Foreign subsidiary development of furniture industry in the context of global recession : case of Vietnam

Wooden furniture industry is a traditional low-technology based and labor intensive industry (Kaplinsky & Readman, 2000), which is highly recommended for global outsourcing. Besides, the raising of “China plus one” manufacturing strategy made Southeast Asian countries became new investment destinations. In case of Vietnam, the largest exporter of wood products in Southeast Asian, wooden furniture industry is highly export-oriented with a fast growing rate especially since 2008 (MARD, 2012). While the global economic crisis in 2008 has a vital impact on the national economy, it is reported that the foreign subsidiaries in furniture industry in Vietnam have outstripped their local competitors (VNS, 2013). Despite the importance of foreign subsidiaries in Vietnam, there is lack of study regarding their competitive advantage and strategy. Investigating on how foreign subsidiaries respond to the external challenges is essential to support strategic knowledge on managing industry? Under the influence of market turbulence. This empirical study used qualitative data from interviews with eight managers of foreign furniture processing subsidiaries in Vietnam. Results indicated that under the influences of global downturn, managers have become more proactive and flexible in their strategic planning when facing with chaotic turbulence, which brings both opportunities and challenges. The study pointed out that the negative impact of global recession was passed through in later time in low-cost manufacturing countries and business risks could be minimized especially in companies with a strong pool of intangible resources (reputation, technology, innovation capability). Despite its complexity, recession was not completely seen a threat, yet the managers perceived it as external turbulence from which organizations can benefit but only if they choose the right strategic orientation.