of 3 - Center for Global Outsourcings

Often, however, feasibility studies can be read and perceived too optimistically and based on
wishful thinking. The urge to outsource can be strong and linked to manager prestige, so that
danger bells are overheard.
In the KMC case the prices that farmers charged for tapioca roots were much higher than
reported in the feasibility study. This was, of course, a blow to KMC Vietnam as tapioca roots
are the main raw material in producing starch.
RECOMMENDATIONS FOR LOCAL STAKEHOLDERS
Local stakeholders should be committed and sincere in their approach to business. It seems
that the Vietnamese mindset is rather opportunistic with focus on short term advantages. This
should be turned into a more relationship-focused mindset, where the outsourcing and host
companies communicate fully with employers in both organizations. It should be emphasized
that cooperation and assertiveness are essential for long term win-win outcomes.
WHAT HOST GOVERNMENTS SHOULD DO?
Porter and Rivkin (2012) have given some policy recommendations to enhance the
competitiveness of the United States. These would be obvious to recommend for other
governments as well. One of these recommendations is to address the country’s business
environment weaknesses. In KMC’s case concerning Vietnam it seems like the communist party
has a good grasp on the economy. Even under Doi Moi, which means change and newness,
which was implemented from 1986 and was a departure from the very Stalinist governance from
1975, there is still much government influence on business life (Dali, 2012). The government did
not keep their promise of land and raw material supply for KMC.
The second recommendation is to protect core country strength. In Vietnam these could be a
hard working population and a good climate for agricultural production. The government should
enhance work ethics, upgrade farming methods, and invest in infrastructure to get farming
produce into a more advanced supply chain. In the KMC case, it was told that Vietnamese
farmers’ productivity was about half that of their Thai colleagues despite similar natural
production conditions. It was mainly a question of the Vietnamese using too little fertilizer.
The third Porter and Rivkin (2012) recommendation is to eliminate trade and investment
distortions that unfairly disadvantage a country. Governments should work actively within
international organizations - not least the WTO framework - to secure orderly trade. It is seen
lately that free trade agreements (FTAs) proliferate, and in the absence of a successful WTO,
these FTAs should have government attention.
Governments are always vulnerable to subsidy wishes from local farmers and industries, but
Porter and Rivkin (2012) suggest avoiding the subsidy trap, and instead “offering a compelling
value proposition, such as access to talent, technological knowledge, supporting institutions, or
a local market that fits the firm’s strategy and cannot be matched elsewhere” (p. 90). In
Vietnam’s case it is obvious that most businesses need “compelling value propositions.”
Linked to the former policy advice is the advice to “Work collaboratively to enhance local
competitiveness” (Porter and Rivkin, 2012). This has much to do with cluster thinking, where
industries collaborate and support each other, along with active government support to
promising industries. In the KMC case the government could have been more dedicated,
consistent, and long term in their attitude to KMC.
Tenth Annual International Daejeon, South Korea P a g e | 84
Smart Sourcing Conference June 28-29, 2012