Group No.

5, Class K13AV1, Sonadezi College

Members:

Nguyễn Ngọc Quang (Team leader)

Nguyễn Tôn Huy

Dương Thiều anh

Nguyễn Ngọc Thủy Tiên

Could you please give some suggestions for value creation through
trade for the following situation?

Kien Hung Joint Stock Company VN – Vietnam Seafood processor and

exporter, we are processing top quality goods are that handled in
accordance with requirements of HACCP, US FDA and ISO.

We supply clean, good quality for frozen Squid sushi, cuttlefish and octopus,
sea fish and freshwater fish, shrimp, scallop, yellow clam meat, value added
product, seawater fish – Spanish mackerel, Snakehead, Climbing perch,
Gourami fish, Black tilapia, Read tilapia, Feather back fish, Yellow catfish,
Silver barb, Sheat fish, Swamp eel, Eel,.. to the Global Market.

Suppose you are the sales manager of the company.

Set up a negotiation to a potential customer from Spain.

Background Information

Potential customer: CASSUA (Spain)

At Vietnam's International Aquaculture Industry Event 2019, which took

place from 16th to 18th October in Can Tho, Mr. Quang, sales manager of
Kien Hung, met Mr. Cesar, purchasing manager of Cassua, an importer of
high-quality seafoods from Spain. Mr. Cesar said that since the demand for
clean seafood in EU market was increasing, Cassua was looking for a highly-
prestigious supplier in Vietnam to establish a long-term partnership. By his

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savvy persuasive invitation, Mr. Quang had succeeded in inviting Mr. Cesar
to visit Kien Hung’s factory on 30th December. After the visit, Kien Hung and
Cassua will come to the negotiating table to discuss more about the
agreement between the two companies.

At Kien Hung Company, Quang and his team are doing research, analyzing
and planning for the negotiaton with Cassua Company.

Value Creation through Trade

‘Value creation through trades occurs in the context of integrated

negotiations. It usually takes the form of each party getting something it
wants in return for something it values much less.’ (Negotiation – Harvard
Business Essentials)

In this situation of Kien Hung and Cassua, we can imagine some points that
each side can compromise to create more value.

 If the customer from Spain are financially strong, they could accept
the price that a little bit higher than the market price and Kien Hung
would please to provide the highest-quality products and render
other related services to the Spain Company as well as make their
compromises in other aspect of the deal (which they do not value
much like the Incoterm, time of delivery, etc.).
 To think beyond the contract, if they can establish a long-term
relationship, Kien Hung could supply to the Spainish company a
variety of Vietnamese special seafood, which could help Cassua
diversify their product offerings. In addition, Cassua can introduce to
Kien Hung, new technology in the seafood industry, how to
understand and comply with the rules and other regulations of EU
market. Kien Hung can expand their market.

This scenario is the best as both parties can achieve what they
want and prosper.

Preparation for the Negotiation

Basic Preparation

- Prepare a good presentation to introduce the potential customers

about KienHung’s company, our high-quality products and our modern
factory.

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 - Make a agenda (to email Mr. Cesar)
- Set up a meal at Kien Hung restaurant. The ingredient mainly come
from the fish and seafood of Kien Hung. Also, we should study about
Spainish culture and ask Mr. Cesar if he has any food taboos.
- Prepare Vietnamese souvenirs to give him as a keepsake.

Identify Our Strengths, Weeknesses, Objectives, BATNA and

Reservation Price

Strengths:

- Kien Hung has the long history of 17 years in processing and

exporting sea food.
- Our products are handled in accordance with requirements of
HACCP, US FDA and ISO.
- Our frozen processing factories can serve over 3000 tons of high-
grade seafood per year.
 All of these meet the requirements of our potential customer,
Cassua Company

Weaknesses:

- We have never had a opportunity to work with a Spain company.

- Large capacity also mean we have to incur the risk of inventory,
warehouses -> we always want to find and deal with seafood
importer from other countries to ensure the output for our
company.

Objectives: We wish to establish a long-term relationship with a Spain

importer as we have plan to expand our market to other EU countries.

BATNA (Best Alternative to a Negotiated Agreement)

If we are not able to make a deal and then a long-term contract with
Cassua, we can work with other smaller importers from Spain and Portugal
(actually we have two names on the list).

Our sales team are always looking for new opportunities for exporting
seafoods to other countries. We reached our target export sales
consecutively in the last 5 years.

Reservation Price

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Anchoring Price for the first deal: Price = 130% x Cost of Goods Sold (or
10% more than the local market price, depending on which price is lower)

As for long-term relationship, we could say that we could offer a lower price
for future contracts.

If they want to lower the price to 120%, they would have to make other
concessions regarding delivery date, payments

The minimum price we would accept is 110% x Cost of Goods Sold

Which Incoterm do we favor?

FOB Incoterm 2010 would be best. If requested, we could help Cassua in

finding and hiring a reliable carrier or shipping lines. In addition, we can also
help at their costs to provide documents and buy a good insurance for the
goods.

However, if Cassua request CIF or CFR terms, we would also please to make
concessions.

Which payment method do we prefer?

The best scenario would be they accept to pay 40% the value of the first
deal in advance by T/T, the rest can be settled by L/C at sight.

Once again, as this is the first deal between two companies, we would like
to have a large proportion of advance payments and the security of a L/C.
We can make more concessions in the future contracts.

Reservation price: 30% by T/T, 70% by L/C at sight

Later we can open credit accout for Cassua and accept Deffered L/C.

How about delivery date?

We can commit to delivery as soon as possible, however, we cannot allow

them to rush us into producing and shipping seafoods. The timing must be
reasonable.

Estimate Strengths, Weeknesses, Objectives, and BATNA of CASSUA

Strengths:

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 - Cassua also have 17 years of experience in international seafood
trade
- Cassua is a prestigious frozen seafood distributor in Spain
- They currently buy products mainly in Spain (40%), EU (20%),
North Africa (30%) and South America (10%)

Weaknesses:

- They have never had a deal with a company in Southest-Asia,

including Vietnam
- The demand for clean and high-quality seafood is increasing in
Spain and EU, therefore they will need to find more suplliers.
- The wholesales prices of their current suppliers are more likely
higher than the prices offered by a supplier from Southest-Asia like
Kien Hung.

Objective: Through research, we find out that Cassua is diversifying their

offerings. That is one of the reasons they find new suppliers from a new
region. Also, having new supplier from Southest-Asia would help them
reduce their cost (compared to other supplier) and therefore, making more
profit.

BATNA:

If Cassua cannot reach an agreement with Kien Hung, they may find another
seafood supplier.

References:

http://www.kihuseavn.com/

http://cassua.com/about-us/

http://www.trade-seafood.com/directory/seafood/country/spain.htm

http://www.trade-seafood.com/directory/seafood/exporters/kien-hung-joint-
stock-company-vn.htm

https://www.aquafisheriesexpo.com/vietnam/en-us/

https://www.oreilly.com/library/view/negotiation/9781422131718/e9781422
131718_cov01.html#

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