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

FOREIGN TRADE UNIVERSITY
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)
Student:

Nguyen Thu Giang

Class:

A – High quality – Inter Econs - K46


Internship report – Summer 2010

Hanoi, August – 2010

2


Internship report – Summer 2010

TABLE OF CONTENTS
Page
INTRODUCTION

3

Chapter I: OVERVIEW OF IVJSC AND ITS BUSINESS OPERATION

4

I.1. Brief history of development

5

I.2. Function, objective and organization structure

6

I.3. Business Operation

8

Chapter II: THE SITUATION OF PREPARING AGRICULTURAL
PRODUCTS FOR EXPORT AT IV JSC

9

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

10

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

21

III.1. Orientation of IVJSC

22

III.2. Suggestions

22

III.3. Recommendation

23

CONCLUSION

25

REFERENCES

26

3


Internship report – Summer 2010

INTRODUCTION
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.

4


Internship report – Summer 2010

CHAPTER I

OVERVIEW OF IVJSC
AND ITS BUSINESS
OPERATION

5


Internship report – Summer 2010

I. 1 Brief history of development:
Established on August 10,1979 with the first name as Internal Import-Export
Company, Intimex was the first company of Ministry of Internal Trade doing
business on Import and Export.
Before 1986, Intimex was the first supplier of consumer goods imported from
Social Republic Countries. It also created thousands of jobs for workers who

produced commodities for export.
After 1986, Vietnamese Government opened the Market. The business of the
Company was entrusted to each facility instead of operating complicatedly as a
whole like before.
1989-1990: Intimex is the one that took the initiative to ask the Government to
allow export from Capital Countries to recollect the foreign currencies for the
workers and the studying and business abroad; creating new consumer goods
imported from Capital Countries to supply to domestic customers.
After 1988: Intimex set up new goals to strengthen agricultural exports focusing on
coffee, peppercorn, making the turnover record. After 10 years, Intimex became the
leading 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 processing
agricultural products: Peppercorn Factory in Binh Duong (2002), Cereal Starch in
Nghe 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 in
the sea of oyster...
To expand the business, Intimex established more branches in Tay Ninh, Binh
Duong, 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 the
supermarket system is one of the strategic target of Intimex in the coming years.

6


Internship report – Summer 2010

Experiencing more than 30 years since its establishment with both success and
hardship, Intimex has kept rising up overcoming difficulties to maintain the firm
foothold and its prestige in the Domestic Market. It was ranked 49/500 leading
Vietnamese 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 the
name 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 in
order 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 – Export
Trading 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,
Basic

Construction...

7


Internship report – Summer 2010

8


Internship report – Summer 2010

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)
INTIMEX

Customer

Website
Marketing
Department

Order

Negotiation

Confirmation
nnnn
Order the
Supplier

Source: Sales Department

Import/
Export
goods

9


Internship report – Summer 2010

CHAPTER II

THE SITUATION OF
PREPARING
AGRICULTURAL
PRODUCTS FOR
EXPORT AT IV JSC

II.1 The factors affecting the preparation activities for the
agricultural products for export
10


Internship report – Summer 2010

I.3.1 External factors:
• Laws & Policies:
Adjustment in laws, regulations policies related to International Trade is the first
factor 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 commodities
collecting, purchase and production activities. The increase of FER will better the
exports as a big profit from the exchange difference is gained.

• Season & Weather:
As agricultural products are seasonal ones, the price and quality are normally
unstable. 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 a
shortage of commodities, worse quality and higher price out of the season.
In addition, these products are so much dependent on weather. Bad weather will
influence 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
be exported.
I.3.2 Internal factors:
• Human Resource:
This is the most important factor, ensuring the success of the firm. The talent and
skills on import-export, IT, foreign language as well as their knowledge on
international customs and law of the staff all determine the effectiveness of the
business.
• Material facilities:
This factor is also very important, which help strengthen the effectiveness of the
preparing process for export. It is the basic element to increase the quality along
with decrease the price of the products, thus help increase the labor productivity.
11


Internship report – Summer 2010

Current IV JSC is facilitated with modern machines and equipment in order to
better the agricultural products in both quality and quantity.
For instance, in 2002, IV JSC invested 20 billion VND for the Clean Peppercorn
Factory in Binh Duong, which has operated well and has been making profit
from 2006.
In 2003, The Cereals Starch Factory was built in Thanh Chuong, Nghe An. At

first, it produced 50 tons per day and now the figure is 180 tons/day. Yearly
export quantity is over 20.000 tons since 2007. This Factory is making profit and
has become the biggest Factory of the North.

• Management Ability:
Management plays an important role in orienting and controlling all the
activities related to contract performance and labor division. Good management
will help the departments carry on their duties at their best. Thanks to that, the
preparing process for export will be done quickly and effectively.

• Finance Resource:
It is called the indispensable “competitive weapon” of any firm and it
determines the prestigious of the firm. A huge finance source will help the
company expand production, improve the product quality and gain a firm
foothold in the market. For that reason, how to manage and use the finance
source wisely is a thing the firm has to take great care about.

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


Internship report – Summer 2010

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 of
108.000 tons in 2006. This is an impressive record which made IVJSC reach its first
rank in exporting coffee throughout the country. Also in 2006 seized the number
one place in exporting black peppercorn with 9858 tons in total.

In 2007, IVJSC exported 33. 719 tons of coffee, gaining the turnover of 51 million
USD.
Besides the main products, IVJSC keep seeking new exports every year. Coconut
rice 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
(Unit: ton)
Products

Rate

Year
2007
33719,44
7012,64

2008
91112,01
6943,23

2009
83264,04
8297,18

08/07
270,2%
99,01%

09/08
91,38%

119,5%

Rice
Cereal

1855

2700

2106

145,55%

78,02%

Starch

6900

4728,6

7512,89

68,53%

158,88%

Coffee
Peppercorn
Coconut

(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 apply
for export products. Toward each product, EU market has particular standards.
13


Internship report – Summer 2010

So as to attract consumers in EU, the commodities not only have to be of good
quality but also of attractive designs. Therefore, import-export firms in general and
IVJSC in particular have to taking care of the products even from printing section to
the color of labels on the packing.
EU has regarded as the biggest partner of Vietnamese agricultural products. Lots of
agricultural ones of Vietnam are appreciated as the best among the exporters by the
EU.
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, making
the profit of 150 million USD.
Table: The export situation of several products into EU Market from 2007-2009
at IVJSC
(Unit: ton)
Year
Products

Rate

2007

11907
2751,59

2008
33241
3294,1

2009
19122,12
3011,05

08/07
279,17%
119,7%

09/08
57,52%
91,4%

Rice
Cereal

394,5

613,77

581,58

155,58%

94,67%

Starch

1270

2013,85

2976

158,57%

147,77%

Coffee
Peppercorn
Coconut

(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.
14


Internship report – Summer 2010

-

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 IVJSC
are 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, IVJSC
begins to prepare the goods for export. This is an significant process to perform the
commitments in the Contract. The agricultural products for export have to be
carefully prepared in case of quantity, quality, technical standards, packaging
labeled 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 are
provided correctly in designs and sorts, of correct quantity and in time with low
expenses. This includes 4 small steps:

a. Defining the demand of the export products:
Defining the category, size, quality, quantity, packaging, label and expected time
for export in order to define the potential supply.
The technical standards and expected time are normally based on International
Trade Contract signed with partners, or based on orders, offer acceptance sent
from foreign partners.
b. Recognizing and classifying the export source:
15


Internship report – Summer 2010

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 to
peppercorn is 15%.
The criterion of classifying the export source is “ geographical areas”. Following
this criterion, the purchase of big quantity can be easier. The main purchase
areas of IVJSC is the North and the North East, accounting for 90%. 10% is
from other areas.
c. Performing the transaction:
There is a team of IVJSC who is responsible for the purchase directly or through
the intermediaries to collect the agricultural commodities. Besides, the Company
also have some factories to process those ones for export. Often do the Company
connect and cooperate with other domestic purchasers and producers to
strengthen 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 send
the Buyer the Delivery Plan sothat The Buyer can store the shipment
charge and rent the warehouse. The content of the notification
includes: name of commodity, number of packaging, weight, expected
delivery day...

+

The Seller shall notify the Buyer the second time 5 days before the
day of ready delivery.

+

Before packing the goods into containers, the Buyer has to inspect the
quantity and quality of the goods.

• Organize to perform the authorization export skill:
16


Internship report – Summer 2010

The IVJSC just perform the export and receive the commissions, other expenses
are paid by the Suppliers.
II.3.2 Step 2 Packing and labeling
Packaging the goods for export:
Packaging is done in order to preserve the goods during transportation sothat the
goods shall be in best condition when arriving at the consumers. The packaging

needs to qualify the convenience in use and attractive in design as well.
IVJSC is using jute bags for packaging agricultural products. The just bags suit the
necessary standards and customs of customers. The expenses are based on those
above standards and economic criteria such as purchase, production and packaging
expenses and the relatively suitable price between the packaging and the goods.
Labeling the goods:
This work helps create convenience in delivery, instructing the method of loading
and unloading, preserving the goods for export.
At the moment, the “labeling” activity is dependent on the designs and requirements
of the customers sent from abroad. IVJSC hasn’t been active in this step yet.
Step 3: II.3.3 Checking the products before export
This is the activity to inspect the quantity and quality of the goods which is going to
be exported of IVJSC.
The Inspection Company chosen can be Vinacontrol, SGS and others depending on
particular export Contract.
This step is taken great care of because it proves the prestige of the IVJSC and the
long term relationship with the Customers.
Unless regulated clearly in the Contract, otherwise the inspection shall be done
directly by the Inspection Department ( KCS) of IVJSC. This activity is carried out
17


Internship report – Summer 2010

at the production places or at the Company’s warehouses. The KCS shall check the
quantity, quality, weight, packing, quarantine regulations...
After that, KCS shall check again, the qualified goods shall receive the Certificate
of the Company, others will the treated timely.
However, the “checking” step at the Company is still loosened due to the difficulties
in equipments and infrastructure.

II.4 Achievements; shortcomings and their causes
II.4.1: Achievements:
EU is really a challenging market with lots of strict standards and requirements.
However, IVJSC did success in entering and doing business with them, becoming
the prestigious partner of lots of Customers from Holand, Sweden, France, UK and
Belgium. It can be remarked as a proud achievement.
To reach this final achievement, IVJSC has taken great care in each small step.
The collecting activity is normally carried out right as the plan of the Contract,
contributing to keep the trust and image of the Company toward traditional partners.
Agricultural is the products that are very dependent on weather. However IVJSC
paid good attention to this factor, researching on how it affected each kind of
products so as to ensure the time of delivery and save transportation fees; thus
improve the effectiveness of the process of preparing the agri products for export.
Besides, IVJSC also focus on investing and improving the processing factories,
creating good conditions for those factories to develop, increase production, trying
the modernize the machines and equipment as well as improve the workers and
staff’s lives.
In such difficult condition when the global economy has just experienced the global
economic crisis with the strict competitiveness in the industry...; IVJSC has done its
best to overcome the hardship so as to remain the firm foothold in the domestic
market.
18


Internship report – Summer 2010

II.4.2 Shortcomings and causes:
Besides the achievements, the

existing shortcomings have influenced the

effectiveness of contract performance in particular and the business operation of
IVJSC in general.
1. The collecting and working with the information while carrying market
research and the commodity supply is still limited due to incorrect and
sometimes unsuitable plan of the Purchase and Collecting Team and the
sudden change of weather. Any postpone when the Team can’t purchase
enough goods will cause delay in delivery time.
2. The quality of several agri products in the areas haven’t really qualified the
requirements of IVJSC as well as IVJSC’s partners. The situation of
unequal and unstable quality, retail quantity... of the suppliers leads to
increasing preserving charges, sanitation... This shortcoming is due to the
weather and the poor methods of the farmers as they don’t have enough
knowledge and active in facing and solving the difficulties during their
planting.
3. Limitation in infrastructure. Even though some factories have been
equipped with new machines, the new ones haven’t meet the demand yet.
Sometimes the factories still can’t produce enough quantity due to lack of
machines or the old and slow ones with low productivity.
4. The packaging in general is very simple in design and not attractive
enough. To such choosy customer in EU, it’s really a problem. The causes
are low techniques in producing the jute bags and lack of creativeness in
designing and printing as well.
5. The checking process has some shortcomings as it has not been done
carefully enough at IVJSC. The causes are mixed by the skill and
responsibility of the inspector and the lack of laboratories and suitable
modern tools and equipment.

19

Internship report – Summer 2010

20


Internship report – Summer 2010

CHAPTER III

SUGGESTION ON
IMPROVING THE
PROCESS OF
PREPARING THE
AGRICULTURAL
PRODUCTS FOR EXPORT
TO EU MARKET AT IVJSC

III.1 Orientation of IVJSC:
This year- 2010

21


Internship report – Summer 2010

The target of IVJSC towards agricultural products is to increase total export at the
average rate of 120% compared to 2009, focusing on 3 products: coffee, peppercorn
and coconut rice. There is not specific figure for the regions such as EU only

because IVJSC hope to expand the markets and seek new potential customers as
well. Seeking some unfamiliar market is one of the challenge set up this year.
In the next five years:
IVJSC continued to seek potential customers and find new products but the strategy
is to focus on specific products, but not to increase or take care of all kinds of
products.
In details, the export activities will pay great attention to coffee, peppercorn,
coconut rice, cereal starch and peanuts. If there shall be a new product, it would be
related to processed agricultural ones. Other kinds of products such as handicrafts
shall be limited as the long-term vision of IVJSC is to gather the capital to expand
and develop the supermarket system stronger and stronger with more and higher
quality supermarkets throughout the cities and provinces.
It is said that in the farther future, IVJSC will set it target focusing on the leading
supermarket system throughout the country. “Supermarket” shall become its best
strength, and the import-export is still a field that shall be taken great care of but not
the best “focusing” section.

III.2 Suggestions:
- Strengthen the research and market expansion
- Enhance the research on commodity supply
- Build and maintain good relationship with the local supply
- Improve the quality of the agricultural products for export
- Improve the quality and design of the packaging
- Improve the quality of inspection process
22


Internship report – Summer 2010

III.3 Recommendation:

a. Toward the Company:
*** The situation is IVJSC normally has difficulties in finding and purchasing
enough qualified commodities for different reasons as stated in II.4.2 number 1.2.5.
To overcome this matter, the key is to carry out careful research before starting the
“collecting”, sothat we can make good plans and follow them easily.
-

The first research activity is market research to define the major markets, the
stability, competitiveness and profit of the commodity. After that the plan
shall be made ( plans shouldn’t be made before doing research and later the
staff has to try their best to reach the target of the plan, as the number “set
up” in papers is usually unmatched with the real situation.)

-

The second research is on the commodity supply. This research should be
carried out carefully based on analysing and researching the fluctuation of
demand-supply, then later give the forecast that helps the Company
maximize profits and minimize losses. When the price of purchased goods
tends to increase or the future demand is expected to go up, IVJSC should
buy and store with a large amount.

The next solution is the “investment” and “care” in order to improve the quality of
the agricultural products:
During the collecting and purchase process, one of the most important things is the
agri products have to be consistent, equal in quality ( the situation that parts of the
purchase are good, parts are bad cannot be accepted)
Therefore, the investment is in the seeds and the technical tools to create good new
seeds and multiple them, investing in modern machines and expenses for hiring
experts to help the farmers grow and take care of the plants with correct techniques,

preserve the products in correct conditions....
The “care” is the careful checking which is carried out regularly in the warehouse:
check whether the warehouse is clean enough, the products are in good condition
23


Internship report – Summer 2010

and are not moist or musty. To do so IVJSC has to recruit the qualified and
responsible Inspection Team and there should have a good Team checking the work
of the inspectors as well.
The “care” also mean taking good care ( or maintaining the good relationship with
the local suppliers) We can’t export without the products they produce, so the
investment in experts and supporters inspecting & helping them with techniques is
very meaningful in helping them over any troubles during the planting time.
Ensuring the in-time payment is also wise care to prove our prestige and make them
trust us better. Sometimes, we need to “overcome” the hardship with them by
giving them some payment in advance so as to avoid the instability or the contract
breach or cancellation which cause a lot of damage to us. Along with the good
treatment, strict punishment to the breaches and defraud must be applied.

*** In order to deal with problem 4 – the quality and design of the packaging:
Some of our packaging is said to be not flexible and stable enough, which may be
torn during transportation. To solve this matter, the production must be carried out
carefully, ensuring the requirements of the partner are met.
The Managers of this process should check the printing ink as well as printing
process carefully to make sure the marked information printed on the jute bags are
correct and clear, not blur which can cause misunderstandings while delivery

*** So as to reach the target of this New year, the Marketing Department should try

their best (by all sorts of marketing: online, media, fairs..) to seek new customers
and markets (other countries in EU we haven’t cooperated or has little business
relation like Spain, Luxemburg, Italia..., hoping to sell more products and get more
profits.

b. Toward the State:
24


Internship report – Summer 2010

*** To solve the matter 3: Investment in infrastructure.
Not only the modern equipments for the Company but the public infrastructure is
very important. Because we need good roads and bridges, good water system and
enough electricity to carry our commodities from place to place more easily and
preserve them better in the warehouse.

***Matter 1.2.5: Support IVJSC in promoting commerce and approaching the
markets:
IVJSC as well as other import-export firm are currently facing lots of difficulties in
seeking EU customers. EU market is very far from us, we normally don’t have
enough conditions to go to and do research on this market. Therefore, the Ministry
of Finance need to ask Commercial affairs in EU to work harder to supply the
domestic ones with enough information, laws, regulations as well as the happening
oF each Vietnamese products into EU: such as forecasting supply-demand,
competitiveness, contribution channels, methods to approach the markets... Part of
the expenses for those kinds of activities should be beared by the State sothat
decreasing the burden for the Company.
Besides, The Government should make publication on EU market, standards...etc
for better understanding to firms. Workshops, forums or something similar should

be held to encourage the relationship and help create new opportunities for the
domestic export-import business firms.

25