THE INTERNATIONAL TRADE AND FINANCE TOPIC: CONSULTING FOR CAO PHAT TO PENETRATE SOUTH KOREA CASHEW MARKET

THE STATE BANK OF VIETNAM BANKING ACADEMY THE INTERNATIONAL TRADE AND FINANCE TOPIC CONSULTING FOR CAO PHAT TO PENETRATE SOUTH KOREA CASHEW MARKET Lecturer Nguyễn Thu Hương Group 7 Members Hoàng Thị H.

THE STATE BANK OF VIETNAM

BANKING ACADEMY -

THE INTERNATIONAL TRADE AND FINANCE

TOPIC: CONSULTING FOR CAO PHAT TO PENETRATE

SOUTH KOREA CASHEW MARKET

Lecturer: Nguyễn Thu Hương Group: 7

Members: Hoàng Thị Hồng Anh 21A4050014

Nguyễn Thị Như Quỳnh 21A4050367 Nguyễn Thị Thùy Linh 21A4050247

Hồ Thị Mỹ Duyên 21A4050082 Nguyễn Phương Linh 21A4050241 Trần Thị Huyền 21A4050205 Hoàng Thị Thúy 21A4050409

Table of contents

I Introduce Cao Phat Company 1

II Reason for finding a new foreign market 3

III New potential country market for Cao Phat: Korea 5

IV Method of entry into new country market 10

V Conclusion 11

Reference Material 12

I Introduce Cao Phat company:

1 A Brief Overview

CAO PHAT COMPANY LIMITED was established in 2007 and specialized in processing agricultural products They incessantly train professional skills for workers and managers during their operation Besides that, they always pay attention to developing both facilities

as well as human resources Their main product is Cashew Nut Kernels which were bought from farmers or local traders to put into their production line according to FSSC 22000 standards Moreover, Cao Phat Company Limited got a BRC issue 7 certificate at the end

of 2015 They export many containers of cashew nut kernels to the world and their main market is Europe, USA and Australia

● Products & servicesCashew KernelsBroken Cashew Kernels

· Cashew Kernels

· Export Cashew Kernels

· Export Cashew Nuts

· Split Cashew Nuts

· White Cashew Kernels

· Yellow Cashew

● Cashew Processing MachineryAutomatic Shelling Machine Model

· Raw Cashew Grading Machine

· Raw Cashew Machine

Quality of product is always their best concern and an important key to develop their trademark to the world So, the most significant thing in their business is satisfying customers and meeting all demands of consumers

With their slogan “Cashew – delicious taste connecting People” Cao Phat Company Limited guarantee that their products have an agricultural source without using any kind

of preservatives as well as pesticide content They are proud of their products which are inspected by authorized inspectors and are clean, safe food as well as serve for consumer’s benefits and health

1 Strength and Weakness:

● Strengths:

✓ Head office has a 5ha-area

✓ The productivity of 20,000 tons of raw cashew nuts The company has exported

hundreds of containers of cashew nuts

✓ Staff: More than 1000 people

✓ Export market: Europe, America, Australia

- By investing in modern production equipment, their company can be proud to be one of the largest manufacturers in the Vietnamese cashew industry Currently, Cao Phat is a member of the Vietnam Cashew Association (VINACAS) and also a member of Ba Ria - Vung Tau Enterprises Association

● Weakness:

•The distribution system of Cao Phat's branded products has not been widely distributed across the country

•Advertising activities have not been paid enough attention

•The company advertises or does little PR on TV, the internet

•The image of Cao Phat brand is not really clear and makes an impression on consumers

II Reason for finding a new foreign market:

The reason is that Cao Phat company exports cashew nuts to South Korea

South Korea was chosen as an international market for Cao Phat company to enter and export cashew nut products for a variety of reasons Some can be listed below:

In the world, the cashew nut brand of Vietnam in general, and Cao Phat company in particular, has attained high rankings in both export quantity and many wide and challenging markets such as the EU, the United States, the Middle East, and so on It is highly respected for its quality And even when the global Covid-19 pandemic exploded, causing the whole economy to go down, Vietnam remained a bright spot in the country, and this provided Cao Phat with such an opportunity for the South Korea cashew nut market

In the Asian region, Korea is Vietnam's fourth-largest trading partner

Phones and components, textiles, footwear, seafood, timber and wood products, computers, electronic products and components, cashew, chocolate, pepper are the main products exported from Vietnam to Korea Meanwhile, Vietnam imports machines, vehicles, pharmaceuticals, iron and steel, and chemicals from Korea The two sides' import and export goods are complementary rather than competitive

Vietnam imports goods from Asian market in 2020

(Source: General Department of Vietnam Customs)

Cashew is one of the key crops of Vietnamagricultural products From a country that only grows cashews and exports raw cashews, Vietnam has modernized its cashew processing technology, expanded its export markets to over 90 countries and territories, becoming a country with the largest cashew nut export turnover one, processing ranks second and holds the third position in the world in terms of yield and output The cashew industry brings great economic value and contributes to creating jobs for millions of farmers and workers, especially in difficult economic areas

Vietnam joined the WTO in 2007, has been participating in bilateral and multilateral free trade agreements (such as the ASEAN-Japan Agreement, ASEAN-Korea, ASEAN-China, ASEAN-Australia/New Zealand) Zealand, the EU-Vietnam Free Trade Agreement, the Trans-Pacific Partnership ), joining the ASEAN Economic Community (AEC) So, these are great opportunities to expand the South Korea market and take advantage of incentives

III New potential country market for Cao Phat: Korea

1 Political Factor:

South Korea is a fully functioning democracy It has a presidential system where the President is the head of state Its constitution ensures that political parties can be established freely; however, political parties must be democratic in their objectives and activities

South Korea is a politically stable country It is an ally of the USA and maintains a close relationship with many countries Its relationship with China and Russia is very good;

However relations with North Korea are almost hostile, frequent disagreements also occur with Japan, mostly because of their pre-independence atrocities

South Korea is an important member of global bodies as UN, WTO, OECD and blocs such G-20, ASEAN plus three, etc

The policy relationship between VietNam and Korea: "The Republic of Korea is a very important partner of Vietnam and a good model for Vietnam to expand cooperation and exchange experiences during its development process

The Vietnam - Korea Free Trade Agreement (VKFTA) took effect on December 21, 2015,

in which South Korea gave many incentives for Vietnamese agricultural and fishery products to access the Korean market

2 Environment factor:

South Korea has modest natural resources Natural resources in the form of plants and ecology are widely missing in the country, which makes the country highly dependent on agricultural imports This makes Korean farmers face many difficulties and disadvantages

in cultivating and developing agriculture

Furthermore, Korea's agricultural sector accounts for only 2.2% of the country's GDP With

a dense population and scarce land, Korea will still depend on imported food This makes advantages for our company when exporting to this country

North Korea constructed Imnam dam very close to the DMZ in 2003 Sudden uniformed release was done by North Korea in 2001, 2002, and 2007, which created flood like situations in the city of Seoul

So (2020) reports that 70% Koreans consider air pollution the most concerning environmental issue Other major issues they consider are waste management, global warming, future energy sources and supplies, emissions, water pollution, and over-packaging of consumer goods To reduce environmental problems in facilities, the company must spend more money in the future, which can cost the company huge costs Therefore, the company of Vietnam will make competitive prices more than domestic similar products

3 Social factor:

Korea is highly developed and one of the most affluent countries in Asia South Korea is a great purchasing market with a population of more than 51 millions in 2018, a GDP of more than $1.6 trillion, ranking 12th in the world and a per capita income of over $40,000 People above 65 will be 40% of the total population in 2060 After 2030 the population will decline

About the Fertility: Low Fertility - 1.24 Children per woman Security healthcare to those parents who both working increased

Korean is the major language, while both Buddhism and Christianity are the most practiced religions (BBC, 2018) South Korean society is influenced by factors such as respect for ancestors, age, and seniority Likewise, factors such as marital and economic status, and hierarchy also play a big role

· Power Distance - At an intermediate score of 60, South Korea is a slightly hierarchical society

· Individualism - A score of 18 is considered a collectivistic society

· Masculinity- Scores 39 on this dimension and is thus considered a Feminine society

· Uncertainty Avoidance - At a score of 85 South Korea is one of the most uncertainty avoidance countries in the world

· Long Term Orientation - At 100, South Korea scores as one of the most pragmatic, long-term oriented societies

· Indulgence - With a low score of 29, South Korean society is shown to be one of Restraint

4 Technological factor:

The new Creative Economy Initiative, Korea has renewed its bio- and nanotechnology strategies It focuses on supporting start-ups and building SMEs innovative capacity by consolidating existing schemes and the share of R&D investment going to SMEs increased from 12.4% in 2011 to 18.0% in 2015 The 10 Year Energy Technology Development Plan (2014-23) has a budget of USD 20 billion PPP to assist in the creation

of a new energy industry and innovation ecosystem Part of this is establishing a new R&D system in terms of supply- demand convergence, encouraging the commercialization of technology

Korea has got a very high Global innovation index ranking in 2020

About South Korea, it is known for its high technology innovation and also very quick to implement ideas, resulting in a very small time gap between innovation and commercialization South Korea made great progress in the field of aerospace engineering, biotechnology, and robotics Most Koreans see artificial intelligence as part

of the solution, not the problem Over 85% of the population use social media

Future challenges and risks:

· Disturbed neighborhood

· Brain drain

· Rising R&D costs

· Added to high wages and strict labor laws, the cost of maintaining an R&D center

is rising

· Foreign companies pulling out of the country, favorable attitude towards investments into R&D there is a lot of local hatred against foreign companies With more and more markets opening up, there is a growing need to reduce restrictions, various business procedures and processes

5 Economic factor:

Korea is the country with the most developed economy and ranked 4th in the Asia economy It is a mixed economy That means it operates as a free market economy in consumer goods and business services

The Organization for Economic Co-operation and Development (OECD) on March 15 revealed that Korea's nominal gross domestic product (GDP) in 2020 is estimated at 1.624 billion USD, ranking 10th in the world, surpassing Russia in 11th place ($1,403 billion) and Brazil ranked 12th ($1,394 billion), Australia 13th ($1,333 billion)

Up to now, the Vietnam – Korea Free Trade Agreement (VKFTA) has been effected for 5 years ( since 2015 ), but the appearance of Vietnam’s strong agricultural products in this market is still limited

According to statistics:

 In 2018, Korea imported 35.2 billion USD of agricultural, forestry and fishery products, of which, imported vegetables and fruits was 8.44 billion USD, seafood was 5.045 billion USD, and forest products were 3.825 billion USD However, in this market, the group of agricultural - forestry - fishery products of Vietnam only accounts for nearly 6% of the market share, with a turnover in 2018 of 2,145 billion USD

 In the first 6 months of 2019, it reached about 760 million USD It is expected that for the whole year of 2019, Vietnam's export turnover of this group of goods to South Korea will only reach about 2 billion USD like last year

 From the end of 2019 to the end of 2020, Korea has been greatly affected by the Covid-19 epidemic The Bank of Korea announced that the country's GDP fell by 3.3% in the second quarter of 2020 Meanwhile, GDP in the first quarter of 2020 decreased by 1.3% With 2 consecutive quarters of decline, the Korean economy has fallen into recession for the first time in 17 years since 2003 This is a direct result of the COVID-19 pandemic that has disrupted supply chains, leading to production and business activities stagnate, exports decreasing

Korea is currently taking steps to maintain and improve its economy in parallel with the control of the Covid-19 pandemic by widely deploying the vaccination against Covid-19 widely deployed The Organization for Economic Co-operation and Development (OECD) forecasts that the Korea economy will increase by 3.3% in 2021

 Positive impact:

South Korea is one of the leading modernizing and industrializing countries in Asia, its agricultural sector accounts for only 2.2% of the country's GDP With a dense population and scarce land, Korea will still depend on imported foods This is a great advantage for Vietnam when entering the Korean food market This is a golden opportunity for not only Cao Phat company but also other businesses to introduce typical Vietnamese agricultural products to international friends If Cao Phat conquers this large market, Cao Phat will hold

a "ticket" to the European market Many Vietnamese food products have won high positions in world exports such as rice, cashew nuts, pepper, coffee, seafood

 Negative impact:

+ Although in the top 5 exporting countries of agricultural products leading to South Korea,but the export value of Vietnam is still modest compared with total imports of South Korea, this figure is modest compared to the total volume of goods Vietnam Nam exported

to Korea In 2018, Korea imported agricultural products worth 37.1 billion USD, while imports from Vietnam only reached 308.6 million USD

+ Besides, when entering the South Korea market, there are many agricultural exporting countries such as Thailand, New Zealand, Australia, that require Cao Phat or Vietnamese enterprises that want to export agricultural products, they need to pay attention to the stages

of cultivation to ensure quality control

6 Legal factor

 Current strengths

South Korea has some regulatory incentives Among all the OECD countries, South Korean offers foreign investors some of the best incentives in the south east Asian region

In addition to offering major financial incentives, the Free Economic Zones (FEZs) of