Improving the process of preparing agricultural products for export to EU market at intimex vietnam joint stock company (IVJSC)

FOREIGN TRADE UNIVERSITY INTERNATIONAL ECONOMICS AND BUSINESS INTERNSHIP REPORT TOPIC: Improving the process of preparing agricultural products for export to EU market at Intimex Vietnam Joint Stock Company (IVJSC) Instructor: Ms Lu Thi Thu Trang (MA) Student: Nguyen Thu Giang Class: A – High quality – Inter Econs - K46 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 Hanoi, August – 2010 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 TABLE OF CONTENTS Page INTRODUCTION Chapter I: OVERVIEW OF IVJSC AND ITS BUSINESS OPERATION I.1 Brief history of development I.2 Function, objective and organization structure I.3 Business Operation Chapter II: THE SITUATION OF PREPARING AGRICULTURAL PRODUCTS FOR EXPORT AT IV JSC II.1 The factors affecting the preparation activities for the agricultural products for export 10 II.2 The export situation of agricultural products at IVJSC 12 II.3 Process of preparing the agricultural products for export to EU market at IVJSC 14 II.4 Achievements; shortcomings and their causes 17 Chapter III: SUGGESTION ON IMPROVING THE PROCESS OF PREPARING THE AGRICULTURAL PRODUCTS FOR EXPORT TO EU MARKET AT IVJSC 21 III.1 Orientation of IVJSC 22 III.2 Suggestions 22 III.3 Recommendation 23 CONCLUSION 25 REFERENCES 26 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 INTRODUCTION During the time working as an intern at IVJSC, I have learned a lot about the general operations of the company I find it very interesting that the business fields of the company are diversified and developing promisingly The major business activities there can be name here: exporting agricultural products and handicrafts; importing machines and equipments; producing and assembling motorbikes and processing garments; managing the Intimex supermarket systems However I decided to choose the traditional ones and also the current strong export commodities of IVJSC to research because of its typical charateristics The export of the agricultural products has been carried out since the early days of the Company’s establishment As a student majoring in International Economics and just completed the subject “International Trade Transaction”, I would love to write a topic related to what I have learned at university Simply it is the reason why my topic is “Improving the process of preparing the agricultural products for export to EU market at IVJSC” I have worked truly hard to study the matter write it in a succinct but informative way fitting the limitation of around 25 pages, however, there cannot avoid lots of shortcomings Thus I really hope for Instructor’s sympathy and concessions in consideration LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 Eventually, I would like to express our most heartfelt and deepest gratitude to my instructor – Ms Lu Thi Thu Trang for your enthusiasm in guiding along with givin me valuable comments Thank you so much CHAPTER I OVERVIEW OF IVJSC AND ITS BUSINESS OPERATION LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 I Brief history of development: Established on August 10,1979 with the first name as Internal Import-Export Company, Intimex was the first company of Ministry of Internal Trade doing business on Import and Export Before 1986, Intimex was the first supplier of consumer goods imported from Social Republic Countries It also created thousands of jobs for workers who produced commodities for export After 1986, Vietnamese Government opened the Market The business of the Company was entrusted to each facility instead of operating complicatedly as a whole like before 1989-1990: Intimex is the one that took the initiative to ask the Government to allow export from Capital Countries to recollect the foreign currencies for the workers and the studying and business abroad; creating new consumer goods imported from Capital Countries to supply to domestic customers After 1988: Intimex set up new goals to strengthen agricultural exports focusing on coffee, peppercorn, making the turnover record After 10 years, Intimex became the leading exporter of coffee and peppercorn throughout the country ( 150.000 – 200.000 tons of coffee account for 20% of the country quantity; 10.000 -15000 tons of peppercorn account for 15% of the country quantity) From 2000: Intimex enter new chapter, investing on factories processing agricultural products: Peppercorn Factory in Binh Duong (2002), Cereal Starch in Nghe An, incoming Coffee Factory in Binh Duong and Buon Ma Thuat Besides, Intimex invested on aquaculture in Dien Kim- Nghe An and Dong Ghep – Thanh Hoa with the biggest area in the North of 100 of shirmp; million m2 in the sea of oyster LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 To expand the business, Intimex established more branches in Tay Ninh, Binh Duong, Nghe An, Dac lac Besides, it merged some loss-making enterprises One of the strengths of Intimex is the supermarket system with the first one opened in 2001 Currently, Intimex has 14 supermarkets in Ha Noi, Hung Yen, Hai Duong, Hoa Binh, Hai Phong, Nghe An, Da Nang, Buon Ma Thuot Expanding the supermarket system is one of the strategic target of Intimex in the coming years Experiencing more than 30 years since its establishment with both success and hardship, Intimex has kept rising up overcoming difficulties to maintain the firm foothold and its prestige in the Domestic Market It was ranked 49/500 leading Vietnamese firms in 2008 thanks to the turnover of more than 9000 billion USD ( more than 300 billion USD was submitted to the State Budget) Currently, Intimex completed its equitization and operates its business under the name Intimex Vietnam Joint Stock Company (IV JSC) I.2 Function, objective and organization structure I.2.1 Function: - To organize production and processing for domestic consumption and export - Import directly and receive consignor of materials, machines, equipments - Transacting services for Vietnamese people abroad with hotels and tourists, trading gemstones - Direct export and entrustment export of agricultural – forestry, fisheries, handicrafts, processed foods and groceries, mineral, seafood I.2.2 Objectives: - Setting up suitable production plans, sales and services to its best operation in order to make as much profit as possible - Building business strategy to deal with competitors (including research, training ) - Performing successfully all contracts - Develop the Company in all fields so as to remain and strengthen the prestige, effectiveness and image of the Company as the Leading firm in Import – Export Trading and other services I.2.3 Organization structure: LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 Please refer to the Chart on the next page: In addition to the chart, there are other departments such as : Planning, Finance, Organization, Technology, Administration, Warehousing service, Basic Construction LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 I.3 Business Operation: I.3.1 Main products: Trading business activities - Export activities: agricultural products, seafood, handicrafts, technology - Import activities: materials, machines, transport means, consumer goods -Domestic activities: distributing wholesaler-retailer channels (supermarkets) with production, business and consumer goods Service business activities - Telecommunication - Warehouse and office for rent - Transiting, transshipment Production activities - Producing and Processing agricultural products - Cultivating and processing aquatic products - Producing and assembling motorbikes - Producing and processing garments I.3.2 Service process (7 steps) INTIMEX Customer Website Marketing Department Order Negotiation Confirmation nnnn Order the Supplier Source: Sales Department Import/ Export goods 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 II.2 The export situation of agricultural products at IVJSC II.1.1 Overall situation: IVJSC is regarded as the leading export in agricultural products such as coffee, peppercorn, rubber, rice, peanuts IVJSC is proud to be the leading firm in exporting coffee with the total quantity of 108.000 tons in 2006 This is an impressive record which made IVJSC reach its first rank in exporting coffee throughout the country Also in 2006 seized the number one place in exporting black peppercorn with 9858 tons in total In 2007, IVJSC exported 33 719 tons of coffee, gaining the turnover of 51 million USD Besides the main products, IVJSC keep seeking new exports every year Coconut rice can be mentioned as an typical example In 2007, IVJSC exported 1855 tons of Coconut rice, gaining over 1.8 million USD Tablet: The export situation of several products from 2007-2009 at IVJSC (Unit: ton) Products 2007 Coffee Peppercorn Rate Year 2008 2009 08/07 09/08 33719,44 91112,01 83264,04 270,2% 91,38% 7012,64 6943,23 8297,18 99,01% 119,5% 1855 2700 2106 145,55% 78,02% 6900 4728,6 7512,89 68,53% 158,88% Coconut Rice Cereal Starch (Source: Final Report on Export Situation of IVJSC year 2007, 2008, 2009) 14 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 II.1.2 The export situation to EU market: With 27 country members, EU is the biggest consuming market in the world However, it is a very choosy market with lots of standards set up in order to apply for export products Toward each product, EU market has particular standards So as to attract consumers in EU, the commodities not only have to be of good quality but also of attractive designs Therefore, import-export firms in general and IVJSC in particular have to taking care of the products even from printing section to the color of labels on the packing EU has regarded as the biggest partner of Vietnamese agricultural products Lots of agricultural ones of Vietnam are appreciated as the best among the exporters by the EU IVJSC is one of the main export markets of established and well known partners in EU Every year IVJSC exported nearly 10.000 tons of agricultural products, making the profit of 150 million USD Table: The export situation of several products into EU Market from 2007-2009 at IVJSC (Unit: ton) Year Products Coffee Peppercorn 2007 2008 Rate 2009 08/07 09/08 11907 33241 19122,12 279,17% 57,52% 2751,59 3294,1 3011,05 119,7% 91,4% 394,5 613,77 581,58 155,58% 94,67% 1270 2013,85 2976 158,57% 147,77% Coconut Rice Cereal Starch (Source: Final Report on Export Situation of IVJSC year 2007, 2008, 2009) 15 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 Some short comments on the above table: - In recent years, the quantity of agricultural products for export has fluctuated unstably because of several factors - In 2008, the export quantity of all the products went up - However, in 2009, the quantity of almost all products went down - The reasons is the influence of the global economic crisis, which made lots of countries tighten their budgets and decrease imports Thus IVJSC had lots of difficulties in seeking partners for export II.3 Process of preparing the agricultural products for export to EU market at IVJSC: The process of preparing the agricultural products for export to EU market at IVJSC are carried out under steps as follows: o Collecting and gathering the agricultural products o Packing and labeling o Checking the products before export After the Contract on exporting agricultural products to EU market is signed, IVJSC begins to prepare the goods for export This is an significant process to perform the commitments in the Contract The agricultural products for export have to be carefully prepared in case of quantity, quality, technical standards, packaging labeled and be ready to deliver at the right time as regulated in the Contract II.3.1 Step 1: Collecting and gathering the agricultural products This step plays a very important roles as it ensures that the commodities are provided correctly in designs and sorts, of correct quantity and in time with low expenses This includes small steps: a Defining the demand of the export products: 16 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 Defining the category, size, quality, quantity, packaging, label and expected time for export in order to define the potential supply The technical standards and expected time are normally based on International Trade Contract signed with partners, or based on orders, offer acceptance sent from foreign partners b Recognizing and classifying the export source: Main export products of IVJSC are coffee, peppercorn, peanuts, cereal starch, coconut rice Among them are coffee and peppercorn – the major ones, making up 20% of the coffee export quantity of the country and that number to peppercorn is 15% The criterion of classifying the export source is “ geographical areas” Following this criterion, the purchase of big quantity can be easier The main purchase areas of IVJSC is the North and the North East, accounting for 90% 10% is from other areas c Performing the transaction: There is a team of IVJSC who is responsible for the purchase directly or through the intermediaries to collect the agricultural commodities Besides, the Company also have some factories to process those ones for export Often the Company connect and cooperate with other domestic purchasers and producers to strengthen this “purchase” and “collecting” activities d Organizing the system of gathering the goods for export: This activity is performed under forms:  Organize to perform the purchase of the exports through the orders and economic contracts: + After the first notification of the Seller (IVJSC), the Seller shall send the Buyer the Delivery Plan sothat The Buyer can store the shipment charge and rent the warehouse The content of the notification 17 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 includes: name of commodity, number of packaging, weight, expected delivery day + The Seller shall notify the Buyer the second time days before the day of ready delivery + Before packing the goods into containers, the Buyer has to inspect the quantity and quality of the goods  Organize to perform the authorization export skill: The IVJSC just perform the export and receive the commissions, other expenses are paid by the Suppliers II.3.2 Step Packing and labeling Packaging the goods for export: Packaging is done in order to preserve the goods during transportation sothat the goods shall be in best condition when arriving at the consumers The packaging needs to qualify the convenience in use and attractive in design as well IVJSC is using jute bags for packaging agricultural products The just bags suit the necessary standards and customs of customers The expenses are based on those above standards and economic criteria such as purchase, production and packaging expenses and the relatively suitable price between the packaging and the goods Labeling the goods: This work helps create convenience in delivery, instructing the method of loading and unloading, preserving the goods for export At the moment, the “labeling” activity is dependent on the designs and requirements of the customers sent from abroad IVJSC hasn’t been active in this step yet Step 3: II.3.3 Checking the products before export This is the activity to inspect the quantity and quality of the goods which is going to be exported of IVJSC 18 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 The Inspection Company chosen can be Vinacontrol, SGS and others depending on particular export Contract This step is taken great care of because it proves the prestige of the IVJSC and the long term relationship with the Customers Unless regulated clearly in the Contract, otherwise the inspection shall be done directly by the Inspection Department ( KCS) of IVJSC This activity is carried out at the production places or at the Company’s warehouses The KCS shall check the quantity, quality, weight, packing, quarantine regulations After that, KCS shall check again, the qualified goods shall receive the Certificate of the Company, others will the treated timely However, the “checking” step at the Company is still loosened due to the difficulties in equipments and infrastructure II.4 Achievements; shortcomings and their causes II.4.1: Achievements: EU is really a challenging market with lots of strict standards and requirements However, IVJSC did success in entering and doing business with them, becoming the prestigious partner of lots of Customers from Holand, Sweden, France, UK and Belgium It can be remarked as a proud achievement To reach this final achievement, IVJSC has taken great care in each small step The collecting activity is normally carried out right as the plan of the Contract, contributing to keep the trust and image of the Company toward traditional partners Agricultural is the products that are very dependent on weather However IVJSC paid good attention to this factor, researching on how it affected each kind of products so as to ensure the time of delivery and save transportation fees; thus improve the effectiveness of the process of preparing the agri products for export Besides, IVJSC also focus on investing and improving the processing factories, creating good conditions for those factories to develop, increase production, trying 19 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 the modernize the machines and equipment as well as improve the workers and staff’s lives In such difficult condition when the global economy has just experienced the global economic crisis with the strict competitiveness in the industry ; IVJSC has done its best to overcome the hardship so as to remain the firm foothold in the domestic market II.4.2 Shortcomings and causes: Besides the achievements, the existing shortcomings have influenced the effectiveness of contract performance in particular and the business operation of IVJSC in general The collecting and working with the information while carrying market research and the commodity supply is still limited due to incorrect and sometimes unsuitable plan of the Purchase and Collecting Team and the sudden change of weather Any postpone when the Team can’t purchase enough goods will cause delay in delivery time The quality of several agri products in the areas haven’t really qualified the requirements of IVJSC as well as IVJSC’s partners The situation of unequal and unstable quality, retail quantity of the suppliers leads to increasing preserving charges, sanitation This shortcoming is due to the weather and the poor methods of the farmers as they don’t have enough knowledge and active in facing and solving the difficulties during their planting Limitation in infrastructure Even though some factories have been equipped with new machines, the new ones haven’t meet the demand yet Sometimes the factories still can’t produce enough quantity due to lack of machines or the old and slow ones with low productivity The packaging in general is very simple in design and not attractive enough To such choosy customer in EU, it’s really a problem The causes are low 20 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 techniques in producing the jute bags and lack of creativeness in designing and printing as well The checking process has some shortcomings as it has not been done carefully enough at IVJSC The causes are mixed by the skill and responsibility of the inspector and the lack of laboratories and suitable modern tools and equipment 21 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 CHAPTER III SUGGESTION ON IMPROVING THE PROCESS OF PREPARING THE AGRICULTURAL PRODUCTS FOR EXPORT TO EU MARKET AT IVJSC 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 III.1 Orientation of IVJSC: This year- 2010 The target of IVJSC towards agricultural products is to increase total export at the average rate of 120% compared to 2009, focusing on products: coffee, peppercorn and coconut rice There is not specific figure for the regions such as EU only because IVJSC hope to expand the markets and seek new potential customers as well Seeking some unfamiliar market is one of the challenge set up this year In the next five years: IVJSC continued to seek potential customers and find new products but the strategy is to focus on specific products, but not to increase or take care of all kinds of products In details, the export activities will pay great attention to coffee, peppercorn, coconut rice, cereal starch and peanuts If there shall be a new product, it would be related to processed agricultural ones Other kinds of products such as handicrafts shall be limited as the long-term vision of IVJSC is to gather the capital to expand and develop the supermarket system stronger and stronger with more and higher quality supermarkets throughout the cities and provinces It is said that in the farther future, IVJSC will set it target focusing on the leading supermarket system throughout the country “Supermarket” shall become its best strength, and the import-export is still a field that shall be taken great care of but not the best “focusing” section III.2 Suggestions: - Strengthen the research and market expansion - Enhance the research on commodity supply - Build and maintain good relationship with the local supply 23 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 - Improve the quality of the agricultural products for export - Improve the quality and design of the packaging - Improve the quality of inspection process III.3 Recommendation: a Toward the Company: *** The situation is IVJSC normally has difficulties in finding and purchasing enough qualified commodities for different reasons as stated in II.4.2 number 1.2.5 To overcome this matter, the key is to carry out careful research before starting the “collecting”, sothat we can make good plans and follow them easily - The first research activity is market research to define the major markets, the stability, competitiveness and profit of the commodity After that the plan shall be made ( plans shouldn’t be made before doing research and later the staff has to try their best to reach the target of the plan, as the number “set up” in papers is usually unmatched with the real situation.) - The second research is on the commodity supply This research should be carried out carefully based on analysing and researching the fluctuation of demand-supply, then later give the forecast that helps the Company maximize profits and minimize losses When the price of purchased goods tends to increase or the future demand is expected to go up, IVJSC should buy and store with a large amount The next solution is the “investment” and “care” in order to improve the quality of the agricultural products: During the collecting and purchase process, one of the most important things is the agri products have to be consistent, equal in quality ( the situation that parts of the purchase are good, parts are bad cannot be accepted) Therefore, the investment is in the seeds and the technical tools to create good new seeds and multiple them, investing in modern machines and expenses for hiring 24 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 experts to help the farmers grow and take care of the plants with correct techniques, preserve the products in correct conditions The “care” is the careful checking which is carried out regularly in the warehouse: check whether the warehouse is clean enough, the products are in good condition and are not moist or musty To so IVJSC has to recruit the qualified and responsible Inspection Team and there should have a good Team checking the work of the inspectors as well The “care” also mean taking good care ( or maintaining the good relationship with the local suppliers) We can’t export without the products they produce, so the investment in experts and supporters inspecting & helping them with techniques is very meaningful in helping them over any troubles during the planting time Ensuring the in-time payment is also wise care to prove our prestige and make them trust us better Sometimes, we need to “overcome” the hardship with them by giving them some payment in advance so as to avoid the instability or the contract breach or cancellation which cause a lot of damage to us Along with the good treatment, strict punishment to the breaches and defraud must be applied *** In order to deal with problem – the quality and design of the packaging: Some of our packaging is said to be not flexible and stable enough, which may be torn during transportation To solve this matter, the production must be carried out carefully, ensuring the requirements of the partner are met The Managers of this process should check the printing ink as well as printing process carefully to make sure the marked information printed on the jute bags are correct and clear, not blur which can cause misunderstandings while delivery *** So as to reach the target of this New year, the Marketing Department should try their best (by all sorts of marketing: online, media, fairs ) to seek new customers and markets (other countries in EU we haven’t cooperated or has little business 25 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 relation like Spain, Luxemburg, Italia , hoping to sell more products and get more profits b Toward the State: *** To solve the matter 3: Investment in infrastructure Not only the modern equipments for the Company but the public infrastructure is very important Because we need good roads and bridges, good water system and enough electricity to carry our commodities from place to place more easily and preserve them better in the warehouse ***Matter 1.2.5: Support IVJSC in promoting commerce and approaching the markets: IVJSC as well as other import-export firm are currently facing lots of difficulties in seeking EU customers EU market is very far from us, we normally don’t have enough conditions to go to and research on this market Therefore, the Ministry of Finance need to ask Commercial affairs in EU to work harder to supply the domestic ones with enough information, laws, regulations as well as the happening oF each Vietnamese products into EU: such as forecasting supply-demand, competitiveness, contribution channels, methods to approach the markets Part of the expenses for those kinds of activities should be beared by the State sothat decreasing the burden for the Company Besides, The Government should make publication on EU market, standards etc for better understanding to firms Workshops, forums or something similar should be held to encourage the relationship and help create new opportunities for the domestic export-import business firms 26 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 CONCLUSION To the best of my ability, I have just completed my assignment on the IVJSC where I was interned this summer Beginning with the brief history of development and business Operation, I would like to draw an overview picture of IVJSC since the establishment up to now when its products are various Chapter brings the more detailed look into the export situation of agricultural products at IVJSC in general and to EU market in particular I have tried to describe the process with the steps as clearly and carefully as possible but still keep the information very succinct As the last part of Chapter mentions the achievements and shortcomings and their causes, the last Chapter surely finds the solutions to solve the difficulties stated above so as to promote the quality of the product and the effectiveness of the whole preparing process As recommended from my point of view towards two level: the Company and the State, hopefully the ideas can somehow be helpful The last words are my best wishes for the development on-keeping situation of the export process of IVJSC’s agricultural products to EU market in the future when the Company have tried to apply different methods to improve the shortcomings and reach the set up target, keeping the rank as one of the leading export-import firm throughout the country 27 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Internship report – Summer 2010 REFERENCES Foreign Trade Skill Text Book – Pr Phd Vu Huu Tuu, Education Publishing House 2006 Final reports on the export situation of Agricultural Products of IVJSC year 2007, 2008, 2009 Some documents related to Agricultural Products Contract of the Company http://wikipedia.org http:// www.viettrade.gov.vn http://www.intimexco.com http://intimexhanoi.com http://www.vcci.com.vn http://www.tinthuongmai.vn 10.http://www.thesaigontimes.vn 28 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ... partners for export II.3 Process of preparing the agricultural products for export to EU market at IVJSC: The process of preparing the agricultural products for export to EU market at IVJSC are... the agricultural products for export 10 II.2 The export situation of agricultural products at IVJSC 12 II.3 Process of preparing the agricultural products for export to EU market at IVJSC 14 II.4... a topic related to what I have learned at university Simply it is the reason why my topic is ? ?Improving the process of preparing the agricultural products for export to EU market at IVJSC” I