1.0 Introduction
In the era of rapid technological evolution, digital transformation emerges as a pivotal force reshaping the global business landscape. The fusion of numerous digital technologies in multifaceted business aspects is changing the pattern of corporate functioning and the delivery of value to the consumer (Tien, Van Trai and Quyet, 2023). As a business strategy, digital transformation has opened opportunities and challenges for small and medium enterprises. Such a need for change in conformity with digital changes toward incrementing competitiveness, efficiency, and innovation is identified globally regarding SMEs. Such adaptation should lie not in the centre of survival but in thriving in the digital market (Mai et al., 2024).
In an economy like Vietnam’s, one of the dynamic emerging world economies with a lead-driven SME sector, digital transformation is the critical path toward new growth avenues and the assimilation of Vietnamese businesses into the world economy (Hoa and Tuyen, 2021). This report focuses on the impact of digital transformation on SMEs in Vietnam, the possible ways digital technologies are adopted, and how this adoption impacts business practices and international trade engagements. Vietnam is unique in combining rapid economic growth, high digital penetration rates, and unique SMEs positioned at the core of national economic development.
2.0 Digital Transformation
Digital transformation implies the infusion of digital technology into all aspects of the business, fundamentally changing how business is being done and how value is delivered to the customer. Therefore, digital transformation is not only about adopting technology but also about cultural change, which needs constant testing, experimentation, and risk tolerance toward failure (Do et al., 2022). “This shift can touch every possible operation of an organisation, from customer interaction to product innovation and many other functions forward.
The most significant change in digital transformation involves the major constituents: cloud computing, big data, and artificial intelligence (AI) with the Internet of Things (IoT). Cloud computing provides SMEs with a flexible, scalable, lower-cost infrastructure and applications that significantly lower capital for investment in an IT infrastructure (Le Viet and Dang Quoc, 2023). It is, therefore, urged that business organisations apply big data analytics in soliciting the tremendous amount of information available in the environment relative to better decision-making, operational efficiency, and customer insights. With more connected devices, businesses can provide more automation, deliver customers more personalised experiences, or solve more complex problems.
Beyond the global movement, staying competitive turned digital transformation into a must-have for SMEs. For instance, an ordinary small retailer can sell online and access a global market far more significantly, several times compared to competitiveness within a local market (Ghi et al., 2022). In agriculture, for example, with SMEs now using IoT devices, monitoring crops and livestock is bettered to an extent besides aiding efficiency and productivity. A small winery in Europe has become a case in point, which has reduced the use of water and, at the same time, initiated better grape quality by using such IoT sensors as monitoring soil moisture and irrigation scheduling through the application of optimal irrigation (Truong and Van My, 2023).
The role of digital conversion in SMEs assumes immense value. It provides the possibility of boosting business performance with the promise of opening new markets and enhancing the efficiency of operations. For instance, a fashion retailer from Vietnam saw a substantial spurt in sales when it massively expanded its base across Southeast Asia by adopting e-commerce and social media marketing. Also, digital transformation endows them with a competitive edge (Chuc and Anh, 2023). More agile SMEs can react to changes in the market environment and effectively outperform a good share of the competition they face from larger companies by seriously considering the use of digital tools and processes that enrich their perspective. It also supports the SME sector in innovating new business and product/service formats. Language learning is one of the industries that constantly maintains curiosity in people’s minds. For instance, in Vietnam, a newly hit small-sized tech firm developed an innovative AI-based application for learning languages, instantly gaining success in some other countries (Alexandrova and Zabolotskaya, 2021).
3.0 Theme in Vietnam
Generally, in modern times, behind the backdrop of present global economic realities, this Vietnamese economy represents a strongly growing, for the last three or so decades, an economy that, to an extent, epitomises economic trends the world over, in which emerging markets continue to assert their position in the global economic orders dynamically. Foremostly, in this economic storyline is the centrality of SMEs (Ngo, Pham and Nguyen, 2023). These form the bulk of the Vietnamese economy, acting as the country’s engine. Realising that small – and medium-sized enterprise play a central role in national economic development; the Vietnamese government seriously emphasises policies that nurture a favourable entrepreneurial ecosystem that encourages high performance and growth.
Vietnamese SMEs are in the middle of a significant transformational journey. With a strong government push toward a digital economy, enshrined at the state and party level through programs like the National Digital Transformation Program to build a digital society in Vietnam by 2025, attention is hoarded to ways the digital infrastructure and e-governance should be put in place and businesses encouraged toward digital adoption (Phuong, 2020). The picture of digital transformation efforts among Vietnamese SMEs emerges as mixed, in urban-rural and intra-sector differences, illustrating that an emergent digital divide is even now. While some businesses take limited action, others lag because of various barriers, from restricted access to digital technologies and the skills to use them to financial constraints (Nguyen, Le and Vu, 2022).
Noticeable are the barriers associated with adopting digital technology among Vietnamese SMEs, which are usually myriad. Most notable is a gap in workforce digital skills, which means an existing workforce needs to be better skilled in using new technologies appropriately. Financial constraints are also a significant feature since it is costly for small firms to embrace investment in a digitised infrastructure setup and tools. Organisational cultural resistance is another factor linked to the prohibitive cause, which slows the adoption of digital workflows and processes (Akbari et al., 2023).
However, the process that comes with the journey of digital transformation can open up several opportunities for Vietnamese SMEs. On the one hand, COVID-19 has pushed the e-commerce market in Vietnam further, amplifying how SMEs can get noticed by new markets and customers. Companies such as Tiki and Send have been growing tremendously, being SMEs’ sales platforms nationwide. In addition, government support for digital initiatives may provide resources SMEs can use to clear some of the most basic problematic aspects of the digital adoption process (Dung and Tri, 2021). Examples include the possible detection of programs in the field of digital skills and programs giving financial incentives for technological adoption.
4.0 Impact of Digital Transformation on SMEs in Vietnam
4.1 Economic Impact
Several studies have validated that digital transformation is completely changing the economic landscape for SMEs in Vietnam, from productivity acquisition and timely, critical decision-making to revenue and market expansion and the like. On the other hand, digital technologies bring about efficiency in business operations, reducing costs and enhancing productivity (Nguyen et al., 2023). For instance, implementing digital inventory management systems has allowed most Vietnamese retail sector SMEs to lower discrepancies in their stock inventories and optimise the stock levels directly related to their revenue (Ta and Lin, 2023). Online sales avenues and marketing strategies have brought revenue cruises to Vietnamese SMEs that need help to target and manage wider customer segments within the domestic and global scenario. Another area where the impacts of digital transformation could be significant is the increase in companies’ revenues. E-commerce alone has been a game changer: with more and more platforms, such as Shopee and Lazada, coming up, it gives an easier platform to even small businesses to have a share of the fast-growing online consumer shopping market in Vietnam (Lang et al., 2023). Another supportive level of digital transformation codified for SMEs is expanding the market by allowing SMEs to scavenge for new markets beyond traditional boundaries. Secondly, digital tools may bring the capability to give openings to local producers by way of linkage with global consumers (Melo et al., 2023).
4.2 Operational Impact
For instance, the operational process of an SME within Vietnam’s digital economy has significantly changed. Visualisation can be used in several ways, such as the optimisation of supply chains; for example, with digital tools, it is easier to follow any food and beverage from farm to table, allowing better coordination of suppliers and manufacturers with a maximum degree of transparency and efficiency (Hoang and Phan, 2022). For example, with the integration of blockchain technology, many Vietnamese SMEs in the food and beverage sector can now trace the origin of ingredients to ensure their integrity across the supply chain and, therefore, consumer confidence. Besides helping manage and facilitate, SMEs interact differently with Customer Relationship Management (now personalised marketing, better customer service, or better customer relations) (Eltahir et al., 2021). Focus must be placed on CRM for loyalty and repeat business by strengthening digital management for customers’ approaches, which remain beneficial to Vietnamese SMEs within the competitive hospitality sector.
Digital transformation also leads to innovation in the process and through product and service offerings. Fintech startups from diverse countries may develop new business models, such as the Vietnamese fintech that has invented the solution of digital payments for SMEs (Hoang and Phan, 2022).
4.3 Social Impact
All these will bring about remarkable social implications of digital reform amongst Vietnamese SMEs. Conversely, other implications point to economic and operational effects, including significant job creation, skill development, and societal inclusion. For example, in digital marketing and analyses, new skill sets are evident; in cases of cybercrime and cybersecurity, there already are. Hence, people are employed (Mitręga and Cho, 2021). This new paradigm shift requires more concentrated efforts toward skill development and lifelong learning, with government and private sector support to upskill and reskill the workforce. “For example, collaborations by Vietnamese universities with technology companies and multinationals will allow students to gain digital skills and inform a workforce ready to back the digitisation of SMEs (Khan, 2023). Another critical aspect is societal inclusiveness, whereby digital technologies put in place means for SMEs to serve populations not served before. In layman’s language, for instance, digital financial services offered by Vietnam SMEs are aiding rural financial inclusion, indicating that digital transformation could broaden social good (Sembiring et al., 2023).
5.0 Case Studies
5.1 Case Study 1: VinFast’s Digital Transformation in the Automotive Industry
Vietnamese automaker VinFast has set the stage for a true digital journey, redesigning how manufacturing used to happen and reshaping customer experience through technology. Bringing data-driven power through AI (Artificial Intelligence) and IoT (Internet of Things) into their manufacturing plants, VinFast completely amplified the quality it was delivering and brought about tremendous cuts in production times. Such an entwining of digital technology into the core of creation further optimises lines in terms of efficiency and precision (Nguyen, 2022). VinFast Company also developed a digital sales platform for customers to visit the company’s website, customise their cars, and order digitally for the first time in the Vietnamese automobile industry. That has been extended to post-sale service, whereby they could gain access to services by app for scheduling maintenance, 24/7 support, and so on, evidencing the digital means of creating continuity through an automotive customer’s journey (Thoburn and Natsuda, 2023).
5.2 Case Study 2: MoMo’s Financial Inclusion Through Digital Wallets
On the other side, MoMo, the application that took good care of the gap in the Vietnamese system, globalises digital financial inclusion, being a virtual treasure house for human finance power on the one hand and demonstrating how digital transformation empowers and fosters financial inclusion on the other. MoMo is the embodiment of inclusive financial services. MoMo and digitalisation have brought millions of people in far and remote rural areas into the digital economy (Tran, 2020). You can pay bills, transfer money, or buy goods and services; everything is possible with a cell phone. MoMo’s ecosystem comes from strategic relationships with banks, retailers, and service providers, amongst others, to stretch out the space where digital payments are accessible and convenient. The digital revolution not only shook up but also brought significant changes toward the growth of the country’s digital economy and the improvement of financial inclusion in the country (Yumvuhore, 2022).
6.0 Challenges to International Business
Reasons why Vietnamese SMEs perceived great challenges in the face of international businesses caused by digital transformation are “navigating complex global e-commerce platforms” and “adhering to stringent international data protection laws, such as the GDPR, which require speedy adaptation and compliance. It is, therefore, a nightmare for SMEs facing this, bearing in mind that they need more resources (Helsper, 2021). Therefore, global competition requires one to be digitally sound and always in pace with the market dynamics. The digital divides become other complications, whereby different digital capabilities impede international engagement fully that can take advantage of global opportunities. Meanwhile, there is also the need to satisfy international quality standards for the products and services by ensuring the quality of these products and services is of a higher order, requiring innovation yet another layer with demanding criteria for achievement of participation in the global market (Reynolds et al., 2021).
7.0 Conclusion
This study on digital transformation in the context of SMEs in Vietnam highlights a landscape rife with challenges and hopeful opportunities. Principally, the discussion here shall revolve around the effect of digital technologies that transform economic performance, optimise operational processes, and support social inclusion. From VinFast to MoMo through VNG Corp., these are success stories that could, through digital transformation, open up new ways in which they could mean competitive advantage, market enlargement, and innovative capacity for Vietnamese SMEs.
Generally, the future of the digital transition of the SME sector in Vietnam is very promising but calls for heavy effort. The implicated technologies, mainly blockchain, 5G, and AI, take a more courageous step toward new prospects that drive efficiency, transparency, and customer-centric approaches. However, the realisation of these heavy, demanding ecosystems is grappling with digital infrastructure, accessible funding, and a skilled workforce.
Policy recommendations are to match the challenges of digital transformation to get the fullest possible benefit, including the development of whole digital literacy programs, incentives for SMEs to use digital technologies, and streamlining regulations balancing innovation with consumer and business protection. The Vietnamese authorities need to implement technological access and affordable service-driving partnerships with international organisations.
References
Akbari, M., Kok, S.K., Hopkins, J., Frederico, G.F., Nguyen, H. and Alonso, A.D., 2023. The changing landscape of digital transformation in supply chains: Impacts of industry 4.0 in Vietnam—the international journal of logistics management.
Alexandrova, E. and Zabolotskaya, V., 2021, March. Opportunities and Limitations for the Digital Economy Development: Case of the SME sector of Vietnam. In IV International Scientific and Practical Conference (pp. 1-5).
Chuc, N.D. and Anh, D.T., 2023. Digital Transformation in Vietnam. Journal of Southeast Asian Economies, 40(1), pp.127-144.
Do, T.D., Pham, H.A.T., Thalassinos, E.I. and Le, H.A., 2022. The impact of digital transformation on performance: Evidence from Vietnamese commercial banks. Journal of risk and financial management, 15(1), p.21.
Dung, N.T. and Tri, N.M., 2021. Digital transformation meets national development requirements. Linguistics and Culture Review, 5(S2), pp.892-905.
Eltahir, A.M., Ahmed, T.M., Ahmed, H. and Abdalfadil, T.A., 2021. Comparative study of customer relationship management (CRM) and electronic customer relationship management (E-CRM). International Journal of Advanced and Applied Sciences, 8(7), pp.1-6.
Ghi, T.N., Thu, N.Q., Huan, N.Q. and Trung, N.T., 2022. Human capital, digital transformation, and firm performance of startups in Vietnam. Management, 26(1), pp.1-18.
Helsper, E., 2021. The digital disconnect: The social causes and consequences of digital inequalities. The Digital Disconnect, pp.1-232.
Hoa, N.T.X. and Tuyen, N.T., 2021. A model for assessing the digital transformation readiness for Vietnamese SMEs. Journal of Eastern European and Central Asian Research (JEECAR), 8(4), pp.541-555.
Hoang, T.G. and Phan, T.N.T., 2022. Cultural entrepreneurship and disruptive blockchain applications in Vietnam: The status quo and the transition towards a digital economy. In Cultural Entrepreneurship: New Societal Trends (pp. 23-38). Singapore: Springer Nature Singapore.
Khan, S.D., 2023. A Systematic Approach on Customer Relationship Management Practices in Non-banking Companies. Journal of Informatics Education and Research, 3(2).
Lang, L.D., Behl, A., Phuong, N.N.D., Gaur, J. and Dzung, N.T., 2023. Toward SME digital transformation in the supply chain context: the role of structural social and human capital. International Journal of Physical Distribution & Logistics Management, 53(4), pp.448-466.
Le Viet, H. and Dang Quoc, H., 2023. The factors affecting digital transformation in Vietnam logistics enterprises. Electronics, 12(8), p.1825.
Mai, B.T., Nguyen, P.V., Ton, U.N.H. and Ahmed, Z.U., 2024. Government policy, IT capabilities, digital transformation, and innovativeness in Post-Covid context: case of Vietnamese SMEs. International Journal of Organizational Analysis, 32(2), pp.333-356.
Melo, I.C., Queiroz, G.A., Junior, P.N.A., de Sousa, T.B., Yushimito, W.F. and Pereira, J., 2023. Sustainable digital transformation in small and medium enterprises (SMEs): A review on performance. Heliyon, 9(3).
Mitręga, M. and Choi, T.M., 2021. How small-and-medium transportation companies handle asymmetric customer relationships under COVID-19 pandemic: A multi-method study. Transportation Research Part E: Logistics and Transportation Review, 148, p.102249.
Ngo, V.M., Pham, H.C. and Nguyen, H.H., 2023. Drivers of digital supply chain transformation in SMEs and large enterprises–a case of COVID-19 disruption risk. International Journal of Emerging Markets, 18(6), pp.1355-1377.
Nguyen, P.H., 2022. Automotive Service Quality Investigation Using a Grey-DEMATEL Model. Computers, Materials & Continua, 73(3).
Nguyen, T.H., Le, X.C. and Vu, T.H.L., 2022. An extended technology-organisation-environment (TOE) framework for online retailing utilisation in digital transformation: empirical evidence from vietnam. Journal of Open Innovation: Technology, Market, and Complexity, 8(4), p.200.
Nguyen, V., Hoang, T., Mai, T., Lam, T. and Pham, H., 2023. The factors affecting digital transformation in small and medium enterprises in Hanoi city. Uncertain Supply Chain Management, 11(4), pp.1705-1718.
Phuong, T.T., 2020. Digital Economy and Digital Transformation in Vietnam.
Reynolds, L., Henderson, D., Xu, C. and Norris, L., 2021. Digitalisation and the foundational economy: A digital opportunity or a digital divide for less-developed regions?. Local Economy, 36(6), pp.451-467.
Sembiring, L.D., Setyawati, A., Indajang, K., Putri, J.A. and Sudirman, A., 2023. The Influence of Entrepreneurial Orientation and Customer Relationship Management on MSME Competitiveness. International Journal of Business, Law, and Education, 4(2), pp.1076-1084.
Ta, V.A. and Lin, C.Y., 2023. Exploring the Determinants of digital transformation adoption for SMEs in an emerging economy. Sustainability, 15(9), p.7093.
Thoburn, J. and Natsuda, K., 2023. National Cars and Product Champions: Ways Forward for Vietnam’s Automotive Industry?. In The Political Economy of Global Manufacturing, Business and Finance (pp. 121-145). Cham: Springer International Publishing.
Tien, N.H., Van Trai, D. and Quyet, N.X., 2023. The impact of digital transformation on tourism sustainable development: A case of SMEs in Vietnam.
Tran, T.M.A., 2020. Mobile Payment Security: A case study of Digital Wallet MOMO.
Truong, N.X. and Van My, D., 2023. Digital Transformation in Small and Medium Businesses in Vietnam. In Handbook of Research on Artificial Intelligence and Knowledge Management in Asia’s Digital Economy (pp. 442-465). IGI Global.
Yumvuhore, C., 2022. Mobile money services and financial Inclusion in rural area of Rwanda. A case study of Nyamasheke District (Doctoral dissertation, University of Rwanda).
write