Coach in Vietnam

Strategic Opportunities for Coach, Inc in Asia

Economic Risks and Opportunities in China and Vietnam

Table of Contents

Executive Summary 3

Company Overview 4

Economic Climate in China 6

Economic Climate in Vietnam 10

Risks of Doing Business in Vietnam 15

Opportunities for Doing Business in Vietnam 16

Conclusion 18

Citations 20

Executive Summary

China has been the chief manufacturing destination for multinational corporations for the past few decades, surpassing the US in manufacturing output by 2010 and accounting for 20% of global manufacturing. The nation’s investment in infrastructure and historically inexpensive labor rates have made it a low cost producer, although times seem to be changing. As the cost of labor increases by close to 20% per year throughout China, companies are looking elsewhere to continue producing goods at low rates; Vietnam has received much of this attention.

Vietnam has one of the fastest growing economies in Asia, attracting significant investment over the past twenty years. In June 2011, Vietnamese labor rates were an astonishing 67% lower than in China, prompting many companies to move production from China to Vietnam. The textile industry has been significantly impacted by this shift; Vietnam is now the second largest supplier of clothes to the US. Coach, the US based luxury handbag manufacturer, recently moved some of its operations to the country with much success, and is working with the manufacturer to build an additional plant.

While the outlook for manufacturing in Vietnam is promising, there can be significant risk involved for investors. The majority of raw materials needed in the textile industry have to be imported from other countries, exposing companies such as Coach to uncertainty in terms of access, availability, and cost. And although Vietnam’s economy continues to expand, a declining growth rate signals the fragility within the nation. Inflation is high and very volatile, and bad debt...