Improving the process of preparing agricultural products for export to EU market at intimex vietnam joint stock company (IVJSC)

INTERNATIONAL ECONOMICS AND BUSINESSINTERNSHIP REPORT TOPIC: Improving the process of preparing agricultural products for export to EU market at Intimex Vietnam Joint Stock Company IVJS

INTERNATIONAL ECONOMICS AND BUSINESS

INTERNSHIP REPORT

TOPIC: Improving the process of preparing agricultural products for export to EU market at Intimex Vietnam Joint Stock Company (IVJSC)

Instructor: Ms Lu Thi Thu Trang (MA)

Class: A – High quality – Inter Econs - K46

Hanoi, August – 2010

TABLE OF CONTENTS

Page

Chapter I: OVERVIEW OF IVJSC AND ITS BUSINESS OPERATION 4

I.2 Function, objective and organization structure 6

Chapter II: THE SITUATION OF PREPARING AGRICULTURAL

PRODUCTS FOR EXPORT AT IV JSC

9

II.1 The factors affecting the preparation activities for the

II.2 The export situation of agricultural products at IVJSC 12

II.3 Process of preparing the agricultural products for export to EU

market at IVJSC

14

II.4 Achievements; shortcomings and their causes 17

Chapter III: SUGGESTION ON IMPROVING THE PROCESS OF

PREPARING THE AGRICULTURAL PRODUCTS FOR EXPORT TO EU MARKET AT IVJSC

During the time working as an intern at IVJSC, I have learned a lot about the general operations of the company I find it very interesting that the business fields of the company are diversified and developing promisingly.

The major business activities there can be name here: exporting agricultural products and handicrafts; importing machines and equipments; producing and assembling motorbikes and processing garments; managing the Intimex supermarket systems.

However I decided to choose the traditional ones and also the current strong export commodities of IVJSC to do research because of its typical charateristics The export of the agricultural products has been carried out since the early days of the Company’s establishment As a student majoring in International Economics and just completed the subject “International Trade Transaction”, I would love to write a topic related to what I have learned at university.

Simply it is the reason why my topic is “Improving the process of preparing the agricultural products for export to EU market at IVJSC”

I have worked truly hard to study the matter write it in a succinct but informative way fitting the limitation of around 25 pages, however, there cannot avoid lots of shortcomings Thus I really hope for Instructor’s sympathy and concessions in consideration.

Eventually, I would like to express our most heartfelt and deepest gratitude

to my instructor – Ms Lu Thi Thu Trang for your enthusiasm in guiding along with givin me valuable comments Thank you so much.

CHAPTER I

OVERVIEW OF IVJSC AND ITS BUSINESS

OPERATION

I 1 Brief history of development:

Established on August 10,1979 with the first name as Internal Import-ExportCompany, Intimex was the first company of Ministry of Internal Trade doingbusiness on Import and Export

Before 1986, Intimex was the first supplier of consumer goods imported fromSocial Republic Countries It also created thousands of jobs for workers whoproduced commodities for export

After 1986, Vietnamese Government opened the Market The business of theCompany was entrusted to each facility instead of operating complicatedly as awhole like before

1989-1990: Intimex is the one that took the initiative to ask the Government toallow export from Capital Countries to recollect the foreign currencies for theworkers and the studying and business abroad; creating new consumer goodsimported from Capital Countries to supply to domestic customers

After 1988: Intimex set up new goals to strengthen agricultural exports focusing oncoffee, peppercorn, making the turnover record After 10 years, Intimex became theleading exporter of coffee and peppercorn throughout the country ( 150.000 –200.000 tons of coffee account for 20% of the country quantity; 10.000 -15000 tons

of peppercorn account for 15% of the country quantity)

From 2000: Intimex enter new chapter, investing on factories processingagricultural products: Peppercorn Factory in Binh Duong (2002), Cereal Starch inNghe An, incoming Coffee Factory in Binh Duong and Buon Ma Thuat

Besides, Intimex invested on aquaculture in Dien Kim- Nghe An and Dong Ghep –Thanh Hoa with the biggest area in the North of 100 ha of shirmp; 1 million m2 inthe sea of oyster

To expand the business, Intimex established more branches in Tay Ninh, BinhDuong, Nghe An, Dac lac Besides, it merged some loss-making enterprises

One of the strengths of Intimex is the supermarket system with the first one opened

in 2001 Currently, Intimex has 14 supermarkets in Ha Noi, Hung Yen, Hai Duong,Hoa Binh, Hai Phong, Nghe An, Da Nang, Buon Ma Thuot Expanding thesupermarket system is one of the strategic target of Intimex in the coming years.Experiencing more than 30 years since its establishment with both success andhardship, Intimex has kept rising up overcoming difficulties to maintain the firmfoothold and its prestige in the Domestic Market It was ranked 49/500 leadingVietnamese firms in 2008 thanks to the turnover of more than 9000 billion USD( more than 300 billion USD was submitted to the State Budget)

Currently, Intimex completed its equitization and operates its business under thename Intimex Vietnam Joint Stock Company (IV JSC)

I.2 Function, objective and organization structure

I.2.1 Function:

- To organize production and processing for domestic consumption and export

- Import directly and receive consignor of materials, machines, equipments

- Transacting services for Vietnamese people abroad with hotels and tourists,trading gemstones

- Direct export and entrustment export of agricultural – forestry, fisheries,handicrafts, processed foods and groceries, mineral, seafood

I.2.2 Objectives:

- Setting up suitable production plans, sales and services to its best operation inorder to make as much profit as possible

- Building business strategy to deal with competitors (including research, training )

- Performing successfully all contracts

- Develop the Company in all fields so as to remain and strengthen the prestige,effectiveness and image of the Company as the Leading firm in Import – ExportTrading and other services

I.2.3 Organization structure:

Please refer to the Chart on the next page:

In addition to the chart, there are other departments such as : Planning, Finance,Organization, Technology, Administration, Warehousing service, BasicConstruction

I.3 Business Operation:

I.3.1 Main products:

1 Trading business activities

- Export activities: agricultural products, seafood, handicrafts, technology

- Import activities: materials, machines, transport means, consumer goods -Domestic activities: distributing wholesaler-retailer channels(supermarkets) with production, business and consumer goods

2 Service business activities

- Telecommunication

- Warehouse and office for rent

- Transiting, transshipment

3 Production activities

- Producing and Processing agricultural products

- Cultivating and processing aquatic products

- Producing and assembling motorbikes

- Producing and processing garments

I.3.2 Service process (7 steps)

Source: Sales Department

Customer

WebsiteMarketingDepartment

INTIMEX

Order Negotiation Confirmation

nnnn

Order theSupplier

Import/Exportgoods

II.1 The factors affecting the preparation activities for the agricultural products for export

I.3.1 External factors:

 Laws & Policies:

Adjustment in laws, regulations policies related to International Trade is the firstfactor affecting the contract performance Some changes also make it difficult for

IV JSC to choose the business commodities and business partners

 Foreign Exchange Rate (FER):

FER makes the price increase or decrease, thus creates impacts on the commoditiescollecting, purchase and production activities The increase of FER will better theexports as a big profit from the exchange difference is gained

 Season & Weather:

As agricultural products are seasonal ones, the price and quality are normallyunstable During the season, the quantity of agricultural products is high, the quality

is good enough and the price is reasonable On the contrary, there can usually be ashortage of commodities, worse quality and higher price out of the season

In addition, these products are so much dependent on weather Bad weather willinfluence the preparing process for export Too hot weather or too much rain lasting

in days both create bad impacts on the quality of the goods, making it impossible to

This factor is also very important, which help strengthen the effectiveness of thepreparing process for export It is the basic element to increase the quality alongwith decrease the price of the products, thus help increase the labor productivity.Current IV JSC is facilitated with modern machines and equipment in order tobetter the agricultural products in both quality and quantity.

For instance, in 2002, IV JSC invested 20 billion VND for the Clean PeppercornFactory in Binh Duong, which has operated well and has been making profitfrom 2006

In 2003, The Cereals Starch Factory was built in Thanh Chuong, Nghe An Atfirst, it produced 50 tons per day and now the figure is 180 tons/day Yearlyexport quantity is over 20.000 tons since 2007 This Factory is making profit andhas become the biggest Factory of the North

 Management Ability:

Management plays an important role in orienting and controlling all theactivities related to contract performance and labor division Good managementwill help the departments carry on their duties at their best Thanks to that, thepreparing process for export will be done quickly and effectively

 Finance Resource:

It is called the indispensable “competitive weapon” of any firm and itdetermines the prestigious of the firm A huge finance source will help thecompany expand production, improve the product quality and gain a firmfoothold in the market For that reason, how to manage and use the financesource wisely is a thing the firm has to take great care about

II.2 The export situation of agricultural products at IVJSC

II.1.1 Overall situation:

IVJSC is regarded as the leading export in agricultural products such as coffee,

peppercorn, rubber, rice, peanuts

IVJSC is proud to be the leading firm in exporting coffee with the total quantity of108.000 tons in 2006 This is an impressive record which made IVJSC reach its firstrank in exporting coffee throughout the country Also in 2006 seized the numberone place in exporting black peppercorn with 9858 tons in total

In 2007, IVJSC exported 33 719 tons of coffee, gaining the turnover of 51 millionUSD

Besides the main products, IVJSC keep seeking new exports every year Coconutrice can be mentioned as an typical example In 2007, IVJSC exported 1855 tons

of Coconut rice, gaining over 1.8 million USD

Tablet: The export situation of several products from 2007-2009 at IVJSC

(Source: Final Report on Export Situation of IVJSC year 2007, 2008, 2009)

II.1.2 The export situation to EU market:

With 27 country members, EU is the biggest consuming market in the world.However, it is a very choosy market with lots of standards set up in order to applyfor export products Toward each product, EU market has particular standards.

So as to attract consumers in EU, the commodities not only have to be of goodquality but also of attractive designs Therefore, import-export firms in general andIVJSC in particular have to taking care of the products even from printing section tothe color of labels on the packing

EU has regarded as the biggest partner of Vietnamese agricultural products Lots ofagricultural ones of Vietnam are appreciated as the best among the exporters by theEU

IVJSC is one of the main export markets of established and well known partners in

EU Every year IVJSC exported nearly 10.000 tons of agricultural products, makingthe profit of 150 million USD

Table: The export situation of several products into EU Market from 2007-2009

(Source: Final Report on Export Situation of IVJSC year 2007, 2008, 2009)

Some short comments on the above table:

- In recent years, the quantity of agricultural products for export has fluctuated unstably because of several factors

- In 2008, the export quantity of all the products went up

- However, in 2009, the quantity of almost all products went down

- The reasons is the influence of the global economic crisis, which made lots of countries tighten their budgets and decrease imports Thus IVJSC had lots of difficulties in seeking partners for export

II.3 Process of preparing the agricultural products for export to EU market at IVJSC:

The process of preparing the agricultural products for export to EU market at IVJSCare carried out under 3 steps as follows:

o Collecting and gathering the agricultural products

o Packing and labeling

o Checking the products before export

After the Contract on exporting agricultural products to EU market is signed, IVJSCbegins to prepare the goods for export This is an significant process to perform thecommitments in the Contract The agricultural products for export have to becarefully prepared in case of quantity, quality, technical standards, packaginglabeled and be ready to deliver at the right time as regulated in the Contract

II.3.1 Step 1: Collecting and gathering the agricultural products

This step plays a very important roles as it ensures that the commodities areprovided correctly in designs and sorts, of correct quantity and in time with lowexpenses This includes 4 small steps:

a Defining the demand of the export products:

Defining the category, size, quality, quantity, packaging, label and expected timefor export in order to define the potential supply

The technical standards and expected time are normally based on InternationalTrade Contract signed with partners, or based on orders, offer acceptance sentfrom foreign partners.

b Recognizing and classifying the export source:

Main export products of IVJSC are coffee, peppercorn, peanuts, cereal starch,coconut rice Among them are coffee and peppercorn – the major ones, making

up 20% of the coffee export quantity of the country and that number topeppercorn is 15%

The criterion of classifying the export source is “ geographical areas” Followingthis criterion, the purchase of big quantity can be easier The main purchaseareas of IVJSC is the North and the North East, accounting for 90% 10% isfrom other areas

c Performing the transaction:

There is a team of IVJSC who is responsible for the purchase directly or throughthe intermediaries to collect the agricultural commodities Besides, the Companyalso have some factories to process those ones for export Often do the Companyconnect and cooperate with other domestic purchasers and producers tostrengthen this “purchase” and “collecting” activities

d Organizing the system of gathering the goods for export:

This activity is performed under 2 forms:

 Organize to perform the purchase of the exports through the orders and economic contracts:

+ After the first notification of the Seller (IVJSC), the Seller shall sendthe Buyer the Delivery Plan sothat The Buyer can store the shipmentcharge and rent the warehouse The content of the notificationincludes: name of commodity, number of packaging, weight, expecteddelivery day