American Rice Inc. in Vietnam

American Rice, Inc. In Vietnam

1. Is Vietnam a suitable expansion location for American Rice?

As American rice expanded their business into Vietnam not only for possessing market share in the Vietnamese market, but also for gaining a strategic foothold to expand internationally and find new market, I would agree that Vietnam was suitable expansion location for American Rice for the following reasons.

1) From their joint venture partnership with Vinafood II, ARI could gain a larger customer base, bigger property, low cost labor, other infrastructure existing in local area and tax benefit.

2) Rice is Vietnam's second largest export item after oil and agriculture employed 72% of the Vietnamese labor force and, with oil, formed the basis of the economy.

3) Vinafood II which is ARI's joint venture partner is one of the 3 regional food corporations and provincial food companies that possess licenses to export rice.

4) And also, ARI could gain experience from testing their strategy & consulting ability of plant operations, plant design and improvements, as well as marketing of the plant's rice production overseas.

5) Lastly, ARI was able to secure a sufficient supply of rough or white rice, of adequate supply, at competitive market price. It was possible since Vinafood II was under a contract to purchase and sell to American Rice-Vinafood directly. The Vietnamese rice is targeted for different markets and as a result, ARI didn't have to worry about possible effects of cannibalization with their premium brands.

However, these positive effects could only be made possible when ARI and Vinafood II were true to the terms of their contract and responsibilities.