THE PROPOSAL FOR a BANK LOAN FROM AGRIBANK TO DEVELOP PHUCSINH’S BUSINESS IN THE UNITED STATES

THE PROPOSAL FOR A BANK LOAN FROM AGRIBANK TO DEVELOP PHUCSINH’S BUSINESS IN THE UNITED STATES Exported commodity: Robusta coffee bean Exporting Country: Vietnam... PART A: AN ANALYSIS

THE PROPOSAL FOR A BANK LOAN

FROM AGRIBANK TO DEVELOP

PHUCSINH’S BUSINESS IN THE

UNITED STATES

Exported commodity: Robusta coffee bean

Exporting Country: Vietnam

FULL NAME STUDENT ID

PART A: AN ANALYSIS OF THE UNITED STATES

A.1 a short introductionA.2 PESTLE analysis

PART B: PROPOSAL FOR A BANK LOAN

B.1 profile of PhucSinh companyB.2 demand analysis

B.3 competitors analysisB.4 Business partners of PhucSinhB.3 SWOT analysis

B.4 feasibility analysis (HR factors, operating capital management)B.6 payback schedule

A.1 A BRIEF INTRODUCTION

History

Columbus discovers America in 1492

In 1776, Americans declare independence from England The Revolutionary War beginsThe Revolutionary War lasts 9 years, and America is free from England

1914—1918 World War I tipped off

1939—1945 World War II took place

FLAG SYMBOL OF AMERICA

Statue of Liberty = Freedom, Hope, and Friendship between Countries

The 48 states that make up the continentalUnited States, which are located betweenMexico and Canada.

Location & infrastructure

America spent about $400 billion annually on infrastructure Transportation - for onlyabout one quarter of this total.

Water, energy, telecommunications, pollution control, other public facilities and, mostimportantly, schools make up almost 75% of all U.S

Social and culture of Americans

Diversity: the most diverse country in the world Folks from all over the world haveimmigrated to the USA

To most Americans, the USA is the world

Americans value their privacy a lot, do not try to be too friendly with them too soon

They are restless, yet disciplined

Most folks who are just passing by will smile at you or say hello

And last but not least: NEVER make any racial comments about anyone E.g blacks arecalled “African Americans” NOT “ nigga or nigger”

Every four to six years, the U.S experiences an economic slowdown It started from 2008.And now, 5 full years after a devastating recession officially ended, the economy isfinally showing the result that Americans have long awaited.

Fluctuation in economy

The USA is now one of the most technologically advanced countries in the world:

Broadband access: reduction in communications cost and increase in remote workingDevelop nuclear weapons

Spent 2.6% GDP for R&D activities Hence the USA is always a national leader intechnology so far

Political system can be seen to range across two extremes, on the one hand

“Authoritarianism/Totalitarianism” and one the other hand “Democracy”

Countries are placed into 1 of 5 tiers, ranging from “CRT-1”,denoting a stable environment with the least amount ofrisk, to “CRT-5” for countries that have the most risk.

The United States is a CRT-1 country with very low levels ofeconomic, political and financial system risk

External interrelations with neighboring countries

TPP (Australia, Canada, Japan, Malaysia, Mexico, Singapore, United States, Vietnam,etc.)

APEC (Australia, Canada, Chile, Indonesia, Japan, Republic of Korea, Malaysia, Mexico,Philippines, Singapore, Thailand, Vietnam, USA, etc.)

WTO with160 members since 26 June 2014

NATO (USA, UK, France, Canada, Italy, etc.)

A.2

PEST analysis (political, economical, social and technological factor) assesses a market, competitors, from the standpoint of a business.

POLITICAL FACTOR

The United States has a stable democratic political system and astrong legal system Political infighting has led to significantdysfunction and inaction in Washington in recent years

The U.S trade policy’s objectives is to open new export opportunitiesfor American businesses, farmers, ranchers and workers throughglobal, regional and bilateral trade initiatives

Import Duty & Taxes For Coffee Beans:

After US-Vietnam Bilateral Trade Agreement went into force onDecember 10, products from Viet Nam will get incentives from MostFavored Nation Treatment (MFN), especially tax applied on coffeebean became 0%

Vietnam has applied for acceptance into the U.S GeneralizedSystem of Preferences (GSP) program and is negotiating a BilateralInvestment Treaty (BIT) with the United States Vietnam also would likethe United States officially to recognize it as a market economy

HS (Harmonized system) commodity codes, import duty & taxes and import restriction for

coffee beans

Import to country Hs commodity

codes MFN duty rate Sales tax

Additional duties and taxes

United states 0901.21.0065 0% Depend on state Merchandise

Processing Fee

Administration of Food and Drug (under anti-biology terror laws): all companiesmanufacturing, processing, packing, or storing food, beverages for consumptionpurposes in the United States must register FDA.

HACCP (Hazard Analysis and Critical Control Point) is a tool to assess the severity anddanger of foods in order to establish a control system, which focuses on product’sembargo rather than appraisal

=> On account of laws and standards mentioned above, PhucSinh is in need ofupgrading machines and technology to meet the requirements of the USA’s market

• Instability or frequent changes in

government (laws, bureaucracy)

• Attitudes hostile towards foreigners

• Antitrust (against monopolies)

• Intellectual property (Patents, trademarks, trade names, trade secrets, copyrights)

• Export/customs requirements

• Product liability

The GDP growth rate of the USA in 2nd quarter of 2014 has reached

the highest level in the last two years, a signal for that strong

recovery – with 4.6% This is the fastest growing rate of America

economy since 4th quarter of 2011

At the end of Aug, 2014, the unemployment rate was 6.1%, down to

0.1% compared with July’s

GDP of the U.S at current prices from

2004 to 2014 (in billion U.S dollars)

The US is now the largest market importing coffee bean from Vietnam on account ofenormous population and a high demand on consuming coffee, especially of Robusta.The US’s total coffee imports volume from Vietnam is very tremendous that makes VietNam come second only after Brazil and prior to Indonesia by 2012.

1193.9 1017.5

485.6 410.7

Imports in million US dollars

Coffee imports to the US in 2013, by country of origin

In the recent survey of technology professionals, 61% said they indulged in some form ofcaffeine throughout the day, with more than 53% relying on coffee This is on par with astatistic that about 150 million Americans drink coffee (drip and specialty), whichrepresents about 49% of the American population US$2.5 billion is spent by Americans

on coffee on an annual basis

In the modern office, most of us are at a desk all day long, so it’s easy to just go for acup of coffee or energy drink Based on caffeine content per ounce, these productsprovide a quick jolt of energy

TECHNOLOGY is another aspect of the environment that PhucSinh should consider in developing strategic plans Technology plays a critical role in producing and exporting coffee to the U.S market:

• Promote to increase production and productivity as well as quality

• Save time and effort

• Mitigate production cost

• Satisfy the high quality demand of fastidious markets such as U.S

• Advance the imports coffee value

In order to utilize this potential effectively, the coffee sector needed to improve itsproduction chain and distribution networks, from producing, processing to marketingprocesses, so as to increase its export value.

That is why PhucSinh needs to upgrade its technique from time to time, so we will outdotheir competitors easily In this case, PhucSinh will invest a fraction of their capital to theResearch and Product Development to boost itself up against competitors

INTERRELATIONSHIP BETWEEN THE U.S AND VIETNAM

Before 1990, one-way trade relations, only the United States exported goods to Vietnam,and Vietnam towards almost no exports to the United States

As of 1994, denounced the embargo against Vietnam In the meantime, Vietnamexported to the United States of goods worth USD 50.4 million,

In 2006, joined the World Trade Organization (WTO)

Vietnam now ranks 7th in coffee export quantity and places 5th in its export value toAmerica The export turnover of coffee bean to the USA is US$2.6 billion in Aug, 2014

The United States and Vietnam signed a bilateral trade agreement (BTA) on July 13,

2000, which went into force on December 10, 2001 As part of the BTA, the United Statesextended to Vietnam conditional most favored nation (MFN) trade status

Vietnam is currently the United States’ 29th largest trading partner U.S exports toVietnam have doubled in just five years, amounting to $5.2 billion in 2013

Vietnam and the United States have shifted from rivalry in war to a confidence-buildingrelationship

Source: U.S data from International Trade

Commission (ITC);

Vietnamese data from General Statistics Office of Vietnam and Vietnam Customs

6.5 1.15

2.6

Top commodities exported value to the United States 8/2014

(in billion U.S dollars)

Textiles and Garments Seafood

Coffee bean

B.1 PROFILE OF OUR COMPANY

B.2 DEMAND ANALYSIS

Coffee demand in the United States of America

The United States - one of the world's largest coffee importers - imports coffee beansfrom a variety of different countries such as Vietnam, Brazil, Columbia, etc Coffee is thenation’s most popular drink that is not water and is the second largest tradedcommodity (after petroleum) in America particular and in the world generallyrespectively

American consumers spent on average US$164.71 on coffee annually When decidingwhere to purchase their beloved coffee, coffee drinkers tends to rate the taste of thecoffee as a key buying factor

Italy Spain Japan Others

ROBUSTA DEMAND BY REGION

Africa Japan, Korea, Australia East Europe US & Canada

Coffee demand in Vietnam

Vietnam coffee consumption is relatively fragile About 6 per cent of Vietnam’s totalproduction is currently consumed domestically, the rest is sold internationally makingcoffee one of the country’s key export commodities On annual average, a Vietnameseconsume 1.15 kilo of coffee

Demand for raw material purchasing and input warranty

Demand for expanding business and product’s quality upgrading PhucSinh’s demand for a bank loan

In Vietnam: INTIMEX TRADING, AN THAI GROUP, INEXIM DAKLAK, VINACAFE DALAT.

In foreign countries: FHS EASTCO – BRAZIL, PARADISE COFFEE – JAKARTA – INDONESIA, CARAVELA COFFEE – BOGOTA – COLOMBIA

2010 top 10 coffee exporter of Vietnam

Weight (tons) Value (USD)

Average value (USD/ton)

Market share (%)

1 Vinacafe company 177.902 274.190.024 1.940 16,47

2 Intimex Export and Import

3 Phuc Sinh Corporation 108.641 187.525.714 1.947 10,95

5 Inexim Daklak Export And Import

6 TM Export and Import Center 19.855 31.914.504 1.957 1,9

B.3 COMPETITORS ANALYSIS

Mercon Noble Atlas Contract validity 2015 – 2017 2015 – 2017 2015 – 2017

The required amount of

coffee bean

500 Tons each year in next 2

year

600 Tons each year in next 2

year

600 tons each year in next 2

The way of using coffee

bean

Export to other countries after adding VAT. Making coffee ground Making expresso blend

B.4 BUSINESS PARTNERS OF PHUCSINH

Table of our contracts in 2015

1. Using ERP

2. Low labor and production cost

3. An old-hand in coffee cultivation

4. Outputs always meet high quality standards required from fastidious importers

5. Large export market share of Robusta coffee bean

6. Professional teams

7. Staffs are bachelors of economics and agriculture

8. One of the prestigious companies for ages

9. A member of VICOFA and VPA

10. Have strong relationship with bank system and other corporations both inside and

outside

11. Registration in FDA/USFDA

1. Not active in participating in competition and searching for new markets

2. Not good in conducting management solutions to lessen the product’s cost

3. Exporting through intermediate system/intermediary, customers are mostly the

traditional clients

4. Staff’s capability and profession skills are slowly advanced

5. There are yet preferential policies for retaining top talents

6. Domestic supply not stable, no long-term investment strategy

7. Slow – moving solutions for ineffective sectors so as to stabilize and increase

profitibility

8. The deficit of capital resources

9. Lack of storage facilities

10. Not good performance at risk management (e.g Insurance for coffee producers)

11. Do not have a particular marketing department

12. Applying ICT is still inferior

1. Vietnam’s coffee production is concentrated in five provinces known as Central

Highlands The climate in the Central Highlands is ideal for Robusta production withthe four-month dry season from mid-December until mid-April, coinciding nicely withflowering

2. Recovery of world market, especially the comeback of USA’s economy

3. Support from Government and VICOFA to advance corporation’s brand name,

trade promotion

4. A member of AFTA, ASEAN, WTO

5. Located in the heart of Southeast Asia - the most important strategic area with many

vitally international maritime intersections

6. Demand of Robusta coffee is likely to increase through years, particularly in the U.S

7. Administrative procedures, certificate of origin, customs documents become simpler

and faster

8. Coffee harvest in Brazil is having problem with drought, leading to a shortage of

supply to the world next year

1. Strict competitiveness on price, product quality among the interior enterprises and

the exterior ones

2. Drought – it can make coffee beans grow slowly and not reach the quality standards

3. Depletion in water resources and evapotranspiration

4. Vietnam is considered a non-market economy, so its products are vulnerably sued

for dumping and against by applied anti-dumping duty from other countries

5. Despite Vietnam’s customs system reformation, the structure is still outdated

compared with developed countries’

6. A rise in both business costs and production costs: gasoline, fuel, marketing, research,

etc

7. Global economic crisis: inflation warnings, exchange rate fluctuations, decrease in

exports/imports demand

8. Material facilities of ports are not yet internationalized, relatively out-of-date

9. Difficulties in expanding distribution network

B.6

1 HR factors

ERP – Enterprise Resource Planning

We use a flexible and powerful approach that is called ERP In practice, this means thatemployees in different divisions—for example, accounting and sales—can rely on thesame information for their specific needs

Auditing Company

In business, our parties always want to know how strong and how reliable our company

is So we kindly let them have our company’s financial information in reality from theauditor’s report from Auditing Association Ernst & Young.

Law consultant Company

We spent thousands of dollars per year for them But when there are any damages or abreach of contract, we receive thousands of dollars It is important to have a LawConsultant Company in an Open Economy.

2 OPERATING CAPITAL MANAGEMENT

2013/2012 (%)

Compare 2014/2013 (%)

Capital

(VND) 96.864.101 106.666.778 127.439.401 9.19 16.3

Capital of Company from 2011 to 2013 (Unit: VND)

GROUP OF PROFITABILITY RATIOS OF THE COMPANY (UNIT: VND)

Difference 2013/2012 2014/2013

Net profit after

24,672,141,984 27,058,326,596 36,372,008,389 9.67% 34.42%