THE INTERNATIONAL TRADE AND FINANCE TOPIC: CONSULTING FOR CAO PHAT TO PENETRATE SOUTH KOREA CASHEW MARKET

THE STATE BANK OF VIETNAM BANKING ACADEMY THE INTERNATIONAL TRADE AND FINANCE TOPIC CONSULTING FOR CAO PHAT TO PENETRATE SOUTH KOREA CASHEW MARKET Lecturer Nguyễn Thu Hương Group 7 Members Hoàng Thị H.

THE STATE BANK OF VIETNAM BANKING ACADEMY THE INTERNATIONAL TRADE AND FINANCE TOPIC: CONSULTING FOR CAO PHAT TO PENETRATE SOUTH KOREA CASHEW MARKET Lecturer: Nguyễn Thu Hương Group: Members: Hoàng Thị Hồng Anh 21A4050014 Nguyễn Thị Như Quỳnh 21A4050367 Nguyễn Thị Thùy Linh 21A4050247 Hồ Thị Mỹ Duyên 21A4050082 Nguyễn Phương Linh 21A4050241 Trần Thị Huyền 21A4050205 Hoàng Thị Thúy 21A4050409 Table of contents I Introduce Cao Phat Company II Reason for finding a new foreign market III New potential country market for Cao Phat: Korea IV Method of entry into new country market 10 V Conclusion 11 Reference Material 12 I Introduce Cao Phat company: A Brief Overview CAO PHAT COMPANY LIMITED was established in 2007 and specialized in processing agricultural products They incessantly train professional skills for workers and managers during their operation Besides that, they always pay attention to developing both facilities as well as human resources Their main product is Cashew Nut Kernels which were bought from farmers or local traders to put into their production line according to FSSC 22000 standards Moreover, Cao Phat Company Limited got a BRC issue certificate at the end of 2015 They export many containers of cashew nut kernels to the world and their main market is Europe, USA and Australia ● Products & servicesCashew KernelsBroken Cashew Kernels · Cashew Kernels · Export Cashew Kernels · Export Cashew Nuts · Split Cashew Nuts · White Cashew Kernels · Yellow Cashew ● Cashew Processing MachineryAutomatic Shelling Machine Model · Raw Cashew Grading Machine · Raw Cashew Machine Quality of product is always their best concern and an important key to develop their trademark to the world So, the most significant thing in their business is satisfying customers and meeting all demands of consumers With their slogan “Cashew – delicious taste connecting People” Cao Phat Company Limited guarantee that their products have an agricultural source without using any kind of preservatives as well as pesticide content They are proud of their products which are inspected by authorized inspectors and are clean, safe food as well as serve for consumer’s benefits and health Strength and Weakness: ● Strengths: ✓ Head office has a 5ha-area ✓ The productivity of 20,000 tons of raw cashew nuts The company has exported hundreds of containers of cashew nuts ✓ Staff: More than 1000 people ✓ Export market: Europe, America, Australia - By investing in modern production equipment, their company can be proud to be one of the largest manufacturers in the Vietnamese cashew industry Currently, Cao Phat is a member of the Vietnam Cashew Association (VINACAS) and also a member of Ba Ria Vung Tau Enterprises Association ● Weakness: •The distribution system of Cao Phat's branded products has not been widely distributed across the country •Advertising activities have not been paid enough attention •The company advertises or does little PR on TV, the internet •The image of Cao Phat brand is not really clear and makes an impression on consumers II Reason for finding a new foreign market: The reason is that Cao Phat company exports cashew nuts to South Korea South Korea was chosen as an international market for Cao Phat company to enter and export cashew nut products for a variety of reasons Some can be listed below: In the world, the cashew nut brand of Vietnam in general, and Cao Phat company in particular, has attained high rankings in both export quantity and many wide and challenging markets such as the EU, the United States, the Middle East, and so on It is highly respected for its quality And even when the global Covid-19 pandemic exploded, causing the whole economy to go down, Vietnam remained a bright spot in the country, and this provided Cao Phat with such an opportunity for the South Korea cashew nut market In the Asian region, Korea is Vietnam's fourth-largest trading partner Phones and components, textiles, footwear, seafood, timber and wood products, computers, electronic products and components, cashew, chocolate, pepper are the main products exported from Vietnam to Korea Meanwhile, Vietnam imports machines, vehicles, pharmaceuticals, iron and steel, and chemicals from Korea The two sides' import and export goods are complementary rather than competitive Vietnam imports goods from Asian market in 2020 (Source: General Department of Vietnam Customs) Cashew is one of the key crops of Vietnam agricultural products From a country that only grows cashews and exports raw cashews, Vietnam has modernized its cashew processing technology, expanded its export markets to over 90 countries and territories, becoming a country with the largest cashew nut export turnover one, processing ranks second and holds the third position in the world in terms of yield and output The cashew industry brings great economic value and contributes to creating jobs for millions of farmers and workers, especially in difficult economic areas Vietnam joined the WTO in 2007, has been participating in bilateral and multilateral free trade agreements (such as the ASEAN-Japan Agreement, ASEAN-Korea, ASEAN-China, ASEAN-Australia/New Zealand) Zealand, the EU-Vietnam Free Trade Agreement, the Trans-Pacific Partnership ), joining the ASEAN Economic Community (AEC) So, these are great opportunities to expand the South Korea market and take advantage of incentives III New potential country market for Cao Phat: Korea Political Factor: South Korea is a fully functioning democracy It has a presidential system where the President is the head of state Its constitution ensures that political parties can be established freely; however, political parties must be democratic in their objectives and activities South Korea is a politically stable country It is an ally of the USA and maintains a close relationship with many countries Its relationship with China and Russia is very good; However relations with North Korea are almost hostile, frequent disagreements also occur with Japan, mostly because of their pre-independence atrocities South Korea is an important member of global bodies as UN, WTO, OECD and blocs such G-20, ASEAN plus three, etc The policy relationship between VietNam and Korea: "The Republic of Korea is a very important partner of Vietnam and a good model for Vietnam to expand cooperation and exchange experiences during its development process The Vietnam - Korea Free Trade Agreement (VKFTA) took effect on December 21, 2015, in which South Korea gave many incentives for Vietnamese agricultural and fishery products to access the Korean market Environment factor: South Korea has modest natural resources Natural resources in the form of plants and ecology are widely missing in the country, which makes the country highly dependent on agricultural imports This makes Korean farmers face many difficulties and disadvantages in cultivating and developing agriculture Furthermore, Korea's agricultural sector accounts for only 2.2% of the country's GDP With a dense population and scarce land, Korea will still depend on imported food This makes advantages for our company when exporting to this country North Korea constructed Imnam dam very close to the DMZ in 2003 Sudden uniformed release was done by North Korea in 2001, 2002, and 2007, which created flood like situations in the city of Seoul So (2020) reports that 70% Koreans consider air pollution the most concerning environmental issue Other major issues they consider are waste management, global warming, future energy sources and supplies, emissions, water pollution, and overpackaging of consumer goods To reduce environmental problems in facilities, the company must spend more money in the future, which can cost the company huge costs Therefore, the company of Vietnam will make competitive prices more than domestic similar products Social factor: Korea is highly developed and one of the most affluent countries in Asia South Korea is a great purchasing market with a population of more than 51 millions in 2018, a GDP of more than $1.6 trillion, ranking 12th in the world and a per capita income of over $40,000 People above 65 will be 40% of the total population in 2060 After 2030 the population will decline About the Fertility: Low Fertility - 1.24 Children per woman Security healthcare to those parents who both working increased Korean is the major language, while both Buddhism and Christianity are the most practiced religions (BBC, 2018) South Korean society is influenced by factors such as respect for ancestors, age, and seniority Likewise, factors such as marital and economic status, and hierarchy also play a big role · Power Distance - At an intermediate score of 60, South Korea is a slightly hierarchical society · Individualism - A score of 18 is considered a collectivistic society · Masculinity- Scores 39 on this dimension and is thus considered a Feminine society · Uncertainty Avoidance - At a score of 85 South Korea is one of the most uncertainty avoidance countries in the world · Long Term Orientation - At 100, South Korea scores as one of the most pragmatic, longterm oriented societies · Indulgence - With a low score of 29, South Korean society is shown to be one of Restraint Technological factor: The new Creative Economy Initiative, Korea has renewed its bio- and nanotechnology strategies It focuses on supporting start-ups and building SMEs innovative capacity by consolidating existing schemes and the share of R&D investment going to SMEs increased from 12.4% in 2011 to 18.0% in 2015 The 10 Year Energy Technology Development Plan (2014-23) has a budget of USD 20 billion PPP to assist in the creation of a new energy industry and innovation ecosystem Part of this is establishing a new R&D system in terms of supply- demand convergence, encouraging the commercialization of technology Korea has got a very high Global innovation index ranking in 2020 About South Korea, it is known for its high technology innovation and also very quick to implement ideas, resulting in a very small time gap between innovation and commercialization South Korea made great progress in the field of aerospace engineering, biotechnology, and robotics Most Koreans see artificial intelligence as part of the solution, not the problem Over 85% of the population use social media Future challenges and risks: · Disturbed neighborhood · Brain drain · Rising R&D costs · Added to high wages and strict labor laws, the cost of maintaining an R&D center is rising · Foreign companies pulling out of the country, favorable attitude towards investments into R&D there is a lot of local hatred against foreign companies With more and more markets opening up, there is a growing need to reduce restrictions, various business procedures and processes Economic factor: Korea is the country with the most developed economy and ranked 4th in the Asia economy It is a mixed economy That means it operates as a free market economy in consumer goods and business services The Organization for Economic Co-operation and Development (OECD) on March 15 revealed that Korea's nominal gross domestic product (GDP) in 2020 is estimated at 1.624 billion USD, ranking 10th in the world, surpassing Russia in 11th place ($1,403 billion) and Brazil ranked 12th ($1,394 billion), Australia 13th ($1,333 billion) Up to now, the Vietnam – Korea Free Trade Agreement (VKFTA) has been effected for years ( since 2015 ), but the appearance of Vietnam’s strong agricultural products in this market is still limited According to statistics:   In 2018, Korea imported 35.2 billion USD of agricultural, forestry and fishery products, of which, imported vegetables and fruits was 8.44 billion USD, seafood was 5.045 billion USD, and forest products were 3.825 billion USD However, in this market, the group of agricultural - forestry - fishery products of Vietnam only accounts for nearly 6% of the market share, with a turnover in 2018 of 2,145 billion USD In the first months of 2019, it reached about 760 million USD It is expected that for the whole year of 2019, Vietnam's export turnover of this group of goods to South Korea will only reach about billion USD like last year  From the end of 2019 to the end of 2020, Korea has been greatly affected by the Covid-19 epidemic The Bank of Korea announced that the country's GDP fell by 3.3% in the second quarter of 2020 Meanwhile, GDP in the first quarter of 2020 decreased by 1.3% With consecutive quarters of decline, the Korean economy has fallen into recession for the first time in 17 years since 2003 This is a direct result of the COVID-19 pandemic that has disrupted supply chains, leading to production and business activities stagnate, exports decreasing Korea is currently taking steps to maintain and improve its economy in parallel with the control of the Covid-19 pandemic by widely deploying the vaccination against Covid-19 widely deployed The Organization for Economic Co-operation and Development (OECD) forecasts that the Korea economy will increase by 3.3% in 2021  Positive impact: South Korea is one of the leading modernizing and industrializing countries in Asia, its agricultural sector accounts for only 2.2% of the country's GDP With a dense population and scarce land, Korea will still depend on imported foods This is a great advantage for Vietnam when entering the Korean food market This is a golden opportunity for not only Cao Phat company but also other businesses to introduce typical Vietnamese agricultural products to international friends If Cao Phat conquers this large market, Cao Phat will hold a "ticket" to the European market Many Vietnamese food products have won high positions in world exports such as rice, cashew nuts, pepper, coffee, seafood  Negative impact: + Although in the top exporting countries of agricultural products leading to South Korea,but the export value of Vietnam is still modest compared with total imports of South Korea, this figure is modest compared to the total volume of goods Vietnam Nam exported to Korea In 2018, Korea imported agricultural products worth 37.1 billion USD, while imports from Vietnam only reached 308.6 million USD + Besides, when entering the South Korea market, there are many agricultural exporting countries such as Thailand, New Zealand, Australia, that require Cao Phat or Vietnamese enterprises that want to export agricultural products, they need to pay attention to the stages of cultivation to ensure quality control Legal factor  Current strengths South Korea has some regulatory incentives Among all the OECD countries, South Korean offers foreign investors some of the best incentives in the south east Asian region In addition to offering major financial incentives, the Free Economic Zones (FEZs) of Incheon, Gwangyang and Busan/Jinhae are committed to creating an international business and living environment Moreover, South Korea has favorable tax policies and an exclusive constitutional court The constitutional court of South Korea was established in 1988, and is designed to protect the people's fundamental rights and effectively check governmental powers  Current Challenges Now, customs operations are inefficient Imports into South Korea have to undergo a long drawn out procedure in order to clear the customs department This customs clearance involves nine stages and each stage has internal procedural loops Besides, the South Korean legal system does not have juries, instead the court is composed of one or three judges who hear cases  Future Prospects The South Korean legal system is similar to that of Germany and the US For instance, the South Korean constitution was established in 1948 and was influenced in part by the US legal system In South Korea, foreign investors can apply for tax abatements and once procedures have been followed, investors can claim tax reductions The tax treatment is carried out at different levels of government priority The legal environment in South Korea is quite stable and safe and the rules are strictly close, so Vietnamese enterprises exporting to this country will be assured of their rights IV Method of entry into new country market: After the success of exporting cashew nuts to major markets such as the UK, Europe, and Australia… Cao Phat can confidently have enough afford and experience to export cashew nuts directly to a new market like Korea without going through any intermediaries So what is Direct Exporting? – It is the export of goods and services produced by the enterprise itself or purchased from domestic production units and exported to foreign countries through its own organization This is exactly the method of entry Cao Phat should choose when entering the Korean market because of the following reasons : - Cao Phat can directly interact with foreign markets, so they can grasp market developments and market needs, thereby making appropriate plans for each specific market to improve efficiency of business - Optimize costs, improve competitiveness and bring higher profits for business - Cao Phat has invested in research and marketing, thoroughly learning about Korean products, partners and markets 10 - This enterprise has a staff of experienced employees in direct export in developed countries, knowledgeable about import-export operations and processes, fluent in languages, customs, and domestic laws as well like international - In addition, Korea is a country with a temperate climate, self-growing and production of nut crops such as cashew is always a great risk, so for agricultural products in general and nuts in general In particular, Korea always gives priority to imports from other countries On the other hand, direct export also has many implicit risks and costs such as allocating a lot of time to market research, possibly needing more experts or customs clearance procedures for export goods Whatever,Korea is still a very potential and worthwhile market to export agricultural products according to our analysis V Conclusion: Cashew is one of six agricultural exports in Vietnam Through the analysis of the pestle model factors, we have an overview of the opportunities and challenges of cashew exports to the Korean market In the current period of deep economic integration, Cao Phat company needs to take positive steps to Korea to expand its market When wanting to promote the export of agricultural products to Korea, Cao Phat company need to make efforts to innovate their ways, pay close attention to safety standards, quality, and suitability with consumers' consumption preferences Korea such as convenience in using products, focusing on investment in packaging, conveying clear, detailed and attractive information about products If successfully exporting cashew to Korea, it will be the key to promote the export of Cao Phat company in particular and Vietnam's agricultural products in general 11 Reference Material: https://trungtamwto.vn/chuyen-de/14003-tang-thi-phan-nong-san-viet-vao-thi-truonghan-quoc http://portal.vietrade.gov.vn/Pages/xuat-nhap-khau thuong-mai/4312-xuat-khauhang-nong-san-cua-viet-nam-sang-han-quoc-phan-1-.aspx https://m.sggp.org.vn/han-che-rui-ro-khi-xuat-khau-nong-san-vao-han-quoc567010.html https://bnews.vn/thuc-day-hop-tac-thuong-mai-giua-viet-nam-han-quoc/79484.html https://www.google.com.vn/amp/amp.tapchicongthuong.vn/bai-viet/internationaltrade-policy-of-south-korea-and-lessons-for-vietnam-to-develop-its-international-trade71658.htm 12 ... nuts to South Korea South Korea was chosen as an international market for Cao Phat company to enter and export cashew nut products for a variety of reasons Some can be listed below: In the world,... of the opportunities and challenges of cashew exports to the Korean market In the current period of deep economic integration, Cao Phat company needs to take positive steps to Korea to expand... exporting cashew nuts to major markets such as the UK, Europe, and Australia… Cao Phat can confidently have enough afford and experience to export cashew nuts directly to a new market like Korea