Approaching “New Business Models of Sustainability”

2011 was a year of big changes for global and Vietnamese economies. World economic growth was 3 percent, not 3.6 percent as expected. The United States and the European Union - the two largest economies on earth, are continually bogged down because of huge public debt and high unemployment rate. The world economy was shocked after credit rating agency Standard & Poor’s downgraded the US credit ratings from AAA to AA+ for the first time in history. ‘Debt disease’ has infected major eurozone economies like Italy, Spain and Portugal. Even, top regional powers like Germany and France are also struggling with debts.

 

The Vietnamese economy experienced a turbulent year when the State had to take heavy-handed measures to lower interest rates, manage the gold market and valorise foreign exchange rates. Vietnam’s inflation grew over 18 percent in 2011, much higher than the target of 7 percent set by the lawmaking National Assembly in 2010. According to the Ministry of Planning and Investment, as of September 2011, nearly 49,000 companies ended operations, an increase of 11,000 businesses from a year earlier. The lacklustre situation is forecast to persist in 2012. Dr Le Xuan Nghia, Vice Chairman of the National Financial Committee, said: In addition to inflation, in 2011, the Vietnamese economy faced many challenges: two-time electricity price hike of 20.8 percent, VN-Index slumping to below 400 points, escalating gold and foreign currency prices weakening the local currency, real estate getting frozen, etc. The Government had to lower GDP growth prospect to 6 - 6.5 percent in 2012 in an effort to address macroeconomic problems. This is an alarming situation for any economy.

 

Troubled economy has posed numerous challenges to enterprises. Strict regulations on ceiling interest rates narrowed access of enterprises to capital sources. Coupled with complex exchange rate volatility and tightened foreign currency management mechanism, enterprises and their leaders are standing ahead of enormous challenges.

Sustainable development is an inevitable requirement at any time. But, in the currently difficult time, many companies, particularly small and medium ones, have to seek the best answer for its questions: Should they expand operations and occupy new markets or stop to focus on short-term objectives to ensure ongoing operations and stabilise market shares? Besides, uncertainty is what almost every business and CEO, no matter how established they are, is afraid of. Yet, uncertainty goes hand in hand with opportunities. So how could enterprises and CEOs realise and seize the opportunities? How could CEOs direct their enterprises to overcome obstacles, actively react to changes in the government’s macro- management policies, affirm their market position and take the lead in future competitions?

 

At the forum, leaders and analysts agreed that a sustainable business model is combined by four main factors: Efficient usage of natural resources which is a basis to construct and determine the business model as well as inputs of the enterprise; High-quality human resources which orient executives, lead business development; Effective funds attraction and utilization which is a driving force for enterprises and Government policy and legal framework helping develop business activities conveniently and stably. These are factors that most major developed countries are adopting today. Enterprises need a business model for long-term development rather than short-term profit objectives.

 

According to former Deputy Prime Minister Vu Khoan, in the short term, or 2012 in particular, the top priority of Vietnam remain inflation control and macroeconomic stability. Vietnam will persist with prudential monetary and fiscal policies; thus, capital sources will be further managed. He noted that if companies do not do business effectively, renovate technologies and corporate governance, and protect the environment, there will be no effective and sustainable development of the economy. In other words, the new development model of the country starts from effective business model of enterprises.

 

Mr Nguyen Tri Dung, Director General of NICD (Japan), said that businesses must go beyond statistical figures. This is not the period of economic upheaval but the period of global restructuring. Businesspeople and leaders must follow the time and have specific and clear strategies, not just sit to wait for a better year to come.