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Mekong Case

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Case Analysis Mekong Corporation

Mekong Auto, a Joint venture with a Japanese industrial group, is Vietnam’s oldest vehicle manufacturer, granted a license on June 22, 1991. It is the pioneer of the local auto industry. The joint venture faced substantial changes due to the changed plans by Vietnam government policies. Complication for foreign business also increased due to the membership of Vietnam in ASEAN (Association of South-East Asian Nations).Over the last thirty years, Vietnam evolved from “war after war” to an emerging economy with an attractive foreign investment policy and commitment to a liberalized economy.

Poter’s Five Forces:

Threat of new entrant
In 1993, Vietnam government introduced new liberalizing reform, this action was taken due to the low e growth rates under centrally planned economy. Introduction of privatization eliminated trade barriers and Vietnam became open economy. This increased competition due to the new entrants in market. Many well-known automobile companies including Toyota, Chrysler, and Ford motors invested in Vietnam. Prior to this, Mekong motors were the only automobile industry in Vietnam. Prior to 1995, Vietnam motor corporation and Mekong corporation were the only automobile and truck assembler in Vietnam.
Bargaining power of consumers
Due to the new open economy, and resulting new entrants, consumers had more choices to buy. Also, Per capita income was also increasing and ASEAN trade agreements lead to competitive prices for consumers. Earlier Mekong was targeting only local consumers but company then started to export its cars to other countries. However, according to one research paper, As consumers in a small country where the infant automobile industry is protected by high tariffs, Vietnam’s consumers must accept higher prices in comparison with the world price.

Bargaining power of supplier

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