EXPORTING COFFEE TO THE UNITED STATES AND INDONESIA course BSc (hons) BUSINESS MANAGEMENT module title global marketing

Introduction:The exporting coffee to the United States and Indonesia market report would present PESTEL Analysis, Marketing Mix and Market Entry Strategies for the two countries and just

EXPORTING COFFEE TO THE UNITED STATES AND INDONESIA

Course: BSc (Hons) BUSINESS MANAGEMENT

Module title: Global Marketing Tutor: Dr David Ratcliffe Course Code: BAM6003 Submission Deadline: September 16th 2019

CONTENTS

I Introduction: 3

II PEST Analysis: 3

II.1 PEST the United States: 3

II.2 PEST Indonesia: 6

III Marketing Mix: 9

III.1 Country the United States: 9

III.2 Country Indonesia: 12

IV Market Entry Strategy: 14

IV.1 Country the United States: 14

IV.2 Country Indonesia: 15

V Market selection and justification for the United States: 15

VI Conclusion: 17

VII References: 18

I Introduction:

The exporting coffee to the United States and Indonesia market report would present PESTEL Analysis, Marketing Mix and Market Entry Strategies for the two countries and justification for the appropriate selection which displays the mains reasons help our company choose the United States market

To begin, Limited Liability Company Excellent Coffee with mission statement is rich flavor but pure The company is granted a business license and food hygiene and safety by the

Department of Agriculture of Vietnam Our company directly produces and distributes clean andpure goods including roasted and instant coffee line We own a sustainable coffee growing area that complies with the UTZ Certified standard They are produced in a closed process from the farm to the processing stage of the finished product by using the latest technology -

refrigeration roaster, thus ensuring the delicious and pure and good for health Excellence Coffee brand was established by an expert in the coffee field in 2000s Over eighteen years of operation, this brand has been one of the prominent names in Vietnam market We are proud

to be a wholesaler and retailer for agents, supermarkets, large and small cafes, Resort, Hotel, Coffee shop and companies nationwide Currently, the company owns 150 hectares of coffee land and 1 factory that are located in Da Lat City In the last two years, the company has

expanded its business with an additional 100 hectares of coffee gardens and a factory to meet the domestic market But that is also the reason why the number of products increases and becomes surplus Hence, the company has set an export target to the international market to release internal inventory

In order to accomplish this plan, we aim at two potential markets namely United States and Indonesia They are known as the two countries that import large quantities of coffee in

Vietnam, in which the United States market consumes the most according to Bộ Công Thương (2019)

II PEST Analysis:

The firm will perform PEST analysis based on the definition - PEST is an acronym for Politics, Economics, Society and Technology that is considered to be a highly effective management method for an organization This analysis supports an organization in evaluating the main external factors affecting its business operations, so that the company could overcome defects and gain market dominance (Kenton, 2018)

II.1 PEST the United States:

a Political Factor:

Taxation regulations:

President Donald Trump has reformed tariff on China Hitherto, the Government of the America has imposed tariffs on $ 250 billion for Chinese items and poses many threats of increasing tariffs (Wong and Koty, 2019) This China’s disadvantage would be become good opportunity to Vietnamese exports in the United States market However, Mỹ (2019) noted Vietnam currently produces 415 out of 1,153 items that China is subject to high taxation More than 40% of

Vietnamese products can be offset by the US market but not only Vietnam but also other

countries

Trade assistance of the two governments of Vietnam and the United States:

According to the Resolution No 29 / NQ-CP, On Approval Of Agreement And Protocol Between The Government Of The Socialist Republic of Viet Nam And The Government Of The United States of America For The Avoidance Of Double Taxation And The Prevention Of Fiscal Evasion With Respect To Taxes On Income (Thuvienphapluat, 2017) This signing aims to eliminate the double taxation by: exempt and cut the amount of tax payable in Vietnam for the U.S

businesses; or abate the amount of tax that Vietnamese enterprises have paid at the U.S

Government on the tax payable in Vietnam (Nhật, 2017)

b Economic Factor:

Gross Domestic Product (GDP):

As of 2018, based on UN (United Nations) and IMF (International Monetary Fund) statistics that shows the United States achieves the highest GDP at “$ 20.4 trillion (IMF) and $ 18.6 trillion” (UN) globally, and it continues to hold the highest position in the list of countries have largest GDP in 2019 with $ 21,410,230 (Worldpopulationreview, 2019) This is an outstanding

advantage and also the biggest challenge, as it attracts businesses large and small from other countries

Interest Rate:

The Federal Reserve has adjusted the rate of funds from 2% to 2.25%, the reason for thereduction in interest rates is attributed to inflation in the context of trade tensions with China(Tradingeconomics, 2019) Besides that, the Vietnam’s benchmarking interest rate is recorded in6.25% (Tradingeconomics, 2019) These two indices indicate that the Vietnamese currency has alower value which can reduce the demand for consumption from consumers

c Social Factor:

Population:

The total the United States population is recorded as 329,256,654 (CIA, 2018) Comparing between countries globally, this is the third number In particular, population growth rate is 0.8% and age structure is under 14 years old years had 18.62%, from 15 to 24 years got 13.12%,

25-54 years occupied 39.29%, between 55 and 64 years account for 12.94%, 65 years of age or older achieved 16.03% (CIA, 2018) The large over 18 population proves a large market and offers many growth opportunities for businesses.

The data illustrate that the majority of the American is in over 18, it contributes to rise up a larger amount of coffee drinker

Coffee drinking habit:

Coffee is considered a favorite caffeinated drink in the United States and Americans tend to use

a lot of coffee It is proved that one third of inhabitants use coffee as their daily drink, nearly half of Americans use coffee the smallest extent every week and more than a half of people drink coffee for sometimes (Scott, 2016) Relying on the National Coffee Association‘s National Coffee Drinking Trends (NCDT) in the 2018 information: The percentage of Americans 18 years

of age and older who have used coffee for more than 60 years account for more than 75%; The amount of coffee drinker has been increasing over the past three years: 57% in 2016 and 62% in

2017, then continue to grow to 64% in 2018 (Brown, 2018) According to statistics from NCA's research on coffee industry trends, 79% of coffee has been consumed by home brewing and 85% said that they are extremely satisfied with the coffee making in the workplace

(Nationalcoffee, 2018) This is an ideal market for trading roasted coffee

d Technology Factor:

Development chances for long term:

These figures illustrate the large amount of population who has used Internet in the US country from 2000 to 2018 (Statista, 2019).

According to the Clement (2019), in 2018 more than 312 million people accessed the internet from the America, the amount of population use Internet increased by nearly 287 million last year The high number of Internet users contributes to creating more opportunities for

businesses to reach consumers with brand promotion programs through social media

II.2 PEST Indonesia:

a Political Factor:

Bribery and corruption:

Corruption is a big challenge for Indonesia and it has a tremendous impact on preventing

business and investment fields both domestically and internationally Bribing and bribing state officials is a violation of the laws of this nation Although the Administration has pledged to

openly and punishes every formalities of corruption, this negative behavior still frequently occurs in business in this country (Gov.uk, 2018)

Trade assistance of the two governments of Vietnam and Indonesia:

“Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Indonesia” signed in Hanoi on 22/12/1997 (WTOCENTER, 2019)

b Economic Factor:

Gross Domestic Product (GDP):

According to World Population Review (2019), Indonesia ranked 16th in the world at

$1,152,890 It is predicted that the economy in Indonesia will grow 5.1 percent in 2019 and thengrow to 5.2 percent in 2020 (TheJakartaPost, 2019)

Interest Rate:

Bank of Indonesia has reduced the repo rate from 25 bps to 5.5 percent and the reason for this cut is to support growth in the context of low inflation (Tradingeconomics, 2019) Besides that, the Vietnam’s benchmarking interest rate is recorded in 6.25% (Tradingeconomics, 2019) According to the comparison of two figures is the Vietnamese currency has a lower value

High coffee consumption in Indonesia:

Indonesia has a strong coffee consumption culture Domestically, consumption has nearly doubled in the last decade, according to Reuters in June (Huang, 2018) Hectic, modern lifestylesmean that consumers demand practical and immediate product that is strong potential for instant coffee for our firm (Euromonitor, 2019)

The diagram describes total amount of coffee consumed by Indonesians between 1990 and 2018 (Statista, 2019).

The line chart shows domestic consumption of coffee in Indonesia has increased significantly since 1990 and the local coffee consumption was written dominated by instant coffee and “kopi tubruk”, but Indonesia is also the world’s leading producers of coffee (Hirschmann, 2019) Although the country consumes a lot of coffee but it is also a highly competitive market for coffee, it will become detrimental to the company

d Technology Factor:

Technology development:

According the article of The Jakarta Post, Information and Communication Technology (ICT) in Indonesia is revolutionizing the way society operates Increasingly, this nation has used IT in a large amount of applications Most important is the rise of online services for consumers from shopping and banking to transportation systems (Vietnamplus, 2018) It supports the business

of the company to become more convenient

III Marketing Mix:

The company implements Marketing Mix is based on the definition - Marketing Mix (also known

as 4P analysis) is a set of strategic marketing tools involves products (goods or services), prices, place (location) and promotion that companies combine to create the reply what they desire in the target market (Kotler and Armstrong, 2015)

III.1 Country the United States:

The company decides to export roasted coffee to the United States market and target is

Americans who over the age of 18 (both men and women) because they are in the working age and be able to earn income and sell products More notably, this is the large population group here Because of their lifestyle, they drink a lot of coffee and almost make it themselves

Additional, this type of coffee allows consumers to brew their own coffee depending on the taste of each person

a Product:

Product description:

Roasted coffee is the material for making drinks (as Cappuccino, Latte, Espresso, Americano and

so on) or food depending on the purpose of the buyer Roasted coffee is a powder of the size equivalent to granulated sugar and has a dark brown color Coffee Excellent roast coffee powder

is formulated exclusively for the brand of Excellent Coffee, which combines perfectly the

aromatic aroma of Arabica, the strong bitterness of Culi and the richness of Robusta caffeine

The coffee powder will be stored in a 300 gram zipper paper bag Moreover, using paper bags contributes to environmental protection and cost savings for manufacturers and buyers.

Product classification and level of product:

Roasted coffee is classified as a convenient product, it means that customers buy or consume them on a regular basis, and do not have to spend a lot of effort searching to buy them (Kotler and Armstrong, 2015), so our goods are sold at low prices and can be found in many places namely local supermarkets, convenience stores nearby home or groceries and many other places The level of coffee belongs to the core customer value (Kotler and Armstrong, 2015), thus it brings to customer basic benefit - drinking a cup of coffee helps stay awake, increase concentration at work

Packaging and labeling:

According packaging and labeling regulation in the United States (Santandertrade, 2019),

roasted coffee packaging is in a 300 gram zipper paper bag that is convenient using and can preserve the product from air, moisture, temperature and light Moreover, using paper bags contributes to environmental protection The dominant color of the packaging is dark green which has associations with nature and it is also one of America's favorite colors (design-

confidential.com, 2016) The use of paper packaging is intended to minimize the risk of

environmental pollution and preserve the product from air, moisture, temperature and light Regarding labeling: the brand name is Excellent Coffee and below it is the mission - rich flavor but pure, the logo is a cup of steaming hot coffee and has three coffee beans next to, type name

of coffee - roasted coffee is printed with the largest and is located in the middle, so that buyers can easily identify the products and uses; ingredient list (Robusta, Arabica and Culi coffee), net weight 300g; company address and made in Vietnam; expiry date and how to preserve it

(should not be placed in high humidity and protected from sunlight); how to use (the roasted coffee line is suitable for all popular brewing methods such as mixing machine, filter, paper hopper, siphon, French press, racket and conventional filter bag); average nutritional value in 100g (Caffeine content 2g) All information is written in English language

Price:

Pricing objective:

The company set a pricing objective to gain market share in the country and increase the

number of products sold in the market This plan helps reduce cost risks and increase long-term profits for the company

Deciding pricing approaches:

In addition, the company applies cost-based pricing to decide pricing approach We take

production costs, distribution costs and product selling prices add to rate of return for the

efforts and risks of enterprise (Kotler and Armstrong, 2015) The firm gives the listed price after the calculation process is one roasted coffee good with a weight of 300g of 89,000 VND which is equivalent to 3.87 USD (Xe, 2019).

Price adjustment strategies:

Enterprise selects geographical pricing strategy It means that the price of coffee sold to people living in urban areas will be higher than in rural areas (Kotler and Armstrong, 2015) And the difference amount of the product in different regions will depend on the purchasing power of local consumers If customer buys the number of one product will be offered a porcelain glass with a capacity of 400ml and is printed with brand Excellent Coffee’s logo This will stimulate theability to consume in customers

c Place:

Distribution approach & method:

Our business point toward utilize the existing channel and indirect distribution method through retailers: Supermarkets (Publix Super Markets) and convenience stores (7-Eleven, Stripes) These are highly rated retail locations in the United States, based on Peterson (2018) and Farfan(2019)

Market coverage:

Roasted coffee is classified as an extensive distribution product, which appears in many places

at the available stores and the various alternatives available (Bhasin, 2018)

Message and media vehicle:

We would like to send our message to consumers that roasted coffee products meet quality anddelicious standards And we use social media network to promote our brand and goods

III.2 Country Indonesia: