TRUNG NGUYEN ENTER INTO CHINA MARKET

TRUNG NGUYEN ENTER INTO CHINA MARKET. China is a potential market for Vietnams coffee industry, but there are also many difficulties and challenges that Trung Nguyen will face in the process of realizing the aspirations of global Vietnamese brands in the near future. On the other hand, the outbreak of the Covid19 epidemic will be a negative factor affecting Trung Nguyens operations in this billiondollar market when in general, in 2020, Chinas imported coffee output will decline decrease due to a deep decrease in consumption. Therefore, Trung Nguyen needs to have appropriate and effective shortterm strategies to overcome this difficult period, and also need a longterm strategy and foresight to stand and thrive in the market. This extremely potential in the future. Currently, Trung Nguyen Legend is gradually asserting its position as the No. 1 coffee brand with strong investment and determination to realize the global vision.

TRUNG NGUYEN ENTER INTO CHINA MARKET "If the oil is the energy of the industrial economy, coffee is the energy of the knowledge economy." Along with other agricultural products such as cotton or cocoa, coffee is the second most traded commodity in the world (after oil) with great export value Why choose Trung Nguyen corporation? (1) Top Vietnamese coffee brand: During 22 years of development, Trung Nguyen Legend has been known as a leading brand in the Vietnamese coffee industry with important contributions to the growth of the coffee brand Vietnamese on the world market (2) International experience: Trung Nguyen Legend’s coffee products have been exported to more than 80 countries and territories, especially target markets such as the US, Korea, Russia, and Europe (3) Trung Nguyen positions its coffee brand as a part of Vietnamese traditional culture They succeeded in bringing the national culture and values to the soul into each fragrant "Ban Me" coffee and bringing it to friends in the five continents The reason for choosing the Chinese market? This is a very potential market that any famous coffee brand wants to win (1) China has a large market with outstanding advantages in many aspects that our group will analyze in the following sections (2) Compared with other markets such as the US (3, %), Japan (1.7%), China's coffee consumption has a double growth rate of 30% (3) Vietnamese coffee holds an important position in the Chinese market as the largest supplier in this country with more than 1.4 billion people (nearly 80% of total imports in the period of 2013 - 2017) On the other hand, Chinese consumers mainly drink instant coffee, accounting for 99% of the volume and 98% of the value of retail sales This is very beneficial when G7 instant coffee is one of the special marks that make up the brand of Trung Nguyen Legend Overview of Vietnam's coffee industry and Trung Nguyen group 1.1 Vietnamese coffee industry Over the past three decades (since the reforms in 1986), coffee has been one of the most important contributors to the revenue of Vietnam’s agricultural sector in particular and the overall GDP of the country in general Two main types of coffee (Robusta and Arabica) are put into production, of which Robusta accounts for 92.9% of the total coffee growing area (and 97% of the total output estimated at 600,000 ha, with the main coffee growing provinces located in the Central Highlands, with the position as the world's second-largest coffee producer and exporter, and the leader in terms of Vietnamese Robusta products to promote their exports coffee to more than 80 countries and regions, accounting for 14.2% of the global coffee bean export market share (second after Brazil) 1.2 Current situation of Vietnam's coffee export to China China is the world's 11th largest coffee market with an estimated value of 9,124 million USD and is the 11th largest importer in the world with an estimated value of 2,650 thousand bags (in 2019/20) In particular, Robusta imports ranked third in the world with an estimated 1,500 bags in the 2019/20 crop In recent years, Vietnam has continuously boosted coffee exports to major markets, especially China - the second-largest economy in the world Vietnam's coffee holds an important position in the Chinese market as the largest source in this country with more than 1.4 billion people (nearly 80% of the total imports in the period 2013 - 2017) T swine to the General Administration of Customs, in the first months of 2020, due to the impact of translation Covid-19, coffee exports to China Quo c fell 10.18% on ene ng and fell 6.83 % to metal turnover and volume of 20,910 tons, equivalent to 49 million USD 1.3 Introduce common on Trung Nguyen Corporation On 16/06/1996, Chairman Dang Le Nguyen Vu established Trung Nguyen in Buon Ma Thuot - the capital of Vietnamese coffee, with the first capital as a bicycle with a strong belief and will of the age along with the desire to build a famous coffee brand, bring the taste of Vietnamese coffee to the world In just 10 years, from a small coffee company, Trung Nguyen has emerged into a powerful corporation with member companies in the fields of tea and coffee production, processing and trading; franchise and modern retail and distribution services Vision: To become a corporation that promotes the rise of Vietnam's economy, keeps the vocabulary of national economic autonomy, and arouses, proves a desire for Dai Viet to explore and conquer Mission: To build a united human community that follows a set of values of a mindful lifestyle, bringing about real success and happiness Core Values: Absolute faith, community service, human response, solid financial experience Trung Nguyen Legend's coffee products have been exported to more than 80 countries and territories and have been selected as "diplomatic ambassadors" connecting Vietnamese culture with the world Outstanding G7 is one of the most loved instant coffee products and Trung Nguyen is the national brand Besides, Trung Nguyen now has a network of nearly 1000 franchised cafes nationwide and overseas shops such as the US, Japan, Singapore, Thailand, China, Cambodia, Poland, Ukraine From a young Vietnamese coffee brand, after 25 years, Trung Nguyen has quickly built up a reputation, becoming the number Vietnamese coffee brand and continues to bring initial achievements on the journey realizing global aspirations China PESTLE-C model Political enviroment Overview of the Chinese political environment: Before 1997, China was a country that completely followed the socialist path, but up to this point, they have come up with a new line called special socialism China and not much changed until now This ideology supports the creation of a socialist market economy but is still dominated and regulated by the Chinese state The Communist Party of China is the only ruling party in China with the basic socialist ideology such as justice, democracy, civilization, but adds a citizen rating system, or system Social credit scoring has the potential to limit the interests of those who not meet the social credit limit  China is considered a relatively safe business and investment environment because the politics follow the republican regime, democracy, with a single Party leader, so it is quite stable, fewer contradictions, internal conflicts between the government and the people Besides, the situation of security national security is also maintained, ensuring good This helps businesses minimize the risks that may be encountered The economic relationship between Vietnam and China: Based on the Comprehensive Strategic Partnership in recent years, the two Parties and States of Vietnam and China have continuously strengthened and developed their relationship Inherent friendship is considered a valuable spiritual property of the people of the two countries Vietnam China's economic relations in recent years have developed very rapidly, making an important contribution to the economic growth of each country Vietnam is China's largest trading partner in ASEAN and the eighth largest trading partner globally  The two countries' political relations are towards peace and friendship, making the commercial cooperation relationship between the two countries to develop stably and sustainably This is good news for Vietnamese enterprises, especially Trung Nguyen, which has been expanding its product export market to China This is a place that helps promote official trade, creating conditions for many high-quality products and goods of Vietnam to be sold in the Chinese market 2 Economic environment GDP: According to preliminary statistics, China's gross domestic product in 2020 will reach 101.569 trillion yuan, at constant prices, GDP in 2020 will grow by 2.3% Specifically, in the second quarter to the fourth quarter of 2020, China's GDP increased by , %, 4.9% and 6.5% respectively over the same period, after seeing the first quarter decline to 6.8% in the same period due to the photo Enjoyed by Covid19 Previously, the National Bureau of Statistics of China announced the consolidated figures for GDP in 2019, reaching 98.6515 trillion yuan Thus, China's gross domestic product in 2020 has reached a new milestone According to a recent assessment by the Director of National Bureau of Statistics Ning Jizhe, after the first quarter of 2020 was stalled by the impact of epidemics, China's economy has gradually recovered, GDP in 2020 will reach a growth rate of more than %, and became the world's only major economy to achieve positive growth During the period when the global economy was affected by the new pandemic, China's economic growth has surpassed most of the countries in the world and it also shows the economy of the land the country is recovering from the pandemic However, this is still China's record for the lowest economic growth rate in decades Interest: In the current period, looking at the context of increasing global economic risks and many central banks in the world have cut the operating rates Without exception, the Bank of China (PBOC) has cut the required reserve ratio by 50 percentage points for all banks and 100 percentage points for eligible city banks The PBOC even cut the compulsory reserve ratio at major banks to 13% and is expected to add 900 billion CNY (or 126 billion USD) in cash flow into the weak economy The macro indicators are less positive Exchange rate systems: Although turning over - import between Vietnam and China big but the payment currency is basically dollar, only a small number of economic contracts transactions in renminbi, but with This contract was basically the two sides pegged to each other before Therefore, the impact of this event on the two countries' trade is not of concern Of course, if the yuan is greatly reduced, while the US dollar has increased the brackish I enterprises import and export, by conversion from the dollar to RMB, the enterprise will be higher benefits Inflation: Weak domestic demand due to the effects of the Covid-19 epidemic also caused core inflation in China to drop to its lowest level in a decade Specifically, the basic consumer price index (CPI) only increased at an annual rate of 1% in February, the slowest rate since June 2010 Weak demand also makes businesses dare not increase the selling price of their products As a result, the producer price index even turned back to drop 0.4% in February from the same period last year after rising 0.1% in January 2.3 The international cultural, demographic and social enviroment Culture: As two neighboring countries with mountains and rivers, Vietnam and China have quite similar cultures in many aspects such as aesthetics, values, customs, attitudes, religion This helps Trung Nguyen is easier to research and develop the market Source: hofstede-insights.com Power distance (PD): China is one of the countries with the highest PDI in the world (80) demonstrating that inequality is acceptable and that the decisions of superiors are more likely to be accepted received without discussion Therefore, there will be respect for the bosses in the company, the elderly, and especially the harmony and courtesy in the working environment Therefore, assuming Trung Nguyen sends a Vietnamese manager to run the branch in China, this person will not face too many difficulties in human resource management and will also be respected by his subordinates Individualism and collectivism: China is a culture of collective high (20), the people promoting collaboration and comfortable working in groups rather than working independently Therefore, Trung Nguyen can let his staff here work in groups in research, marketing, and sales, which will bring better work efficiency Masculinity and Feminnity (MAS): China is a masculine society (66), in other words, prone to achievement, assertiveness, material rewards, and success For many Chinese, leisure time is not so important This will motivate employees to work hard, strive for high efficiency This can also be an attractive point of this market, so Trung Nguyen needs to encourage and motivate them to develop business here Uncertainty avoidance: China has a low level of risk hedging (30), that is, the Chinese are comfortable with ambiguity, not too harsh on uncertainty The Chinese are adaptable and business well when the majority (70%-80%) of Chinese businesses tend to be small to medium-sized and owned by families This can be seen as an opportunity for Trung Nguyen to change a few things if necessary and manage well the human resources here Long-term orientation: It can be said that China is a very pragmatic culture (87) They can adapt easily to changing conditions, have a strong propensity to save and invest, be thrifty and persistent in achieving results Therefore, this can also be a challenge for Trung Nguyen as they will not spend too much money on drinks Ethnicity and religion: China is a multi-racial country with 56 ethnic groups, many different beliefs, and religions, but has the common characteristics: attaching great importance to national traditions, attaching great importance to family traditions, saving This may make it difficult for Trung Nguyen to bring their products to the entire population because they have a high national spirit and will give priority to using their own products Family: The Chinese have a more son preference mindset, which may also be one reason why Trung Nguyen chose China as his market because coffee is often more attractive to men Traditional values: Traditional Chinese values are largely derived from orthodox Confucian ideas China is a market with a long tradition of drinking tea However, in recent years, the Chinese tend to see drinking coffee as an expression of a new style, instead of traditional tea-drinking habits, which is especially popular among young people Therefore, the fact that they have not formed a habit of forgetting to drink a certain type of coffee will be an opportunity for Trung Nguyen to take advantage of introducing and positioning their products Demographics Population: China is the most populous country in the world with 1,442,651,038 people (danso.org) as of March 6, 2021, equivalent 18.38% of the total world population Sex ratios (2020) 0-14 years: 17, 29 % (male 129,296,339 / female 111,782,427) 15-24: 11, 48 % (male 86,129,841 / female 73,876,148) 25-54 years: 46, 81 % (male 333,789,731 / female 318,711,557) 55-64: 12, 08 % (male 84,827,645 / female 83,557,507) 65 and older: 12, 34 % (male 81,586,490 / female 90,458,292)  Based on China's age structure, we can see that the age group from 25 to 54 accounts for a large proportion (46, 81 %) These people are of working age and have a very high need to meet their friends and partners On the other hand, young people tend to step out of the traditional tea drinking culture, so coffee is a popular choice Therefore, Trung Nguyen can choose this age group as its target customer Birth rate: 11, children / 1000 people (2020) Death rate: 7.4 people / 1,000 people (2020) Natural change = birth rate - mortality = 1, - 7.4 = 3.9 (2020) Net migration: - 0.25 people / 1000 people (2020) Over increase or decrease in population = natural variability + net migration = 3.9 - 0, 25 = 3.65 (2020) Average life expectancy: 76, 96 years (2020)  In recent years, China’s population structure tends to age markedly with a smaller number of babies born, a decrease in the number of people of working age, and a higher proportion of the elderly than the average vase of the world Social trends Family: The Chinese government's abolition of the "One-Child Policy" and instead permitting the birth of two children has yet to help China raise its birth rate On the other hand, a current concern is that women tend to like to be single, enjoy life, to be afraid of marriage "No children, no wedding rings, just live peacefully" - These 11 words have become a catchphrase in China recently Healthy: The Covid-19 pandemic made all Chinese people realize that good health is of utmost importance Therefore, they are more strict in eating and tend to exercise harder It is this higher demand for this food that may be a challenge for Trung Nguyen to fully satisfy both the taste and value of the health of the Chinese people  Coffee is gradually becoming a familiar beverage with Chinese consumers However, compared to other major coffee consuming countries, the Chinese market is at an early stage of development, consumers mainly use instant coffee Therefore, this will be an extremely potential market in the future 2 The technology environment Today, China is known from being the world's factory to one of the world's new technological powers It is the result of well-thought-out, well-thought-out planning and investing in large sums of money China has become a giant in many high-tech fields such as artificial intelligence, IoT, nanotechnology, biotechnology and big data From 2002 up to now, every year This country has obtained more than 20,000 achievements in the fields of energy, agriculture, environmental protection making the capacity of S&T constantly improving With 35 million people working in S&T fields, China currently ranks first in the world in science and technology human resources Due to being denied access to advanced American technologies, China is accelerating the development of "Made in China 2025" technologies The UK Research and Innovation Agency (UKRI) has predicted that China will overtake the US by 2022 to become the world's number one country in R&D investment In 2017, the Organization for Economic Co-operation and Development in Europe (OECD) estimated that China accounted for 23% of the world's total R&D investment And the following year, the country's total investment continued to rise to 2.19 % of GDP (it was 2.15% in 2017) - insignificantly more than Europe China not only accounts for 25% of the world's R&D personnel, but also ranks second in the world for international patent applications in 2018 (53,981) , just behind the US (55,981) Source: sciencebusiness.net Investment in R&D of China and other countries from 2000 – 2018 After the outbreak of the COVID-19 epidemic, the speed of digitalization continues to increase rapidly and the shift from offline to online, especially personal shopping, is becoming a habit of Chinese consumers E-commerce systems such as Alibaba, Taobao, Tmall, JD, YiHaodian and electronic payment are developing and dynamic in China c  Catch trend electronic commerce internationally in the context of pandemic Covid- 19 present as well as the realization of aspirations to conquer the globe, Trung Nguyen Legend has embarked flooring e-commerce Alibaba China Previously, Trung Nguyen Legend's products were also widely present on leading Chinese e-commerce sites such as Alibaba, Taobao.com, Tmall.com, Yihaodian.com, JD.com Especially, on Tmall.com, Trung Nguyen has successfully built pioneering stores on this site 2.5 Legal Enviroment Intellectual Property Rights: Recognized and protected in China since 1979 Accordingly, China must protect copyrights and related rights, rights to other intellectual property such as inventions, trademarks commercial brands, industrial designs, geographical indications, integrated circuit designs, foreign trade secrets such as protection of intellectual property and individual rights to intellectual property , organized both at home and abroad Trademark Law: Includes general guidelines for managing trademarks, protecting the exclusive rights of trademark owners and maintaining the quality of products and services under registered trademarks Trademark registration in China is a mandatory requirement for an individual or organization to monopolize the trademark in China A trademark is exclusively accepted when the trademark owner commits to apply for trademark registration in accordance with the trademark registration procedures in China and is granted the trademark registration certificate by China Failure to register a trademark will easily lead to commercial disputes that some Vietnamese businesses have encountered such as Ben Tre coconut candy, Vinamit - Duc Thanh  The realization of intellectual property rights is particularly difficult in China, few people are aware of intellectual property infringement, or may be protected by local authorities who not want to support the work anti - piracy eg This is also a difficulty for Trung Nguyen when entering the Chinese market because the intellectual property law and trademark copyright in China are not strict Therefore, Trung Nguyen needs to strengthen the promotion of its brand image, so as not to be confused with other brands, not to suffer from counterfeiting and poor quality products Import and Export Tax Policy: In 2019, China announced an adjustment of import tax (often referred to as Postal Tax) Including items in Group from 15% to 13%, Group from 25% to 20% and keeping the same 50% tax rate of Group Combining more measures to adjust VAT to help expand Imports, promote consumption, meet the increasing needs of life In 2020, China proceeds to reduce the MFN import tax rate Imposing temporary tax rates on 859 items (excluding items managed by tariff quotas) Abolishing 07 import tax items belonging to group of information technology products from July 1, 2020 Adjusting the reduction of MFN tax down to - 13% for groups of machinery and equipment  This is a good opportunity for Trung Nguyen to enter the Chinese market Food Safety Law: In 2008, China enacted a food safety law to strengthen the regulation of food safety The focus of the Law is on the correct use of food, origin, food additives and containers, packaging materials the purpose is to protect consumers 2.6 Ecological Environment Accompanying the economic leap in the 1990s-2010s with an average GDP growth of 10.5% / year, China suffered from extremely heavy environmental pollution In March 2014, President Xi Jinping officially launched the fight against environmental pollution Tightening emissions policies and water reduction policies were issued in 2014 and 2017 to tighten supply These policies affect other countries in no small way because China is the world's factory Apply policies for environmental protection make the cost of production in China increased the prices of finished products increased under which reduces the competitiveness of the imported goods, but the goods affected Enjoy the benefits of industries such as metals, textiles, plastics In addition, China has the potential to become a “green superpower” According to a report published by the Dutch company Elsevier, China could achieve 26% renewable energy consumption by 2030 A report by the Energy Transition Commission (ETC) and the Institute Rocky Mountain (USA) shows that China has a good foundation to achieve a balance of carbon emissions when it becomes a fully developed economy by 2050 Although air pollution, soil and water pollution remains problematic The problem is serious in China, which is approaching greener growth Along with the government's tightened environmental policies, Chinese consumers are also very aware of environmental protection when they are ready to strongly boycott production enterprises that have a heavy impact on the environment water sources, air sources as well as land Therefore, any business participating in the Chinese market must also have a high sense of environmental protection in order to be allowed to participate in the market and be accepted by consumers here Competitive environment Market structure Coffee package: Coffee shop: From statistics collected are, we can comment: - Both of two market or Chinese coffee may be highly concentrated market - Barriers to entry in the Chinese coffee market is high - Low competitiveness 3.2 Porter’s Five Force model Industry rivalry: High China is seen as an extremely attractive market, collect the attention of coffee exporters Vietnam and Indonesia are the two main coffee exporting countries to China, followed by Brazil, accounting for 10% of the imports In addition, China also promotes self-cultivation and production of coffee and roots mainly in Yunnan province, where the planted area has tripled in the past 10 years As for the coffee chain brand, so far, Starbucks has opened more than 4100 stores in this country, second only to the US, becoming a familiar choice for the majority of people In 2017, suddenly a domestic coffee company - Luckin Coffee - was born and crushed the market immediately with huge capital and became a "unicorn" startup worth over billion USD in July 2018 In addition, there are also chains such as Mccafé, Costa, Pacific In terms of packaged coffee, Nestle occupies the highest market up to 70%, followed by Starbucks Cor, Sunstory Holding, Uni - President Cor or some Other Vietnamese coffee brands such as Vinacafe, An Thai  Nowadays, the increasing number of coffee brands exported to China is causing enormous competitive pressure in the industry on Vietnam's Trung Nguyen brand New entrant: Medium Firstly, coffee beans exported to the Chinese market must meet the standards of the International Coffee Association (ICO) on moisture, impurities, spoiled beans (young, thin, black) due to preliminary processing relies heavily on natural (sun-drying) or manual drying Second, China is a large and populous country, so it is very difficult to access supply channels and customers Therefore, it can be assessed that the barrier to entering the Chinese coffee market is at medium level Threat of substitutes: High China is still a country associated with tea drinking culture, tea is listed as one of seven important things in life Taiwan is regarded as the "cradle" of milk tea, almost all ages are demand and popular milk tea, with many famous names such as The Alley, Gong father, Taiwan coco In addition, a Some other products such as energy drinks , cocoa also have a high risk of substituting for coffee Besides, for coffee products, at present, many companies tend to produce coffee in cans, bottles (drink right away without preparation) in order to hit the convenience and suitability busy life of consumers like Nescafé instant coffee (Nestlé) Power of Buyers: High Today, Chinese people tend to consider drinking coffee as a new expression of style, especially young people in big cities With rich preferences, varying levels of income, as well as the willingness to pay for a cup of coffee, the demand is increasingly diverse However, all coffee companies in the world consider China to be a "lucrative" market, a "delicious piece of cake", so the competitiveness is increasing Therefore, buyers will have more choices Power of suppliers: Low Currently, Trung Nguyen has a very efficient production system when the raw materials used for instant coffee production as well as other types of coffee originate from coffee farms approved by the Central Nguyendau investment and administration of UTZ standards This material resources each year to provide three-quarters of Trung Nguyen coffee granules, the remaining receivables purchased from growers coffee In other words, Trung Nguyen is also the supplier of input materials for its production Therefore, competitive pressure from suppliers is an issue that Trung Nguyen does not face at present Rate Political environment: Average Economic environment: High Social and cultural environment: Low Technology environment: Low Legal environment: Medium Ecological environment: Low Competitive environment: High CONCLUDE China is a potential market for Vietnam's coffee industry, but there are also many difficulties and challenges that Trung Nguyen will face in the process of realizing the aspirations of global Vietnamese brands in the near future On the other hand, the outbreak of the Covid-19 epidemic will be a negative factor affecting Trung Nguyen's operations in this billion-dollar market when in general, in 2020, China's imported coffee output will decline decrease due to a deep decrease in consumption Therefore, Trung Nguyen needs to have appropriate and effective short-term strategies to overcome this difficult period, and also need a long-term strategy and foresight to stand and thrive in the market This extremely potential in the future Currently, Trung Nguyen Legend is gradually asserting its position as the No coffee brand with strong investment and determination to realize the global vision  ... also a difficulty for Trung Nguyen when entering the Chinese market because the intellectual property law and trademark copyright in China are not strict Therefore, Trung Nguyen needs to strengthen... Trung Nguyen' s operations in this billion-dollar market when in general, in 2020, China' s imported coffee output will decline decrease due to a deep decrease in consumption Therefore, Trung Nguyen. .. why Trung Nguyen chose China as his market because coffee is often more attractive to men Traditional values: Traditional Chinese values are largely derived from orthodox Confucian ideas China