Posted: May 25th, 2022

Vietnam International Hospital Case Study

Vietnam International Hospital Case Study

Using Porter’s five forces, what does the picture look like for success?

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Porter’s Five Forces Analysis Model. Applying this to VIH shows what the picture looks like for success.

Threat of New Entry

There are high barriers to new entry as the majority of Vietnamese are content with the socialized and often low-quality medical care they receive already. There is a strong bias in the Vietnamese community to not pay for medical treatment, a result of being raised in a communist nation where socialized medicine, however bad, is free.

Established hospitals are unlikely to significantly increase their coverage as the majority of Vietnamese have not been educated on the advanced medical diagnostic and analysis techniques. As a result there is little threat of new entry into the high end of the market from established, socialized hospitals. This leaves the high end of the market underserved.

Competitive Rivalry

Medical evacuation services, the apex of medical services available in Vietnam, is seen only as the alternative for the wealthiest of Vietnamese and the senior executives who are expats.

In retrospect it is clear why medical evacuation companies didn’t get into clinics and hospitals, as their medical evacuation services are built on cost structures that allow them to have a business model that flexes to the level of activity or inactivity of a select group of clients. Medical evaluation services have done well by staying with their elite and highly personalized service for a premium price. Further, it is rare that any Vietnamese would use the medical evacuation service as they would either use localized socialized medicine or use organic or handed-down medicines in their families.

Supplier Power

Suppliers, which in the case of the VIH, would be physicians who can speak multiple languages including English, French and possibly German, have a decided advantage in defining their salary and benefits details in going to work in the VIH. The reality is however that many of the physicians attracted to practicing in Hanoi would be those more inclined to see it a labor of altruism, similar to a personal mission of compassion.

Suppliers in the form of medical products manufacturers have significant leverage when selling into Vietnam, as the costs of freight are high and there is limited demand. Mr. Lee and Dr. Tan would need to bargain heavily to get the same prices for supplies as would be possible in Sydney, Singapore or San Francisco,

Buyer Power

Serving only a small percentage of the Vietnamese expat population which has dropped from 9,000 to 4,500 after the devaluation of the Cambodian currency and the crisis of confidence in the Vietnamese government’s willingness to develop business.

Upper middle class and wealthy Vietnamese do not have awareness and appreciation of the advanced medical techniques offered by VIH and further, sees the pricing required to even get the entry-level programs offered but VIH as at least 10X what they pay, with bribes, to medical providers in their own socialized medicine programs.

Undertake a traditional SWOT analysis of the case.

The following is an analysis of the strengths, weaknesses, opportunities and threats for Vietnam International Hotel:


Excellent facilities with state-of-the-art medical testing and treatment equipment.

Ability to attract financing with the concept of a premium hospital facility in Hanoi.

Initial strong positioning in the high-end of the expat marketplace.

Potential of transforming healthcare in the entire Southeast Asian region with a new concept of complete care for wealthy Vietnamese and expats looking for exceptional service.


Ambiguous and unclear positioning in the Vietnamese and western expat community have made it very difficult for the VIH to make any progress with business development efforts.

When VIH begins to make staff reductions the rumors begin they are pulling out of Hanoi and ceasing operations.

A very elitist position begins with the very expensive service programs VIH launches the hospital with; the move to Australian pricing solves his somewhat but there is still a wide gulf between the pricing seen as reasonable by wealthy Vietnamese vs. even the lowest pricing of the VIH.


Defining the primary mission of the hospital as either for middle-class and wealthy Vietnamese and drastically modifying the services offered and therefore the costing structure in the process.

Defining themselves as the patient-facing part of the complete service medical evacuation service and do arbitrage of serious medical conditions before patients are airlifted to another hospital.

Investigate the opportunities of taking the hospital in a very specialized direction, in one specific area of treatment. Examples of this are reconstructive surgery for this part of the world.

Sell the VIH to a large, multi-national nonprofit healthcare organization that wants to set up a location in Hanoi.

Sell the hospital to a French firm and cut the losses.


Continued confusion regarding the business focus, either it is the high-end of the Vietnamese market or the expat market, both of which are very transitory as members of both markets eventually leave the country for more affluent nations and services.

Rejection by the Vietnamese as the VIH moves closer to expats and tries to capture these customers through a very westernized approach to service.

Continued struggles financially make it increasingly difficult to keep the best surgeons and physicians, and they leave to do humanitarian work in other nations, disillusioned with the vision of VIH.

The Communist government decides that it wants to be the sole provider of healthcare for its people and moves to close all privately-owned hospitals.

Based on the original concept of the hospital, do you think Mr. Lee and Dr. Tan made a realistic assessment of the Hanoi market for private medical care when they launched the project?

No, Mr. Lee and Dr. Tan allowed the basic concept of a high-end hospital, filling a very unique and potentially profitable hospital to get them and other investors motivated without first completing the necessary market research to see if the expat population in Hanoi could support a premium services hospital.

What was needed was a thorough needs assessment both of expats from western nations who had the expectation level of premium healthcare to begin with. From these expectations, their unmet needs could be measured and key value propositions of the VIH could have been ascertained. The path from unmet needs to a unique value proposition for the VIH however would need to be a methodologically sound one. Instead of taking this approach Mr. Lee and Dan Tan have replaced market research and analysis with an intuitive sense of the high end of the medical services market being a prime opportunity for them to sell a premium service to expats. What the painful experience of opening the VIH showed was that there was a very good reason that there was not a medical facility of this level of quality in Hanoi: the market could not support its ongoing operation. So what intuitively appeared as a wide swath of the high end of the market being open in actuality wasn’t a real market at all.

Mr. Lee and Dr. Tan instead needed to first get an understanding of the supply and demand factors that brought expats into the country in the first place. The bhat’s relative volatility in neighboring Cambodia and the resulting loss of confidence in the Vietnamese government’s interest in developing business lead to an en masse migration of the target market of expats. Even secondary research completed as part of a broader market research strategy to gauge the true size of the market could have found this out. Secondary research in the form of business plans and even 10Ks on file with the Securities and Exchange Commission in the U.S., of corporations that moved to Vietnam would give a glimpse into the logic of companies moving into and investing in the region.

Mr. Lee and Dr. Tan would have done better to find out the factors that drove companies to come into Vietnam in the first place, and cheap labor would not be an acceptable answer. What else are the factors driving this migration and what type of managers are being transferred to Vietnam? Answering this question tells Mr. Lee and Dr. Tan who the potential customers are for the VIH.

Secondly and requiring much more work is a thorough methodology to ascertain the unmet needs of both expats and wealthy Vietnamese to determine which market they will initially target, and which one they will not go after, ever. This primary research needed to have a very thorough methodology to capture what services each audience wanted and what they were willing to pay for them. The bundling of services for each audience is quite distinct and very different, as is the pricing strategies for each. None of this was known when the VIH was created, and this is large part why the intensive and commendable efforts around sales are still not delivering results. What VIH is selling isn’t resonating with either segment (wealthy Vietnamese or expats) as they weren’t ask for what they wanted in the first place.

In summary there is a complete lack of methodology to get beyond what appears to be a major opportunity in the Hanoi market for healthcare when in fact there was a very good reason that part of the market was open; no one had taken the time to define services in the high-end of medical services, and the pricing dynamics of the market would later prove to be difficult to sustain such a high-end hospital on. If the founders had done research before the actual launch of the VIH they would have known this.

If you had been acting as a pre-project marketing consultant to Mr. Lee what might you have done by way of data collection to ascertain the nature of the market? (Remember, this is a developing-world country, and oftentimes consumers have little conceptualization of the product you envision.) would have taken a very systematic approach to building a research methodology that would have taken the following steps. First and foremost I would have decided this would be an expat hospital only, as the extreme pricing pressures in the Vietnamese market on medical services should have been obvious from just observing the market in action. To verify pricing dynamics nonetheless I would have included focus groups on pricing alone with middle class and wealthy Vietnamese. Here is the methodology I would have undertaken:

1. Define the total universe of expat companies in the areas with senior managers who had incomes and age levels where preium medical services would appeal to them. The younger (less than 40) managers, without children, would not see the value of this service. Conversely expat families would be willing to pay for this service to ensure their children received the best car. In completing this first step I would do a census of all companies in the Hanoi area and grade each on a scale of 1 to 10 in terms of their long-term commitment to the region with 1 being no commitment (they could leave tomorrow and 10 being in-country for decades).

2. Next I would take the total number of managers with families (a rough approximation) and those over 40 and put them into a table, next to the “commitment score” from step 1. I would then multiply them against one another to build a rough index of how many expats would likely be in Hanoi for several years. Any company with a score of 7 or more would constitute part of the relevant market. Any score of less than 7 on the company commitment score (from step 1) would signal a very transitory nature of the market. Transitory employees would burn an inordinate amount of time serving and managing their records only to have them leave in a year or two.

3. Based on multiplying the company commitment score by the number of employees who fit the profile (families with children and those over 40) then the total available market would be defined.

4. Next, I would start a primary research methodology to find out what mattered most to these people in terms of unmet needs. This would start with focus groups and progress to questionnaires that measure their relative level of price sensitivity to these services as well.

5. From this research I would next extrapolate the findings to the entire region and see if making such a premium hospital made sense from a business perspective. I would not consider offering services to the wealthy Vietnamese, because in general they have attained their wealth through strong negotiation skills and by being very focused on controlling costs. Vietnamese as a culture would find it difficult to grasp why such premium pricing would need to be paid for what their country’s government delivers free in the form of socialized medicine.

To build volume for the Hospital among Vietnamese, it appears that VIH not only needs to build brand awareness, but must also create need awareness in its market. How would you suggest VIH go about creating in the Vietnamese community recognition of the need for higher quality medical care without offending the government and its state-sponsored health care system?

The best strategy to accomplish this is to select a specific area of treatment and focus on being the best in that region of the world. To be a general practitioner hospital, VIH would need to match the pricing of the state-run facilities, and there is no viable business case in taking that strategy. For the Vietnamese population of Hanoi to accept the VIH, it would need to focus on earning a reputation in one of several areas including pediatrics, cardiology or facial reconstruction and cleft lip surgery for example. All of these areas that are very deficient in the Vietnamese medical system today for example and need greater focus, and in those unmet needs is a major market opportunity.

Take pediatrics for example. While the wealthier Vietnamese do not spend for their own healthcare as adults, they will for making sure their children’s diseases are taken care of by the best doctors available. Specifically the areas of cardiology and heart surgery for children, nutritional supplements, and cures for the more advanced forms of disease in the area would support this very specific market positioning.

Further supporting the pediatric specialist approach is the need for better prenatal care and birthing facilities. The bottom line that adults in societies where healthcare is provided by the state will not be willing to pay for their own care, but will support their children’s health with much higher levels of spending.

In addition to the steps already taken by Ms. Anh and Mr. Nguyen, what other measures could you suggest to expand the business volume at VIH?

After deciding to not take the positioning of trying to be all things to all people in Hanoi and focusing on just the expat population, then completing the analysis provided earlier in this paper, the strategy of being the best in one specific area of treatment in the entire region is the one I would undertake. What is missing today from the VIH is the alignment of services more precisely with the unmet needs of both the Vietnamese and the expats and the pricing dynamics of the Vietnamese population is unfavorable for a premium service hospital.

I would transform the hospital to a specialty center on pediatrics and look to provide valuable social service to the Vietnamese population for little or no cost by underwriting this public service from the higher prices to expats. This would bring the stature of the VIH way up in the Vietnamese population but also bring in more expats looking to having their children receive the best possible treatment possible.

Expanding on this positioning of premium pediatric and family care, the next step would be to look at partnering with regional medical evacuation companies in Cambodia, Laos and southern China where there is virtually no level of medical service. The goal would be to airlift in clients from these regions for treatment of their children and families.

Finally, I’d completely redefine services programs to make them more aligned with a very specialized area of medical practice and look to subsidize service to Vietnamese families with the profits from premium services. The focus on specialization in the region and being the best pediatrics hospital would bring in more expats with families and also provide a very valuable service to the region.

What risks, if any, do you see in trying to market to expatriates and Vietnamese at the same time?

There are many risks associated with this strategy and the biggest one of all is not having a definitive position in the markets the hospital intends to serve. The primary reason that many businesses fail isn’t lack of financial capital, it’s lack of focus when it comes to market positioning. Additional risks include the following:

The candid comment from one prospect of being able to afford 50 dancing nurses for the service fee strikes to the core of where VIH has failed in its market positioning; it’s seen as elitist today by the majority of Vietnamese, even the wealthiest who can afford their fees.

Lack of credibility in terms of treating Vietnamese due to the expat focus at the launch of the hospital. This has been further exacerbated by the value proposition at the launch of the VIH as being an alternative to medical evacuation services. Inadvertently this competitive position furthered the elitist image of VIH, as it is $5,000 to $6,000 to get medical evacuation if the patient can sit up or between $10,000 to $15,000 if the patient needs to be taken on a gurney on the flight. Just the $5,000 price point is many times the annual salary of a typical Vietnamese worker. Positioning against a service only the wealthiest and more senior members of the Communist Party could gain access to further gives VIH an elitist image.

For many expats, including the one who is defined his ordeal in Exhibit 6.1 of the case, Vietnamese care is something they are looking to escape. Taking the positioning towards the Vietnamese has required VIH to take the pricing down significantly. The trouble with this from an expat perspective is that in many of their minds, there is a definite price/quality relationship in terms of quality of medical care in Vietnam. Expats are willing to pay a premium to have exceptional care, yet the Vietnamese see bargaining and low prices as critical. So the dynamics of the price/quality relationship cannot work for both Vietnamese and expat audiences; VIH has to choose one or the other or it won’t get anywhere.

The services mix is radically different for Vietnamese vs. expats. This is a systemic problem that VIH needs to address immediately, as their pricing strategies can partially compensated for this, yet VIH cannot sell the same services mix to each audience. The Vietnamese have no idea of the value of the higher services; they have never used them before and are ignorant of their benefits. Expats on the other hand want state-of-the-art medical facilities and expect exceptional facilities, medical diagnosis and well-trained physicians who have excellent analytical skills. There is a major disconnect between what the expats expect and the Vietnamese want. Literally the VIH would have to split into two different divisions to be successful at a strategy of trying to cater to each.

Figure 1:

Porters’ Five Forces Model

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