market internalization a case study from hoanglong seafood corporation

This internship report studies the case of exporting Basa catfish from a Vietnam to the world in Hoang Long Group Corporation: why the company got blocked from its main targeted market;

COMPANY BACKGROUND

Hoang Long Group Corporation (hereafter called HLG) was initially established in October

1999 in Long An province, south of Vietnam as Hoang Long Trading – Services – Construction limited liability company Having contributed equity of 1 billion Vietnam Dong (equivalent to 77,000 US Dollars at that time) and wholy-owned by Mr Pham Phuoc Toai’s family, its core activities were quite simple: imported tobacco and tobacco flavor from Cambodia, Thailand, Singapore then sold to provincial tobacco producers in Mekong delta (Long An, Dong Thap, An Giang, Can Tho) who produced & sold local brands cigarette Demand for cigarettes at reasonable retail price in rural areas of Mekong delta was quite high Imported cigarette brands like Hero, Jet, 555, Marlboros, Craven, Kent… were subjected to extremely high import tax (tax rate of 50%) and excise tax (tax rate 70%) causing retail price of imported cigarettes beyond budget of majority consumers in rural area of Mekong delta Tobacco smuggling was not serious as trans-border US Dollars cash transaction and cigarettes transportation were too risky for smugglers Local brands cigarettes made domestically then were perfectly met the low-end market segment then demand for tobacco flavors increased tremendously Thanks to its exclusive territory distributorship contracts with foreign suppliers, HLG had gained huge profit during period of 2000-2005 from trading tobacco and tobacco flavors Being a family-owned company, Mr Pham Phuoc Toai - President & CEO decided that no dividend distributed during this period Thanks to its accumulated retained profit, HLG shareholder’s equity capital increased sharply, beyond 200 billion Vietnam Dong

After joining WTO in December 2006, Vietnam import - exports activities were booming and competition in tobacco market became tougher from both international giant firms like B.A.T, Phillip Moris who got license to do OEM and marketing activities in Vietnam as well as cross border tobacco smugglers Vinataba, the largest Vietnam cigarettes producer also launched a wide range of products with some low-cost brands like Thang Long, White Horse, Saigon, Bong Sen, Bastion… so almost domestic cigarette producers in Mekong delta had to close their factories Vinataba imported directly tobacco and tobacco flavor from international suppliers then HLG’s main business was seriously impacted and declined from

In February 2007 HLG restructured from a limited liability company to be a joint-stock company with the equity of 266 billion VND and expanded its activities to construction,

4 | P a g e infrastructure investment The fiscal year of 2007 was a milestone in HLG history with turnover of 875 billion VND, and earned the highest ever profit after tax of 117 billion VND

In August 2008, HLG went IPO and decided to move its core business to seafood industry, targeted to basa catfish product The company had invested huge capitals and applied 3F model in this new business of feed, farm and food process in Dong Thap province where they were given Corporate income tax incentive and land usage right at very reasonable annual rental

Basa catfish (Pangasius) is a kind of native river fish which can be farmed with highest productivity only in Mekong delta, Vietnam thanks to its unique geographic condition Being natural freshwater fish, it used to be caught by fishermen with limited quantity and the volumes highly fluctuated depending on the seasons Having tasty meat, it has been a favorite choice of seafood dishes for Mekong delta residents Some Vietnamese seafood processing firms did export frozen basa catfish fillet to Australia in 1988 as testing cases and got positive feedback from oversea consumers Since natural basa catfish was not able to meet the demand of industrial size of operation then some farmers tried to have basa catfish farmed by feeding on river’s floating house and digesting ponds along Mekong river’s branches and got success in An Giang, Dong Thap, Tien Giang (Nguyen 2019) basa catfish harvested by the farmers in Mekong delta then was able to satisfy demand in big volume of seafood processing plants and the name of basa became popular in not only Australia but Euro, and the US since the years of 1990s In September 2009, HLG listed all 44,337,585 shares (10,000 VND/share par value) in Hochiminh city Stock Exchange (HoSE), Vietnam

In June 2010, just less than 3 years from the time of selecting seafood as core business, the company has inaugurated a sophisticated complex facility of: i) 48 hectare fishery ponds, ii) An aquarium food processing plant with production capability of 150,000 tons/year (Mekong aquarium food plant) iii) a fresh fisher processing plant of 130 ton/day with frozen storage facility of 5,000 tons (Hoang Long seafood processing plant) in Tam Nong district, Dong Thap province (Hoang Long 2017) at the time of completion, this 620 billion VND investment was among the largest and most advanced technology fishery-related-facility in Mekong delta of Vietnam

Thư viện ĐH Thăng Long

1.3- Company’s products and market overview

From June 2010 upto now, HLG’s main products are: fresh basa catfish, aquarium food brands Hoang Long and frozen basa catfish fillet (almost no brand, packed following buyers’ instruction)

With fresh basa catfish harvested from its own 48 hectare fishery ponds, they were raw- material for the Hoang Long seafood processing plant (Mai 2018) in fact HLG has to procure more fresh basa catfish from market for the fresh fishery processing plant as the harvested output 48 hectare ponds just meet 60% demand (a hectare fishery pond can deliver 500-600 ton fresh basa catfish/annum) With Hoang Long aquarium food, HLG uses just a part of its output products for the 48 hectare fishery pond’s consumption (Chi 2017) it’s statistic that 1kg of matured basa catfish needs 1.5 kg -1.7 kg of aquarium food Assuming HLG can harvest 25,000 ton of raw-material basa catfish from its owned 48 hectare ponds then demand for aquarium food would not beyond 45,000 ton per year; the rest of 100,000 ton aquarium food should go to the market and the buyers are farmers in Mekong delta who also farm basa catfish In order to secure the supply’s source of fresh basa catfish to Hoang Long seafood processing plant, HLG also supplied aquarium food to some selected farmers under food- fresh basa catfish exchange method: HLG supplied aquarium food to farmer without payment requested and farmer signed a commitment of offsetting the debt by selling matured fresh basa catfish to HLG when having harvested

With frozen basa catfish fillet, nearly 100% of the finished products were exported as Mekong delta is in rich of fresh fish and local consumers prefer fresh fish to frozen fillet fish Below are some statistics of Vietnam’s basa catfish export and HLG frozen basa catfish fillet sales/export during 2010 – 2018 period

Table 1.3.1: Vietnam basa catfish harvested quantity, export volumes and average FOB price

Harvested volume Left direction: Volume in tons

Export volume Right direction: US $/ton

Table 1.3.1: HLG basa catfish export statistics for 2015-2018 period

Table 1.3.2: HLG basa catfish export volume statistic for 2015-2018 by countries imported

Year EU Brazil Mexico US China Asia(non

Table 1.3.2: HLG basa catfish export turnover statistic for 2015-2018 by countries imported

Year EU Brazil Mexico US China Asia

HLG appointed CEO, Deputy CEO in 2015, the new management team setup their owned created reporting structure then export data from 2014 backward was not available

HLG was unable to export its basa catfish to the US under the name of company during

2015-2019, except a very small order of 16 ton in 2017 as consequence of Farm bill for

Vietnam basa catfish products and the company failed to prove that they were not subsidized by the government As long as HLG listed in the anti-dumping price tariff Vietnam basa catfish firm, the is no way for the company to directly export its product to the US

EU, Brazil, Mexico and China imported more than 70% company’s sales volume during this period China just arose as the 2 nd largest market after EU in last 2 years however all exports to China was done via cross border trade export Export to Brazil decreased in 2015 as they stopped importing basa catfish from Vietnam due to quality related controls, resumed in 2016 and reached the highest position in 2017 but suddenly downed in 2018 for the same reason: hygiene quality food’s concerns

EU market export volumes did not fluctuate largely past 4 years All exports to the EU made under official distribution contracts with oversea distributors

1.4- Financial figures in 2017, 2018 and 1 st half of 2019

Accounts Code 30 th Jun 2019 31 st Dec 2018 31 st Dec 2017

III Short term Accounts receivable 130 915,137,905,131 916,777,773,644 642,127,662,768

IV In-progress construction fixed assets 240 25,158,103,572 24,791,988,572 22,318,902,302

VI Other long term assets 270 16,649,688,099 15,228,928,780 12,974,673,716

I Shareholder equity 411 (52,317,376,239) (129,861,582,338) (190,082,029,774) Paid-in capital 421 210,000,000,000 210,000,000,000 200,000,000,000 Retained profit 430 (262,317,376,239) (339,861,582,338) (390,082,029,774)

HLG working capitals are fully financed by the bank short term loans Since the company operation result generated serious lost past years so shareholder equity even in negative figure since 2015 Chairman of HLG, Mr Pham Phuoc Toai made strong commitment to the normal operation of HLG by mortgaged his own properties to the bank for the bank loan’s guarantee so there is no concern with the continued operation capability of the company

All loans are mortgaged loans computed in US Dollars as the interest rate for loan made in

US Dollars are much cheaper than VND (interest rate of 4.5% short term loan in USD while

9 | P a g e for VND loan it should be at leat 8.3% per annum) There is no exchange rate risk as HLG exports all finished products then turnovers made in US Dollars

Account receivables and finished products stocked recorded at rather high level, taking into account that all working capital and capital expenditure funded by the bank Depreciation was calculated with life time of the asset no more than 10 years so this cost will be reduced tremendously in the future

Description Cod e 1 st half of 2019 2018 2017

4 Cost of goods sold 11 1,058,083,997,480 1,828,328,675,502 1,430,521,498,172 5.Gross margin (20 = 10

Turnover increased substantially in 2018 (37% increased to 2017 figure) and even better in 1 st half of 2019 (18% higher than 2018) Gross margin improved tremendously to 12.7% (for 1 st half 2019), 10.6% (for fiscal year 2018) and 4.4% (for fiscal year 2017) thanks to reducing unit cost of goods sold coming from:

- Efficiency of fresh fish processed progress at the plant;

Financial expenses also under well-controlled as the company targeted to customers who accepts FOB plant contracts, rather than D/A or L/C contracts Thanks to surplus fresh fish supply source in the free market, HLG also did not have to pay immediately when procuring fresh fish for the plant’s production as it did before Earning positive cashflow from main activities helping the company to reduced, at certain level, of short term loan payment and interest in last few years was relatively cheaper than years before

Sales admin costs and overhead costs remain unchanged In fact, the company has reviewed these costs on monthly basic even by the Chairman, all factors were optimized in line with the industry so there seems no room for further cost cutting

COMPANY STRUCTURE AND ORGANIZATION CHART

HLG structure their operations as a group of companies in which: i) holding company (HLG holding) centrally controls all financial and banking, human resources, purchasing, ERP & informatics technologies activities Group’s functional departments implement everything related to such matters for both holding & subsidiaries, then allocate to each strategic business unit or cost centre Given its registered head office in Long An province, the top corporate management leads the group’s operation from their liaison office located in Tam Nong town, Dong Thap province where the farm-feed-food facilities stationed Even HLG is a listed company but the Chairman holds 80% issued shares than delegation of authority is not clearly setup and/or implemented He and his daughters who is vice chairwoman of HLG review and decide nearly everything, even endorse any bank account holder signatories The CEO Mr Nguyen Quoc Dao who was an experienced CFO before joining HLG in 2015 - acts just as a senior financial and corporate planning advisor to the Chairman

HLG holding and its domestic affiliates are only using PGBank for their transaction Thanks for this “cash pooling” service, HLG’s management can utilize their cash flow at corporate level

- domestic subsidiaries which are wholly owned by HLG holding: ii) Hoang Long aquarium farming company: farming basa catfish, then supplying harvested fresh fish to Hoang Long seafood processing company Since they just farm basa catfish in HLG owned ponds and using HLG supplies aquarium food then the management of this firm is simple Except concentrating on river fish farming know-how, this subsidiary does not require nor consume much resource iii) Mekong aquarium food: producing food for basa catfish, supplies internally for Hoang Long aquarium farming company and sells to the market as well Materials for producing were procured by HLG holding but invoicing directly from the suppliers to Mekong aquarium food This company also sets up their own, independently marketing & distribution strategy but cashflow is fully controlled by the HLG holding

Beside the operation and maintenance of a 150,000 ton/annum plant producing aquarium food, Mekong aquarium food also responsible for debt collection from selling aquarium food or exchanging aquarium food-for-fresh basa catfish with farmers who were given credit of

12 | P a g e late payment Exchanged basa catfish from farmers (if any) will be sold to Hoang Long seafood processing and written-off against the raw materials procured by HLG holding iv) Hoang Long seafood processing: procuring fresh basa catfish from Hoang Long aquarium farming company and from the free market; processing fresh fish to be fish fillet, packaging and having it frozen in the cold storage The company sells frozen fillet catfish to both domestic and international buyers and carries out all distributing, marketing related activities Like Mekong aquarium food, cashflow of this subsidiary also under the strictly monitored of HLG holding

Nearly all finished products of this company were exported Payment terms would vary from one to other but mostly Irrevocable L/C and 100% down payments before shipping Logistic services related to goods delivery, shipping… is fully outsourced v) Offshore company established in the US (HLG US holding LLC): carries out marketing, logistics and even outstanding debts collection activities for US, Brazil and Chile markets Since HLG was charged extremely high import tariff for frozen basa catfish by the US Department of Commerce then this offshore company remains operation moderately

Finance Dept Procurement Dept H/R Dept IT & ERP Dept Hoang Long fish farming

HLG US holding LLC (USA)

Group CEO Executives committee (CEOs, CFOs of subsidiaries)

(Dung 2003) as a victim of the catfish dispute initiated by the US Department of Commerce, HLG was among a list of Vietnamese firms who are:

- Not allowed to use Catfish brand for goods exported to the US;

- Blamed to be selling at dumping price as subsidized by the government of Vietnam then subject to high import tax when selling to the US market;

- Under strictly supervised for goods quality imported to the US which increased the logistics cost for storage and caused difficulty to the delivery plan

At the time of deciding to invest in seafood industry, US market was HLG top priority market as demand of basa catfish was quite high, competition from suppliers was moderate and Vietnam was the unique country who can farm basa catfish at very competitive cost then gross margin was so good, up to 80%-90% Since the US market suddenly closed to HLG, sales volumes and gross margin turned down while they all fixed assets plus majority part of working capital financed by the bank then they were unable to fulfill the commitments of repaying both principle and interest to PGBank, starting from 2 nd quarter 2014

I was assigned by HLG’s CEO to observe the operation of HLG at both group (corporate finance) and affiliate level (Hoang Long seafood processing and Mekong aquarium feed, for sales administration subject) I work closely with the Chairman, CEO, CFO of HLG holding; with CEO and CFO of Mekong aquarium food, with Deputy CEO of Hoang Long seafood processing to make sure that:

- They have sufficient cash flow for normal operation;

- Credit facility provided by the bank only used for HLG seafood and aquarium food business;

- Their operation: sales, procurements, stock, costing… are managed optimally;

- HLG financial reports, operation related figures submitted to PGBank are correct and fairly recorded

As agreed with HLG’s Chairman, I am authorized to freely access to HLG production facilities (warehouse, storage, plant and pond), view operation database or request any related functional department of the companies to get necessary information for carrying-out the mission

THE MISSION ASSIGNED TASKS AND GOALS

My self-assigned tasks for 4 months of internship were:

- Understand quality, technical requirements from the oversea buyers for Vietnam basa catfish;

- Preliminarily study HLG’s basa catfish production, storage and delivery processes;

- Review some purchase orders from EU, Brazil, Chile and China buyers; get involved the negotiation for few deals;

- Analyze frozen basa catfish exported figures for 2018, and 1 st half of 2019 in terms of: gross margin by quarter, market segments, payment term, repeated order buyers;

- Understand tax and non-tax barriers of 4 key markets (US, EU, Brazil and China);

- Observe marketing activities of HLG for its frozen basa catfish products

3.2- Link between subject and the internship mission

HLG has been changing its targeted market of the US to other countries in order to remain its 3F model operation and generate enough cash for its commitment of paying back due loans to the bank So finding new international markets and keeping market shares for both new and existing customers are critical to the survival of the company

At the beginning time of expanding core business to seafood industry, HLG made a wrong approach to the US market by not taking into full scale of risk factors which would even prevent HLG from distributing its finished products to the world largest market Not only US, even Brazil, a market with much lower requirements for imported agriculture products also did close their market for certain time to Vietnam products In other words, market selection and market entry should not only be studied during process of development of a business plan but regularly reviewed and adjusted to avoid or mitigate potential risks and I wonder if this practical executed in HLG management

By analyzing catfish business inside, company & industry sales records, reviewing company’ supply capability and its marketing strategy; updating changes in term of government’s regulation from both Vietnam and the export’s destination countries in past few years then we can measure risks suppose in connection with justify impact if incur Depend on management final review, the company will initiate or revise the business plan for the goal seek of a

15 | P a g e harmonized oversea markets scheme which can balance the risks in terms of buyer’s government trading regulation, buyers’ power and even threaten from new suppliers

Goal 1: Review the market entry’s theory in term of market selection and market entry in the Business Planning course versus HLG’s fact;

Goal 2: Propose a benefit-cost-risk-trade-off approach for HLG’s top management when identifying an oversea market for their frozen basa catfish

DEVELOPMENT

In 1977 Johanson and Vahlne (2009) developed the Uppsala internationalization process model They found that a firm entering new oversea markets using an establishment chain During initial steps of internationalization process, firms would select and enter markets with closer geographically and culturally with low-risk market entry modes like 'export', 'licensing' or 'franchising,' in collaboration with a local partner (Neubert, 2016) Internationalization or Going global occurs in a context of high degrees of uncertainty Firms doing business abroad possibly facing problems arising from the unfamiliarity of the environment, cultural, political, economic difference

Carpenter (2012) and Abrams (2010) also developed some recommendations for evaluating list of factors may impact to a firm going global

In 2010, HLG decided to expand its core business to seafood industry and selected America as main targeted market As explained in 1.3- Company’s products and market overview (Chapter 1), they were unable to export their frozen basa catfish to the US and even lost Brazil market share in 2015 and 2016 due to both tariff and non-tax obstacles initiated by the government of the import countries So there must be some serious problems in HLG business plan

Reviewing their business plan comprehensively would require a lot of resources so this study will only review one factor of HLG’s business plan: markets selection using PESTEL model, theory of globalization of Carpenter (2012), theory challenge in international business of Abrams (2010)

HLG was unable to sell its product to the US during 2016-now as the company has been imposed extremely high the so-called anti-dumping price tariff ranging 2.4$-7.4 US Dollar per kg while the FOB Saigon port price would just around 2.2$ - 2.5$/kg (Nguyet 2018) with effectiveness from August 2019, only Vinh Hoan Corporation – the largest basa catfish producer in Vietnam can enjoy tax rate of 0% thanks to their continually lobby activities in the US

Having business in seafood industry with 48 hectare fish farming pond, a comprehensive fresh fish processing plant with capacity of 130 ton/day and a cold storage facility of 5,000 ton and more importantly more than 1,400 contracted employee; they by no way can temporarily stop operation or even leverage the operation less than a half of designed capacity as:

- The equipment in the fresh fish processing plant will be destroyed if no operation in place as they need daily maintenance, and require specific maker’s set-up temperature/humidity Once the plant closed, it would be too expensive to recover the standby status

- The cold storage facility will be seriously affected if not in operating, not only equipment but also hygiene indicators’ requirement as they are to store foods

- Employees working in the fresh fish processing plant requires a lot of experiences If the company downsize this labor force, then once operation resumed it’s impossible to recruit them back as they already moved to other seafood processing plants

- Cash flow for their responsibility of paying due loans, both principle and interest

Starting from 2012, HLG decided to approach EU countries market by participating several oversea Seafood Products Trade Fairs Being a member of VASEP (Vietnam Association of Seafood Exporters and Producers), they also benefited from Association shared information, database and other resources related to seafood market, both domestically and internationally Brazil and Mexico became HLG next targeted markets in 2014 At present EU, Brazil, Mexico and China are the key markets for HLG; this 4 markets account for more than 75% exported volume, more than 80% in term of turnover from their export, below are statistic in percentage in term of exported quantity and value:

Table 4.2.1.1: HLG key export markets

Volume Value Volume Value Volume Value Volume Value

(Source: company export report file)

4.2.2- Markets selected analyzing using Pestel model

This model was used for analyzing US, EU, Brazil, Mexico and China markets to justify should theory is correct with the fact of operation and explain further why HLG failed to enter to the US market

Factor US EU Brazil Mexico China

Political Stable Stable Less stable Less stable Stable

The world largest economies GDP, GDP per capita also among the top countries

Among the world largest economies, GPD ~ 22% global economy

GDP per capita rank 73th, GDP rank 9 th

Very fast developing country GDP rank 2 nd , GDP per capita rank

Freedom Freedom Highly oriental social culture value

Developed Developed Developing Developing Developing

Environment protection are top priority

Environment protection, sustainable development are highly concerned

Less concern on environment but in progress of improvement

Legal Very complicated laws system, a complex organization

Legal system bases on civil law

Brazil's judiciary is a multifacete d system

A civil law legal system is statutorily based, which means

Not so strict but directly interfered by the central government

19 | P a g e of Federal and State governmental divisions

Legal advisory service expensive and easy to be suit law that operates on the state and federal levels, much like the U.S judicial system cases are decided individually by looking at the law

Unlike in the United States, Mexican case law does not have precedential value

Can be changed without pre- noticed

Pestel model showed that all 5 markets are potential in term of economic, social and technology However, there is concern over Environment factor in the US, EU and legal risk for US, Brazil and China market This analysis result absolutely respects the fact that HLG suffered legal problems when distributed its products to US and Brazil and possibly face similar obstacle in China market

4.2.3- Markets selected analyzing using Rhonda Abrams’s research recommendation

Rhonda Abrams’s research was used for analyzing existing key export market of EU, Brazil, Mexico and China only The purpose was to measure HLG’s fact or its readiness for going globalization to these oversea markets

Table 4.2.3 Rhonda Abrams’s research recommendation

Globalization EU Brazil Mexico China

Global Risk: major risk facing HLG in each area, rate the approximate extent of that risk (high, medium or low-

20 | P a g e risk), and note steps HLG can take, or have taken, to lessen that risk

Transportation and logistics service for

EU delivery are well-organized

Medium risk as long distance and require transshipment by sea Freight cost somehow beyond HLG control

Low risk Easy transportation and delivery to China border from HLG plant HLC can fully control this factor Currency fluctuation

Payment in Euro and exchange rate EUR/VND is stable

HLG can control this factor

Payment contracted in USD and exchange rate USD/VND is stable

Payment made in USD and exchange rate USD/VND is stable

No impact Payment in USD or even VND for cross border trade and exchange rate USD/VND is stable

HLG can control this factor Labor/workforc e problem

Low impact Low impact Low impact Low impact

Inadequate/Inco nsistent quality control

High risk Apply good practical standards for farming, fresh fish processing and (GAP, HACC);

Medium risk as Chinese vendors inspected each cargo before departing HLG storage warehouse

21 | P a g e control, especially for fresh fish before processing and frozen storage;

- Consult with legal advisor to be informed/updated should the importer’s country changes specification requirements for frozen fish imported;

- Standardize transportation service for goods delivered;

- Buy insurance control, especially for fresh fish before processing and frozen storage;

- Consult with legal advisor to be informed/updated should the importer’s country changes specification requirements for frozen fish imported;

- Buy insurance house quality control, especially for fresh fish before processing and frozen storage;

- Consult with legal advisor to be informed/update d should the importer’s country changes specification requirements for frozen fish imported;

Political risks Low impact Medium impact Medium impact High risk, High impact Changes in international trade laws

Medium or even High impact HLG is to review existing internal policies, regulations and find the gaps with good practical;

Medium or even High impact

HLG is to review existing internal policies, regulations and find the gaps with good practical;

High impact Step by step reduce the cross border trade for China market;

- Analyze, update China regulation for official imported

22 | P a g e minimize the gap; necessary actions to minimize the gap;

- Implement necessary actions to minimize the gap; frozen fresh fish

- Appoint a Hong Kong based distributor in charge of mainland market so will be alerted if any restriction imposed by China authority

Like all Vietnamese exporters, HLG export its products under FOB any Hochiminh city port term, Irrevocable L/C payment and the currency is either US Dollar or Euro The exchange rates between VND and USD/Euro have been well control by the State Bank of Vietnam so there exist only 3 risk factors: (i) Inadequate/Inconsistent quality control; (ii) Political risks and (iii) Changes in international trade laws

- HLG exported products is frozen basa catfish They were packaged following buyers’ instruction: weight per pack, name/branding on the package as basa catfish can be named in several names

The quality of fresh basa catfish before having processed and chilled (ingredients, especially for some chemical contents) was hard to controlled, even with the fresh fish farmed by HLG as it depends on several factors: ingredients of foods, quality of water in the ponds, the usage of applied chemicals during the farming There is no global quality standard for frozen basa catfish; each country may issue their own specification requirement for imported basa catfish Even HLG applies GAP, HACCP standards but there happened shipments of frozen basa catfish rejected by the buyers (Tuyen 2016) in November 2016, Brazil decided to stop importing basa catfish from some Vietnamese firms The ban was lift in 2017 but Brazil authority closely monitors quality of imported basa catfish from Vietnam

CONCLUSION

HLG made serious mistake with their Basa catfish Business Plan in 2010 as they did not take into account legal risk factor for US and Bazil market They have not anticipated that

America catfish farmers in Arizona state would be able to lobby the US government creating both tariff and non-tariff obstacles to prevent HLG’s products When US-Vietnam basa catfish dispute incurred, they suffered lost as sales volume turned down while fixed costs of operation remained unchanged

HLG current Business Plan also not seriously considers political risk for China market Cross border-trade may support HLG in maximizing production’s capability, improving gross margin thanks to unit costs of goods sold reduced but this trend is not secured

Vietnam Basa catfish enterprises, in which HLG was a member appears to be having weakness of Inadequate/Inconsistent quality control for their exported products With

HLG, no risk mitigation proposal for quality related risks made so far and if continuing doing, they may once again face problem if the imported country raising product’s quality control alerts

HLG is not well-prepared for change in international trade laws even the country has entered several bilateral trade agreements, free trade agreements Non-trading condition, requirements, specification from these agreements would easily isolates the company from dealing with big name international distributors as they seriously consider code of conduct, legal compliance …

5.2- Suggestions i) HLG should prepare a well-structured business plan, taking into account full factors which may incur and impact to the business operation, rather than the traditional method of preparing budget of a family-oriented company where the Chairman decided by himself; ii) HLG should mitigate the risk of concentrating too much for China market As Vietnam entered CP TPP and FTA with EU in 2019, the company should spend enough resources for readiness of changing in international trade laws

REFERENCES Abrams, R., 2010 Successful Business Plan: secrets and strategies The Planning Shop

Anh Chi., 2017 Application of research on fast growth period for farming basa catfish

Available at: https://tongcucthuysan.gov.vn/vi-vn/nu%C3%B4i-tr%E1%BB%93ng- th%E1%BB%A7y-s%E1%BA%A3n/doc-tin/007240/2017-03-17/ung-dung-cac-nghien-cuu- ve-tang-truong-bu-tren-ca-tra-nuoi

Carpenter, M.A., 2012 Challenges and Opportunities in International Business, 1 st ed., FlatWorld

Dang Phuong Mai., 2018 Why Vietnam farmers can supply catfish at such competitive price

Available at: https://ndh.vn/hang-hoa/ly-giai-cau-chuyen-ca-da-tron-cua-viet-nam-ngay- cang-re-1233546.html

Hoang Long Group., 2017 Company history [online]

Available at: https://hoanglonggroup.com/lich-su-hinh-thanh/

Khoi Nguyen., 2019 40 years of business fluctuation of Vietnam basa catfish [online]

Available at: http://vneconomy.vn/40-nam-thang-tram-cua-ca-tra-basa-viet-

Michael Evans., 2015 10 Key Steps To Expanding Your Business Globally [online]

Available at: https://www.forbes.com/sites/allbusiness/2015/03/04/10-key-steps-to- expanding-your-business-globally/#115298903803

Nguyen Huu Dung VASEP., 2003 Press release on catfish dispute [online] http://vietnamembassy-usa.org/relations/press-release-catfish-dispute

Pham Tuyen., 2016 Brazil stopped importing basa catfish from Vietnam firm [online]

Available at: https://www.tienphong.vn/kinh-te/brazil-dung-nhap-khau-ca-tra-cua-mot-cong- ty-viet-nam-1068701.tpo

Tran Minh Nguyet., 2018 The US anti-dumping price solutions and the impact to Vietnam exporting seafood products [online]

Available at: http://vias.vass.gov.vn/noidung/tintuc/Lists/Tintucsukien/View_Detail.aspx?ItemID0

VASEP., 2018 Efficiency and productivity from farming basa catfish [online]

Available at: http://vasep.com.vn/Tin-Tuc/778_52802/Hieu-qua-va-nang-suat-san-xuat-ca- tra-so-voi-ca-hoi-ca-chem-va-ca-trap-chau-Au.htm

Table 1.3.1 HLG basa catfish export statistics for 2015-2018 period

Table 1.3.2 HLG basa catfish export volume statistic for 2015-2018 by countries imported Table 1.4.1 Balance sheet

Table 4.2.1.1 HLG key export markets

Table 4.2.3 Rhonda Abrams’s research recommendation

Tiêu đề	Market Internalization: A Case Study from Hoanglong Seafood Corporation (HLG)
Tác giả	Nguyen Quoc Trung
Người hướng dẫn	Associate Professor Doctor Le Thai Phong
Trường học	University of Nice – Sophia Antipolis IAE School of Business Administration
Chuyên ngành	International Business
Thể loại	Internship Report
Thành phố	Hanoi

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