BANKING ACADEMY OF VIETNAM FACULTY OF INTERNATIONAL BUSINESS INTRODUCTION TO INTERNATIONAL TRADE AND FINANCE CASE STUDY TRUNG NGUYEN LEGEND GROUP ENTERS CHINESE MARKET Lecturer Class Group Nguyễ.
Trang 1BANKING ACADEMY OF VIETNAM FACULTY OF INTERNATIONAL BUSINESS
- -
INTRODUCTION TO INTERNATIONAL
TRADE AND FINANCE
CASE STUDY: TRUNG NGUYEN LEGEND GROUP ENTERS
CHINESE MARKET
Lecturer Class Group
Nguyễn Thu Hương BUS12A05
05
: : :
May 23rd, 2021
Trang 2MEMBERLIST
2 Nguyen Xuan Huy 21A4050182
3 Duong Hoang Linh 21A4050226
5 Bui Thi Tuyet Mai 21A4050272
6 Nguyen Dieu Linh 21A4050236
7 Nguyen Thi Giang 21A4050110
8 Dao Thi Thu An 21A4050002
Trang 3TABLE OF CONTENTS
A INTRODUCTION 4
B CONTENTS 5
I Company Background 5
1 Mission and vision 5
2 Current market 6
3 Products and services 7
4 Certification and trophies 10
5 Infiltrating into the Chinese market 10
II Reason for finding a new foreign market 10
1 Reasons from domestic market 11
2 Reason from the international market 12
2.1 Market Overview 12
2.2 Key Market Trends 12
III PESTEL ANALYSIS 14
1 PESTEL ANALYSIS 14
1.1 Political Factors 14
1.2 Economic Factors 15
1.3 Social Factors 16
1.4 Technology Factors 17
1.5 Ecological Factors 18
1.6 Legal Factors 19
IV Methods of entering Chinese Market 19
1 Direct exporting 19
2 Indirect exporting 20
3 Joint venture 21
4 Licensing/ Franchising 22
5 Subsidiary companies 23
6 The main reasons why Trung Nguyen should choose direct exporting 24
C CONCLUSION 25
REFERENCES 26
Trang 4A INTRODUCTION
In the process of strong globalization integration of the world's economies, many companies and corporations not only conduct business within the domestic scope but increasingly expand to large foreign markets This is a huge transformation for Vietnamese enterprises, both in terms of their size, revenue, profit and competitive position Therefore, researching and coming up with a suitable way to penetrate foreign markets is an extremely important step to expand production scale and improve product quality in business Many Vietnamese enterprises not only focus on developing the domestic market but also penetrate into the international market to enhance their brand and reputation Trung Nguyen Legend, it can be said that Trung Nguyen Legend is the number one coffee brand in Vietnam today The company is rated as the top 5 largest private enterprises in Vietnam (according to Vietnam Report)
Realizing that China is a potential for the coffee industry With the ambition
to achieve $ 1.6 billion in revenue from China's $ 9 billion coffee consumption market In fact, in 2020, Trung Nguyen Legend Group's G7 coffee achieves a strong growth rate of 24% in the offline market and holds the 2nd largest market shares in the online coffee market, becoming the leading coffee brand and is the most popular
in China To better understand the success of Trung Nguyen Legend's penetration,
we will discuss the following issues:
- Why did Trung Nguyen Legend choose the Chinese market?
- How does Trung Nguyen Legend enter the Chinese market?
Trang 5
B CONTENTS
I Company Background
Born in the middle of 1996 - Trung Nguyen is a fledgling coffee brand of Vietnam, but has quickly built up a reputation and become the most familiar coffee brand for consumers both at home and abroad In just 10 years, from a small coffee company located in the middle of the coffee capital Buon Ma Thuot, Trung Nguyen has risen to become a powerful corporation with 6 member companies: Trung Nguyen Joint Stock Company, the company Trung Nguyen Instant Coffee Joint Stock Company, Trung Nguyen Coffee Company Limited, G7 Trading and Service Joint Stock Company and Vietnam Global Gateway Joint Venture Company (VGG) with main industries including: production, processing processing and trading tea and coffee; franchise and modern distribution and retail services In the future, Trung Nguyen Group will develop with 10 member companies, dealing in a variety of industries
Pioneering in applying the franchise business model in Vietnam, Trung Nguyen now has a network of nearly 1,000 franchised cafes nationwide and 8 stores overseas such as the US, Japan, Singapore, Thailand, China, Cambodia, Poland, and Ukraine Trung Nguyen coffee products and G7 instant coffee have been exported to
60 countries around the world with key markets such as the US and China Besides, Trung Nguyen has also built a system of more than 1000 convenience stores and G7 Mart distribution centers nationwide
1 Mission and vision
- Vision: To become a corporation that promotes the rise of Vietnam's economy, maintains the autonomy of the national economy and arouses and proves a desire for Dai Viet to discover and conquer
- Mission: Building a leading brand by bringing coffee drinkers creative inspiration and pride in Trung Nguyen style imbued with Vietnamese culture
Trang 62 Current market
In 2020 is considered a difficult and challenging year for the world economy
as well as for Vietnam, strongly affecting most businesses globally With a creative spirit, steadfastly pursuing strategies different, special, unique, Trung Nguyen Legend has made a difference in 2020, continues to be the Top 5 leading brands in Vietnam, becomes the most favorite coffee brand, according to the results Survey results "Top 1,000 Asian Brands" in 2020 conducted by Campaign Asia and Nielsen
In the international market, Trung Nguyen Legend strives to maintain outstanding growth rates in China, Korea, Japan, the US, Russia, the EU market and continues to expand into new markets in Asia Up to now, Trung Nguyen Legend has successfully joined the system of major global supermarket chains such as Metro
in Russia, Costco in Australia and Costco Business Center in the US, 7-Eleven in Thailand, Lotte and Homeplus Korean Trung Nguyen Legend has marked with many great awards such as: International Marketing and Innovation Award for the G7 Digital Marketing Campaign (G7 Digital Campaign) in China; Top 3 favorite instant coffee brands shopping on Korean online sales channels for G7 black instant coffee (Nielsen)
Trung Nguyen Legend has made efforts to diversify online sales channels through e-commerce channels to increase the conversion rate of potential customers
as well as reach customers in the new situation In 2020, Trung Nguyen Legend opened Coffee World on global e-commerce platforms Amazon and Alibaba, China (Taobao.com, Tmall.com, Yihaodian.com, JD.com,…) and cooperate with more than
30 largest e-commerce sites in Korea, China and leading e-commerce sites in Vietnam (Lazada, Tiki, Shopee) The Group also applies technology on online shopping platforms such as Grab, Now, Go Food, Loship, etc., promotes cooperation with online payment partners, and combines door-to-door delivery for Chinese chain stores Nguyen Legend and Trung Nguyen E-Coffee, helping to optimize the customer experience Trung Nguyen Legend also achieved a growth rate of nearly 200% in the Asian market, covering supermarkets, trade centers, convenience store chains, e-commerce channels, pharmacy systems, etc Especially at the leading supermarket chains in Korea: Lotte mart, Homeplus, Emart,…
Trang 73 Products and services
The above types of Trung Nguyen coffee all have different characteristics, catering to the preferences of each separate customer group It is from the development of a variety of products that Trung Nguyen has quickly dominated the coffee market of the country Trung Nguyen brand goes into consumers' subconscious about genuine coffee products From high-end to popular lines, from the purpose of enjoying a cup of coffee in the morning to gifting each other quality coffee boxes Trung Nguyen coffee meets all the needs of users
- Premium Trung Nguyen Coffee
+ Weasel coffee
+ Creation 8
Trang 8- Coffee Roasters
+ Group of popular roasted and ground products
+ Group of innovative products 1, 2, 3, 4, 5
- Pure coffee beans
+ Arabica beans
+ Coffee beans Culi Robusta
Trang 9- G7 instant coffee
+ G7 coffee includes 3in1, 2in1 (Iced Black), Instant Black, Strong Gu X2 (2in1 and 3in1), Cappuccino, Passiona and White Coffee
+ G7 3in1
+ G7 2in1 (Stone Black):
+ G7 Soluble black (sugar free)
+ Traditional fresh coffee with rich, popular flavor
+ Stylish fresh coffee with a smooth, characteristic aroma
- Thick cream with Brothers sugar
Brothers sugar condensed cream also adds Vitamin B1, B6 which is very good for health
Trang 104 Certification and trophies
The recognition and honor of a series of leading media during the past year journey is a testament to Trung Nguyen Legend Group's constant creative efforts and the trust, companionship and support of coffee lovers around the globe This will be the driving force for Trung Nguyen Legend to continue to bring
25-sustainable multi-benefit values to society through different - special - unique
products - models - services, affirming the brand position No 1 coffee from
Vietnam - the world's best Robusta coffee powerhouse
- Certified FSSC 22000
- National Brand Award
- National Quality Gold Award 2011
- Vietnam Gold Star Award 2010
- High Quality Vietnamese Goods Award
- Trung Nguyen Coffee was selected by the Ministry of Foreign Affairs as
"Cultural Diplomatic Ambassador"
- Certificate of Excellence in Asia - Pacific Enterprise 2014
5 Infiltrating into the Chinese market
China is a large market, with a large population, large coffee consumption (equivalent to a market that uses a lot of coffee, the US) with Eastern culture that has many similarities with our country At the same time, China is also a thriving emerging market with a convergence of populations from all over the world This is not only an opportunity but also a challenge for Trung Nguyen when entering a
"difficult" market like China
II Reason for finding a new foreign market
Coffee consumption in east and south-east Asia is steadily increasing as more households reach middle-income status and move to coffee-consuming regions like Europe and the United States According to Euromonitor International, Asia's consumption will rise at an annual rate of 18 percent between 2014 and 2019
Trang 111 Reasons from domestic market
- Our country's coffee demand is pretty low However, consumption demand in developed countries is several times higher, each Vietnamese consumes about 500g per year, compared to about 10kg in developed countries
- Excess capacity is generated by favorable natural conditions and investments
in production size
Top 10 thị trường Việt Nam xuất khẩu cà phê nhiều nhất 7 tháng 2020
- When doing domestic business, profit margins are low
- Trung Nguyen coffee is gradually losing its domestic market share, with great
domestic competition pressure from competitors such as Highlands, Nescafe, Vinacafe, and especially Starbucks
- Trung Nguyen coffee benefits from a close proximity, cultural similarities, a
large market, a young population, and a strong trend of switching from tea to coffee
in the Chinese market
Trang 122 Reason from the international market
2.1 Market Overview
The overall Chinese coffee market has been least effective after the advent of COVID-19, as per the analysis, in 2020 an average of one new coffee shop opened every day in China's Chengdu City That pushed the total number of coffee shops in the city to over 4,000 – just after Shanghai and Beijing Moreover, with the strict lockdown measures being imposed in the country, the consumers in China have been resorting to at-home coffee consumption thus, increasing the sales of instant coffee
in the country during the COVID-19 times
According to the data from the China Coffee Association Beijing (CCAB), coffee consumption is increasing at an annual rate of 15%
2.2 Key Market Trends
China lacks in the production of coffee, owing to which, the country is dependent on imports For instance, in 201d7, the United States exported 1,800 metric tons of roasted coffee and coffee products to China, worth over USD 22 million
Trang 13Data Source: International Coffee Organization, ‘Coffee bean exporters to China’
+ Increasing Consumption of Instant Coffee in China
The instant coffee segment held a significant amount of share in the market
studied, owing to the convenience provided by it
Online retailing has remained a minor distribution channel for instant coffee for the past few years in China It is likely to gain prominence in the market during the forecast period, owing to the convenience it provides to the consumers, as they find it easy to choose their preferred brands from the vast variety of product choices available
Trang 14III PESTEL ANALYSIS
As a trade consultant, after researching, we decided to choose China to become the new exporting market for Trung Nguyen Legend Group This is an overview of this market
With a population of about 1.3 billion people and a gradual shift from tea to coffee, China is a potential export market for Vietnam's coffee industry Coffee consumption in China grows at an average annual rate of about 20%, the coffee market size is forecast to reach 9 billion USD by 2020 Besides, the community of more than 50 million overseas Chinese living and working in continents will be an important factor for Trung Nguyen Legend Group to realize the aspirations of global Vietnamese brands in the coming time
no conflict within the nation At the same time, the national security situation is well guaranteed, that makes the foreign companies feel secure when they choose to invest in this country
- In diplomatic relations:
China has reasonable diplomatic policies to promote cooperation with other countries, the country has engaged in several bilateral and multilateral trade agreements that have opened new markets for its products A Free Trade Agreement (FTA) between China and the ASEAN nations came into effect in January 2010, which created the world’s third largest free trade area in terms of nominal GDP China also established, among others, FTA with countries such as, Australia, Chile, Costa Rica, Korea, Pakistan, Peru, New Zealand, and Singapore Moreover, there are other FTAs under negotiation with the Gulf Cooperation Council, Japan, Norway and Sri Lanka
Trang 15- The political relationship between China and Vietnam:
In recent years, the relationship between Vietnam and China has continuously developed strongly, the two countries regularly exchange visits to each other, exchange trade and sign investment cooperation agreements, Create conditions for two countries’ businesses to develop business cooperation From January 1, 2010, when the China ASEAN free trade area agreement came into effect The two sides implementing import and export tax reduction is an opportunity for businesses to enter the Chinese market Trade relations between Vietnam and China are increasingly expanding This is a very favorable thing for Trung Nguyen Legend Group in introducing products, promoting brands as well as seeking Chinese partners
In 2020, per capita GDP in China reached around 10,484 U.S dollars According to the projections at hand, the Chinese economy will maintain a steady growth momentum Even though the growth rate of China’s real GDP gradually slowed down
in recent years, year-on-year GDP growth still reached 6.1 percent in 2019 and is forecast to range at around 5.6 percent after the corona crisis Since 2010, China has been the world’s second-largest economy, surpassing Japan The impressive economic development in China has led millions of people out of poverty
China’s emergence in the world’s economy has a lot to do with its status as the
‘world’s factory’ Since 2013, China has been the largest export country in the world Some argue that it is partly due to the undervalued Chinese currency The Big Mac Index, a simplified and informal way to measure the purchasing power parity between different currencies, indicates that the Chinese currency yuan was roughly undervalued by 46 percent in 2019