive ecosystem allows smoother integration of innovations. Furthermore, partnerships that can drive business growth and the broader technological landscape in Vietnam.
Challenges
- Cultural differences: A significant challenge for FDI companies in Vietnam is navigating cultural, linguistic, and legal differences between the host and home markets. These gaps can slow the digital transformation, especially when aligning local teams with global strategies.
- Infrastructure & technology limitations: Despite significant improvements in Vietnam’s IT infrastructure, there are still areas, particularly in rural regions, where connectivity and technology infrastructure lag behind. These limitations can pose challenges for industries that rely on advanced digital solutions but operate in less developed areas. According to Vietnam News, Nearly 85% of FDI enterprises still use outdated technology. Furthermore, a 2021 survey revealed that 42% of FDI companies found Vietnam’s infrastructure and public services below par compared to regional counterparts like China, Thailand, Singapore, Indonesia, and Malaysia.
- Human resource gaps: Finding and developing a workforce with the right digital skills remains a major challenge for enterprises across Vietnam, not just for FDI companies. While the country’s talent pool is expanding, the demand for highly skilled professionals in automation, AI, and data analysis often exceeds supply. This gap can hinder FDI companies’ ability to capitalize on digital transformation opportunities fully.
Digital transformation strategy and technology application of FDI enterprises in Vietnam
AI
FDI companies in Vietnam are capitalizing on AI to boost operational efficiency and foster innovation across diverse industries. For example, AI systems enhance quality control through automated defect detection and improve supply chain management by anticipating disruptions.
Vietnam’s digital economy is forecast to expand elevenfold to $220 billion by 2030, driven partly by AI advancements (Vietnam Net). Moreover, with an AI readiness score of 54.48, Vietnam ranks 9th in East Asia. This is outpacing the regional average, according to the 2023 Oxford Insights assessment. This positions FDI companies to gain a significant advantage by applying AI technologies in Vietnam.
Big Data
Big Data plays a crucial role for FDI enterprises in Vietnam by enabling them to process and analyze vast amounts of information. Companies leverage data analytics to optimize supply chains, understand market trends, and make informed business decisions.
Notably, the Vietnamese government is actively developing a comprehensive database as part of its initiative to create smart cities and an e-government framework from 2020 to 2025. This effort enhances the capabilities of FDI companies. It allows them to operate more efficiently and take full advantage of Big Data as Vietnam continues to strengthen its data infrastructure. As the country invests in these advancements, FDI enterprises are better positioned to harness insights that drive innovation and competitive advantage.
Cloud Computing
Cloud computing revolutionizes how FDI enterprises in Vietnam manage data and streamline business processes. This technology enables companies to scale their operations effortlessly. Furthermore, it supports the shift toward remote work, a trend that gained momentum during the COVID-19 pandemic. A report released in early 2024 indicates that Vietnam’s cloud computing service market is projected to reach $1.2 billion by 2030, with an anticipated annual growth rate of 11-12% (Vietnam Net). This growth reflects the increasing reliance on cloud solutions for flexibility, cost-effectiveness, and enhanced business collaboration.
Internet Security
With the rapid adoption of digital technologies, FDI companies in Vietnam face increased exposure to cyber threats. In response, they significantly invest in cybersecurity measures to safeguard their operations. According to the International Telecommunication Union (ITU), Vietnam ranks 25th globally in the Global Cybersecurity Index, reflecting its commitment to improving cybersecurity infrastructure. However, the growing sophistication of cyberattacks necessitates ongoing updates to security systems to counter these threats effectively. As cyber threats evolve, FDI enterprises must allocate a substantial portion of their IT budgets to protect sensitive data and ensure compliance with global security standards.
Automation
With the rise of technology, the automation of repetitive tasks is transforming how FDI enterprises operate by reducing human error, increasing efficiency, and allowing human resources to focus on more strategic initiatives. Automation technologies such as Robotic Process Automation (RPA) and hyperautomation are essential for companies seeking to streamline their workflows. These technologies enable bots to handle routine tasks, freeing employees to concentrate on higher-level decision-making and analytical tasks.
According to Vietnam Incorp Asia, 75% of companies are focused on automating existing tasks, while 67% are set to automate new tasks by 2025. Organizations in Vietnam are continuing to embrace automation. It is clear that this is not merely a temporary trend but a strategic imperative for long-term success.
Advice from professionals for FDI businesses in technology application & digital transformation
Building a clear digital transformation strategy
Like a master chess player, a skilled strategist anticipates moves and positions their pieces for maximum impact. A well-defined digital strategy aligns your business goals with online activities, driving success in the digital landscape. According to McKinsey‘s insights, successful companies often differentiate themselves through ambitious strategies focused on customer engagement and innovation rather than merely operational efficiency. Organizations that maintain a clear digital strategy report greater success in sustaining the benefits of their digital transformations over time
Sustainability is the key to digital transformation
Minister of Information and Communications Nguyen Manh Hung emphasizes that digital transformation and green transformation are the two most critical changes of the 21st century. He stated, “Green and digital are twin transformations.” This interdependence urges FDI enterprises to prioritize sustainability alongside their digital initiatives. By incorporating sustainable practices, companies can enhance their brand reputation and attract environmentally conscious consumers while complying with regulations.
Flexibility and adaptability for change
Digital transformation is an ongoing process that requires agility to respond to market shifts, regulatory changes, and evolving customer expectations. Companies must foster a culture that embraces change and encourages continuous learning to maintain competitiveness. In today’s dynamic environment, adaptability is essential.
Research by McKinsey indicates that successful agile transformations often yield a 30% increase in efficiency, customer satisfaction, and operational performance. Such organizations can operate 5 to 10 times faster and significantly enhance their innovation capabilities. By embedding flexibility into their operations, FDI companies in Vietnam can effectively navigate uncertainties and position themselves as leaders in a rapidly changing market.
Conclusion
In short, digital transformation is essential for Vietnam’s FDI enterprises, presenting challenges and opportunities. These companies can enhance their operational efficiency and sustainability by leveraging advanced technologies. A culture of agility and continuous learning will enable them to adapt to evolving market demands and regulatory changes.
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