The first report on family businesses in Vietnam by PwC has uncovered how these businesses are navigating the changing business and social environments.
According to PwC's Family Business Survey 2021 – Vietnam Report, 65 per cent of surveyed Vietnamese family businesses predict growth in 2021.
The view for 2022 is more positive, with three out of four respondents saying that they are optimistic about growth, and 33 per cent anticipating that the growth will be “quick” and “aggressive” – higher than the regional and global responses, which stand at 28 and 21 per cent, respectively.
In keeping with such growth aspirations, the findings also reveal that business expansion and technology adoption are the key priorities. 55 per cent of the respondents confirmed a focus on bringing new products and services to the market, with 52 per cent focusing on the increasing use of new technology.
Given that the global pandemic is marking permanent changes, the rethinking or adaptation of new business models is also top of mind for 52 per cent of respondents.
There are also apparent shifts towards business diversification and more externally-managed structures for family businesses. Within five years, 45 per cent of Vietnamese family businesses are aiming to become more diversified, highlighting the need for sustainable revenue streams for future disruptions.
The current operating model – which centres on businesses that are owner-managed and family-managed – is expected to shift towards a “family-owned/externally-managed” or “externally-run” model, increasing from 12 to 60 per cent over the next five years.
Over half (52 per cent) of Vietnamese family businesses expect that the next generation will become majority shareholders within five years' time. However, only 36 per cent of respondents claim to have a formal succession plan in place.
|Johnathan Ooi, Private Business Services leader at PwC, at the webinar shining light on key points in PwC's Family Business Survey 2021-Vietnam Report |
“Family businesses are having to navigate a faster pace of change than ever before,” said Johnathan Ooi, Private Business Services leader at PwC Vietnam. “An equal focus should be placed on strategic planning and succession planning. Making a head start in this area will therefore be helpful for the next generation. They will be equipped with the necessary tools to drive the business forward and in the right direction.”
Although the survey findings indicate a strong emphasis on digital, innovation, and technology initiatives, progress in those areas remains limited. Only 30 per cent of respondents said that they have strong digital capabilities, as compared to 38 per cent globally, while a mere 9 per cent say that their digital journey is complete.
This slow progress could be tied to the reportedly high levels of resistance to embracing change within the company, as revealed by 67 per cent of respondents. This is significantly higher than the perceived sentiment of regional peers (29 per cent) and global peers (33 per cent).
|The report also shed light on the growing need for Vietnamese family businesses to factor ESG (environmental, social, and corporate governance) credentials into their plans for securing their legacy. |
The report also shed light on the growing need for Vietnamese family businesses to factor ESG (environmental, social, and corporate governance) credentials into their plans for securing their legacy.
While the majority of Vietnamese family businesses (85 per cent) are reportedly engaged in some form of social responsibility activities, issues relating to sustainability are currently far down the list of priorities. Only 21 per cent of the surveyed family businesses feel that there is a responsibility to fight climate change, versus 50 per cent in both Asia-Pacific and globally.
Johnathan Ooi commented: “The world is changing, and so is the formula for lasting family business success. Tomorrow's family businesses require a new approach to enhancing their legacy – one that is based on keeping ahead of digital transformation, with a greater focus on sustainability goals and professional family governance.”
The 10th freshly-released PwC Global Family Business Survey surveyed more than 2,800 senior executives across 87 territories, from October 5 to December 11, 2020. Of these, the key decision-makers of 33 family businesses in Vietnam participated in an online interview for the Vietnam report.