Fostering Platform Economy

10:24:32 AM | 11/16/2023

In the 21st century, the platform economy has emerged as a transformative economic paradigm, reshaping conventional business practices. This model, characterized by platform-like structures, interconnects diverse sellers and buyers, facilitating the exchange of a wide array of goods and services.

The platform economy represents a novel form of industrial organization, driven by digital technology, data-driven methodologies, and platform support. It leverages these technologies to enhance efficiency, reduce operational costs, and instigate alterations in business processes, sector consolidation, and multifaceted business combinations. The contemporary global landscape, marked by globalization, digitization, and pervasive networking, underpins the growth of online commerce, including trading platforms, while significantly influencing the financial and banking sectors. It has the capacity to digitize and disintermediate, presenting an opportunity to foster the evolution of traditional manufacturing strategies. This evolution calls for the abandonment of mass production in favor of modular, individualized flexibility.

Platform-driven production techniques hold the potential to address three strategic challenges within the traditional manufacturing industry. These challenges encompass the reduction of high inventories, cost optimization, and invigorated innovation; the transition from hierarchical management to a streamlined, order-driven platform economy; and the embrace of industrial transformation and upgrading through information systems and the cultivation of symbiotic open supply chains with suppliers, thereby establishing a value-added economy.

The rise of platform ecosystems has redefined the traditional industrial model and blurred the lines between industries. Platform-based enterprises now seamlessly conduct cross-border operations, leveraging their core products or services and integrating various business elements to promote industrial transformation and advancement. This strategic shift equips traditional manufacturing with greater adaptability to international competition by expanding production links across the value chain. Notably, 60 of the world's top 100 companies derive their primary income from platform-based operations.

Vietnam, at the forefront of national digital transformation initiatives, has been quick to embrace this shift. By June 2023, over 60 mobile platforms and applications were serving over 1 million monthly users in Vietnam, signifying a nearly 10% growth compared to 2022. In the first half of 2023, monthly users on Vietnamese mobile applications surpassed 500 million, reflecting a nearly 16% surge from the same period in the previous year. According to the Wall Street Journal (U.S.), only in May 2023, Vietnam was among five countries with the largest trading volume on Binance, reaching US$20 billion. Notably, technology-driven ride-hailing applications like Grab and Go-Viet, in tandem with cross-border platforms such as Google and Facebook, have precipitated transformative shifts in the domestic market. Homegrown platforms like Zalo, MoMo, and Be are equally contributing to the advancement of the platform economy.

To foster the platform economy in alignment with the Government's initiatives, it is imperative to establish resilient economic institutions and frameworks. These frameworks are essential for regulating the efficient operation of key stakeholders, encompassing government entities, supply firms, platform developers, and customers. The focus should be directed towards four pivotal areas:

Legal Framework for the Platform Economy: Recognizing products, assets, and intangible resources as novel socio-economic assets in Industry 4.0 era, facilitating the gradual development of appropriate tax policies and comprehensive strategies for the nation's socio-economic advancement in the era of the platform economy.

Data Privacy and Commercialization: Given that customer data fuels the platform economy, the implications of privacy laws are inexorable.

Intellectual Property Protection: This involves the registration and utilization of trademarks, licenses, copyrights, patents, and the formulation of relevant non-disclosure and non-fraud considerations.

Competition and Anti-Monopoly Measures: Ensuring healthy competition between suppliers and platform developers while safeguarding consumer rights.

Dr. Doan Duy Khuong

Source: Vietnam Business Forum