Applying m porter’s diamond model to analyze the competitiveness advantages of vietnam’s dragon fruit to japanese market

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Applying m porter’s diamond model to analyze the competitiveness advantages of vietnam’s dragon fruit to japanese market

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ABSTRACT Dragon fruit, also known as pitaya, is a tropical plant with numerous health benefits and high commercial value. Vietnam has emerged as a leading exporter of dragon fruits and products due to its nutritional advantages and economic viability. This article analyzes the export of dragon fruits during two periods, taking into account the impact of Covid19 and global competition on supply chains. The Vietnamese government aims to enhance dragon fruit production and exports by 2025, with Japan being a significant market. This study applies M. Porters Diamond model to assess competitive advantages and supporting industries in Japan. The objective is to identify areas for improvement, enhance production efficiency, and align with the Japanese markets requirements.

Applying m.porter’s diamond model to analyze the competitiveness advantages of vietnam’s dragon fruit to japanese market Trường Đại học Ngoại thương, Hà Nội, Việt Nam Vũ Huyền Phương Giảng viên Viện Kinh tế Kinh doanh quốc tế Trường Đại học Ngoại thương, Hà Nội, Việt Nam ABSTRACT Dragon fruit, also known as pitaya, is a tropical plant with numerous health benefits and high commercial value Vietnam has emerged as a leading exporter of dragon fruits and products due to its nutritional advantages and economic viability This article analyzes the export of dragon fruits during two periods, taking into account the impact of Covid-19 and global competition on supply chains The Vietnamese government aims to enhance dragon fruit production and exports by 2025, with Japan being a significant market This study applies M Porter's Diamond model to assess competitive advantages and supporting industries in Japan The objective is to identify areas for improvement, enhance production efficiency, and align with the Japanese market's requirements KEY WORDS: Dragon fruit, export, Diamond model, Japan Chapter 1: Overview of Vietnamese dragon fruit exports to Japan and M Porter's diamond model 1.1 Overview of Vietnam's dragon fruit industry's emergence and growth Vietnamese dragon fruit through the ages ● Early Cultivation (Late 19th Century - 1990s): Dragon fruit, also known as pitaya, is native to Central America It was introduced to Vietnam by the French in the late 19th century However, cultivation remained limited during this period due to various factors, including lack of awareness, limited technology, and a focus on other agricultural products Therefore, this non-native strange fruit has not been focused on research and development ● Cultivation and Commercialization Expansion (1990s - Early 2000s): The government of Vietnam saw the potential for dragon fruit as an export crop in the 1990s They pushed for its production by supplying farmers with resources and advice to help them start growing dragon fruit Moreover, research has shown that dragon fruit grows well in the Mekong Delta and can provide economic benefits to local farmers over time Binh Thuan province, the dragon fruit center of Vietnam, is where the industry really took off ● Technological Advancements and Production Scaling (The mid-2000s - 2010s): Significant advances in dragon fruit farming technology occurred around this time Drip irrigation, organic fertilizers, and greenhouse cultivation—three examples of modern farming techniques—were implemented, leading to higher yields and higher-quality fruit Large-scale dragon fruit plantations were set up, and export-focused methods were implemented At that time, Vietnam shipped its dragon fruit to markets in China, Southeast Asia (including Thailand, Laos, and the Philippines), and East Asia (including South Korea and Japan) ● Expansion of Domestic and International Markets (2010s - Now): The domestic and worldwide demand for dragon fruits produced by Vietnam has increased significantly The fruit became well-liked because of both its eye-catching look and its health advantages Some of the cutting-edge technologies developed in Vietnam to help assure year-round production of dragon fruit and facilitate export trade include lighting to stimulate out-of-season flowering and irradiation of fruit flies There are currently 60/63 provinces and cities in Vietnam where dragon fruits are grown, and the area and output are rapidly expanding, as reported by the Vietnam Trade Promotion Agency Over 13,400 acres were used for dragon fruit cultivation in 2009, producing almost 282 tons A decade later, in 2018, farmers were tending crops on approximately 54,000 hectares, with over 48,000 hectares in full harvest mode An astounding increase of nearly five times in both area and productivity, the volume increased to over 1,017 metric tons Figure Annual planted area and production of dragon fruit in Vietnam (2009-2018) source: Ministry of Industry and Trade Some major markets of Vietnamese dragon fruit Dragon fruit from Vietnam has been exported to China, Laos, and Thailand for quite some time, albeit mostly through quota (border trade) However, with the support of APEC, EVFTA, and CPTPP, the Vietnamese dragon fruit industry has seen significant growth in recent years Figure Vietnam dragon fruit export market share in 2022 source: Ministry of Industry and Trade It is clear that China, the United States, and India are the top three importing countries in the world More than 80% of Vietnamese dragon fruit is sent to China, a country with a population of billions because of its proximity to Vietnam, its ease of transportation, and its enormous consumption Next came established Asian markets like Korea, Japan, and Thailand; more recently, several European countries and Middle Eastern countries like UAE have emerged as a new export avenue for Vietnam 1.2 The situation of Vietnam's dragon fruit export to Japan market 1.2.1 Period 2009 - 2017 In 2009, Vietnam started to export dragon fruit to Japan, with a total export value moderately around $0.26 million However, until 2013, the export volume and value increased substantially By 2017, Vietnam's dragon fruit exports to Japan reached $2.76 million This indicates a significant growth in both volume and value over the eight-year period Figure Dragon fruit export turnover from Vietnam to Japan in the period 2009-2017 source: United Nation Comtrade Database Dragon fruit shipments from Vietnam to Japan increased for a number of reasons In the first place, the demand for dragon fruit in Japan is rising because of the country's love of exotic fruits Vietnam's climate and agricultural conditions are ideal for dragon fruit growing, allowing for greater production and export, and the country's technology has advanced to fulfill the stringent requirements of the Japanese market The two countries' free trade agreements and efforts to liberalize their respective markets have also helped the export of dragon fruit By lowering trade barriers and increasing bilateral commerce, agreements like the AJCEP and VJEPA have been instrumental 1.2.2 Period 2019 - now Vietnam's dragon fruit export sector suffered from Covid-19 from 2018 to 2022 Since 2019, dragon fruit exports have dropped out of the top billion-dollar goods, according to Ministry of Industry and Trade 2022 statistics, dragon fruit shipments dropped by half to $633 million in 2022 This can be explained that Vietnamese dragon fruit is overly dependent on the Chinese market Meanwhile, the "Zero-COVID" regulations and the rise of domestic dragon fruit cultivation have reduced demand for imported dragon fruit Figure Dragon fruit export turnover of Vietnam in the period 2019-2022 source: Ministry of Industry and Trade, 2022 However, in the same period, the Japanese market has made remarkable progress According to data from the Ministry of Industry and Trade, the export turnover of dragon fruit is kept stable from 2018-2020 and increases sharply to more than 36% in 2021 In 2022, dragon fruit exports decreased but still grew quite high compared to the beginning of the period Figure Dragon fruit export turnover from Vietnam to Japan in the period 2019-2022 source: Ministry of Industry and Trade The value of dragon fruit imported from Vietnam into Japan decreased by 16.3 percent, to $1.062 million in the first quarter of 2023, according to the Ministry of Industry and Trade The new rule prohibiting the export or repatriation of significant quantities of dragon fruits is mostly to blame for the drop in supply Only one Vietnamese LD1 dragon fruit cultivar is officially recognized in Japan at this time This means that only this specific kind of dragon fruit with a breed protection certificate will be allowed in Japan But only Hoang Phat Enterprise has this protection certificate Because of this issue with copyright registration, exports of dragon fruit to the Japanese market are hampered 1.3 The national competitive advantage theory Michael Porter, a professor, and economist at Harvard Business School, developed the diamond theory of national competitive advantage, which explains why certain countries excel in specific industries The diamond framework or model devised by Porter evaluates a nation's competitiveness based on four interconnected factors that support industry competition and success These four components are as follows: Factor Conditions: A country's natural resources, labor force, capital, infrastructure, and technological skills determine the direction of international trade and its ability to compete in the global market (Porter, 1990) Porter emphasizes that the key lies in the effective utilization of these elements rather than their sheer abundance Demand Conditions: Innovation and competitiveness are heavily influenced by the type and sophistication of domestic demand Companies are driven to expand, introduce new products and services, and improve quality in response to the evolving demands of local consumers (Bruin, 2018) Fierce competition from demanding domestic customers enhances a company's inclination to innovate and thrive on a global scale Related and Supporting Industries: The presence of competitive and internationally successful suppliers and supporting industries enhances sector competitiveness These industries provide inputs, support services, and specialized infrastructure for specific sectors Collaboration and proximity among suppliers contribute to improved efficiency, innovation, and overall value chain enhancement Firm Strategy, Structure, and Rivalry: The nature and intensity of domestic competition, along with the strategies and organizational structures adopted by enterprises, influence their competitive advantage Strong domestic rivalry stimulates innovation, efficiency improvements, and international expansion A highly competitive domestic environment fosters an atmosphere that compels enterprises to excel These four components are interconnected and mutually reinforce each other, forming a framework that either strengthens or weakens a nation's competitive edge in a particular industry Porter also emphasizes that government actions, chance events, and culture can impact the diamond model According to classical economics, prosperity is not inherited but earned It does not solely depend on a nation's natural resources, labor pool, interest rates, or currency value (Porter, 1990) By effectively utilizing these variables and fostering a favorable business environment, countries can maintain competitive advantages in specific industries This highlights how a nation's internal dynamics significantly impact its global competitiveness 1.4 Diamond model Figure The Porter Diamond Model Each of the four elements comprising the diamond model exerts an impact on a nation's competitive advantage within a particular industry, wherein the attributes of these elements are mutually dependent Typically, the simultaneous presence of all four components becomes imperative for the augmentation of competitive advantage, as any deficiency in a single determinant curtails the potential for progress and enhancement within an industry While the diamond is regarded as a self-reinforcing system, the role of two additional forces is also important: government and chance Governments: The government guides economic agents through policies promoting development, employing regulations and ensuring fair benefit distribution However, the diamond model emphasizes firms, not nations, as key players in the international market (Porter, 1990) The government is seen as influenced by domestic firms, rather than directly creating a national competitive advantage Opportunities: Even though Porter originally didn’t write anything about chance in his research, the role of chance is often included in the Diamond Model as the likelihood that external events such as war and natural disasters can negatively affect or benefit a country or industry Chances often arise discretely within long-term strategies; however, economic agents still have to soon recognize and promptly adjust strategies Besides national competitive advantages, some researchers (Dunning 1993) argue that international activities should be considered as a third external variable Governments and chances have a measurable impact on competitiveness but primarily contribute to and enhance the system of national competitiveness, rather than directly establishing longterm competitive advantages Chapter 2: Vietnam's current competitive edge in exporting dragon fruit to Japan 2.1 Factor condition 2.1.1 Basic factor conditions Vietnam boasts a hot and humid tropical climate, characterized by high average temperatures and minimal temperature fluctuations In the southern region, where dragon fruit thrives, the annual sunshine hours range from 2,000 to 2,600, providing the ideal lighting conditions for optimal growth Dragon fruit can be commercially cultivated at altitudes of up to 1,700 meters, with rainfall ranging from 500 to 1,500 mm, which aligns with Vietnam's average annual precipitation Thanks to its shallow roots (

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