Significance of the topic
The agricultural sector is a vital pillar of Vietnam's economy, serving as a key food supply industry for domestic needs and a major driver of exports In February 2022, Vietnam's export turnover was nearly $3.3 billion, with agricultural products contributing over $3.2 billion to this figure (Chi Tue, 2022) Notably, in 2020, agricultural exports reached a record value of $41.2 billion, despite challenges posed by the COVID-19 pandemic (Truong Thi Quynh Van, 2021).
A market penetration strategy is crucial for the growth, operational scale, and profitability of exporting businesses, particularly in international trade Many agricultural enterprises often prioritize immediate income-generating activities, such as sourcing, production, and sales, while neglecting the development of systematic long-term market penetration strategies This oversight can hinder exporters, especially in the agricultural sector, from effectively orienting their business activities and maximizing their potential in foreign markets As competition in trade intensifies, Vietnamese agricultural suppliers must concentrate on developing strategic market entry goals Currently, Vietnam is engaged in trade integration with numerous countries, including the US, Japan, China, and notably, the EU market.
Since establishing a partnership on November 28, 1990, Vietnam has exported $45.8 billion worth of goods to the EU, reflecting a 14.2% year-on-year increase, while imports reached $17.9 billion, up 16.5% as of 2021 Recognized as the 15th largest trading partner and the largest in ASEAN in 2020, Vietnam now faces new challenges with the implementation of the EU-Vietnam Free Trade Agreement (EVFTA) Factors such as the pandemic and geopolitical tensions are influencing international trade dynamics, prompting further research into Vietnam's strategy for penetrating the EU market amidst these developments.
The author explores the "Market Penetration Strategy of Vietnamese Agricultural Products into the EU Market," focusing on the current state of these strategies and offering recommendations for Vietnamese agricultural suppliers and government bodies The goal is to refine and strengthen the penetration strategy to improve market access and competitiveness in the EU in the near future.
Literature review
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”
The global organic food market is experiencing significant growth, prompting research into the selection of entry modes for organic agricultural products This study connects analytical marketing literature on distribution channel structures with supply chain management The authors provide recommendations for organic farmers to enhance their food supply chains, noting that entering the market through established conventional retailers can intensify competition among farmers and potentially boost retail profits A relevant study by Calegario, Houston, and Bruhn in 2015 explored foreign market entry strategies in this context.
This study analyzes American foreign market entry strategies within the European Union agribusiness sector, utilizing logistic regression analysis and generalized estimating equations to explore the decision-making processes of multinational firms It highlights various factors influencing the choice of penetration strategies in the EU agribusiness context Building on over 20 years of research, including the work of Stiegert, Ardalan, and Marsh (2006), which specifically examined foreign direct investment (FDI) patterns by agri-food and beverage multinationals in the EU, the paper considers a wide range of variables—socio-cultural, infra-firm, and political stability This comprehensive approach enhances the understanding of modal investment strategies and the impact of macroeconomic changes on foreign market entries within a customs union.
The authors' research paper provides valuable insights into the EU market and the factors influencing market penetration strategies, particularly in agribusiness However, existing studies have not utilized the Uppsala Model to evaluate suitable market entry methods for the EU, especially regarding agricultural products Additionally, many of the referenced papers are outdated, with the most recent research dating back to 2020 Given the emergence of new narratives in 2022, there is an urgent need to address this research gap.
The market penetration of Vietnamese agricultural products into the EU has been a focal point of numerous national studies, particularly following the implementation of the EVFTA, which has created significant opportunities for Vietnam In 2020, Nguyen Thi Viet Ha published research titled “Exporting Agricultural Products to the EU Market: In the Context of the EVFTA,” providing an overview of Vietnam's agricultural exports and the implications of the agreement Utilizing quantitative analysis, the study predicted export scenarios and offered recommendations for enhancing Vietnamese agricultural exports to the EU, while also detailing various agricultural products in the market Additionally, Nguyen and Trinh (2021) examined the “Impacts of EVFTA on the Exportation of Vietnamese Agricultural Products to the EU Market,” assessing the potential effects of the agreement on these exports.
The application of the SMART model to the EVFTA's tax elimination indicates that the agreement is likely to positively impact the export of Vietnamese agricultural products to the EU market Consequently, the article provides several recommendations for local authorities and domestic suppliers to enhance export promotion efforts.
While previous national research has thoroughly examined the impacts of the EVFTA on Vietnamese agricultural products, they have not addressed the broader political narratives or assessed market penetration strategies Currently, there is a lack of studies in Vietnam that utilize the Uppsala and SWOT models to evaluate market entry strategies into the EU market, particularly in the context of international partnerships established in 2022 This gap highlights the need for a comprehensive study that considers all factors influencing Vietnamese agricultural products' entry into the EU market Such research could provide valuable recommendations to enhance the quality and capacity of these products and outline effective market penetration strategies for the EU, with potential applications to other developed economies.
The research purpose
The study's findings will offer valuable policy recommendations for Vietnamese agricultural suppliers and government entities, aimed at enhancing strategies for penetrating the EU market It seeks to address the critical question of how government and related bodies can effectively improve the long-term market penetration strategies for Vietnamese agricultural products in the European Union.
This research paper analyzes the current state of Vietnamese agricultural exports using the SWOT and Uppsala models, aiming to evaluate the penetration strategies employed by Vietnamese agricultural suppliers The findings will provide valuable insights for both suppliers and the Vietnamese government amidst the complexities of the global market.
The subject and scope of the research
This research focuses on analyzing Vietnamese agricultural products within the context of the EU market It will review and evaluate the current market penetration strategies employed by Vietnamese agricultural products in the EU, providing insights into their effectiveness and potential improvements.
- Research time range: 2018 to April 2022
This article explores the market penetration strategies for Vietnamese agricultural products in the EU, focusing on the competitive landscape and conducting a SWOT analysis to identify strengths, weaknesses, opportunities, and threats It aims to provide actionable recommendations for Vietnamese agricultural suppliers to enhance their market presence and achieve sustainable growth in the EU market.
Research method
This thesis will compile essential theories on agricultural products and market penetration, providing a solid foundation for analysis Additionally, it will incorporate key international trade theories and relevant objective variables The research will analyze secondary data gathered from various reports and studies, utilizing an integrated approach and statistical analysis to deliver an objective assessment of the findings.
Research structure
Except for the introduction, conclusion and reference list, the dissertation is structured with three main chapters as below:
Chapter 2: Situation analysis of Vietnamese agricultural products’ penetration into the EU market
Chapter 3: Suggestions for Vietnamese agricultural products’ market penetration strategy into the EU market
THEORETICAL BACKGROUNDS
Overview on Vietnamese agricultural products
1.1.1 Definition and characteristics of agricultural products
Agricultural products are essential commodities that serve as fundamental resources for food production and play a crucial role in the economic stability of nations Due to their significance, numerous definitions of agricultural commodities exist at both national and international levels.
In Vietnam, following Decree 57 of the Government on mechanisms and policies to encourage enterprises to invest in agriculture and rural areas (Thu vien Phap luat,
In 2018, it was established that agricultural products encompass commodities derived from agriculture, forestry, fisheries, and salt production This definition specifies that agricultural products are restricted to outputs generated by these specific industries, including those from forestry, fisheries, and salt production.
The FAO (Food and Agriculture Organization, 2001) defines agricultural products as any raw or processed commodities marketed for human consumption or animal feed, explicitly excluding water, salt, and additives This definition differs from Vietnam's, as the FAO categorizes products based on their processing status and intended market, highlighting the distinction between raw and processed goods.
Taking on another perspective, WTO’s Agriculture Agreement (WTO, 2003), by the agreement’s Annex 1, went for a more detailed description by presenting a list of the
The HS Chapters, Headings, and Codes relevant to agricultural products encompass a wide range of commodities, reflecting various levels of processing It's important to note that this classification excludes certain items, such as fish and forestry products.
HS Chapters 1 to 24 less fish and fish products
Chapters 1 to 5 Meat, fish, dairy produce, eggs, honey, other edible products, and inedible products, excluding certain oils and fats (Chapter 15), as well as hides, skins, furskins and articles thereof (Section VIII)
Chapters 6 to 14 Plants, seeds, vegetables, fruits, cereals, flours, straw, plaiting materials, etc (whether or not edible), but excludes certain oils and fats (Chapter 15) and wood (Chapter 44)
Chapter 15 Animal or vegetable fats and oils and products derived there from
Chapters 16 to 24 Beverages, spirits, vinegar and tobacco, together with products of the food industries not covered by previous Chapters
35.01 to 35.05 (Albuminoidal substances, modified starches, glues)
50.01 to 50.03 (Raw silk and silk waste)
51.01 to 51.03 (Wool and animal hair)
52.01 to 52.03 (Raw cotton, waste and cotton carded or combed)
*The product descriptions in the brackets are not necessarily exhaustive
Table 1.1: List of Agricultural products in HS
Source: WTO’s Agriculture Agreement and VietnamTrade
The WTO's Agriculture Agreement provides a comprehensive framework for addressing agricultural products, distinguishing it from Vietnam's more localized definition As the EU has been a WTO member since 1995 and has adopted the FAO's definition, it offers a detailed and adequate list of agricultural products Therefore, for the purposes of this research, we will analyze agricultural products in accordance with the WTO's Agriculture Agreement.
Agricultural products are vital commodities that demand careful production processes and effective market penetration strategies Their unique characteristics play a crucial role in assessing their value and marketability This study highlights key attributes of agricultural products, providing a comprehensive evaluation based on extensive research to better understand this essential merchandise.
Agricultural products are heavily reliant on natural conditions, as the agricultural sector is significantly influenced by the external environment Changes in soil or weather conditions directly impact the quality and growth of produce Furthermore, climate change has been shown to significantly affect crops, farmland values, livestock, household welfare, and food security (Cramer, Paudel and Schmitz, 2018).
Agricultural products exhibit significant seasonal and annual variability in production, primarily influenced by climate differences throughout the year (Dilley, 2000) This variability affects not only the quantity but also the quality of agricultural goods, which can fluctuate from year to year The health of the soil and its natural conditions play a crucial role in determining agricultural output As soil loses essential minerals over time and various yearly factors impact crop quality and yield, substantial differences in agricultural performance are observed annually (Le Houérou, Bingham, and Skerbek, 1988).
Agricultural products exhibit a geographic concentration in production, influenced by historical land use patterns that evolved alongside industrialization and urbanization This evolution has led to agricultural regional specialization, as noted by Zhao et al (2012) The cultivation of these products is closely tied to land utilization and the harvesting of resources derived from it Additionally, geographical variability plays a significant role, as different regions possess unique topographic, climate, and weather conditions, resulting in diverse agricultural outputs.
Agricultural products exhibit a remarkable diversity in output, characterized by various types and quality levels These products, originating from different geographical locations, are influenced by unique natural factors, leading to a wide array of qualities, sizes, and colors.
The quality of agricultural output significantly influences consumer decisions, as it remains the primary concern for buyers Additionally, the competitiveness of agricultural products—both domestically and internationally—is closely linked to their quality With rising living standards and the ongoing effects of the COVID-19 pandemic, the requirements for agricultural products have become increasingly stringent Consequently, the pathway for products to meet essential criteria such as quality, food hygiene, safety, quarantine, and origin has become more challenging than ever.
Provide food to the population and secure the national food security
Food is crucial for human existence and socio-economic development, particularly in Vietnam, where agricultural products support the livelihoods of over 60% of the rural population as of July 2021 From August to December 2021, southern provinces produced approximately 7.1 million tons of rice, with the Mekong Delta contributing 6.6 million tons, ensuring both domestic demand and export needs The Mekong Delta also maintained a surplus of about 3 million tons for food security Defined as universal access to sufficient food for a healthy life, food security is vital in Vietnam, which successfully ensures food safety for nearly 100 million people and plays a significant role in the global food safety system.
Help reduce the threat of poverty
Agricultural products play a crucial role in combating hunger and poverty, particularly in developing countries like Vietnam, which heavily relies on agriculture The Vietnamese government has implemented various programs focused on agricultural products to alleviate poverty and enhance food security One notable initiative is the OCOP (One Commune One Product) program, aimed at promoting local agricultural production and improving livelihoods.
The program aims to enhance both agricultural and non-agricultural products and services in local communities, aligning with the value chain established by private and collective economic sectors This initiative is designed to foster rural economic development, facilitate economic restructuring, and boost income for local residents.
Generate and provide jobs for Vietnamese labor
Theoretical background on market penetration strategy
1.2.1 Definition of market penetration strategy
Market penetration, as defined by Harry Igor Ansoff in 1957, is a strategy aimed at boosting company sales and facilitating future growth planning According to Armstrong and Kotler (2009), this approach involves implementing a low pricing strategy for both new and existing products to attract more buyers and expand market share By leveraging an aggressive marketing mix, companies can effectively increase product sales within their markets.
In the realm of global internationalization, a precise definition for market penetration strategy remains elusive Global expansion involves entering new overseas markets, which companies achieve by establishing a legal presence through methods like foreign subsidiaries, exporting, licensing, or franchising Therefore, an international market penetration strategy aims to boost sales of new or existing products and services, ultimately increasing market share and customer base in competitive foreign markets.
A market penetration strategy is a versatile approach to business growth, suitable for countries, industries, and startups, whether they are bootstrapped or hold a strong competitive position While it can be viewed as a safe option, successful implementation and execution of products or services are crucial to effectively compete against established rivals in diverse and competitive markets, ultimately aiming to capture their customer base.
To effectively implement a market penetration strategy for Vietnam's agricultural products, it is essential to optimize all efforts to compete against existing rivals in sales and market share This approach requires a focused examination of the processes and strategies necessary to successfully deliver these products to customers.
This article explores the "Place" strategy within the 4Ps model of marketing, focusing on the distribution and accessibility of Vietnam's agricultural products By analyzing how these products are positioned in the market, we aim to identify effective channels for enhancing their penetration and reach Understanding the strategic placement of these goods is crucial for improving their competitiveness in both domestic and international markets.
When determining where to sell a product, businesses focus on the most effective distribution channels to reach consumers likely to purchase, including marketplaces, retail locations, and trade shows Entering new geographical markets through various modes of entry is a strategic approach to market penetration Historically, crossing national borders for economic purposes has proven to be beneficial, highlighting the potential for economic productivity in new markets.
To successfully enter new geographical markets, firms can adopt various modes of entry, allowing them to expand their businesses internationally Key strategies for venturing abroad include joint ventures, franchising, and direct investment, each offering unique advantages for market penetration and growth.
Exporting is the most fundamental method for companies to enter foreign markets, defined as the process of sending goods and services from the home country to other nations (Frynas and Mellahi, 2011) It is often the simplest and initial step for firms pursuing international expansion There are two primary types of exporting: Direct exporting and Indirect exporting.
Direct exporting involves a company independently selling its products overseas, either with or without the assistance of foreign agents or distributors (Kumar, 2016) This approach allows businesses to quickly access local markets and customers without the high costs of establishing operations in a new country, facilitating initial internationalization and local service support through collaboration However, it also presents significant risks, as companies may face challenges such as limited control over market prices and distribution, as well as vulnerabilities to cultural differences, communication issues, conflicting information, and political instability (Frynas and Mellahi, 2011).
Indirect exporting allows businesses to enter international markets through independent intermediaries, such as trading firms, export merchants, and export agents This method is often the quickest way for companies, particularly those producing primary products like agricultural goods, to reach foreign markets (Kumar, 2016) The key benefits of indirect exporting include lower investment requirements, reduced risk, and the advantage of leveraging the expertise and services of international-marketing intermediaries However, this approach also presents challenges, including limited direct market exposure, increased costs, and a lack of control over marketing and sales, as exporters rely heavily on their intermediaries.
Licensing is a strategic entry mode where a foreign licensor transfers patented technologies, trademarks, and brand names in exchange for financial compensation This approach is particularly prevalent in R&D-intensive industries, allowing companies to adapt their products to specific markets rather than duplicating them across borders By leveraging licensing, licensors can swiftly penetrate new markets without significant investments in capital or personnel However, this strategy carries risks, as it may lead to a loss of control over production and marketing, potentially allowing licensees to become future competitors A poorly managed licensing agreement can have lasting negative effects on the licensor's brand equity.
Franchising is a strategic approach for entering foreign markets, where a semi-independent franchisee pays fees and royalties to a franchiser to utilize their trademark and sell products or services This system fosters mutual cooperation between distinct firms, particularly in service industries like restaurants, hotels, and retail While franchising offers advantages similar to licensing, such as rapid market entry and low investment costs, it also presents risks, including increased responsibilities and complexities Additionally, the potential for franchisees to mismanage operations or harm the franchiser's reputation in the host country poses significant challenges.
Another form of entry is foreign direct investment or FDI According to Moosa
Foreign Direct Investment (FDI) involves residents of one country acquiring ownership of assets in another country to control production and distribution activities This investment often leads to lower production costs in the foreign market while fostering stronger relationships with local governments, customers, and suppliers These connections become valuable assets for firms, enabling them to better adapt their products to the local market FDI strategies typically manifest as joint ventures or wholly-owned ventures.
A joint venture is an enterprise where two or more investors share ownership and control over property rights and operations (Food and Agriculture Organization, 1997) For a joint venture to succeed, the participating organizations must align their business objectives and agreements This collaborative approach allows firms to mitigate risks and leverage each other's strengths without sacrificing their competitive advantage or intellectual property However, challenges such as evaluating suitable partners, political risks, and financial commitments can arise (Food and Agriculture Organization, 1997) Additionally, smaller companies must exercise caution, as they risk being overshadowed by larger partners in the venture.
Wholly-owned ventures present a higher risk compared to other market entry strategies, involving either greenfield investments in new facilities or mergers and acquisitions with established local firms Greenfield investments create new subsidiaries from the ground up, often utilized when a firm's unique technical and organizational skills are essential for market competition Conversely, mergers combine two companies into a new legal entity, while acquisitions involve a foreign firm purchasing local assets Despite the inherent risks, successful implementation of wholly-owned ventures can lead to advantages such as expanded geographic reach, enhanced market knowledge, increased profits, and greater control and commitment However, firms may also encounter significant costs, cultural challenges, and potentially lower credibility among local populations compared to independent entities.
SITUATION ANALYSIS OF VIETNAMESE AGRICULTURAL PRODUCTS’
Auditing the EU market
2.1.1 Analysis of macro environmental factors
The European Union functions with its own legal personality, distinct from international law, which means that EU law directly or indirectly influences the national laws and legal systems of its member states.
The governance of the European Union is facilitated by several key political institutions that operate in conjunction: the European Parliament, which is elected by and represents EU citizens; the European Council, made up of the Heads of State or Government of EU Member States; the Council, representing the governments of these Member States; and the European Commission, which advocates for the interests of the EU as a whole These institutions are closely interconnected with the member states, ensuring effective governance across the EU.
EU has political stability in the region
By 2020, the EU successfully established a broad consumer market for goods, leveraging its single market as the main economic engine This initiative aims to facilitate the free movement of goods, services, money, and people, maximizing benefits for Europeans The EU's economic policies are designed to enhance the business environment, enabling easier market access for businesses, particularly in the agricultural sector, thus fostering development opportunities within the EU market.
Understanding tariff levels and regulations is crucial for Vietnam to effectively penetrate the market, especially within the EU, which maintains uniform tax policies among its member states While individual governments can establish their own tax laws based on national priorities, they must adhere to fundamental EU principles such as non-discrimination and the free movement of goods and services within the single market Consequently, goods transported between EU member states are exempt from customs duties, facilitating smoother trade.
Graph 2.1: EU simple average applied MFN tariffs (in percentage)
Source: WTO, EU Trade Policy Review (2019)
The European Union is recognized for its establishment of free trade agreements (FTAs), which significantly contribute to its economy In 2021, trade with 67 partners reached €1,167 billion, accounting for 32.0% of the EU's total external trade, as reported by the European Commission Despite a 9.1% decline in trade with preferential partners due to the COVID-19 pandemic, certain sectors, like pharmaceuticals, experienced growth Additionally, agri-food trade saw a 2.2% increase, with agri-food exports under preferential agreements rising by 1.8% and imports by 2.7% The signing of enhanced trade agreements further creates opportunities for businesses operating within the EU.
EU market to develop and prevent unfair competition from outside the EU
The EVFTA, signed on June 30, 2019, between the EU and Vietnam, presents a significant opportunity for Vietnamese agricultural products to penetrate the European market, which is one of Vietnam's largest export destinations While this agreement facilitates deeper integration and offers the potential for higher selling prices, it also challenges Vietnamese manufacturers to adopt sustainable practices to meet the demands of the discerning European market Notably, EVFTA standardizes import requirements for products from EU Member States, allowing for streamlined imports without prior inspections for approved categories Furthermore, the agreement aims to reduce tariffs on various agricultural products to 0% within a 5-10 year timeframe, benefiting Vietnamese rice exports, which currently face high import duties Under EVFTA, Vietnamese rice is exempt from these taxes, and utilizing the 80,000-ton export quota could potentially triple export revenues.
Progressive elimination of customs duties for representative agri-food products when exporting from Vietnam to the EU, including
Tax rate Quota Customs duties’ elimination time
The total quota is 80,000 tons/year, specifically:
- Unmilled rice: the quota is 20,000 tons/year
- Milled rice: the quota is 30,000 tons/year
- Fragrant rice: quota is 30,000 tons/year
Broken rice: 5 years Products made of rice: 3-5 years
Coffee No tax - EVFTA comes into effect
- Products containing more than 80% sugar: 10,000 tons/year,
Natural honey No tax - EVFTA comes into effect
Fresh/processed vegetables and fruits, juices, fresh flowers
No tax - EVFTA comes into effect
- Sweet corn (except those with a core diameter of 8 mm or more but no more than 12 mm): 5,000 tons/year
- Some chemical products (mannitol, sorbitol, dextrins etc.): 2,000 tons
Table 2.1: Progressive elimination of customs duties article of EVFTA for representative agricultural products (2020)
Participating in the European Union offers agricultural manufacturers a favorable political and legal environment, ensuring equal treatment and adherence to uniform rules and procedures for efficient business operations The European Union-Vietnam Free Trade Agreement (EVFTA) and international trade policies further enhance this landscape, enabling businesses to thrive in a transparent and advantageous market.
The European Union stands as a significant trading power and one of the most open economies globally, despite the ongoing impact of the rapidly spreading Omicron variant on its economic outlook Eurostat (2022) reports that the EU's GDP experienced a growth of 5.2% in 2021, recovering from a record recession in 2020.
As of now, the GDP of the European Union exceeds $17 trillion, marking a return to its pre-pandemic levels and representing approximately one-sixth of the global economy, making it the world's third-largest economy after the US and China A key characteristic of the EU is the euro, which serves as the official currency for over 340 million people across 19 member countries and is recognized in 25 countries overall The euro is the second-largest reserve currency globally and ranks second in international transactions, following the US dollar.
Graph 2.2: Real GDP per capita from the European Union - 27 countries (as of
Source: Author’s comprisal from Eurostat data
The COVID-19 pandemic stroke and left enormous impacts upon the EU’s economy, causing the steepest decrease in output in Europe’s post-war history By mid-
In 2020, households experienced a 7.3% decline in primary income, with 49% of EU firms reporting a drop in sales due to the pandemic, while only 21% saw increases The hardest-hit sectors included transport, hotels, and restaurants However, timely interventions by EU government bodies helped mitigate income losses for households and prevented business closures Policy support allowed firms to experience less severe revenue declines, although this assistance led to increased public debt, raising concerns for the future, especially among already indebted EU member states.
The ongoing war in Ukraine, initiated by Russia, is significantly impacting the European Union's economy, with potential long-term effects on its priorities and policy decisions, as highlighted by Pisani-Ferry (2022) As Russia supplies approximately 40% of the EU's gas and one-third of its oil imports, energy prices are surging and are expected to rise further in the near future (Espiner).
In 2022, the EU is prompted to reevaluate its wholesale electricity pricing system, which is currently influenced by gas prices This shift indicates that the supply chains and logistics within the EU may undergo significant changes in the future.
The European Union's economic structure is predominantly driven by the service sector, which accounts for 74.7% of GDP, followed by manufacturing at 23.8% and agriculture at just 1.5% This minimal contribution from agriculture highlights a significant reliance on imported agricultural products within the EU.
In 2021, Vietnam's agricultural exports to the EU totaled approximately $2.2 billion, marking a 10.1% increase from 2020, according to the General Department of Customs The EVFTA has provided Vietnam with significant trade advantages, including the elimination of 99% of tariffs and a reduction in regulatory barriers and red tape These factors are crucial for enhancing the export potential of Vietnam's agricultural sector, enabling the development of brands and the expansion of market share within European markets.
The European Union is recognized for having some of the highest environmental standards globally, as highlighted by Selin and VanDeveer (2015) To enhance its environmental sustainability, the EU has implemented a range of policies aimed at safeguarding natural resources and ensuring the well-being of its citizens.
Vietnamese agricultural products’ penetration into EU market
2.2.1 Overview on the exportation of Vietnamese agricultural products to the EU
In 2020, Vietnam emerged as the EU's 15th largest trading partner and the foremost partner among ASEAN nations, surpassing Singapore The country exported goods worth $45.8 billion to the EU, reflecting a year-on-year increase of 14.2%, while imports from the EU reached $17.9 billion, marking a 16.5% rise (Web Portal Ministry of Industry and Trade, 2022).
It is also reported that there has been an increasing number of European companies are establishing in Vietnam, setting up a hub to serve the Mekong region (European Commission, 2020)
In 2021, Vietnam's agricultural exports to key EU markets experienced significant growth or only minor declines, marking a crucial milestone for the country, as reported by the Ministry of Industry and Trade (2022), despite the challenges posed by the COVID-19 pandemic.
Graph 2.3: Total Vietnamese agricultural export turnover in EU member states
Source: Author’s comprisal from the Vietnam’s Ministry of Industry and Trade
It is evident that Germany accounted for the largest percentage with 28.8% of the total export turnover of Vietnam's main agricultural products to the EU, reaching USD
In 2021, the export turnover reached 641 million USD, marking a significant increase of 24.4% compared to 2020 The Netherlands followed with a 22.5% share, totaling 500 million USD, a 1.9% rise from the previous year Italy contributed 12.8% with an export value of 285 million USD, while Spain accounted for 9% at 202 million USD, and France represented 6.4% with 142 million USD in exports Additionally, several smaller markets demonstrated remarkable growth potential, including Finland (up 198%), Hungary (up 86.9%), and the Czech Republic (up 49.2%).
As of 2020, tea and coffee accounted for 43% of Vietnam's agri-food imports into the EU, followed by fruits at 37% During the 2020-2021 period, Vietnam exported its signature fruits, including lychee and fresh longan, directly to Western European countries such as the Netherlands, Belgium, France, Germany, and the UK Notably, these fruits have successfully entered European food supermarket chains, expanding beyond the Asian retail market.
Graph 2.4: Top EU Agri-Food imports from Vietnam in 2020
Source: Author’s comprisal from the European Commission
Vietnam's agricultural products are showing significant potential in international markets, particularly in Germany Mr Bui Vuong Anh, the Commercial Counselor at the Vietnamese Embassy in Germany, highlights that while Vietnam's agricultural exports currently represent a small share of total exports to Germany, there is substantial room for growth The Vietnam Trade Office in Belgium and Luxembourg notes that with the EU's COVID-19 situation stabilizing, now is an opportune moment to refocus on international trade As EU member states enhance vaccination efforts and ease travel restrictions, this creates a favorable environment for promoting Vietnamese agricultural exports within the EU market.
The implementation of the EVFTA is set to benefit Vietnam's agricultural sector significantly, as key products like pepper, cashew nuts, coffee, and vegetables will enjoy reduced tax rates This advantage positions Vietnam favorably against other Asian countries with similar agricultural outputs, particularly in light of our major regional competitors who have not yet established Free Trade Agreements (FTAs).
Vietnam's agricultural sector must strategically invest in enhancing trade and expanding its presence in the EU market to capitalize on current opportunities This urgency arises from the need to secure market shares before the EU implements additional Free Trade Agreements (FTAs) that could favor competing countries Establishing a strong foothold in the EU is essential for Vietnamese products to thrive amidst increasing international competition.
EU market will also help form and raise Vietnam’s credibility in the long term and even enter other difficult markets
Despite the significant potential for expanding Vietnam's agricultural exports, it is crucial to address the pressing challenges that hinder this growth.
The European Union (EU) imposes stringent requirements regarding food quality, safety, hygiene, and technical barriers, presenting significant challenges for Vietnamese agricultural exports The EU's strict policies are designed to protect the health and safety of its population, making non-tariff measures like phytosanitary standards (SPS) and technical barriers to trade (TBT) particularly difficult for exporters Despite the implementation of the EU-Vietnam Free Trade Agreement (EVFTA), there have been limited advancements in addressing these non-tariff barriers Notably, between October 6 and 12, 2021, the EU recalled or issued warnings for five Vietnamese agricultural and fishery products due to violations of food safety regulations Consequently, to successfully enter the EU market, Vietnamese exporters must navigate these rigorous standards effectively.
Vietnam's agricultural exports must comply with strict rules of origin regulations, particularly under the EU-Vietnam Free Trade Agreement (EVFTA) Compared to other Free Trade Agreements (FTAs) in Vietnam, the EVFTA imposes more stringent criteria, requiring that agricultural products be wholly obtained to qualify for preferential treatment.
Follow up, it is still quite difficult for Vietnamese agricultural firms to access the
The EU agricultural product market faces challenges due to internal resource deficiencies and a lack of knowledge among manufacturers and exporters In addition to insufficient capital and labor forces, these stakeholders often struggle with limited information and guidance on frequently changing EU regulations Consequently, this leads to delays in meeting sanitary and phytosanitary requirements, which can increase costs and hinder firms' export capabilities.
Intellectual property is a crucial yet often overlooked aspect for many businesses, particularly in the agricultural sector While some enterprises prioritize export volume, they neglect the importance of developing strong brands for their agricultural products, which is highly valued by EU consumers Additionally, Vietnam's agricultural exports are hindered by high logistics costs exacerbated by COVID-19's impact on supply chains These challenges largely stem from internal issues within Vietnam's agricultural production industry Therefore, it is essential to implement appropriate assessments and solutions to address these significant obstacles, aiming to enhance Vietnam's agricultural exports to the EU and increase its market share in this region.
2.2.2 Evaluation of current market penetration strategies of Vietnamese agricultural products into the EU market
This article aims to enhance economic-trade relations between Vietnam and the European Union (EU) by evaluating the current market penetration strategies for Vietnamese agricultural exports It will summarize the existing strategies used to initiate trade in agricultural products within the EU market Furthermore, the study will analyze key characteristics that should be considered in the current market penetration strategies for Vietnamese agricultural products, ensuring their alignment with the evolving landscape of international trade.
As of now, Vietnamese agricultural enterprises primarily engage in exporting their products to the global market, particularly the EU, through indirect export methods This approach is the most common and fundamental way for these firms to penetrate international markets Currently, no Vietnamese agricultural company has been able to directly export to the EU, making indirect exporting a practical solution This method resembles domestic sales, as the Vietnamese companies rely on foreign partners for marketing and sales activities abroad Indirect exporting is often the quickest and most cost-effective way for these companies to access international markets, allowing Vietnamese agricultural products to reach the EU with minimal expenses and resources.
Vietnam's internationalization strategy, guided by the Uppsala Internationalization Model, emphasizes a gradual approach to entering foreign markets through careful information acquisition Given the significant power disparity between Vietnam and the EU, a low-risk entry method is essential for maintaining the quality of agricultural products and gradually building brand recognition among EU consumers This strategy aligns with Vietnam's goal of enhancing its presence in the EU market while leveraging available information on international trade As Vietnam's relationship with the EU strengthens, the country continues to prioritize indirect and direct export methods as its primary entry strategies, reflecting a commitment to sustainable growth in this influential economic region.
SWOT analysis
To gain a clear understanding of Vietnam's agricultural products penetration strategy into the EU market, this study employs the SWOT analysis model, which stands for Strengths, Weaknesses, Opportunities, and Threats This strategic planning tool is essential for organizations to develop competitive strategies (Gürel, 2017) By leveraging the SWOT matrix's ability to assess both internal and external resources, the research aims to summarize the current state of Vietnam's agricultural products in the EU market and explore future possibilities for growth.
- Vietnam has high quality products with reasonable prices
- Vietnam agricultural products cater to the long- term demand of the EU’s consumers
- To the EU, Vietnam is ranked as the 15th trade in goods partner and the largest trading partner in the Association of Southeast Asian Nations
- While Vietnam’s agricultural products account for a relatively small proportion in Vietnam’s export products to Germany, the ability to further develop the product in the market is promising
- Direct export of agricultural products is still limited
- Too dependent on the large number of intermediaries
- Vietnam's agricultural exports need to meet strict regulations on rules of origin
- The issue of intellectual property is another important aspect that has not been paid enough attention by many businesses
- It is still quite difficult for Vietnamese agricultural firms to access the EU agricultural product market
- The EU is an area with a large population and is a long-term and sustainable partner of
- EVFTA’s progressive elimination of customs duties will help to reduce taxes on some agricultural products to 0% in the 5 to 10-year roadmap
- EU laws create conditions for businesses to compete fairly, transparently and avoid fraud
- The climbing tension of the Russian war increasingly becoming uncertain making the future of Ukraine’s agri-food trade has still to be
- There are many competitors with good quality products in the market
- The EU is a market with high requirements in terms of food quality, safety as well as hygiene and technical barriers
- High cost of logistics in export in general and agricultural exports in particular after the impacts of COVID-19 to the overall supply chains assessed
- Vietnam's agricultural companies can get a surge of demands as the environmental situation in the EU is not appropriate for mass production of some agricultural products
- EU agriculture takes up only 1.5% of GDP, showing that the demand for agricultural products imports in the EU is fairly prominent
- With the decline in the EU’s arable crops as well as the high demand in organic agricultural products, this poses a great opportunity to
Vietnam’s agricultural products’ penetration into the market
- Climate change is increasingly unpredictable and has a significant impact on agricultural production
Table 2.2: The SWOT Model analysis
Chapter 2 provides insights into the macro and micro environment of the EU market, revealing its stable political landscape and advanced economy Recent trends indicate a growing consumer preference for organic products, particularly highlighting the appeal of Vietnam’s affordable, high-quality agricultural offerings This shift in consumer behavior is a crucial factor driving the strategy for promoting Vietnamese agricultural products in the EU market.
Based on the Uppsala Model, Vietnam's penetration strategy appears suitable for the near future; however, SWOT analysis reveals significant challenges ahead for increasing international trade with the EU The agricultural sector faces intense competition, the need to meet strict EU quality standards, and ineffective branding efforts To enhance trade with the EU market, Vietnam must implement stimulating, long-term solutions and policies for its agricultural products This study will leverage insights from Vietnam's agricultural industry and the unique characteristics of the EU to propose recommendations and solutions aimed at facilitating the entry of Vietnamese agricultural goods into the EU market in Chapter 3.
SUGGESTIONS FOR VIETNAMESE AGRICULTURAL PRODUCTS’
Suggestions for Vietnamese agricultural suppliers
To successfully penetrate the market, Vietnamese agricultural suppliers must actively enhance their products and operations Despite positive developments in trade relations with the EU through the EVFTA agreement, businesses need to implement necessary adjustments to fully leverage the advantages offered by this trade deal.
To successfully penetrate the EU market, agricultural suppliers must embrace technology and digitization in their production processes The surge in information technology, coupled with rising demands for higher-quality agricultural products and the challenges posed by climate change and global disruptions, necessitates this shift Digitization, defined as the transformation of information into digital formats, is essential for advancing high-tech agriculture and streamlining documentation and customs procedures This integration represents a crucial trend in addressing current agricultural challenges and fostering the development of the sector.
Agriculture suppliers must leverage advanced technology to enhance the quality of agricultural products and meet the EU's stringent food safety and hygiene standards Digitization of processes will boost productivity, ensuring that agricultural exports can satisfy the rising demands of EU consumers With an anticipated increase in demand for organic products, Vietnamese suppliers should utilize digital tools for efficient tracking and recording of goods throughout production and distribution This enhanced traceability will not only align with EU regulations but also build confidence in the transparency of Vietnam’s agricultural products, facilitating their integration into the European market.
The integration of advanced technology and digitization in agricultural production is expected to enhance the consistency of quality among Vietnam's agricultural suppliers This progress will help secure technical standards for each shipment and improve traceability conditions.
Vietnamese suppliers must prioritize trade promotion and branding of agricultural products in the EU market Current analysis reveals that Vietnamese businesses heavily depend on foreign intermediaries for promotional and branding efforts This reliance could negatively impact company profits, hinder brand development, and limit the distribution of Vietnamese agricultural products in the EU.
Branding should be a key focus in the marketing strategy for Vietnamese agricultural products, as it enhances their appeal in the European market and boosts recognition among EU consumers Vietnamese exporters must analyze the EU market's demand, consumer psychology, and buying habits to craft effective international marketing campaigns and distribution channels High-quality products require attractive packaging, particularly for EU customers who prioritize aesthetics Incorporating unique Vietnamese elements into packaging design will enhance brand recognition Additionally, attention to details such as brand names, logos, and packaging materials is crucial for differentiation Utilizing eco-friendly materials for packaging can further strengthen the brand's commitment to environmental sustainability.
Trade fairs present an invaluable opportunity for agricultural suppliers from Vietnam to connect with potential customers in the Eurozone Notable events like the Global Organic Farmer Fair (Biofach) in Germany and the National Brand and Investment Fair (NBI Expo) in Eindhoven, Netherlands, enable these suppliers to network, engage with future clients, and effectively promote their products to a targeted audience.
Vietnamese agricultural suppliers must prioritize green and sustainable production to overcome significant challenges, including the impacts of the COVID-19 pandemic, global disputes, political instability, resource depletion, and climate change To sustain growth and enhance the productivity and quality of agricultural products, a comprehensive strategy focused on sustainability and adaptability to climate change is essential.
Vietnam's suppliers are set to leverage their resources in alignment with the agricultural restructuring policy, which aims for sustainable and resource-friendly production This involves adapting agricultural land use to promote crop and livestock diversity and enhance the value of agricultural products A key focus will be on transitioning from low-value products to high-value, competitive export commodities The restructuring process will necessitate increased investment in infrastructure for concentrated commercial use, as well as in environmental monitoring and disease surveillance systems Collaboration among agricultural manufacturers, businesses, and cooperatives is essential for effectively implementing technology in cultivation and harvesting Additionally, enterprises and cooperatives must prioritize the development of post-harvest preservation and processing systems to maximize product value.
Vietnamese agricultural firms must expedite their restructuring efforts to enhance the quality of their export products, positioning quality as the cornerstone of Vietnamese agriculture Although the EU has recognized Vietnamese products for their high quality, suppliers now face increased scrutiny due to prior warnings about exceeding agrochemical residue levels The critical goal of eliminating the "yellow card" by 2026 underscores the importance of adhering to green initiatives; failure to do so risks a "red card" penalty, which would prohibit the export of agricultural products to the EU.
So with the application of green and sustainable production, agricultural suppliers will most likely be one step closer to get back on the EU’s good side
Lastly, Vietnamese agricultural suppliers need to start developing new, high quality agricultural products With the European Union–Vietnam Free Trade
With the new agreement in effect, many Vietnamese agricultural products now enjoy tariff-free access, presenting a significant opportunity to enhance exports and diversify the product portfolio in the EU market By introducing high-quality products with innovative variations, Vietnam can expand its market share and effectively compete in the challenging agricultural sector Additionally, in light of the COVID-19 pandemic, climate change, and global political tensions, improving machinery and processing methods to diversify offerings is essential for overcoming current trade and export challenges.
To enhance the quality and longevity of agricultural products during transport, businesses must adopt innovative methods, especially in light of recent global disruptions affecting logistics and supply chains Techniques such as drying and deep processing using clean heat have shown success, as evidenced by the province of Son La in 2021 Reputable agricultural processing and exporting companies equipped with modern machinery and skilled product development teams are well-positioned to create and introduce new product lines Additionally, Vietnam must consistently elevate product quality and adhere to EU standards, such as GlobalGAP, to ensure superior farming practices and transparent product origins.
Suggestions for Vietnamese government and related governmental bodies
In addition to the dynamic improvement of Vietnamese agricultural production enterprises, we cannot ignore the adjustment and coordination of instructions of the
The Vietnamese government must implement strategic measures and policies to collaborate effectively with agricultural suppliers, ensuring sustainable market penetration in the EU To enhance trade in agricultural products within the EU market, this study presents key recommendations for the Government of Vietnam.
The Vietnamese government must enhance trade relations and negotiate to eliminate unreasonable barriers imposed by the EU, especially in light of ongoing global challenges such as the Russia-Ukraine war and economic polarization With Russia as a key supplier to the Eurozone, fluctuations in the EU market are expected, necessitating close monitoring To navigate these changes effectively, Vietnamese authorities should engage in thorough research and consult with experts to gain insights into the EU market and its impact on Vietnam's trade This proactive approach will enable the development of effective strategies and agreements that not only strengthen trade relations with the EU but also attract foreign direct investment, ultimately boosting export growth.
To enhance trade with the EU, the Vietnamese government must introduce new regulations that align with EU market trends while facilitating business operations Despite the benefits of the EVFTA in reducing tariffs, existing technical barriers still impede Vietnamese agricultural suppliers Therefore, it is crucial for government bodies to strengthen their partnership with the EU, actively collaborating with agricultural suppliers to improve product quality and negotiate against unreasonable trade barriers.
To enhance agricultural production through high technology, the Vietnamese government should allocate a suitable budget for investment in agricultural innovation and accreditation reform This investment should prioritize improving the quality of machinery, equipment, and production technology to ensure the production of high-quality, fresh agricultural products that meet international standards Additionally, increasing tax exemptions for agricultural suppliers who effectively implement technology in their operations could further encourage investment in the sector.
The establishment of a robust policy framework is essential for fostering synchronized mechanization and digitization in agriculture This initiative aims to motivate and encourage enterprises and producers to adopt high-tech agricultural practices and innovative technologies, including automation, digitization, IoT, and AI, throughout planning, manufacturing, trading, and supply chain connections.
The article emphasizes the importance of market demand information for products and recommends that the government establish a supportive policy framework This framework should facilitate access to technology and interdisciplinary national databases, including land use, hydrometeorology, satellite imagery, resource management, and disaster risk assessments By doing so, businesses and producers can leverage advanced digital technologies, enhance e-commerce, connect consumers with manufacturers, and improve traceability and food safety controls, ultimately fostering integration into international trade.
Thirdly, Vietnamese governments should assist agricultural suppliers in accessing detailed updates on the commercial information of EU countries The
The Vietnamese government can enhance support for businesses by developing a comprehensive market information system and organizing targeted trade promotion programs It is essential for specialists and consultants to improve market analysis, forecasts, and research to facilitate business operations effectively Access to critical information will provide a significant advantage, ensuring that Vietnamese businesses can secure their place in the EU's agricultural supply and value chains.
Establishing comprehensive methods and platforms to inform agricultural manufacturers is crucial for enhancing awareness of regulations related to export challenges The Ministry of Industry and Trade previously launched the Free Trade Agreement portal (FTAP), which includes the EVFTA agreement, serving as a significant resource for Vietnamese authorities to update and expand the platform This tool enables companies to access vital information regarding their obligations under the agreement and gather essential market data By leveraging such platforms, Vietnamese agricultural suppliers can stay informed, align their business strategies, and effectively plan their market penetration efforts.
Authorities should consistently conduct training programs, both online and in-person, adhering to pandemic safety protocols, to update businesses on the current state of commercial trade with the EU These training events can significantly enhance effectiveness when made accessible to companies across various localities and regions nationwide.
To enhance the competitiveness of Vietnamese agricultural products in the challenging EU market, government bodies must establish comprehensive safety and health standards This involves implementing rigorous technical standards that align with international benchmarks like VietGAP and GlobalGAP By enforcing these standards, Vietnamese authorities can ensure that agricultural suppliers meet necessary safety indices, thereby improving product quality and compliance with strict EU regulations.
To enhance the efficiency of agricultural practices, government bodies should implement policies that reduce the time and cost of specialized inspections and phytosanitary procedures for farmers and agricultural businesses This initiative will encourage compliance with quality control regulations and foster collaboration among stakeholders Additionally, the government can assist agricultural suppliers by facilitating access to advanced technologies that improve productivity and meet EU market requirements It is crucial for Vietnamese authorities to establish a comprehensive information dissemination strategy, ensuring that all agricultural suppliers understand the necessary standards This effort will involve building strong relationships with ministries and local authorities to maintain transparency and prevent misunderstandings regarding agricultural product standards.
Forming from the theoretical background of Chapter 1 and the analysis of Chapter
The thesis outlines key orientations and recommendations for Vietnamese agricultural product suppliers and government bodies, aiming for successful implementation between 2022 and 2032 These suggestions are grounded in the current state of Vietnam's agriculture and significant global trends, with the goal of strengthening the agricultural sector and enhancing Vietnam's cross-border commerce.
Having joined the Vietnam-European Union Free Trade Agreement (EVFTA) in
In the context of the ongoing COVID-19 pandemic and significant global events in 2020, Vietnam's strategy for penetrating the EU market requires urgent evaluation and reform Agricultural products play a crucial role in Vietnam's economy and are among the country's largest exports to the EU This study aims to analyze current export statistics and utilize the Uppsala Model to assess the effectiveness of Vietnam's market penetration strategy in the EU.
The thesis pointed out that even though the main current mode of entry
(exporting) is appropriate in the foreseeable future, according to the assessment of the
The Uppsala Model, combined with a SWOT analysis, highlights the need for Vietnamese suppliers to enhance their agricultural products to comply with the strict standards of the EU market It is essential for them to modernize manufacturing processes and adopt environmentally friendly practices in the handling of agricultural goods.
The ongoing supply challenges in the EU market due to the Russia-Ukraine war present a significant opportunity for Vietnamese suppliers to enhance their presence in the EU and other major economies.
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Available at: https://laodong.vn/kinh-te/tong-ket-nganh-nong-nghiep-2021-lan-dau- xuat-khau-lap-ky-luc-486-ti-usd-989424.ldo (Accessed: 18 March 2022)
20 Xuân Anh and Bích Hồng (2021) Đảm bảo nguồn cung lương thực, thực phẩm cho
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