North vs. South: Business Culture Differences in Vietnam (3/3)
Updated: Mar 30, 2020
In the first part of this mini-series we learnt about the distinct regional cultures of northern and southern Vietnam. In part II we looked into how these differences evolved. In this third and final part we will now learn how to deal with them in business.
Part III: Differences in Culture and Influence on Business
Approaching Northerners and Southerners
As displayed in part I, Northerners can be very hard to access. They tend to be rather reserved and suspicious of new contacts; even if they are potential clients. Therefore, receiving no answer to “cold calling” (via e-mail or phone) is a more pronounced challenge in the north than in the south. Often you will need to do a lot of follow-up or work through a trusted intermediate (see blog article on "Circle of Trust"). Also, Northerners will be more afraid of a “loss of face” than Southerners. This may materialize in suppliers not fully acknowledging that they cannot fulfill requirements or making an early exit because they are too fearful of potential client´s demands (e.g. technical know-how, quantities, delivery dates). In these cases, a foreign business partner should show understanding and try to get deeper into a personal discussion. Naturally, a close relationship (within the coconut´s shell, see part II) would help. In the south, people get into contact more easily and communicate challenges more directly. However, in some cases you should be double-checking if they can actually follow through on their commitments.
Overview: Differences in Business Culture
*The above-mentioned differences should be considered as nuances. However, many business travelers to Vietnam will soon notice them after a completing a few meetings locally.
Building up Relationships within the Context of Internal Cultural Differences
Cultural differences will mostly affect you when doing sales in Vietnam. Most international companies will operate through one or more intermediaries (i.e. wholesalers). However, a sales manager from Hanoi will face huge obstacles doing cold calling in HCMC. As indicated above, there are certain cultural differences, sometimes only nuances, that might prevent sales managers from effectively establishing a personal relationship with their targets.
Linguistics are reinforcing the divisions explained here. Somebody from Hanoi will immediately be recognized as such in HCMC after uttering a few words. The southern accent – for instance – is perceived as being particularly smooth and friendly but may understood by northerners as a bit “sneaky” and untrustworthy. On the other hand, people from the south sometimes do not like the northern accent due to its “roughness” (albeit, Hanoians do in fact consider their dialect to be "formal, soft, sweet, and accurately pronounced" 🤔).
Therefore, if your sales targets are in northern AND southern Vietnam, you should work locally with locals. Either you find a sufficiently big partner that has teams in HCMC and in Hanoi or you cooperate with two different intermediaries in northern and southern Vietnam. In this way, you can a) use local networks of your partners and b) they might be more successful in accessing new local customer groups. Many companies set the sales area boundaries at the “cloud pass” between the central Vietnamese cities of Da Nang and Hue. Some are even using the 17th parallel as a boundary; as this used to be the border between northern and southern Vietnam from 1954 to 1976 this seems to be a bit outdated though.
You should be aware that undercutting between parties seems to occur occasionally. Measures to prevent these practices should accordingly be implemented.
Wholesaler boundaries as set between Da Nang and Hue (orange line in map beneath)
Susceptibility to Graft
One big prejudice is that Hanoi - respectively northern Vietnam - is more corrupt than southern Vietnam. Some talk about the "Ten-percent rule" in Hanoi because you allegedly have to pay 10% extra to "get things done". I remember I once went to a networking event in HCMC where I met a Saigonese. When I introduced myself as coming in from Hanoi, he was grinning and asking: “How much do I have to pay you so as to be able to speak with you?”. This joke was a hint to the stereotype of the corrupt Hanoian/northern Vietnamese. Graft is – of course – an all-Vietnamese phenomenon. However, there are indeed different nuances in respect to corruption. The "Provincial Competetiveness Index" (2018) measures susceptibility to graft in Vietnam. On a scale of 1 (worst) to 10 (best) northern Vietnam scores 5.59 while southern Vietnam scores a little better at 6.43. However, Ho Chi Minh City actually scores a bit lower at 5.50 than Hanoi with 5.56. So, there is in fact not a big difference regarding corruption in the two halfs of the country.
Setting up shop north or south from a cultural perspective
Even though north and south are sometimes perceived differently regarding their business friendliness, statistics show that they are indeed on equal footing. For instance, Quang Ninh, a northern province on the Chinese border was on first rank in the above-mentioned Provincial Competitiveness Index; therefore being the "business-friendliest" province in Vietnam. Within sales and sourcing projects we also cannot typically make out any real differences in the “sales acumen” of northern and southern Vietnamese companies apart from above mentioned traits.
Therefore, personal taste might play a role in which region fits you best. A lot of people who prefer the more discreet and more “original” people of northern Vietnam while others praise the lust for life and the openness of the southerners. There is no right or wrong here. The diversity of the Vietnamese is surely one reason why they survived hundreds of years of foreign oppression and are now emerging as an economic powerhouse in south-east Asia. As Taylor wrote: “The two poles of Vietnamese national character (..) are complementary. This combination of northern resolve and southern release is a source of both irritation and creativity.”