Request
Having failed to establish the subsidiary in Vietnam during its first year, the business has come to a halt due to the absence of a responsible person for the local corporation, leading to significant challenges. Therefore, we would like to request support for the prompt revitalization of the local subsidiary’s business.
Our Support
First, we had a meeting with the Singapore headquarters managing the ASEAN base to understand the situation of the local subsidiary in Vietnam. Following that, we visited Vietnam to conduct a situation survey of the local corporation. Since the local subsidiary was in a very risky business state without being able to receive a handover from the predecessor, we identified as many risks as possible and created a business revitalization plan based on the situation. We began by working to return the negative situation to a neutral point, then developed a business plan to transition to a positive state. After obtaining approval for these plans, we implemented the business revitalization of the local subsidiary.
- Understanding of current business and identification of risks
- Accounts receivable collection work for local subsidiaries
- Visits and hearings with related parties
- Develop local suppliers and vendors
- Liaise with local accounting firms and tax offices to organize and settle money around money.
- Organize internal documents related to registration, accounting, taxation, and legal matters
- Settlement of unpaid taxes and delinquent accounts
- Procedures for international remittance of working capital based on the plan for the time being to the head office in Singapore
- Resolving legal issues caused by failed mergers and acquisitions in the first year of start-up
- Resolution of HR and labor issues for the remaining local employees
- Retraining of local employees
- Establishment of personnel evaluation system
- Assistance in preparing a 3-year business plan (mainly quantitative income statement)
- Contracting with a new local accounting firm
- New Customer Development
- New Partner Development
- Update business plans as needed
- Local employee recruitment and management
- Expansion of new market support for projects outside of the Vietnamese market (Thai market)
- Expansion of new market support for European market projects
- Started collaboration with a major travel agency
- Expanded support for local government public notices
- Consolidated Financial Statements Coordination (Collaboration with Auditors from Singapore Headquarters)
- Audit support (Collaboration with Auditors from Singapore Headquarters)
- Budget planning for the next fiscal year
Results
- Within six months of starting operations on-site, we returned the negative situation to a neutral point, enabling the business to resume.
- Achieved a 50% reduction in annual running costs for local subsidiaries without reducing payroll.
- Achieved 200% sales over the previous year
- Avoidance of tax office recommendations through the settlement of audit deficiencies and outstanding invoices
- Resolving legal issues caused by the failure of the M&A
- Restoration of trust through the development of past customers and partners, contributing to business expansion
- Recovered to near profitability in the second year of the turnaround
- Completed building a foundation for business expansion in the next fiscal year and beyond
- Obtained approval from Singapore parent company and Japan headquarters to continue business upon completion of business reorganization.
Comment from the person in charge
This client is a case of business revitalization after a failed expansion into Vietnam.
When I was assigned to the Vietnamese subsidiary, there was a mess of invoices and contracts scattered around my desk, and the person in charge of setting up the subsidiary had disappeared due to problems.
In such a situation, there is a possibility that only operating funds will continue to flow, and there could be penalties for tax delinquencies or compensation due to litigation risks, which may lead to business suspension. Therefore, I believe we should first start by examining the risks and only proceed with the local subsidiary’s business activities once we can see that the concerns have been cleared. The reason is that if we resume sales activities out of a desire for operating funds without considering the risks, and later decide to withdraw, we would lose the trust of customers and partners who continued their relationships with us after we lost their trust in the first year. This could also negatively affect other locations.
Therefore, in this case, we first aimed to clarify the operational risks of the local subsidiary, including potential risks, as much as possible. We then worked to resolve each concern one by one while restoring the local subsidiary’s condition to a healthy neutral point.
Once we returned the local subsidiary to a healthy neutral point, we created a new business plan and took proactive steps in sales activities and partner development. We strengthened the organizational structure, established healthy information sharing and collaboration systems within the company’s ASEAN group, and built a third-party review system. This ensured that the operations of the local subsidiary were not dependent on any single individual, preventing similar failures from occurring. Ultimately, we were able to complete the business revitalization.
Currently, it is said that around 2,500 Japanese companies have entered Vietnam, but in addition to that number, there are also companies withdrawing and those expanding their businesses.
When expanding overseas, various risks and unforeseen circumstances may arise. Therefore, it is recommended to secure ample preparation, a flexible schedule, and budget. By establishing a withdrawal line and having various options in place, you can respond appropriately in the event of unforeseen situations, enabling you to recover your business.
Moreover, there is a significant difference between understanding the business practices and risks of the target country and not understanding them.
I believe that entrusting overseas expansion and business revitalization to experts with knowledge and experience leads to smoother processes, total cost reduction, and early business growth.
