Business Report

BUSM3311
International Business
Hoa Hong Nhung
S3275899
Lecturer: Dennis Tan

RMIT International University Vietnam

Bachelor of Commerce Program
ASSIGNMENT COVER PAGE

Your submission will not be accepted unless all fields below are completed

Course Code: BUSM3311

Course Name: International Business
Location where you study: RMIT Vietnam, Hanoi Campus
Title of Assignment: Individual Assessment 2: Business Report
File(s) submitted BUSM3311 Assessment 2 - Hoa Hong
Nhung - s3275899
Student name: Hoa Hong Nhung
Student e-mail address: S3275899@rmit.edu.vn
Learning Facilitator in charge: Dennis Tan
Assignment due date: 20th August, 2012
Date of submission: 20th August, 2012
Number of pages including this one: 30
Word Count: 2550 words

Hoa Hong Nhung Individual Assesment 2

Table of Contents
ASSIGNMENT COVER PAGE .......................................................................................................... 1
Executive Summary ....................................................................................................................................... 3
1.

Company Background ......................................................................................................................... 4

2.

South Korea Market Background....................................................................................................... 7

2.1.

Market Demand and Consumption ................................................................................................. 8

2.2.

Market Opportunities...................................................................................................................... 9

3.

Competition ......................................................................................................................................... 10

4.

Business Model ................................................................................................................................... 12

4.1.

Entry Mode Evaluation................................................................................................................. 12

4.2.

Targeted South Korea Partners ..................................................................................................... 14

4.3.

Implementation and Control ......................................................................................................... 15

4.3.1.

Action Plan ........................................................................................................................... 15

4.3.2.

Organization Chart ............................................................................................................... 16

4.3.3.

Distribution Channel ............................................................................................................ 17

4.3.4.
5.

6.

Resource Requirement (See Appendix) ................................................................................... 17

Regulation Issues ................................................................................................................................ 18

5.1.

Political......................................................................................................................................... 18

5.2.

Economic ...................................................................................................................................... 18

5.3.

Society .......................................................................................................................................... 19

5.4.

Technology ................................................................................................................................... 19

Critical Risks....................................................................................................................................... 20

Conclusion .................................................................................................................................................... 21
References .................................................................................................................................................... 22
Appendix....................................................................................................................................................... 26
SWOT Analysis .......................................................................................................................................... 26
Resource Requirement Format ................................................................................................................. 28
Critical risks ............................................................................................................................................. 29

Hoa Hong Nhung Individual Assesment 2

Executive Summary

Executive Summary
The benefits of international integration have motivated many companies in Vietnam to expand
their operations overseas with the purpose of maintaining long-term reputation and gaining
business profitability. Those companies not only cooperate with single foreign country, but also
make the partnerships with many firms in various nations. In Vietnam, multinational enterprise
concept is becoming more familiar due to the appearance of many foreign MNCs like Unilever,
Nestle and P&G, which operate their business in at least 2 different countries. Moreover, there are
also many Vietnam-born MNCs like PetroVietnam, Viettel, Hoang Anh Gia Lai, Vinamilk,
Vinacafe, FPT, etc., which have generated huge revenues and profits to make great contribution
for the development of Vietnamese economy (Vnr500, 2012).
The report chooses Vinacafe as the model of MNCs to expand its business to a potential market South Korea. The below papers will propose the next steps of internationalization for Vinacafe by
analyzing the new market opportunities, evaluating 3 possible entry modes (exporting, joint
venture and wholly owned subsidiaries), indicating operation strategies and investigating critical
risks which Vinacafe must be overcome in South Korea.

Hoa Hong Nhung Individual Assesment 2

Company Background

1. Company Background
Being established in 29 April 1995 under the decision of Prime Minister, the Vietnam National
Coffee Corporation (Vinacafe) has become the largest coffee company and contributed
considerably to the development of coffee industry in Vietnam. By leading the coffee
manufacturing and trading, Vinacafe has expanded operations to the whole country with
approximately 56 company members (Vinacafe, n.d.).

Robusta Coffee Beans (Washed and Unwashed)

Instant Black Coffee - VinaCafe PET

Instant Black Coffee - VinaCafe PS

Ground Coffee VinaCafe Natural

Hoa Hong Nhung Individual Assesment 2

Company Background

Ground Coffee VinaCafe Select

Figure 1: VinaCafe product line (Reproduced from Vinacafe, 2012)

Ha Anh (2012) shows the net profit 103.55 billion VND of Vincafe Bien Hoa a major company
member of Vinacafe in only first 6 months of 2012, which asserts the great effective business and
high competitive ability with other coffee brands in the market such as Trung Nguyen and
Nescafe. The bar chart below shows the sales revenue of Vinacafe from 2006 to 2010:

Sales Revenue (Million VND)

10000000
9000000
8000000
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0

Sales Revenue

2006

2007

2008

2009

2010

Figure 2: Total Sales Revenue from 2006 to 2010 (Reproduced from Vinacafe, 2012)
Moreover, not only occupying more than 50% market share of domestic instant coffee, Vinacafe
has exported thousand tons of coffee bean to over 20 countries such as the USA, the UK,
Germany and Japan which makes up 20-24% of Vietnam total export (Quoc Hung, 2010). After
that, the company established one manufacturing unit in Laos, and joint ventures with firms in
Hoa Hong Nhung Individual Assesment 2

Company Background
Bulgaria and Belarus (Vinacafe, n.d.; Vneconomy, 2002; Belta, 2012). Therefore, Vinacafe needs
to build a sound international value chain of different factors such as logistics or marketing in
order to support the business operations and meet the high demands in both domestic and foreign
markets.
As a role of Vietnamese National brand in the eyes of overseas companies, Vinacafe continues
expanding its trading activities to more foreign countries. Therefore, South Korea is chosen as the
next destination of Vinacafe international strategy because this country not only has a good
relationship with Vietnam, but also is a competitive market to help Vinacafe gain more
experiences in international business, improve distribution channel of the company and raise its
reputation.

Hoa Hong Nhung Individual Assesment 2

South Korea Market Background

2. South Korea Market Background

According to Lee and Oh (2011), the coffee industry of South Korea depends mainly on the
imported products from various countries, including Vietnam. However, Vietnamese coffee is not
known in South Korea, because almost all imported coffee beans are used as the ingredients for
Korean brands (Hanh Nguyen, 2011). Therefore, it is a golden opportunity for Vinacafe to lead its
brands over other home companies in a potential market like South Korea.
Within the period of 2005 to 2008, the imported value of coffee bean increased from $164,934 to
$331,353 and in the first half of 2009, the value reached $157,611 which is approximately equal
to the whole year of 2008. Those figures prove the high demand of coffee that possibly, attracts
more foreign companies to enter and invest into South Korean market.

(Lee and Oh, 2011)

On the other hand, the country also exports its extracts of coffee products to many countries such
as China, South Africa, Germany, Canada and the US with reasonably high exported value and
market share.

(Parker, 2011)

Hoa Hong Nhung Individual Assesment 2

South Korea Market Background

2.1.

Market Demand and Consumption

Arirang News (2011) states that South Korea coffee consumption has risen dramatically and
become the top 10 in the world. The country citizens drink coffee every day, and moreover
require the high quality of the ingredients used.
According to Nielsen (2011), South
Korean consumers prefers the Instant
Coffee Mix and Ready to drink
(RTD) coffee in bottle or can rather
than spending time at coffee shops.
The annual sale of two product lines
had the significant upward trend from
2008 to 2010, and has been forecasted
to grow more in the next years
(Euromonitor
Moreover,

International,
the

South

2012).
Korean

consumers also usually care about the

healthier and premium of the products,
thus they prefer the black coffee which
is appreciated by most media in the
country (Lee and Oh, 2011).
According

to

Kang,

Tang

and

Bossleman (n.d.), the majority of

coffee customers in South Korea fall
between 20 to 34 years old, who are
possibly students and office staffs. Lee,

(Nielsen, 2011)
Knight and Kim (2008) indicate that Korean consumers have become sensitive in price, especially
the young customers. On the one side, they care about the product quality, brand and taste to
determine their purchase frequently. On the other side, they can purchase the unbranded products
with discounted selling price, but are also willing to spend much money for expensive and
fashionable goods (Lee, Knight & Kim 2008).
Overall, the South Korean market demand for coffee drinks has been increasing annually,
especially with the Instant and RTD coffee. However, the consumers are very careful in choosing
Hoa Hong Nhung Individual Assesment 2

South Korea Market Background

their favorite brands among many domestic as well as foreign companies in the current market,
and additionally they are also price sensitive as coffee brands improving the promotion ways or
old tastes.

2.2.

Market Opportunities

By understanding the customers behaviors and some incentives to push sales, Vinacafe is able to
determine its target market in South Korea. The company will improve its coffee products to
convince potential customers from 20 to 34 years old and simultaneously, penetrate the selling
price to meet the target market demand and compete with other current brands. Furthermore, the
aiming market share will be 4 5% within 3 years, which is reasonable for the company abilities
and market situation. On the other hand, due to the consumers preference of instant mix coffee,
Vinacafe will focus on providing its instant black coffee product line and coffee beans so as to
catch the South Korean tendency in drinking coffee.
As a result, depending on the company capabilities such as budget, human resources and
operation, there will be several specific opportunities for Vinacafe to develop and achieve success
in South Korean marketplace.
*SWOT Analysis (see Appendix)

Hoa Hong Nhung Individual Assesment 2

Competition

3. Competition
Besides many valuable opportunities in the new market, Vinacafe must consider the serious
competition of other coffee brands in South Korea. Evaluating carefully the direct and indirect
competitors will not only help the company choose the most suitable international strategy, but
also gain the better market share in the new market.
When it goes to the direct competitors, there are some main coffee players which Vinacafe should
notice their market sectors in South Korea, including Dongsuh Foods, Nestle Korea, Daesang,
Starbucks, Coffee Bean & Tea Leaf. The table below shows the Coffee Mix Sales of some key
companies in instant mix coffee sector from 2006 to 2008:

(Lee & Oh, 2011)

It can be seen that DongSuh is the giant brand of instant coffee line which occupies over 80%
number of product sales in the market. Hence, any business activities of this brand will certainly
affect the whole market as well as customers attitudes towards coffee drinks.
Moreover, according to Collins (2008), American coffee has become more common in South
Korea with the appearance of famous brands like Starbucks and Coffee Bean & Tea Leaf. These
foreign players compete in the sector of coffee beans and RTD coffee, and moreover Starbucks
has made the cooperation with Dongsuh Foods in terms of local development, marketing and
sales & distribution (Starbucks, 2007). That has raised the reputation of Starbuck and gain huge
market share with 367 licensed stores throughout South Korea in 2011 (Starbucks, 2011). In
addition, VIR (2011) indicates that G7 coffee of Trung Nguyen Company has also appeared at
largest discount supermarket chain of South Korea E-mart since October 2011, thus Vinacafe
needs to make a special marketing strategy or business actions to differentiate the company
products with another Vietnamese brand. Besides, although Vinacafe focuses on the instant coffee
Hoa Hong Nhung Individual Assesment 2

10

Competition
and coffee bean market, Korean RTD coffee companies such as Haitai and Lotte Chilsung also
have considerable competition ability in coffee market.
With regards to the indirect competitors, there are many beverage companies, which provide
coffee substitute products such as tea, juice and soft drinks, can be strong competitors. Korean
Coca-Cola, Lotte Chilsung Beverage, IIhwa Company, OKF Corporation and Dong-A
Corporation are some key players in beverage market that Vinacafe should consider carefully
when entering South Korea.
On the other hand, Vinacafe also has to figure out its upcoming direct competitors to prepare
essential business strategies for effective competition in the new market. According to Kim
(2012), NamYang Dairy has declared a plan to build nations largest coffee plant which can
annually provide 7200 tons instant coffee mix. The new company will compete directly with the
giant Dongsuh to gain 50% market share of coffee market in South Korea. Therefore, market
share of other brands will shrink due to the huge investment of NamYang Dairy on coffee sector
(Kim, 2012).
It is clear that the barrier to entry the coffee market in South Korea is moderately high and there
will be several obstacles for Vinacafe to overcome in the future strategy. However, Vinacafe still
has many opportunities in the potential market like South Korea by differentiating its instant
black coffee, which is seen as healthier drink with the Vietnamese tastes and moreover,
improving the design or package to be suitable with the favorite of consumers.

Hoa Hong Nhung Individual Assesment 2

11

Business Model

12

4. Business Model
Choosing the appropriate entering strategy is the key stage of achieving success in the foreign
market for almost all multinational enterprises. In the case of Vinacafe, 3 best alternative entry
modes are selected, which are: Exporting, Joint Venture and Wholly Owned Subsidiary.

4.1.
Exporting

Joint Venture

Wholly
Owned
Subsidiary

Entry Mode Evaluation

Pros

Cons

Low capital, low cost and low risk

required to enter market and gain
information.
Sales diversity for different markets.
Gain incremental sales revenue from
production excess
(Wild, Wild & Han, 2008)
Vinacafe can expand market share rapidly
with less cost to test customers behaviors
and acceptance.
No manufacturing infrastructure, physical
stores and facilities required in South
Korea.
(Deresky & Christopher, 2008)
Economic of scales.
Share risks and costs with foreign partner.
Increase customer service in South Korea.
Gain the market awareness and power in
foreign consumers.
Reduce regulation restricts from
government.
(Ball et al., 2010)

Imported tax/tariff set by South Korea or

WTO
Different regulations in trading activities
High cost for transportation and logistics
activities
High competition risk from other
countries such as Brazil, Thailand, the
US, etc.
Low level of integration and customer
service in South Korea.
(Esperanca, Hill & Valente, 2006)

Control the whole of trading and financing

activities.
Improve the average profit of subsidiary
and the headquarter company.
Reduce risk of integration in new market.
(Gionea, 2005)

Hoa Hong Nhung Individual Assesment 2

High cost of entering and investment in

the market.
Conflict between different management
style and share power.
Moderately low level of integration in
foreign market.
(Gionea, 2005)
High cost of entering and investment in
foreign market
High level of risk
Require high commitment with foreign
companies
Different foreign regulations
(Gionea, 2005)

Business Model

Implications:

Exporting
Exporting is the easiest entry mode for almost all enterprises going international.
However, less risk less return, thus Vinacafe must consider their objectives carefully and
which they want to achieve in South Korea. According to Hubbard & Beamish (2011),
depending on the available export channels in foreign market, the firm can use in-house
wholesale and retail system, or more simply, using independent channels of distribution
such as export agents, import jobbers and trading houses to have the reasonable
bargaining power. In short, the more appropriate the channel is for the export market,
the higher the probability of export success (Hubbard & Beamish 2011, p.310)

Joint Venture
Joint venture is also a type of strategic alliance between entities involved in the business
to share business operations. Adobor (2004) states that partnerships in joint venture must
go through the contract law in their agreement in terms of the responsibility and
financial positions. Moreover, Vinacafe also needs to consider other key issues:
Employees: deciding to keep who or dismiss who in the venture, and agree with
benefits arrangements for employees.
Tax: deciding tax burdens depending on the income earned of each partner.
Management: rearranging and balancing the board of executives and management
power between venture partners.
(Adobor, 2004)

Wholly Owned Subsidiaries

Change of jobs demand in foreign subsidiaries.

Resource gaps arising from strategic subsidiary evolution
Change in mandates
Preconditions for subsidiary development: parent company assignment, subsidiary
management choice, and local environment factors
Intra-organizational relationships, inter-organizational relationships in subsidiaries and
effective autonomy
Bargaining processes between the parent company and subsidiaries.
(Gammelgaard et al., 2011, pp. 378 379)

From the evaluation of 3 potential entry modes, it is seemed to be that Joint Venture is fitted with
capability of Vinacafe and also more appropriate with the companys purpose to improve the
distribution channel system, raise reputation of company and expand its business in international
markets.
Hoa Hong Nhung Individual Assesment 2

13

Business Model

4.2.

Targeted South Korea Partners

As the result of choosing Joint Venture as the entry mode, Vinacafe can collaborate with Lotte
Chilsung Beverage Co. Ltd to get win-win partnership in producing coffee drinks for South
Korea (financial benefits will be divided 50 - 50 in net profit earned). Establish in 1950, Lotte
Chilsung is the leader of Korean beverage industry and its RTD coffee brand Lets Be is also
very popular in the coffee market (Lotte Chilsung, 2012). However, this company has not
developed the coffee product line to instant mix coffee and coffee beans, therefore by becoming
venture partner with Vinacafe, Lotte Chilsung can expand its national business into a new sector
and get more opportunities to compete with other coffee brands in domestic market. Furthermore,
Lotte Corporation the holding company of Lotte Chilsung has declared many projects for
investing to Vietnam (Xuan Son, 2011); hence there will be a good business relationship between
Lotte Chilsung and Vinacafe for the cooperation in South Korea. Therefore, Vinacafe will
definitely gain more benefits in terms of the market share, quick brand awareness and competitive
ability by cooperating with one of the largest company in South Korea like Lotte Chilsung.
For the further development in South Korea, Vinacafe should find a bank partner to help the
company manage financial situation in the new market and also connect with home country for
other supports. Therefore, Citibank Korea will be suitable bank partner for Vinacafe. CitiBank
has been in Korea since 1967 and this international bank also has branches in Vietnam, thus it is
very convenient to make the strong connection between the joint venture in South Korea and
holding company in Vietnam. Furthermore, According to CitiBank Korea (2012), Citibank works
based on the international standard, provides many customer services and has the professional ebanking through national wide, thus Vinacafe can trust Citibank to manage the company financial
activities in a long term.

Hoa Hong Nhung Individual Assesment 2

14

Business Model

4.3.

Implementation and Control

4.3.1. Action Plan

Hoa Hong Nhung Individual Assesment 2

15

16

Business Model
4.3.2. Organization Chart

General
Manager

HR Department

HR Manager

Office Representative

Vice-manager

(Vietnam)

(South Korea Office)

Financial
Departmetn

Marketing & Sales

Department

Manufacturing
Department

Operation
Department

Logistics
Department

Financial

Marketing & Sales

Manager

Manufacturing
Manager

Operation

Logistics

Manager

Manager

Manager

Recruitment
Officers

Accountant

Marketing

Manufacturing

Officers

Officers

Teams

Training Officers

Analyst

Sales Officers

Customer Service
Staffs

Hoa Hong Nhung Individual Assesment 2

Supplier
Controllers

Transportation
Staffs

Testing Teams

Distribution
Controllers

Warehousing

Packaging Teams

Procedure Staffs

Staffs

Business Model
4.3.3. Distribution Channel

Vinacafe Distribution
Channel

Supplying raw materials

from Vietnam

Supplying equipment
from South Korea

Representative Office in
Vietnam

Manufacturing factory
in South Korea

3PL Warehousing

Marketing & Sales

(Vietnam)

(South Korea)

Wholesalers

Sales subsidiaries

(70%)

(30%)

Customers/Retailers

4.3.4. Resource Requirement (See Appendix)

Hoa Hong Nhung Individual Assesment 2

17

Regulation Issues

5. Regulation Issues
5.1.

Political

The unstable relationships between South Korea and the neighbors can affect considerably the
international business activities. If the tensions are not solved, South Korea will limit the trading
actions with foreigners to focus on improving the country military.
On the other hand, the WTO Zero for Zero initiatives can help Vinacafe reduce the imported
tariffs of exporting coffee ingredients to the joint venture, thus less cost in manufacturing.

5.2.

Economic

The high corruption and bureaucracy in South Korea will raise the cost of goods and services in
the market. Companies must increase the selling price due to the high materials cost or service
costs in manufacturing and other functional areas, thus the consumers will buy less to save money
(Mauro, 1997). Moreover, the depreciation of South Korea won currency will bring benefits to the
local exporters, but reduce the imported revenue from foreigners because the price imported
Hoa Hong Nhung Individual Assesment 2

18

Regulation Issues
products will become higher. However, South Korea won is more appreciated than Vietnam
Dong, thus the value change of this currency does not affect seriously the selling price of
Vinacafe products.

5.3.

Society

Therefore, Vinacafe should focus on not only producing the high quality of coffee products, but
also improving the design and packaging for South Korea consumers.

5.4.

Technology

According to Borland and Kanellos (2004), the advanced technology in South Korea has been
improved significantly. The manufacturing process is specified and automatically to increase the
productivity and reduce cost. Therefore, by cooperating with Lotte Chilsung, Vinacafe can learn
and gain valuable experiences of modern technology in production and improve the product
quality of company to satisfy South Korea customers.

Hoa Hong Nhung Individual Assesment 2

19

Critical Risks

6. Critical Risks

Hoa Hong Nhung Individual Assesment 2

20

Conclusion

Conclusion
In conclusion, although South Korea is a very potential market, there are still several obstacles
which Vinacafe must consider carefully to expand its business effectively and gain profitability in
the high competitive market. However, by building a clear plan as well as making right decisions,
Vinacafe definitely have significant ability to achieve great success with the partners in South
Korea.

Hoa Hong Nhung Individual Assesment 2

21

References

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Hoa Hong Nhung Individual Assesment 2

22

References
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Hoa Hong Nhung Individual Assesment 2

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References
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Vinacafe 2012, Sn phm, viewed 14th Augt 2012, <http://www.vinacafe.com.vn/products>
Vinacafe n.d., Abouts, viewed 14th August 2012,
<http://www.vinacafe.com.vn/en/abouts/detail/introduction-vietnam-national-coffee-corporationvinacafe-236/>
VIR 2011, Vietnamese coffee brand sells in US and Korean supermarket stores, Vietnam
Investment Review, 31st October, viewed 14th August 2012,
<http://www.vir.com.vn/news/business/vietnamese-coffee-brand-sells-in-us-and-koreansupermarket-stores.html>
Vneconomy 2002, Tng cng ty c ph Vit Nam u t sang Bungari, VnExpress, 26th
October, viewed 16th August 2012, <http://vnexpress.net/gl/kinh-doanh/2002/10/3b9c1b65/>
Vnr500 2012, Homepage, viewed 16th August 2012, <http://vnr500.com.vn/>
Wild, JJ, Wild, KL & Han, JCY 2008, International Business: the challenges of globalization,
4thedn, Pearson Prentice Hall, New Jersey

Hoa Hong Nhung Individual Assesment 2

24

References
Xuan Son 2011, Tp on Lotte mun gia tng hp tc u t vi DN Vit Nam, Din n
doanh nghip, 26th September, viewed 14th August 2012,
<http://dddn.com.vn/20110926044726548cat106/tap-doan-lotte-muon-gia-tang-hop-tac-dau-tuvoi-dn-viet-nam.htm>

Hoa Hong Nhung Individual Assesment 2

25

Appendix

26

Appendix
SWOT Analysis
Observations
1

High sales
revenue and High
net profit

Good Bilateral
Relationship with
South Korea

Strengths
Description
More capital
to invest in
the new
market.
Create trust in
partners to
cooperate.
Increase
inventory
turnover

Implications
Company can
use the profit
gained in the
domestic
market to invest
for business
activities
(exporting,
marketing,
logistics, etc.)
in South Korea

Easier to
negotiate
business
activities with
South Korea
companies
Avoid
conflicts
Good
condition to
enter the new
market

Due to the good

relationship
with South
Korea,
Vinacafe can
expand the
international
business
without strict
limitations,
except for
government
law.

Hoa Hong Nhung Individual Assesment 2

Weaknesses
Description
More cost of
goods
manufactured and
sold (variable
costs) due to more
sales.

Opportunities

Implications
Description
When
Receive supports
Vinacafe sells (finance,
more
marketing,
products, the
human resources
company
from partners
must produce Develop
more, the
business plans
variable costs
and projects with
will increase
partners in South
but the fixed
Korea
costs will
decrease.
Receive supports
(finance,
diplomatic) from
Vietnamese
government.
Get notice and
appreciation
from South
Korean.

Implications
Not only
create own
opportunities
by itself,
Vincafe will
receive many
positive
cooperation
with foreign
partners due
to the
excellent
performance.
As many
business cases
in the world,
maintain good
relationship
with foreign
countries will
open many
golden
opportunities
inside and
outside the
company to
develop
international

Threats
Description
Out of
stock/Lack
of available
inventory

Implications
If the
production
cannot meet
high demand,
Vinacafe can
lose their
customers in
domestic
markets while
entering the
foreign
business.

If the
business
does not
work well, it
can affect
negatively
the
relationship
between 2
countries.

Vinacafe must
ensure the
product
quality and
professional
working
styles when
cooperating
with
foreigners,
otherwise it
will be a big
threat for
future plans.

Appendix

Vietnam Dong
(VND) is
depreciated than
Won (KRW)
(1 KRW =
18.3541667
VND)

Vinacafe is
belong to
Vietnamese
government

Domestic market
share in Vietnam
occupies 50% of
instant coffee

Increase export
to South Korea

Vietnamese
products are
cheaper than
South Korean
products.

Decrease import
Selling price of
goods increase in
Vietnam
Vietnamese
customers buy
less

Supports from
government
Stable capital
structure
High reputation

Government
always try to
create better
conditions for
Vietnamese
companies to
develop and
expand to
international

Under control of
government
Minor
limitations of
management

Government
sets some
rules to
control
activities of
national
Vietnamese
companies

Less
competition
Reduce risks of
economic or
market change
Brand
awareness

Vinacafe is the
largest instant
coffee
production in
Vietnam.

Too wide
operations
throughout the
nation (human
resources)

Vinacafe must
operate its
business
activities in
many
provinces
with different
sectors, thus it
can be lack of
control in
some areas.

Hoa Hong Nhung Individual Assesment 2

South Korean Increase sales

Gain market
products are
share in South
more
Korea
expensive in
Increase brand
Vietnamese
awareness
market.

Gain reputation
easily in South
Korea.
Receive
supports from
government in
difficult cases.
Bargaining
power with
foreign partners.

South Korea will

be willing to
cooperate and
exchange
experiences with
Vinacafe to
develop together

trade.
Due to the
cheaper price,
Vinacafe can
take
impression
quickly
together with
the good
quality in
South Korea
Foreign
partners
usually feel
secured with
company
belong to
Government,
thus it is
easier to
cooperate
with them.
With the high
reputation and
market share
in Vietnam,
Vinacafe will
have valuable
experiences in
expanding
brands which
will attract
foreign
investors.

Vinacafe
products can
be punished
if the selling
price is too
low under
acceptable
level.

Political
issues

Loss current
market share
due to
concentrate
on develop
international
business

27

WTO requires
reasonable
selling price
in foreign
countries, the
products will
be punished if
they are under
the acceptable
criteria.
If there are
any political
problems
between two
countries, the
business
activities of
Vinacafe will
be restricted
in South
Korea.
Vinacafe can
loss control
when
focusing on
too many
markets and
different
customer
sectors inside
and outside
country.

28

Resource Requirement Format

Resource Description

Human Labor

Average Cost

Quantity

Total Average

EA (VND)

Required

Cost (VND)

10.000.000

40 staffs

400.000.000

Justification
Employees in 6
departments
Hiring both Vietnamese
and South Korean

Entrepreneurship

20.000.000

9 managers

180.000.000

1 general manager, 1 vicemanager, 1 representatives

and 6 department managers

Land
Building, Offices

30.000.000/month 3 offices

90.000.000/month For 1 Manufacturing

(Warehouse) and 2 Offices

Raw Materials

40.000.000/ton

2 tons

80.000.000

For Trial Production in 3

months

5.000.000.000

Capital

Including Set-up costs,

Manufacturing cost,
Marketing campaigns,
Operation and Logistics
activities

Facilities/Equipment

20.000.000

50

1.000.000.000

Equipment and Machines

for Manufacturing
Facilities in Offices

*Resource requirement for the first period (3months) of entering South Korea

Hoa Hong Nhung Individual Assesment 2

29

Critical risks
Critical risks
Shipping risk

Information
There are many transportation ways to deliver coffee ingredients to South
Korea like airplanes or ship. However, because coffee beans are easy to be
spoiled and loss original tastes in unsuitable conditions, Vinacafe must
ensure that there will be no unexpected problems during the shipping.

Communication risk In fact, South Korean people are preferred to speak their own languages
rather than speak English in the business activities. Moreover, Vinacafe
still needs a translator or employees who can speak South Korean to avoid
the misunderstanding in negotiation.
Currency risk

The change of foreign exchange market affect considerably on the

financial situation, specifically the currency between 2 countries.
Therefore, Vinacafe must consider the foreign exchange rate carefully and
make a stable financial strategy to control any risks of changing currency
value.

Economic risk

Not only in South Korea, the world economic is now unstable. It directly
creates the risks of generating revenue, gaining profits and maintaining
business activities in both countries. As a result, Vinacafe must analyze
the current situation of the world economy, and then make forecast to
adapt any fluctuations of economic and reduce the consequences.

Competition risk

South Korea is a potential market for many foreign investments;

furthermore the domestic companies are also very strong and have
significant power in their own market as well as among international
firms. Although Vinacafe will cooperate with one of the largest companies
in South Korea - Lotte Chilsung, it is still important to differentiate
Vinacafe products, add more customer values and have special marketing
campaigns in South Korea in order to compete effectively with the
numerous coffee brands in this marketplace.

Hoa Hong Nhung Individual Assesment 2