Icom’s strategic export plan for household and family care products in south africa

FOREIGN TRADE UNIVERSITY HCMC CAMPUS 28k ok MIDTERM EXAM REPORT INTERNATIONAL TRADE TRANSACTION ICOM’S STRATEGIC EXPORT PLAN FOR HOUSEHOLD AND FAMILY CARE PRODUCTS IN SOUTH AFRICA

FOREIGN TRADE UNIVERSITY HCMC CAMPUS

28k ok MIDTERM EXAM REPORT

INTERNATIONAL TRADE TRANSACTION

ICOM’S STRATEGIC EXPORT PLAN FOR HOUSEHOLD AND FAMILY CARE PRODUCTS IN SOUTH AFRICA

Class code: TMAE302

Lecturer: Dr Nguyen Thi Quynh Nga

Group: 9

HCMC, 20th of September, 2024

TABLE OF CONTENT

2.1.1 Overview

2.1.2 Strong Consumer Demand

2.1.3 Established Trade Relations with Vietnam

2.1.4 Favorable trade Regulations

2.1.5 Market Opportunities

2.1.6 Potential Threats

2.1.7 Conclusion

2.2.1 Joint Venture as a Market Entry Mode for ICOM in South Africa

a Key Advantages of a Incorporated Joint Venture 00 000.0cc cece

ID {09:0 TP 2.2.2 Exporting through a Distributor in South Africa

ID {09:0 TP

3.1 Ủnderstanding the CIF (Cost, Insurance, and Freight) Process 3.1.1 Cost of Goods and Export Preparation

3.1.2 Freight Arrangement

3.1.3 Insurance Coverage

3.1.4 Shipping Documentation and Customs Clearance

3.1.5 Transfer of Risk and Ownership

3.2 Rationale for Choosing the CIF Strategy cccccccccccccceecestseeeeaeeeenes 3.2.1 Risk Management and Mitigation

3.2.2 Market Preferences and Competitive Edge

3.2.3 Enhanced Control Over Logistics and Insurance

3.2.4 Simplified Buyer Experience

3.3.1 Product-Specific CIF Pricing

LN SE AC i80i(\)0)5ddiiiiiiddiảảẢ

3.3.2 Gross Margin Analysis

V Conclusion X4:

I Introduction

iCOM (International Commodity Corp), a Vietnamese trading and exporting company, has been delivering high-quality agricultural, wooden, processed food, and technical products to global markets since 2013 By 2025, iCOM aims to expand its operations by developing and exporting its own line of products, with a focus on household and family care items Therefore, the company seeks to build strong mtemational partnerships and establish its presence in the South African market

To ensure a smooth market entry, it is essential that we develop a comprehensive export plan, which will help iCOM navigate the complexities of international trade while minimizing risks and maximizing potential benefits Throughout this report, we will demonstrate detailed market analysis, give pricing details based on Incoterms to meet the demands of international buyers while safeguarding interests for iCOM

iCOM will focus on exporting three key product categories in the household and family care products such as hand wash liquid, kitchen cleaning liquid, and multipurpose lubricants These products have been selected based on their high market demand, essential utility, and the growing awareness of hygiene across African households Hand wash liquid, for instance, has seen an uptick in demand due to increased health consciousness following the pandemic, while kitchen cleaning liquid is indispensable in both residential and commercial kitchens However, the nature of these products also significantly influences the exporting process in terms of packaging, regulatory compliance, and logistics

The export process for these products is significantly mfluenced by their characteristics Hand wash and kitchen cleaning liquids require leak-proof packaging and adherence to stringent international labeling and safety regulations Compliance with these regulations necessitates pre-shipment testing and certification, adding complexity to the export process For multipurpose lubricants, which may be classified as hazardous materials, iCOM must manage additional documentation, and ensure robust packaging to prevent leaks and environmental contamimation The liquid nature of these products impacts logistics by increasing shipping costs due to volume and weight considerations

Providing product samples is a crucial step in penetrating the South African market Product samples allow potential buyers and distributors to assess the quality and effectiveness of iCOM’s offerings before committing to larger purchases This 1s extremely important when entering a new market where building trust and credibility is essential 1COM will utilize various channels, including trade fairs and direct outreach, to present these samples effectively to target markets, particularly in South Africa, ensuring that the products meet local market needs and expectations

II Market Entry Strategies

2.1 Market Research

2.1.1 Overview

Business expansion is a continuous process in the current world, thus, choosing the nght market to enter is critical for success ICOM has exported quality products to international markets since 2013, however, the company is now eyeing global market expansion with household and family care products The study conducts research on various specific criteria, pointing out opportunities and threads From there, the target market that stands out as the most suitable for ICOM’s product line is South Africa 2.1.2 Strong Consumer Demand

One of the key factors of targeting South Africa is the rising demand for household and family care products in that nation With a population of over 62 million, South Africa has a sizable urban population as well as a growing middle class The rising number of households and disposable income in South Africa has raised consumer purchasing power for products related to homecare and hygiene, which align perfectly with ICOM's product portfolio Moreover, consumer trends toward health consciousness, where hygiene in the home is prioritized, are another factor driving demand

On average, individuals in South Africa spend about US$91.54 annually on household essentials, which is lower than the average of US$127.80 in Vietnam (Statista, 2024) This spending aligns with the typical prices for products in South Africa For mstance, a 500ML hand wash liquid costs between R30 and R100, translating to approximately

US$1.72 to US$6.00 Similarly, a 750ML kitchen cleaning liquid starts at R27, which is

around US$1.55 (PriceCheck, 2024) Overall, these insights reveal the patterns of household spending in South Africa, showcasing variations across different segments 2.1.3 Established Trade Relations with Vietnam

South Africa and Vietnam shared a robust trade relationship for more than 30 years This country is currently Vietnam's largest trading partner and largest export market in Africa

In 2023, total export turnover between the two countries reached 764 million USD Vietnam's export turnover to South Africa in the period 2013-2023

Vietnam's export turnover to South Africa in the period 2013-2023

1.039

N2013 N2014 N2015 N2016 N2017 N2018 N2019 N2020 N2021 N2022 N2023

mmm Kim ngạch xuất châu (ĐVT: Triệo USD) —— Tếc đệ tăng trưởng (9%)

Source: Vietnam General Department of Customs

With a favorable economic partnership between the two countries, South Africa is considered a potential market, a gateway for Vietnamese enterprises to penetrate deeper into this continent According to Vietnamese government and economic specialists, to have a large and sustainable supply of goods, Vietnamese export enterprises need to exploit the South African market more strongly, especially the retail chain system in South Africa through production, processing and product supply contracts (Vietnam

Industry and Trade Information Center, 2024) This condition simplifies export procedures and reduces potential barriers to entry for ICOM

2.1.4 Favorable trade Regulations

South Africa's trade policies are aligned with international standards, offering a clear and predictable regulatory environment Because of this transparency, ICOM's compliance procedures are made simpler, which lowers the risk of entering the market Access to a wider market is made possible by South Africa's participation in regional economic blocs like the African Continental Free Trade Area (AfCFTA) and the Southern Afncan Development Community (SADC) These agreements might make it possible for ICOM

to expand into neighboring countries using South Africa as a launching pad

The country's relatively less stringent import restrictions and lower tariff rates for consumer goods offer smooth market access This favorable regulatory landscape reduces the financial and procedural hurdles typically associated with entering new markets Moreover, taking advantages of the long term economic partnership between the two countries, the Embassy continues to play a bridging role, actively supporting relevant agencies of Vietnam and South Africa to exchange, complete and sign cooperation documents to strengthen the legal corridor for bilateral relations in specific areas such as the Agreement on Cooperation on Science, Technology and Innovation, Memorandum of Understanding on Forestry Cooperation, Memorandum of Understanding on Mineral Cooperation, Agreement on Cooperation on Education and Training, Agreement on Cooperation in Crime Prevention, Extradition Agreement, Agreement on Mutual Legal Assistance, Agreement on Double Taxation Exemption, etc.( Vietnam News Agency, n.d)

2.1.5 Market Opportunities

complemented by growing e-commerce platforms The presence of major retailers

like Woolworths, Pick n Pay, and Shoprite provides ICOM with various entry points for distribution, ensuring broad market coverage

e-commerce in South Africa present an opportunity for ICOM to capitalize on online distribution channels This trend aligns with global shifts in consumer behavior and offers a cost-effectrve way to reach a wider audience

force and a vital trading hub in the Southern African region, South Africa acts as a point of entry for both air and marine trade routes Vietnamese products have a lot

of potential to grow in the region if they can break into the South African market, particularly in the 14 nations that make up the Southern African Development Community (SADC) Further improving trade prospects is South Africa's membership, along with four other countries, m the Southern African Customs Union (SACU) Establishing a presence in South Africa can help make it easier for products from ICOM to enter this customs union, resulting in a wider audience and more potential sales

2.1.6 Potential Threats

While South Africa presents numerous opportunities, it 1s important to recognize potential threats such as economic fluctuations and competition from established brands South Africa has experienced economic instability in recent years, which could impact consumer spending However, ICOM’s focus on affordable household products could position it favorably in a market where consumers are seeking cost-effective solutions Competition is another consideration, as there are several local and international players

in the household care segment However, ICOM can differentiate itself by offering high- quality, affordable products and leveraging Vietnam’s reputation for producing reliable consumer goods Additionally, ICOM's experience in international markets will provide a competitive edge in navigating and adapting to market dynamics

2.1.7 Conclusion

South Africa emerges as the ideal target market for ICOM's household and family care products due to a combination of favorable factors The primary winning characteristic of South Africa's market for ICOM's household and family care products is the robust and growing demand for hygiene and household products This demand is driven by a convergence of factors: a rising urban middle class, increasing consumer awareness of health and hygiene, and a cultural shift towards cleanliness as a priority in daily life South African consumers are increasingly seeking high-quality, affordable cleaning and care products, which aligns perfectly with ICOM's product offerings This trend is not merely a short-term fluctuation but a sustained market evolution, providing ICOM with a solid foundation for long-term growth and success The consistent demand growth in this sector offers ICOM an opportunity to establish a strong market presence, build brand loyalty, and potentially capture a significant market share in a country where hygiene products are becoming an essential part of everyday consumer spending

Moreover, the established trade relations between South Africa and Vietnam provide a solid foundation for market entry, reducing many of the typical barriers faced by international companies The favorable regulatory environment in South Africa, characterized by transparent trade policies and participation in regional trade agreements, offers ICOM a clear path to market entry and potential expansion Furthermore, the country's robust retail infrastructure and growing e-commerce sector provide multiple channels for product distribution and market penetration

While challenges such as economic fluctuations and competition exist, ICOM's should adopt a strategic approach to risk management and establish a strong presence in the South African market

2.2, Market Entry Modes

2.2.1 Joint Venture as a Market Entry Mode for ICOM in South Africa

A joint venture is a strategic partnership between two or more companies to create a new business entity In the context of ICOM's expansion into South Africa, a joint venture could involve partnering with a local South African company to establish a joint venture company

There are 2 types of Joint Venture in South Africa: Incorporated JV (corporate JV) or an Unincorporated JV (contractual JV) For ICOM, the better Market Entry mode is Incorporated JV

a Key Advantages of a Incorporated Joint Venture

A joint venture allows ICOM to share the financial nsks and costs associated with entermg a new market The local partner can contribute capital, expertise, and connections, reducing ICOM's upfront investment Cooperating with a local partner can provide valuable msights into the South African market, including consumer preferences, distribution channels, and regulatory requirements ICOM and the local partner together navigate the local business culture and establish relationships with key stakeholders By combining ICOM's product knowledge and international reach with the local partner's market understanding and distribution network, the jomt venture can accelerate market penetration and help ICOM achieve economies of scale Furthermore, the local partner can help ICOM comply with local laws and regulations, reducing the risk of legal and financial penalties

b Key Considerations

Firstly, Partner Selection, choosing the right partner is crucial for the success of a joint venture Therefore, ICOM should carefully evaluate potential partners based on their

Secondly,determining the ownership structure and decision-making process is another important factor ICOM should ensure that it has sufficient control over the joint venture

to protect its interests and achieve its strategic objectives ICOM should be prepared for potential conflicts because Joint ventures can be prone to conflicts between partners,

especially when there are disagreements over strategy, resource allocation, or profit distribution Therefore, ICOM needs to have a clear understanding of how such conflicts will be resolved Finally, it's important ICOM have a plan for exiting the joint venture if

it becomes unprofitable or no longer aligns with ICOM's strategic goals

Overall, a joint venture can be a strategic and effective way for ICOM to enter the South African market and benefit from the advantages of local partnership However, it's essential to carefully evaluate the potential risks and challenges and choose a suitable partner to ensure the success of the venture

2.2.2 Exporting through a Distributor in South Africa

Exporting through a distributor involves appointing a local company in South Africa to handle the distribution and sales of ICOM's products The distributor acts as a middleman between ICOM and South African customers, taking responsibility for marketing, sales, customer service, and logistics

a Key Advantages

customers, which can help ICOM quickly penetrate the South African market

African market, including consumer preferences, distribution channels, and competitive landscape

reduce its operational costs and risks associated with entering a new market

transportation networks, and sales teams, to support ICOM's operations

b Key Considerations

this market entry strategy ICOM should evaluate potential distributors based on

their reputation, market reach, financial stability, and alignment with ICOM's brand and values

agreement that outlines the terms and conditions of the partnership, including pricing, territories, sales targets, and dispute resolution mechanisms

process, it's important to establish effective monitoring and reporting systems to ensure that the distributor is meeting its performance objectives

issues such as pricing, marketing strategies, or territory disputes ICOM should have a clear understanding of how such conflicts will be resolved

Overall, exporting through a distributor can be a cost-effective and efficient way for ICOM to enter the South African market and benefit from the expertise of a local partner However, it's essential to carefully select a distributor, negotiate a strong distribution agreement, and monitor the distributor's performance to ensure the success of the partnership

IIL Pricing Strategy

3.1 Understanding the CIF (Cost, Insurance, and Freight) Process

The CIF (Cost, Insurance, and Freight) pricing strategy is a widely used method in international trade, particularly advantageous in markets like Africa where logistics can

be challenging Under CIF terms, iCOM takes on the responsibility of covering the costs, insurance, and freight necessary to bring the products to the buyer's designated port of destination This process involves several key steps:

3.1.1 Cost of Goods and Export Preparation

10