Market penetration strategy of vietnamese agricultural products into the eu market

BANKING ACADEMY OF VIETNAM FACULTY OF INTERNATIONAL BUSINESS GRADUATION THESIS MARKET PENETRATION STRATEGY OF VIETNAMESE AGRICULTURAL PRODUCTS INTO THE EU MARKET Student’s name Class Course Student ID Instructor :Vu Thi Hanh Trang :K21KDQTB :2018 - 2022 :21A4050452 :Dr Hoang Phuong Dung Hanoi, May 2022 Tai ngay!!! Ban co the xoa dong chu nay!!! 17014127689751000000 i COMMITMENT This graduation thesis under the topic of “Market penetration strategy of Vietnamese agricultural products into the EU market” is my own research work, conducted under the instructions of Dr Hoang Phuong Dung Statistics used for analysis purposes in this thesis have clear, well-founded origins and were published legitimately The research findings in this thesis are my independent, factual and objective work and these findings have not been published in any other work before at the time of this thesis’s completion If stated otherwise, I will take full responsibility for my work Hanoi, May , 2022 Vũ Thị Hạnh Trang ii ACKNOWLEDGEMENT Having the opportunity to partake in my thesis writing at the final stage here at Banking Academy, I would like to express immense gratitude to the Academy as well as its teachers and staff for having always supported and created an engaging learning environment for us alumni during our years here I would also like to express my sincerest thanks to my instructor, Dr Hoang Phuong Dung, for having accompanied and devoted her time so that I could complete the thesis in the most detailed and thorough manner within the allotted time At the same time, I also want to express my gratitude to the teachers of the Faculty of International Business who have imparted useful knowledge and have constantly supported me over the years with attentiveness and consideration Despite the effort and the help from the instructor, due to my lack of theoretical background and practical experience, shortcomings in my dissertation are inevitable Hence, I hope to be to receive valuable suggestions and comments from the lecturers to improve my thesis even further! I sincerely thank you! iv TABLE OF CONTENT COMMITMENT i ACKNOWLEDGEMENT ii LIST OF ABBREVIATIONS v LIST OF TABLES, GRAPHS AND DIAGRAMS vi INTRODUCTION 1 Significance of the topic Literature review The research purpose The subject and scope of the research 5 Research method Research structure CHAPTER 1: THEORETICAL BACKGROUNDS 1.1 Overview on Vietnamese agricultural products 1.1.1 Definition and characteristics of agricultural products 1.1.2 Roles of agricultural products 11 1.2 Theoretical background on market penetration strategy 13 1.2.1 Definition of market penetration strategy 13 1.2.2 Market penetration strategies 14 1.2.3 Overview on the market penetration strategy of main Vietnamese agricultural products Error! Bookmark not defined SUMMARY OF CHAPTER 21 CHAPTER 2: SITUATION ANALYSIS OF VIETNAMESE AGRICULTURAL PRODUCTS’ PENETRATION INTO THE EU MARKET 22 2.1 Auditing the EU market 22 2.1.1 Analysis of macro environmental factors 22 iv 2.1.2 Analysis of micro environmental factors 30 2.2 Vietnamese agricultural products’ penetration into EU market 34 2.2.1 Overview on the exportation of Vietnamese agricultural products to the EU 34 2.2.2 Evaluation of current market penetration strategies of Vietnamese agricultural products into the EU market 38 2.3 SWOT analysis 43 SUMMARY OF CHAPTER 46 CHAPTER 3: SUGGESTIONS FOR VIETNAMESE AGRICULTURAL PRODUCTS’ MARKET PENETRATION STRATEGY INTO THE EU MARKET 47 3.1 Suggestions for Vietnamese agricultural suppliers 48 3.2 Suggestions for Vietnamese government and related governmental bodies 52 SUMMARY OF CHAPTER 57 CONCLUSION 58 LIST OF REFERENCES 61 A Foreign References 61 B Vietnamese References 67 v LIST OF ABBREVIATIONS Abbreviation Full meaning ASEAN Association of Southeast Asian Nations CAP Common Agricultural Policy CBI Center for the Promotion of Imports EU European Union EVFTA European Union - Vietnam Free Trade Agreement FAO Food and Agriculture Organization FDI Foreign Direct Investment FTA Free Trade Agreement FTAP Free Trade Agreement portal GAP Good Agriculture Practice GDP Gross Domestic Product HS Harmonized System M&A Merge and Acquisition NBI National Brand and Investment OCOP One Commune One Product OECD Organization for Economic Co-operation and Development R&D Research & Development SMART Specific, Measurable, Achievable, Relevant and Time-Bound SMEs Small and Medium Enterprises SPS Sanitary and Phytosanitary SWOT Strengths - Weaknesses - Opportunities - Threats TBT Technical Barriers to Trade WTO World Trade Organization vi LIST OF TABLES, GRAPHS AND DIAGRAMS Table Page Table 1.1 (List of Agricultural products in HS) Table 1.2 (Export turnover of main agricultural products 21 (billion USD)) Table 2.1 (Progressive elimination of customs duties article of 27 EVFTA for representative agricultural products (2020)) Table 2.2 (The SWOT Model analysis) 45 Graph Page Graph 2.1 EU simple average applied MFN tariffs 26 (in percentage) Graph 2.2 Real GDP per capita from the European Union - 27 29 countries (as of 2020) (in percentage) Graph 2.3 Total Vietnamese agricultural export turnover in EU 37 member states (million USD) Graph 2.4 Top EU Agri-Food imports from Vietnam in 2020 38 Diagram Page Diagram 2.1 (Extra-EU (countries outside of the EU) exports 33 and imports of agricultural products by main partners, 2021 (in shares and million Euro)) Diagram 2.2 (Basic mechanism of Internationalization) 40 INTRODUCTION Significance of the topic In the Vietnam market, the agricultural sector is considered as one of the important pillars and the foundation of the economy As a food supply industry to serve domestic needs, agricultural products are also one of the major export drivers to foreign markets In February 2022, Vietnam’s export turnover is estimated at nearly 3.3 billion USD, in which, the export of main agricultural products is estimated at over 3.2 billion USD, contributing the most for the export turnover (Chi Tue, 2022) Agricultural products even set a new record for export value in 2020, reaching $41.2 billion (Truong Thi Quynh Van, 2021), all while facing the adverse situation caused by COVID-19 pandemic Market penetration strategy in international trade is an important factor for the development as well as the operation scale and profitability for exporting businesses or countries In fact, many agricultural production enterprises only focus on income-raising activities or usual tasks such as: finding sources of goods, production, sales, etc without making too much investment in the construction of long-term market penetration strategies in a systematic manner This will often make it difficult for exporters in general and agricultural exports in particular to orient their business activities and maximize development in foreign markets With competitors advancing in trade by day, Vietnamese agricultural suppliers will need to focus more on formulating their strategies and market entry goals Up to present, Vietnam has carried out the process of trade integration with many countries in the world such as the US, Japan, China, etc and in which, it is impossible not to mention the EU market Having officially established partnership on November 28, 1990, Vietnam has exported 45.8 billion dollars USD worth of commodities to the EU, up 14.2 percent year on year, while importing 17.9 billion USD worth of goods, an increase by 16.5 percent as of 2021 Even though being recognized as the 15th largest trade in goods partner and the largest trading partner in the Association of Southeast Asian Nations (ASEAN) in the year 2020 to EU, Vietnam still has to face new challenges and obstacles now that we are entering a new stage in the country’s partnership with EU as EU-Vietnam foreign trade agreement (EVFTA) came into effect Not to mention, there are many variables now able to affect the international trading between the parties such as the pandemic, the heightened tensions and war eruptions between nations All prompts for new research to further analyze the current state of Vietnam’s penetration strategy into the EU in the midst of these occurrences That’s the reason why the author decided to dig deep into the topic “Market penetration strategy of Vietnamese agricultural products into the EU market” In the thesis, the research will revolve around the current state of Vietnamese agricultural products penetration strategy into the EU market and recommendations for Vietnamese agricultural suppliers as well as Vietnam government bodies in order to perfect and enhance the penetration strategy in the foreseeable future Literature review 2.1 International researches Currently, there has been a number of international studies on the revolving the penetration strategy of agricultural products Namely, we can mention the study of Xujin Pu, Rongbing Huang and Zimin Xu (2020) with the topic of “Entry mode selection and its impact on the competition between organic and conventional agricultural products” As the global organic food market continues to grow, the research focused on the entry mode selection problem when it comes to organic agricultural products and especially, helped link the analytical marketing literature on distribution channel structures with the supply chain literature From then, the authors gave out suggestions for the organic agricultural products farmers on how to maintain a proficient food supply chain and that when the organic agricultural product enters the market through the incumbent conventional retailer, the competition between the farmers will be elevated, and the profit at the retail end will most likely increase While back in the year 2015, Calegario, Houston and Bruhn presented the research “Foreign market entry strategies in the United States: European Union agribusiness trade context” This particular study has commenced analysis on the American’s foreign market entry strategies in the European Union agribusiness context with the research going deep into the multinational firms’ decision to penetrate the EU market using logistic regression analysis with generalized estimating equation method to make hypotheses as it had shown a variety of variables considered to affect the process of choosing penetrating strategies when it comes to EU agribusiness And as there is research going back to more than 20 years ago, Stiegert, Ardalan and Marsh (2006) has commenced a research focusing specifically on the market penetration strategy of foreign direct investment (FDI) patterns by agri-food and beverage multinational companies into and within the European Union As the paper utilized a diverse bundle of variables, ranging from socio-cultural, infra-firm to political stability, it has contributed a deep understanding on the modal investment strategies and the role of macroeconomic changes on the foreign market entries into a custom union From the authors' research paper, the thesis is able to gain a vast knowledge on the EU market and the elements within this market which can alter and affect the decision on market penetration strategy, especially in the agribusiness context While the researches have proven to be informative, none of the studies made use of the Uppsala Model to assess and confirm the appropriate form of market entry into the EU market in general or in the context of agricultural products particularly It’s also of importance to notice that most of the papers are not up-to-date, despite the newest research being based in 2020 As there are multiple new narratives right now in the year 2022, this research gap urgently asks for fulfillment 2.2 National researches On the topic of the market penetration of Vietnamese agricultural products into the EU market, there have been many national papers discussing the topic When the EVFTA came into effect, the event gathered a lot of attention from firms, industries and definitely researchers and specialists as the agreement has opened up a large number of opportunities for Vietnam as a whole Hence, in 2020, Nguyen Thi Viet Ha had