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The two countries compare despairingly in terms of development, Japan is more developed than Vietnam and thus the entrepreneurial engine in Vietnam is less developed than in Japan.  This means that Vietnam has got fewer SMEs than Japan although interestingly has a higher number of people per SME than in Japan. This interprets that in Vietnam there’s a small number of SME start-ups and thus a smaller number of pool of SMEs from which a high growth of SMEs can emerge is fewer leading to a less growth than would be expected. Statistics show that in Japan, the bulk of its growth comes from high-growth firms while in Vietnam the bulk of its SME contribution come from net-startups which is relatively low in Japan. There’s also the internationalization of SMEs in Japan than in Vietnam. A small but significant number of SMEs in Japan have expanded abroad and currently about 13% of Japan’s manufacturing output is now outsourced abroad. This means that the money gotten from abroad will contribute to the national economic growth and thus its SMEs will grow at a faster rate as compared to a country like Vietnam which has not internationalized (Harvie C. & Lee B. 2002).

Another key factor is the number of employees per each SME, SMEs with less than 100 employees are not only important to economic growth but also to job creation. In developing countries like Vietnam, the contribution of SMEs to employment is higher as shown from above than in a developed country like Japan.  Hence in Japan, there are about 20 people per SME but in Vietnam the number is around 100 people per SME thus the ability to create jobs by start-ups is more and the pool of SMEs from which new SMEs emerge is smaller.

There’s also the issue of support both economically and politically to the SMEs by the existing respective governments. In a developed country like Japan there is more government recognition mainly because they employ many people. Although in Vietnam the SMEs and agricultural sector were prioritized as the main beneficiaries of stimulus package, neither were the receivers of the government money and about 29% of the SMEs as a result deactivated in the 2009 economic downturn. This shows that the SMEs in Vietnam have received little support and attention. These SMEs unlike those in Japan lack clear guidance on doing business both locally and internationally on valuable support programs. While some countries like Japan do give formal support their SMEs, Vietnamese SMEs are managing to survive without substantial government assistance (Khang T. 2010).

Because of the technological advancement of Japan, Vietnam is now receiving technical and financial assistance from Japan to help it develop its SME. According to a senior economist at Japan Economic Research Institute, Hirohika Sekiya, the Japanese government has approved a grant of US$180 million to finance the SMEs from 2009 in the next four years. Unlike in Japan, in Vietnam investors have always complained the lack of supporting industries making it difficult for the investors to boost their investments in the country thus Japan will assist Vietnam with technical information on how to best manage and grow their SMEs(Quang M. 2010). The strength of Japanese manufacturing is actually its capability to produce outstanding products because of its advanced technological know how. Because of the small size of the SMEs, they tend to be fragile and are easily affected by external factors like economic globalization and financial instability and Japan has an SME agency to resolve these kinds of issues and secure a financial safety net.

There are several recommendations that can be made to improve the state of SMEs in Vietnam and survive the test of time, these include but are not limited to;

Government should be involved. The Vietnamese Government should actively be involved in the development of SMEs and assist its local SMEs not only with money but also give relevant information on available opportunities and look for a market for its goods. There’s the export problem related to product acceptance and assist in logistics management. In their quest for internalization, the government should assist by doing research to examine the challenges that may be faced by the local SMEs and how they can be avoided or solved. They need to use a qualitative approach involving an in-depth analysis of the biggest challenges in conducting international business. This will definitely help it to capture a wider market for its products and hence have a higher economic return. There’s also the use of expertise in managerial positions in terms of experience as it was found that the top management have a far wide reaching impacts on decisions that they do make and in determining the direction and the future of the SME. This can be sourced from outside if lacking back home. For example; a country like Japan can help in funding of a manufacturing SME and give direction on how to conduct international business because of its expertise in the field.

In conclusion, because of the number of people it employs, SMEs should not be ignored by governments but rather assisted to grow because they are now part of the framework of the economy both in a developed country like Japan and a developing a country like Vietnam and revitalization of both of these economies is impossible without revitalization of the SMEs.

Code: Sample20

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