05 BANANA FROM HAGL GROUP PENETRATES INTO AMERICAN MARKET

BANKING ACADEMY INTERNATIONAL TRADE AND FINANCE LECTURER: NGUYEN THU HUONG BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET TEAMWORK REPORT GROUP 05 20/05/ 2022 GROUP LECTURER: NGUYEN THU HUONG 01 NGUYEN PHUONG THAO - 22A4050354 02 DINH THI CAM TU - 22A4050299 03 TRAN THI TRUC - 22A4050182 04 NGUYEN THI HAI HANH - 22A4050050 05 NGUYEN THI ANH TUYET - 22A4050044 06 NGUYEN THI THU HANG - 22A4050293 07 KIEU THI HAI VAN - 22A4050381 GROUP BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET CONTENTS FOREWORD INTRODUCTION OF COMPANY REASON FOR ENTERING A NEW FOREIGN MARKET ANALYSIS OF AMERICAN MARKET THE MACRO ENVIRONMENT OF AMERICA 15 THE RISK THAT THE COMPANY MAY FACE WHEN THEY INVOLVE IN SUCH FOREIGN MARKET AND HOW THE COMPANY COULD MITIGATE SUCH RISKS 20 FIVE-FORCE MODEL IN US'S BANANA MARKET 23 METHODS OF ENTRY 27 CONCLUSION 28 REFERENCES GROUP BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET FOREWORD Vietnam is a tropical country and also home to many precious banana plants Banana plants are cultivated in a large area with a high yield In recent years, Vietnam's banana export market has increased sharply in demand Countries such as Korea, Japan, Russia, EU countries are gradually believing in the quality of bananas in Vietnam Grasping this situation, Hoang Anh Gia Lai Group has promoted banana exports in recent years After 10 years of careful and meticulous screening from customers, markets, customers, soil, and potential of the group Group, HAGL has decided to export bananas to foreign markets It has properly grasped the trend and demand as well as helped Vietnamese agricultural products obtain a certain foothold in the international market The purpose of this essay is to research the the opportunities as well as challenges that a firm faces when entering a new foreign market Specifically, banana product of company Additionally, our attempt is to give recommendations to this company into one of the largest consumer market in the world - American market PAGE 04 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET INTRODUCTION OF COMPANY HAGL GROUP Hoang Anh Gia Lai Joint Stock Company, formerly known as Hoang Anh Proprietary Enterprise, was established in 1993 The company is located in Pleiku City, Vietnam In 2019, HAGL Agrico has recorded many important milestones of the financial restructuring process Hoang Anh Gia Lai Joint Stock Company is organized in the form of a multi-industry corporation with the main fields of fruit growing and cattle raising Besides, the Group also maintains a number of other supporting industries such as hospitals and sports HAGL AGRIO Hoang Anh Gia Lai Agricultural JSC (HAGL Agrico) was established in 2010, when Hoang Anh Gia Lai Joint Stock Company (Parent company) carried out the program of corporate restructuring Now, the Company is operating in agriculture with rubber and fruits as its core products Its projects are located in Vietnam, Laos and Cambodia FRESH BANANA OF COMPANY Fresh bananas are the key product generating the biggest revenue to the Company The Company always focuses on producing high quality products, meeting the GlobalGAP standards or equivalent standards, eligible to export to tough markets such as China, Japan, South Korea Currently, the Company takes the Chinese market as a platform and will occupy the position of the largest supplier of tropical fruits in this market PAGE 05 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET REASON FOR ENTERING A NEW FOREIGN MARKET INCREASE REVENUE POTENTIAL Revenue from export enables the Company to be more proactive in its prevention of exchange rate risks Banana in particular, is the largest contributor to the revenue generation in 2019, accounting to about half of the total earnings and will continue to grow in the years to come HAGL's banana product have been exported in China, Korea, Japan So, it should enter a new foreign market to increase revenue NEW CUSTOMER BASE The international agricultural product market always has outstanding potential The demand for fruits in the consumer market is very large Another benefit of expanding abroad is that it gives the opportunity to not only sell your current product or service to a new customer base but also to invest and introduce new products/services With a much broader customer base, you can generate more business and increase sales From there, HAGL can export more other agricultural products, especially tropical fruits to consumers abroad IMPROVE HAGL'S REPUTATION When HAGL captures market share in even the most demanding markets such as America will help the quality of Vietnamese agricultural products be appreciated more with international friends A good global reputation will attract new customers Expanding abroad allows a company to build name brand recognition and establish credibility internationally If HAGL Group successfully participating in the banana export market, HAGL will receive a lot of benefits from reputation to profit PAGE 06 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET ANALYSIS OF AMERICAN MARKET THE MARCO ENVIRONMENT OF AMERICA POLITICAL Government plays a vital role in overall economic development and the business sector The USA follows the presidential democratic political system US has a fair electorate process and election system US's president falls under the category of the world’s most powerful person because he’s the head of the superpower country US has a great influence over the policymaking, political, and economic affairs of the country and worldwide The U.S-Vietnam Bilateral Trade Agreement (BTA) is a comprehensive document covering trade in goods, protection of intellectual property rights, trade in services, investment protection, business facilitation, and transparency Besides, Vietnam and US are member of APEC WTO, UN, IMF, World Bank An opportunity that Vietnam has from the US government is a good relationship both politically and economically This is an opportunity to promote trade with the United States to receive incentives and join US economic associations to have more development opportunities in the future PAGE 08 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET THE MARCO ENVIRONMENT OF AMERICA ECONOMY The USA has the world’s largest and most stable and powerful economy The economic system is well-developed and gathers its strength from its services and manufacturing industries The United States is a highly developed country with a market economy and has the world's largest nominal GDP and net wealth It has the second-largest purchasing power parity (PPP) behind China It had the world's eighth-highest per capita GDP (nominal) and the ninth-highest per capita GDP (PPP) in 2022 Labor is not cheap in the USA, the availability of cheap labor has encouraged many US firms to outsource many of their business activities around the world The unemployment rate is increasing and it’s declining the purchasing power of people because the pandemic of covid-19 has shut down all the businesses worldwide The unemployment rate continued its rapid decline falling to 3.6% in 2022 The U.S is the world's largest importer and the second-largest exporter (That means it operates as a free market economy in consumer goods and business services) The U.S plays a major role in the international trade system and is generally seen as a proponent of reduced trade barriers and free trade agreements The United States currently has more than a dozen free trade agreements in place QUICK FACTS GDP: $25.347 trillion (nominal, April, 2022), 1st in the world Unemployment: 3.6% (March, 2022) Inflation (CPI): 8.3% (April, 2022) Imports: $3.387 trillion (2021) PAGE 09 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET THE MARCO ENVIRONMENT OF AMERICA SOCIAL - CULTURE The USA is the world’s 3rd most populated country They also have a high aging population The high population age creates problems in terms of labor supply The Vietnamese immigrant population is the fourth-largest Asian immigrant group in the United States Because of the structure of a large immigrant population and a large Vietnamese community, Americans attach great importance to Vietnam's export products DIVERSITY: The country is the melting pot of all the world’s cultures and civilizations comprising people from everywhere Differences in culture and cultural ignorance of the market can lead to a loss of market share in the target market HEALTHCARE: The USA has the most advanced healthcare system and it’s very expensive Now they’re moving towards a healthier lifestyle, diet, and exercise However, health care is not usually free and certainly not cheap for many people LIBERAL MINDSET: The American people are open-minded and they have got liberal-minded It’s because they’re accustomed to seeing different cultural norms and trends RACIAL: The racial tension has been increasing in some states of the US, where the police have a tyrannical attitude toward Blacks It’s mostly due to socioeconomic mobility Socioeconomic mobility means upward and lowers the class of people in society because of the social and economic level PAGE 10 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET The risk that HAGL GROUP may face when they involve in such AN American market and how HAGL group could mitigate such risks Language and culture Doing business with importers and customers in another country requires a certain amount of trust Differences in language, culture, religion and many other aspects of life can lead to misunderstandings Different cultures can affect everything from “normal business hours” to ethical behavior to whether customers want to buy a product There are many areas where well-intentioned exporters can inadvertently create stress or discomfort for customers, government officials and other key people in the timely delivery of products and other aspects of the problem side of the business Buyer and seller The US currency is USD and they have a stronger competitive position than us Then we will have exchange rate risk due to currency conversion from USD to VND when receiving export money from US customer Exporting during a period of strong exchange rate fluctuations will cause Vietnamese enterprises to always have to deal with foreign exchange losses by raising their selling prices to cover losses This makes the prices of Vietnamese enterprises become more expensive become less attractive and less competitive In the United States, Therefore, Vietnamese enterprises often face many risks How to mitigate The best way to prevent these types of problems is to have American staff members who speak the local language or have experience living in American culture or region Alternatively, Vietnamese exporters can focus on building local business relationships countries in US to help resolve issues as they arise and strengthen relationships and presence of local exporters How to mitigate The competitive position and value of money of Vietnamese enterprises cannot be changed, so we can only reduce the risk by using derivative financial instruments on the foreign exchange market (contracts options, futures, swaps, forwards) PAGE 16 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET Legal issues We have already mentioned some of the legal issues above The United States is considered a country with a strict and complex legal system Two systems of commercial law of the federal and 50 states are applied co-inviting, sometimes cross, even conflicting with each other, and at the same time due to changes in businessrelated laws such as regulations on trademarks and the environment Therefore, it is not easy to study and understand this legal system If you not have a thorough understanding of federal and state laws in the US, you may be sued for violations of Intellectual Property Law, Anti-Counterfeiting Law, Environmental Protection Law Lack of understanding of the laws and regulations in the US trade policy has limited the partnership, search, penetration and market expansion of Vietnamese agricultural product exporters How to mitigate Hire legal counsel in a country with certain jurisdiction or proven expertise in handling local laws Relying on trusted legal advice can help us avoid, even anticipate, and proactively deal with potential legal problems Vietnamese enterprises must have the FDA's PCIQ direct preventive control certificate and meet the food safety requirements Every two years, that is, in even years, Vietnamese businesses transporting food and beverages for humans and animals to the U.S market must re-register their production facilities and representatives with the U.S Department of Agriculture and Rural Development United States Food and Drug Administration (FDA) for a new valid business number PAGE 17 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET Credit and Financial risks The risk of customer default or default is one of the important issues that exporters have to deal with This is even more difficult when HAGL's customer is the US - a foreign customer Even assessing the creditworthiness of an international customer can be difficult Not all countries have detailed information about a customer's past credit history or current credit rating, and the US is no exception To mitigate these credit risks, exporters often rely on prepayment or credit guarantees, such as letters of credit, before shipments are made However, taking these steps can delay shipments or exclude potential customers who are unable or unwilling to provide these documents, causing exporters to lose business opportunities How to mitigate Export credit insurance is perhaps the most effective way to deal with export credit risk In addition to providing payment in the event of a customer default, credit insurance can also provide important credit information about current and potential customers, allowing us to make informed decisions more transparent credit determination Transport risk The length of time the goods will need travel to get their final destination will be much further than for a domestic transaction This poses the additional risk that there will be more chance of the goods being damaged or being tampered with while in transit This is a great disadvantage when exporting bananas to the US because the distance between the US and Vietnam is too large, without large fleets, we cannot gain the right to transport in trade and cannot take the initiative in supplying goods Banana is an easily ripened fruit, so during transportation, it needs to be preserved very carefully, because if it doesn't meet the needs of American businesses, they can completely refuse the order How to mitigate Appropriate insurance is available to cover such risks, and the agreed Incoterm, which should be incorporated into the sales contract, will decide which party is responsible for insuring which part of the journey for goods in transit Professional transport companies and insurance companies will somewhat reduce the risk of losses due to delays and malfunctions during transportation PAGE 18 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET Risks relating to financial crime Trade fraud between countries is also considered as a challenge for Vietnam when enjoying NTR At that time, if the US applies GSP to Vietnamese goods exported to the US, there will be a situation where foreign goods take advantage of Vietnamese origin to disguise and forge Vietnamese origin to other countries to enjoy tax incentives Goods are simply “transported” from Vietnam with no physical changes to the product or disassembled products exported to Vietnam, followed by simple assembly steps (no creating significant transformation) into finished products and then exported to the United States While the production cost of these countries is much lower than that of Vietnam, even Even if it is only half the cost of Vietnam, and enjoys the usual preferential tax rate of less than 5%, the goods of these countries will certainly compete and beat Vietnam's goods and gain market share in the market Fraudulent origination increases risks for Vietnam's key, highly compliant businesses Goods from the highrisk market will have to undergo quality inspection for more complicated procedures PAGE 19 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET FIVE FORCES MODEL IN US'S BANANA MARKET POWER OF BUYER Bananas are one of the most popular fruits in the United States Customers in the US had a high income and bananas are cheap food, so they will not be too price sensitive However, around the end of 2021 and the beginning of 2022, inflation began to increase sharply, putting pressure on US consumers to force them to care about the price of goods High level of banana consumption There are always a number of customers willing to spend money to be able to use bananas Advantages for Hoang Anh Gia Lai POWER OF SUPPLIER HAGL Agrico currently has 18,000 hectares of agricultural land (worth about 400 million USD) growing a variety of fruits, including bananas, in Koun Mom district of Rattanakiri province in northeastern Cambodia, the area bordering Vietnam and Laos This is a large land fund far from residential areas, suitable soil climate, geographical distance and favorable transportation conditions to seaports and consumption markets, creating competitive advantages for HAGL According to statistics released in 2020, HAGL has planted more than 7,000 hectares of bananas, mainly Cavendish varieties according to Global Gap standards Along with that, HAGL also actively builds packaging facilities to meet annual production needs HAGL Agrico has created itself a functional ecosystem of caring, planting and watering plants according to agricultural technology from Israel Competitive pressure from suppliers is not a problem that HAGL has to face PAGE 20 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET FIVE FORCES MODEL IN US'S BANANA MARKET RIVALY IN THE INDUSTRY The US banana market is free of tariffs or quantitative import restrictions, making it a very competitive market In 2020, the United States imported $2.58MM worth of Bananas, fresh or dried, becoming the number importer of Bananas, fresh or dried in the world In the same year, Bananas, fresh or dried, were the number 157 most imported product in the United States The United States imports fresh or dried bananas mainly from Guatemala ($908M), Ecuador ($586M), Costa Rica ($417M), Honduras ($224M), and Mexico ($219M).Based on the above fact, the US can be considered as a fertile market for banana products There are many competitors making it difficult to enter the market Banana products are indistinguishable and can be easily substituted Big challenge for HAGL PAGE 21 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET FIVE FORCES MODEL IN US'S BANANA MARKET THREAT OF NEW ENTRANCE Banana is considered a market with high profit opportunities, the selling price is often double or triple the price, so there may be a lot of potential competitors who want to enter this market However, at present, to import bananas, the US has many choices Quality and price become the top priority There are quite a few suppliers who want to become US partners, but the quality requirements are very strict, creating competition among suppliers Putting great pressure on HAGL THREAT OF SUBSTITUTES Banana is a nutrient-rich food that is very popular in the US but it can also be replaced by many other products, for example: · Apples: according to 2019 data, apples take the top position in terms of consumption in the US In addition to fresh, canned, dried and frozen apples, Americans are especially fond of apple juice · Oranges: behind apples and holding the 2nd place on the chart, oranges are consumed all year round and become a favorite drink for many people Americans have many choices other than bananas, but in recent years, per capita consumption of bananas per year has remained well at 27 pounds HAGL needs careful preparation in terms of raw materials, techniques, people, product quality and compliance with international regulations to bring its fruit brand closer to the US market PAGE 22 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET METHODS OF ENTRY HAGL actually has experience in exporting to foreign markets, however, the US is a difficult market, so it is advisable to choose a way to penetrate the market slowly, such as indirect export, to learn about people's preference for this agricultural product Then we flexibly switch to other penetration methods to increase profits for businesses while still being able to satisfy the market We are at the highest point we've been since 2002 Congratulations to everyone! Indirect exports are also known as consignment exports With this form, the party having the goods will entrust another party called the consignee to carry out the export on behalf of the entrusting party In other word, Indirect exporting is where the company would engage the services of an intermediary that specializes in finding foreign markets and buyers for its products To implement this form, the entrusting enterprise needs to sign an entrustment export contract with a domestic unit The entrusting party will sign the export contract, deliver the goods and make payment for the foreign unit and finally receive the export entrustment fee from the goods owner who has entrusted the export Normally, enterprises that not have enough necessary information about foreign markets, or have small business sizes, limited resources or face many barriers from the state will apply this form of export PAGE 24 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET As a exporter, HAGL Group could take many advantages of indirect exporting ADVANTAGES Banana products can easily access the American market through intermediaries For example, the company can use an export management company, export trading houses, or confirming houses with extensive experience operating in the American market and thus, reduce the risks associated with selling in unfamiliar environments Moreover, the company can also use the experience, capital, and facilities of experts and intermediaries The company can build its image reputation in the American market and Concentrating resources for production Little or no financial commitment as a customer’s export usually covers most of the costs associated with international sales Export management is outsourced, reducing press from the management team No direct handling of export processes PAGE 25 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET DISADVANTAGES Besides the above strengths, indirect exporting also has some disadvantages Giving up control of markets, sales, and distribution May take buyer’s perspective with seller the third party can prioritize clients based on product, pay, commission, and incentives Must pay a fee to the export intermediaries so the profits of the business are reduced The company does not know promptly the changing needs of the market foreign market as well as the taste of customers when consuming products Loss of market control over how your goods are sold and marketed as well as the potential cost incurred Wrong choice of distributor, and due to efficiency, market, can lead to inadequate market feedback affecting the international success of the company Potential sales are lower than direct export (although low volumes can be an important aspect of successful direct exports) Exporting partners choosing the wrong particular distributor/ market can hinder a company’s ability to operate PAGE 26 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET CONCLUSION The report is conducted to analyze HAGL Agrio (HAGL Group) penetration into the American market Nowadays, America becomes one of the most potential markets accounting for economic development, large consumers, good conditions, and so on As a result, all the brands and companies want to have a chance to enter this market On the other hand, the American market is very densely competitive for foreign companies Besides, the U.S government also provides great support to domestic enterprises However, these still cannot reduce the attractiveness of this market HAGL needs to carefully review and analyze the market to develop an effective strategy to take advantage of opportunities and minimize difficulties For long-term goal, HAGL Agrico would like to become an industrial-scale agricultural corporation, strictly follow environmental and ecological standards, and to create a tropical fruit value chain in Vietnam's agricultural sector participating in the global market HAGL Group always gives prominence to the quality of products and promises to bring the most satisfaction to customers Due to many limitations and initial application of theory to practice, this report inevitably has shortcomings and limitations in the writing process Our group is looking forward to receiving your valuable contribution to improve our article Finally, the group would like to thank Ms Nguyen Thu Huong for her lecture teaching and guidance so that we can finish this topic well PAGE 27 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET REFERENCES Multiple authors, Guide to International Trade and Finance chapter 1,2,3 2021, HAGL Group, HAGL Annual Report 2021 2020, HAGL Group, HAGL Annual Report 2020 2019, HAGL Group, HAGL Annual Report 2019 Hoang Anh Gia Lai Joint Stock Company, http://www.hagl.com.vn/ April 9, 2021, U.S Department of State, U.S Relations With Vietnam, https://www.state.gov/u-s-relations-with-vietnam/ May 06, 2022, Việt Nam News, "Opportunities growing to export farm produce to US", https://vietnamnews.vn/economy/1188812/opportunities-growing-toexport-farm-produce-to-us.html Allianz Trade, "Export Risk Management", https://www.allianztrade.com/en_US/insights/export-risk-management.html May, 2020, Nguyen Thi Kim Thuy, "Export situation of Viet Hung Ltd and cashew nut export market to the U.S.", https://123docz.net/trich-doan/2727840cac-rui-ro-khi-xuat-khau-hang-hoa-sang-thi-truong-my.htm? fbclid=IwAR3ub992U0mSM4MIeB7NM1mVbAT5N0CSv7swhnEVxlRco0AxjaCC U8-5dv8 10 The Observatory of Economic Complexity, Banana market in United State, https://oec.world/en/profile/bilateralproduct/bananas/reporter/usa#:~:text=United%20States%20imports%20Banan as%20primarily,and%20Colombia%20(%2419.1M) 11 January 01, 2020, Ho Mai, "Hoang Anh Gia Lai export banana to China", https://theleader.vn/hoang-anh-gia-lai-xuat-khau-chuoi-sang-trung-quoc1577777853957.htm 12 The Packer, " Top 20 fruits and vegetables sold in the U.S.", https://www.freshproduce.com/resources/consumer-trends/top-20/ 13 July 22, 2020, Joe Ford, "How many pounds of bananas Americans eat per year?", https://answers-to-all.com/object/how-many-pounds-of-bananas-doamericans-eat-per-year/ 14 March 21, 2021, Tom Karst, "U.S banana imports steady", https://www.thepacker.com/news/industry/us-banana-importssteady#:~:text=U.S.%20banana%20imports%20in%202020,in%20the%20past%2 0five%20years 15 Economy of the United State, https://en.wikipedia.org/wiki/Economy_of_the_United_States 16 2020, "8 Reasons to expand internationally in 2020", https://www.capitalges.com/8-reasons-to-expand-internationally-in-2020 17 January 11, 2021, Ahsan Ali Shaw, "PESTLE Analysis of USA, https://swotandpestleanalysis.com/pestle-analysis-ofusa/#Fair_Political_System THANK YOU FOR READING OUR REPORT Please contact us if you have any question Group 05 - BUS12A06 Nguyen Phuong Thao (leader) phuongthao200112@gmail.com GROUP BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET ... the US market PAGE 14 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET The risk that HAGL GROUP may face when they involve in such AN American market and how HAGL group could... company into one of the largest consumer market in the world - American market PAGE 04 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN MARKET INTRODUCTION OF COMPANY HAGL GROUP Hoang... If HAGL Group successfully participating in the banana export market, HAGL will receive a lot of benefits from reputation to profit PAGE 06 BANANA FROM HOANG ANH GIA LAI GROUP PENETRATES INTO AMERICAN