BE Assignment 2

NAME OF STUDENTHoang Thai Duong( Sunshine)

REGISTRATION NO. ITP-039UNIT TITLE Business EnvironmentASSIGNMENT TITLE Vietnam Fruits AssociationASSIGNMENT NO 2 of 2NAME OF ASSESSOR Jubred PenãnoSUBMISSION DEADLINE 6/2/2012

I, _______Hoang Thai Duong_________ hereby confirm that this assignment is my own work and not copied or plagiarized from any source. I have referenced the sources from which information is obtained by me for this assignment.

________________________________ _________________________________

Signature Date

----------------------------------------------------------------------------------------------------------------

FOR OFFICIAL USE

Assignment Received By: Date:

BTEC HND IN BUSINESS (FINANCE)

ASSIGNMENT COVER SHEET

Unit Outcomes

Outcome Evidence for the criteria

FeedbackAssessor’s

decisionInternal

Verification

Investigate the

behaviour of

organisations and the

market environment

(3)

Explain how market structures in

practice deviate from the model of

perfect competition

a

Use a range of examples to illustrate the relationship

between market forces and

organisational responses

b

Explain the behaviour and

competitive strategies

employed by an organisation and

discuss the role of the Competition Commission and regulatory bodies

c

Explore the significance

of

international trade and

the

European dimension

for UK

businesses

Discuss the importance of

international trade,

economic integration and

global markets to UK

business organisations

a

Analyse the impact of two policies of

the European

Union on UK business

organisations

b

Outcome Evidence for the criteria

FeedbackAssessor’s

decisionInternal

Verification

(4)

Explain the economic

implications for the UK of

entry into EMU

c

Merit grades awarded M1 M2 M3

Distinction grades awarded D1 D2 D3

Comments by Assessor - Common Skills

A B C D E F G

Assignment( ) Well-structured; Reference is done properly / should be done (if any)

Overall, you’ve

Areas for improvement:

ASSESSOR SIGNATURE DATE / /

Outcome Evidence for the criteria

FeedbackAssessor’s

decisionInternal

Verification

NAME:.................................................................................

(Oral feedback was also provided)

STUDENT SIGNATURE DATE / /

NAME :................................................................................

FOR INTERNAL USE ONLY VERIFIED YES NO

DATE : ..................................................................

VERIFIED BY : ..................................................................

NAME : ..................................................................

COMMON SKILLS & COMPETENCIES ASSESSED (indicated by X)

1. Managing own roles & responsibilities 12. Use information sources X2. Manage own time in achieving objectives 13. Deal with a combination of routine & non-routine tasks

3. Undertakes personal and career development 14. Identify & solve routine & non-routine problems X4. Transfer skills gained to new/changing situations & contexts

B. WORKING WITH & RELATING TO OTHERS E. APPLYING NUMERACY5. Treat others beliefs and opinions with respect 15. Applying numerical skills and techniques

6. Relate & interact effectively with individuals & groups

7. Work effectively as a team memberF. APPLYING TECHNOLOGY

C. COMMUNICATING16. Use a range of technological equipment and systems

8. Receive and respond to a variety of information XG. APPLYING DESIGN AND CREATIVITY9. Present information in a variety of visual forms X 17. Applying a range of skills and techniques to develop a variety of ideas in the creation of new / modified products, services or situations

10. Communicate in writing X11. Participate in oral & no-verbal communication 18. Use a range of thought processes

Executive Summary

VIETNAM’S FRUIT & VEGETABLES ASSOCIATION(VFA) is one of the most important organization

in Viet Nam. It has become the leading exporting fruits organization in Vietnam. VFA

was accredited as one of the biggest enterprises in Vietnam as well as long-standing,

trustworthy exporters to all organizations and all people from a variety of society. The

purpose of this report is to provide readers with clearly identification of the market

structures and strategies employed by VFA. Besides, we will have a lot more

information about this company.

Table of ContentsExecutive Summary...............................................................................................................................1

Introduction...........................................................................................................................................3

1. Explain how market structures in the above case study deviate from the model of perfect competition...........................................................................................................................................4

a. Identify the market structure in the case of VFA.........................................................................4

b. Differences between monopolistic competition and perfect competition..................................6

c. Deviation from the Model of Perfect Competition........................................................................6

2. Use a range of examples to illustrate the relationship between market forces and Vinafruit responses..............................................................................................................................................8

a. Bargaining power of suppliers:......................................................................................................8

b. Bargaining Power of Customer:.....................................................................................................8

c. Competitive rivalry:........................................................................................................................8

d. Threats of New Entrants................................................................................................................9

e. Threat of Substitutes:.....................................................................................................................9

3. Explain the behavior and competitive strategies employed by VFA and discuss the role of the competition commission and regulatory bodies.................................................................................10

a. Strategies used by VFA to compete with other rivals and expand its market.......................10

Price strategy and the marketing mix.......................................................................................10

Branding.....................................................................................................................................11

Porter’s generic competitive strategies....................................................................................11

b. The role of the Competition Commission........................................................................12

4. Discuss the importance of international trade, economic integration and global markets to VFA..14

a. Define international trade:..........................................................................................................14

b. The importance of international trade:.......................................................................................14

c. The context of economic integration and its influences on global market as well as local markets (VN and the rest of the world).........................................................................................................15

Influences of economic integration.............................................................................................15

1. Global market (rest of the world):...........................................................................................15

2. Local market (Vietnam):..........................................................................................................16

Table 5: The Commodity Composition of Exports and Imports: 1995-2002 (percentages)................17

3. VIETNAM’S FRUIT & VEGETABLES ASSOCIATION:...................................................................17

d. The impact of two policies of the European Union on VFA Corporation.....................................18

1. Monetary policy:......................................................................................................................18

2. Regional policy:........................................................................................................................19

e. Explain the economic implications for the UK of entry into EMU:...............................................19

1. What is EMU?..........................................................................................................................19

2. The advantages of an EMU member countries:.......................................................................20

3. The pros and cons of joining EMU:..........................................................................................21

4. Should UK entry into EMU?.....................................................................................................22

References...........................................................................................................................................24

IntroductionThe economy of Vietnam is considered as the most rapid develop country in the South

East Asia and quickly expanding relationship with other nations and also the

international organizations. The economic growth rate of Vietnam got 6.5% in 2010 and

is expected to hit 7% in 2011. Taking part in WTO in 2007, Vietnam accepts to face with

more competition and difficulties. Among Asia countries, Vietnam is known as one of

the most dynamic markets, which has attracted more and more foreign investment in

almost every sector of the economy. Nowadays, Vietnam has been opening the door to

increased trade and investment in the country.

The three breakthroughs defined by the strategy to promote international trade which are

built to uniform economic institutions with focus on renewal of policy to liberate the

production force and expand markets at home and abroad; make a vigorous change in

the development of economic integration and global markets; renew the operation of the

political system, focusing on administrative reform.

Likewise, Vietnam’s fruit and vegetables Association-called VINAFRUIT – was

established in March 2001- as a non-governmental organization. The association

consists of enterprises operating in the fruit and vegetables sector, with both joint-

venture and 100% foreign invested companies.  VINAFRUIT protects the legitimate

rights of its members and promotes and supports Vietnam’s fruit and vegetables trade

& international co-operation. At December 2008 VINAFRUIT had 67 members including

Vietnamese companies specializing in producing, processing, exporting, retailing,

researching, consulting and various services related to the fruit and vegetables sector.

VINAFRUIT is member of the Vietnam Chamber of Commerce and Industry (VCCI).

VINAFRUIT has associated fruit and vegetables companies and encourages the

development of   its industry, particularly in tropical fruit and vegetables in order to

meet increasing demand from local and international markets as well as to contributing

to Vietnam’s efforts to integrate its economy into the world.

1. Explain how market structures in the above case study deviate from the model of perfect competition

 a. Identify the market structure in the case of VFA

An oligopolistic market is the one which is dominated by some large suppliers. In an oligopolistic market, the leading firms account for a large percentage of market share. Firms manufacture branded products and high competition among them results in tremendous advertising and marketing spends by these firms. Leading forms are able to make abnormal profits in the long run, as new firms have numerous entry barriers. As all firms in an oligopolistic market are interdependent, they need to consider impact and reactions on other firms while determining their own pricing and investment policies. Homogeneous products, mutual interdependence, few large producers and high entry barriers are oligopoly characteristics prevalent in such markets.

Vietnam fruit market is a very good example of an oligopolistic market. There are various competitors in this market but the dominant ones include most of the tropical fruits imports into Vietnam originated from ASEAN countries.Among ASEAN countries, major source of Vietnam’s tropical fruits imports were Thailand, the Phillipines and Vietnam. Thailand was the leading exporter of tropical fruits into the Vietnam market in 2003. Malaysia was ranked as 16th. largest exporters of fruits to Vietnam, with a value of US$2.91 million, taking 0.5 % of the market share. Entry barriers prevent other entrants and pricing is mostly by competition and mutual understanding between top importers.

Countries 2002 (USD Million)

2003 (USD Million)

Market share(2003)

(%)

Yearly Increase

(%)Vietnam Global Fruits

Imports377.62 494.73 100.00 31.0

Thailand 70.52 83.04 16.8 17.8Philippines 65.10 81.64 16.5 25.4

United States 50.14 78.81 15.9 57.2Vietnam 69.15 69.05 14.0 -0.2

New Zealand 27.10 38.68 7.8 42.7Chile 28.86 33.26 6.7 15.2

South Korea 8.78 20.82 4.2 137.1Russia 10.64 15.18 3.1 42.7

Iran 4.55 12.05 2.4 164.8Myanmar 7.57 10.85 2.2 43.3

Malaysia (Ranked 16th.) 3.29 2.91 0.5 -11.6Other Countries 31.92 48.44 9.8 51.8

Source : Vietnam Custom Trade Information

The three most important characteristics of oligopoly include:

Industry dominance by few large firms Products sold by these firms are either differentiated or identical in nature Various entry barriers depending upon the industry

Few Large Firms

This is a very crucial oligopoly characteristic which states that these markets include few large firms which are dominant in existence, and each one of these firms is comparatively larger than the market size. This particular oligopoly characteristic ensures that all large firms have a fair amount of market control, not seen in a monopoly market. In spite of there being other smaller firms in the market, the major ones account for more than half of the total industry output. For example, in the case of VFA, out of the 25 exporting fruits firms doing business in the market but the top 5 firms are responsible for 65% of the total market share, while the figure shoots up to 80% if the top 10 firms are taken into consideration.

Homogeneous or Differentiate Products

Certain markets in an oligopolistic market produce homogeneous products, like in a perfect competition market, while others differentiated products like in an monopolistic market. It can thus be inferred that oligopolistic markets are found in two separate categories:

Homogeneous Product Oligopoly: Markets in these markets produce intermediate goods which are use by other different industries later on for manufacturing their products.Differentiate Product Oligopoly: Goods produced in these kinds of markets are for personal consumption. Consumers need a variety of products, as they have different needs and wants. Applying this to the case of VFA, the most successful example is the fruits distribution system. Bananas can now be found in markets and fruit stalls throughout the country as well as all the supermarkets and hypermarkets. Similarly, the outlets for pineapples are growing and occasionally other fruits like durians, mangosteens, papayas, rambutans, mangoes and avocados are finding their ways into markets and fruit stalls as well as supermarkets and hypermarkets throughout the country. The presence of foreign hypermarkets like Carrefour and METRO as well as Vietnam Parkson have also contributed to the increased presence of imported tropical fruits throughout Vietnam. Mangosteens, papayas and mangoes are even distributed by street peddlars recently.

Entry BarriersEntry barriers helps existing firms to exercise market control. Government restrictions, copyright issues, huge setup cost and undivided resource ownership are common barriers to entry. This particular feature also helps in differentiating an oligopolistic market from a monopolistic market, as new firms can enter a monopolistic market and reduce dominance of the large firm. For example, if a new firm tries to enter the market discussed earlier it will have to compete against already existing brand names, set-up a manufacturing unit without any initial sales or income from the business and will also need to come up with innovative production techniques to sustain itself in the long run. All these barriers make it difficult for the new entrant to enter the oligopolistic market, irrespective of the product.

b. Differences between monopolistic competition and perfect competitionThree (3) main differences between two types of market

For perfect competition, products are homogenous. While for monopolistic, products are differentiated.

In contrast to competitive firms, monopolistic competitive firms produce more products and they also take price higher.

For the relationship between price and marginal cost: For a competitive firm, price = marginal cost. For a monopolistic competitive firm, price exceeds marginal cost.

c. Deviation from the Model of Perfect Competition In a perfect competition, several elements have to be present. For instance, an identical product should be present with every firm taking the role as price takers. (BPP, 2004) In the same manner, a perfect competition allows only a small market share for every player as the products are identical and interchangeable. This is based on the reason that all the buyers are aware of the product that these players sell along with their pricing levels. Normally, a perfect competition consists of a market that has no barriers of entry, which means that everyone who wants to penetrate the market will have ample opportunity to open shop.

In the case of VFA, it doesn’t want to be stagnated in a market with a perfect

competition. In a profit-driven market, staying in a perfect competition will never be sufficient

to the needs of modern businesses. In fact, their scope on the fruit market is considerably strong

with over 67 companies under control of VFA in Vietnam alone. They have other outlets in

Mainland Vietnam and Macau. In addition, they control a certain number of other names in

Vietnam, namely HACCP and BRC. 

Looking at this description of the company, VFA appears to change direction on the model of perfect competition as it uses diversification strategies to acquire a large part of the market. This is manifested in the creation of two other brand names that carry the same products of the company. As stated in their annual report, this two other stores tend to provide to other parts of the market, particularly different income brackets. To this end, the VFA is able to not only acquire a larger market share they have also expanded their client base to every spectrum of Vietnam society. 

2. Use a range of examples to illustrate the relationship between market forces and Vinafruit responses

Michael Porter develops the 5 forces model 1985 to help analyse and better understand thefirm’s industry environment. The strategic business manager seeking to develop and edge over rival firms can use this model to better understand the industry context in which the firmoperates. These tools are mainly use to analyze competitive business environment and to understand the changes on business environment. Buyer power, for example, influences the prices a firm can charge, as does the threat of substitutes. The bargaining power of suppliers determines the cost of raw materials and other inputs. It is in a company’s interest to examinethese forces in detail to establish the industry strengths and weakness. Knowing these forces, and how they are likely to affect their industry, enables managers to decide on future direction

a. Bargaining power of suppliers: Revenue depends on supplier and customer, as VFA has a great level of market share and a good reputation. And they purchase a great range of product from their supplier.

And 91% of supplier around Vietnam said “VFA treated them with respect” (VNEconomyTimes, 2011). Because they buy many kinds of product and they for their huge number of branch so suppliers can’t bargain with them. By this way they are able to face challenge competitor.

b. Bargaining Power of Customer: This refers to the choices as regards where buyers/customers shop for their products and services. Customers are the source of revenue and they have so many options to switch to competitor any time. In this situation VFA is doing well, their price is always cheaper than their competitors. The higher price cause higher bargaining power of customers, for example, customers have many choices when they shop for fruit. This means that consumers can buy different products from many suppliers such as USA, Thailand, India and so on. Buyers tend to seek lower prices or higher quality at constant prices, thus forcing down prices and organization’s profitability. Buyer power is likely to be high when, the buyer purchases a large part of a supplier’s output. Otherwise, there are plenty of substitute products, allowing easy switching among different types of fruits: water melons, pineapples, coconuts or mangoes and so on.

c. Competitive rivalry: This refers to the intensity of competition among existing firms in an industry.In the traditional economic models, competition among rival firma drivers profit to zero.

Companies need to very careful about their competitors movement. Tesco always take care about their competitors offers which are great challenge against competitor. They always try to sell cheaper than their competitor. Butcompetition is not perfect and firms are not unsophisticated passive price takers. Rather, firmsstrive for a competitive advantage over their rivals. The intensity of rivalry among the firmsvaries across industries. There are high exit costs; specialised assets which may be hard to sell or management loyalty ( for example in long establishment family firms can create exit barriers which prolong excess capacity and low profitability Products are similar, so customers can easily switch to other suppliers.A highly competitive market will also be one in which the threat of new entrants is high. While Thailand still dominated the fruit market in 2004, it was facing growing pressure fromestablished competitors Vietnam, USA, Malaysia and from new entrants from Asia

d. Threats of New EntrantsIt is not only incumbent rivals that pose a threat to firm in an industry i.e. the possibility that newcompetitor/ firms may enter the industry also effect competition.Threats of new entrants refer to how easy or difficult it is for new competitors to enter the firm’sindustry.Companies need to consider how the competitive market is for new entrants. Here it is high, Vietnam market is very massive, with population of about 1,3 billion people it is hard for any company to cover all Vietnam market. The threat of new competitors to an industry depends on the ease with which they can enter amarket. Major barriers to entry are as follows:The need for economics of scale (to complete on the basis of cost), which are difficult to achieve in the short run. Almost companies which come from developing countries face this problem. Their small capacity of capital and lack supports of banks and governments make them can’t sign big, long-term contracts. Legislation or other government policy such as selective subsidies. Although the government of Vietnam promises to open- door to every enterprises which do businesses in Vietnam, however almost government’s attention always focus on local companies and giant corporate . Small firms will find difficult to exist in such market. Cost advantages of existing firms such as access to raw materials or know-how toamong product or service differentiation-customers are loyal to the brand.

e. Threat of Substitutes: In Porter’s model, substitute products refer to products in other industries that can

perform thesame function as the product of the industry. Substitutes are products that

can be used interchangeably or in place of one another. For example, drinking tea

instead of coffee. The threat of substitute typically affects an industry through price

competition, and it is high when buyers are able and willing to change their buying

habits, in the VFA’s case, fruits & artificial foods like organic products, vitamin capsules.

Therefore, to surpass its rivals and attract more customers, VFA has carried out several

campaigns to take back its market share. VFA always advertises to inform and

differentiate the firm’s products from those thesubstitute. It maintains good relation

with electronic media i.e. lobby with media and offers high quality products and

services like home environment.

3. Explain the behavior and competitive strategies employed by VFA and discuss the role of the competition commission and regulatory bodies

a. Strategies used by VFA to compete with other rivals and expand its market

Vietnam is an emerging market, per capita income was only $250 (the 2010 figure was

$1,200). Therefore, top leaders of VFA chose to develop a moderate product that would

appeal to both domestic and export markets. To do so, VFA persuaded the home market that

their product offered value, and convince overseas customers that Vietnam could produce

best quality fruits. As the leading supplier of fruits in Vietnam, VFA could improve the

quality but there was no efficient distribution network, so that the company set up a chain of

fruit shop that would also sell fruits for home consumption.

Price strategy and the marketing mix

By pricing high, VFA appealed to the aspirations of Vietnamese people. An emerging middle

class took to the brand and the fruits shops became important social centres. The first shop

opened in Ho Chi Minh City in 2002, and by 2010 there were more than 100 across Vietnam.

VFA can set high price for new product when these product begin to appear on market.

However, company should choose rapid penetration strategies, because in Vietnam

market VFA still focuses on encouraging current customers to buy the product

frequently. Besides, implicating competitor’s customers move to buy their product,

furthermore, encouraging people who never buy their product to start buying. In

general, the income of Vietnamese isn’t high than other country, set the low price to

attractive customer is best solution for VFA in this market.

Marketing mixes are segment-specific. The product may be designed for a given

segment (BPP, 2004). VFA introduced new types of product with brand-new outfits and

colour. Besides, the price plays an important role in the marketing mix. VFA can set high

price with high quality fruits which are specialized in any parts of making these fruit

including store and delivery stages because these products are not only for eating , but

also for decorative, easy to bring, and suitable with plentiful people or working.

Alternatively, VFA also set lower price which is suitable for common buyers in Vietnam.

Branding

The branding of VFA was carefully planned. To counter competition from big multinationals, whether fruits shops or brands VFA positioned it as part of a Vietnamese tradition. Marketing this delicacy, which is harvested only in south-east Asia, helps identify VFA’s products with other countries’ fruits.Combining heritage and modernity is at the heart of the brand, whether in the packaging or the styling of the fruits shops. Straplines such as “Bringing creativity into fruits” suggest innovation. Export was part of the strategy from the start. VFA now markets its fruits in more than 40 countries, including the US and Japan. Most of the brand’s appeal is to niche markets, to consumers interested in delicious fruits and, especially in China, to visitors to Vietnam who have seen the brand there. Most of the fruits is sold online through franchisees. Sales volumes are moderated compared with those in Vietnam.

 Porter’s generic competitive strategies

Differentiation strategy involves selecting one or more criteria used by buyers in

a market and then positioning the business uniquely to meet those criteria. This

strategy is usually associated with charging a premium price for the product-often to

reflect the higher production costs and extra value-added features provided for the

consumer. Differentiation is about charging a premium price that more than covers the

additional production costs, and about giving customers clear reasons to prefer the

product over other, less differentiated products (tutor2u). Different with other

competitors, VFA has many lines of product to suit with the need and want of

customers. For example, the target customers of high quality fruits are individual

customers with high income and the demand is working or using at home. On the other

hand, low price fruits focuses on small office, home, the target is low income people.

Besides, to reduce the impact of declining fruits prices and strengthen VFA’s presence in

the global market, it will further strengthen sales structure. Moreover, it will further

differentiate products by enhancing imagine quality and speed through modern

technology as well as by improving operability and design.

b. The role of the Competition Commission

The Competition Commission has a crucial advocacy role to play in the regulatory reform process. With regard to the restructuring and privatization of state-owned enterprises, the commission has to ensure that the process leads to a competitive outcome. The resultant market structures should be such that new entrants can compete fairly with incumbents. In other words, for these industries to be fairly contestable, the playing field between the incumbents and new entrants must be leveled. To do this, previous benefits like tax exemptions, preferential access to scarce inputs and discriminatory subsidies enjoyed by these former state-owned enterprises ought to be phased out. It’s not enough to simply substitute private monopolies for public ones.

According to Vietnam Competition Administration Department (VCAD):

“Competition is widely recognized as a dynamic for economic development, social and

technological improvement. In the current situation of Vietnam’s economy, fair and equal

competition takes a fundamental role, ensuring an effective functioning of the market

mechanism. In an effort to create a favorable environment that facilitates economic

development, on the 3rd of December, 2004, at session 6th, the National Assembly in

legislature XI, passed the Competition Law No. 27/2004/QH11 and the law took effect on

the 1st of July, 2005.

With 123 Articles incorporated in 6 chapters, the Competition Law aims at:

Control competition-restricting acts that would likely result in competition restriction,

particularly in the context of market opening-up and global economic integration;

Protect from unfair competition actions the legitimate rights of enterprises to do

business, and;

Create and sustain a fair competitive environment.”(VCAD,2011)

From what is stated above, it shows clearly the protection of the regulatory bodies for its companies which each body represents for. To protect the rights for every contributor in the market, every enterprise, individuals or institutional bodies all have obligation to share partly their information for the regulatory bodies. Consequently, VFA is not an exception, in some points of view; people can see how the company follows the guiding policy of the government. In order to advance the development of the Vietnamese fruit industry, Vinafruit organizes many regular activities, including:

-Information dissemination about new technologies and innovations, domestic and international market trends, prices, and industry forecasts.

-Trade promotion, including organizing trade fairs, international study tours, and opening representative offices.

-Cooperating with domestic and international organizations and enterprises in the areas of fruit cultivation, preservation, processing, and exporting to utilize the advantage of development opportunities in international markets.

- Capacity building, including training, workshops, seminars, and discussions.  Previous workshops include: Cooperating for Exporting to China,Organic Fruit Cultivation for Export to Japan ,Fruit Processing for Exporting to the USA and exporting fruit ,vegetables to EU. Vinafruit issues an annual report of the association's activitiesVinafruit has also organized study tours to China Thailand, SGP, Malaysia, Hongkong, Taiwan, Korea , Dubai, EU.

Vinafruit has also participated in trade fairs Anuga in Germany ,Sial in France,  Quang Zhou in China and is a regular participant at the annual agriculture fair in Can Tho and Hanoi , Vietnam. Vinafruit has also participated in the USAID-funded Vietnam Competitiveness Initiative (VNCI) to develop strategies for improving the competitiveness of the Vietnamese fruit industry. In near future Vinafruit will undertake several important new initiatives, including the development of an industry master plan, conducting market research in USA, Japan and participation in the assessment of the implementation of the National Program of Developing Vegetables, Fruits and Flowers, 2000-2010

The Commission has intervened successfully in the past where proposed legislation and policies would have inhibited the ability of firms to compete freely. Whereas such interventions have been limited to the competition impact of these laws, government appraisal would go a step further to consider the effects thereof on employees, consumers, the environment, civil society, and so on.

4. Discuss the importance of international trade, economic integration and global markets to VFA

a. Define international trade:International trade is exchange of capital, goods, and services across international

borders or territories. It refers to exports of goods and services by a firm to a foreign-

based buyer (BPP, 2004). In most countries, it represents a significant share of gross

domestic product (GDP). While international trade has been present throughout much

of history, its economic, social, and political importance has been on the rise in recent

centuries.

b. The importance of international trade:Geographical location in different countries are different, each country's topography,

the types of resources are not the same, land, labor, resources, technology and

management are different in different countries, different combinations of production

factors, therefore most companies need international trade. For some reasons, foreign

markets represent new market segments, it happens due to the saturation of domestic

market and commercial buyers of products operating in a number of overseas countries

may require their suppliers to be able to cater for their needs across national

boundaries. The removal of many restrictions on international trade, increasing

household disposable incomes results in greater consumption of many categories of

luxuries, such as overseas travel, which can only be provided by overseas suppliers.

Countries have comparative advantage in production, some goods and service are

highly specialised and the domestic market is too small to allow economies of scale to

be exploited, so the world's resources are optimized, the production efficiency, the

countries can benefit from international trade.

Vietnamese enterprises in international trade have many benefits. Vietnamese

companies will compete with other companies in the international market, more and

more demands and deals in international market, so that Vietnamese enterprises need

to increase production capacity to meet the world market needs, a mass of output will

decrease the unit cost of products, enhance industrial competitiveness. The nature of

trade decide the either party access to the interests, Vietnamese enterprises in the

world market competition can enhance the strength of their own businesses and can get

benefits.

c. The context of economic integration and its influences on global market as well as local markets (VN and the rest of the world)

Influences of economic integration

Economic integration of the Vietnamese enterprises have a great impact, economic

integration has four characteristics:

2. Strengthen the social division of labor;

3. To enhance the allocation of resources;

4. The development of countries in the competition can get more benefits;

5. Increased trade transparency.

Because of the existence of comparative advantage, the best allocation of resources is to

maximize the use of the comparative advantage, but it is an ideal situation. Although

some countries do not have comparative advantages in producing strategic goods, but

to defend their sovereignty and independence they will to produce products; and even

the state will protect its high-profit industrial development. Because of these reasons, it

created trade barriers. States for its industrial development encourage exports, blocking

imports.

Since Vietnam takes part in WTO, Vietnam's trade with other countries had a higher

degree. Enterprises use production resources to more efficient, to get higher output and

profits, and increasing transparency of trade, giving enterprises more equitable

opportunity to compete.

1. Global market (rest of the world):

Vietnamese enterprises are developping to become the international enterprises, it

improves enterprise anti-risk capability and economic strength. Vietnamese enterprises

to go to a place of production factors with better production, such as U.S. companies set

up factory in Vietnam and other developing countries, using Vietnam's cheap labor;

enterprises to develop special economic zones, where there is a lot of promotion of

economic and financial policies. In the present context, economic integration is not

limited in the scope customs tariff that has been extended to all areas related to

economic and trade policy, with purpose of opening global market for goods and

services, removing barriers to trade. Economic integration help the global market to

expand for business opportunities, penetration to market each country, building good

relationship among nations, thereby creating common global market stability.

Enterprise through these measures to improve the efficient use of resources, with

limited resources to obtain the greatest possible economic efficiency. In addition,

economic integration also brings some other risks, such as when a few big markets

having difficulty or crisis, it will impact greatly to rest of the world, economy is affected

severely and may be lead to a global crisis.

2. Local market (Vietnam):

From the late 1980s to around 2000, Vietnam steadily liberalized its trade and investment regime from a system largely inward looking and reliant on trade with European socialist economies to an outward looking system with exports to a wide range of economies, except for the United States. With natural resources are abundant and labor cost is cheap, Vietnam is able to expand exports of agricultural products, aquatic products, and textiles and garments, etc. The opening of the economy of the Vietnam market brings a diversity of goods and services with the participation of domestic enterprises and foreign enterprises; the participation of foreign enterprises has brought resources, technology and knowledge, supporting development of Vietnam's economy and improvement environmental business. On the other hand, trade policy in the 1990s not only served to protect domestic firms from import competition, it also served to promote exports. An important international trade theory holds that a tax on imports is equivalent to a tax on exports. In other words, in a fully-employed economy, restricting imports has the unplanned by-product effect of restricting exports. In Vietnam, the government has taken measures to exports that result from tariffs and quotas on imports. For the most part these consist of different kinds of tax exceptions for exporters. It also includes a policy to maintain a relatively real exchange rate. Some industries have low competitiveness as services will be placed in the disadvantageous situation, leading to the adverse impact to the economy in general. If the State and business have not remedial measures, the Vietnamese market will become confusion and the local products will be the more essential.

Over the 1990s to 2002, the share of manufactures in total exports does not appear to have increased significantly in spite of an acceleration in manufacturing activity. However, with the positive impacts of the opening of the U.S. market, manufactured exports have become relatively more important in 2003 and 2004. Within manufactured exports, the dominance of clothing and footwear attests to Vietnam’s

strong comparative advantage in these traditional labor-intensive products. It can be expected that Vietnam will diversify its exports into new labor-intensive products (electrical appliances, plastic products, toys and other miscellaneous products) that other developing countries, especially Asian countries, exported in great abundance when they were at a stage of development comparable to Vietnam today.

Table 5: The Commodity Composition of Exports and Imports: 1995-2002

(percentages)

1995

1996

1997

1998

1999

2000

2001

2002

Exports Primary products Rice 9.5 11.7 9.5 10.9 8.9 4.6 4.1 4.4 Coffee 10.6 4.6 5.4 6.3 5.1 3.5 2.7 1.9 Fish/Seafood 8.3 8.9 8.6 9.2 8.4 10.2 12.3 12.2 Petroleum 19.7 18.3 15.6 13.2 18.1 24.2 21.9 19.5

Manufactured products Clothing 8.3 15.7 16.4 15.5 15.1 13.1 13.6 16.4 Footwear 3.8 7.2 10.7 11.0 12.0 10.1 10.8 11.1 Electronic products 4.8 5.3 5.1 5.4 4.2 3.1 Handicrafts 1.3 1.1 1.3 1.2 1.5 1.6 1.6 2.0

Imports Machinery & equipment

25.7 27.6 30.3 30.5 30.1 30.9

Fuels & raw materials 59.1 60.0 59.6 61.0 63.5 63.8 Consumer goods 15.2 12.4 10.1 8.5 6.4 5.3

Source: GSO as provided by CIEM.

3. VIETNAM’S FRUIT & VEGETABLES ASSOCIATION:

Economic integration has helped to promote the development opportunities of Vietnamese fruit sector in general and VFA in particular. Vietnam has integrated into the global economic. The following events have greatly enhanced its fruit & vegetables industry, the 2001 signed Bilateral Trade Agreement between Vietnam, United States that has opened up the new opportunities for export to the US market. AFTA Program on the reduction of import tariffs. And thenVietnam became a WTO member. Those above mentioned events and the rapid development of Vietnam’s economy will bring further opportunity and challenge to its developing fruit & vegetable industry.

Furthermore, the government represents specific its main concerns to create a multinational economy, in other words, the government wants foreign companies to take more involves into national economy instead of only stated enterprise like before, namely, many new policies were published for the purpose of promotion of internationalization as well as allowances or grants to encourage the new emerging industries developments such as IT, high-tech company and insurance also. This change apparently makes a critical impact on VFA’s structure and performance, new law forces the managers to vary company’s old current policies, even the fundamental rules which used to constantly exist in the company. Vietnamese fruit-trees &vegetables cultivated area is 1.4 million ha, in which vegetables represent 635,000 ha and fruit-trees 767,000 ha. Average annual production is 20.4M tons comprising 12.7M tons of vegetables & 7.7M tons of fruit. In 2008, Vietnam exported US$396M of fruit & vegetable to 30 markets in Asia, Europe & North America  an increase of 29.5% compared with the same figures in the previous year.Not only success in achieving high income, the company also expanded its products to customers in rural areas. The trade liberalization policies allows the company to acquire the international markets, for instance, in 2002, VFA first entered the international market as a legal entity by establishing one of its branches in China. Nowadays, VFA is regarded as Vietnam’s leading export fruits corporation. These include awards for excellent business performance and contribution to the Vietnamese economy. In addition, the government also forms some restrictions to eliminate the negative effects of economic boost policies, for example, foreign companies can’t use government’s capital for the purpose of establishing. This is to protect the domestic companies to protest the international monopolies, to build a fair, transparent business environment for enterprises to develop by their own capital.

d. The impact of two policies of the European Union on VFA Corporation We discuss the impact of European monetary system and on Vietnamese enterprises.

1. Monetary policy:

a. The importance of European monetary system:

European Monetary System was set up in 1979. Its purpose is to establish greater

monetary stability in the European Union. The exchange rates between currencies can

fluctuate considerably. ( BBP, 2004).

In Europe, EMS is playing a very important role to recognize change in relative prices,

avoid inflation risk premium, reduce the distortional impact of tax and social security

systems and maintain social cohesion and stability.

b. The impact on VFA Corporation:

The EU After several decades of development, already has 27 members, has become a

very well integrated economy, there to discuss the impact of EU's monetary policy on

Vietnamese enterprises. European Monetary System was used, especially the common

currency of Europe (Euro) was circulated, it makes reciprocal exchange of economic

trade between Vietnam and Europe as more convenient. The unified currency will

promote the EU market development both in width and depth, so opening a large space

for economic trade relations between Vietnam and Europe.

Enterprises within the European Union suffer less damage than the Vietnamese

enterprises from the fluctuation of Euro exchange rate. Because of the Euro against the

RMB's exchange rate changes, first of all will affect the profits of Vietnamese

enterprises. For example, the Euro exchange rate of the RMB exchange reduced, it will

reduce the profits of Vietnamese enterprises, goods exported from VFA will be forced

to lowering price because if a higher price than the market will make the EU more easily

find reasons to cut the goods and use anti-dumping duty, difficulties for business.

2. Regional policy:

a. The importance of regional policy:

The CET (common external tariff) is a policy with the stated aim of improving the

economic well-being of certain regions in the EU. The EU's budget is devoted to this

policy, the aim of which has been stated to be to remove the disparities in wealth across

the EU, restructure declining industrial areas and to diversify rural areas which have

declining agriculture. This means that the EU's average GDP per capita has been

reduced leading to some regions in the earlier no longer qualifying for extra financial

aid.

b. The impact on VFA:

We talk about the impact of CET on Vietnamese enterprises, The European Union as a

full economy is the representative of the economic regionalization. Regional integration

is a trend of world economic development, but also is a trend of improve the allocation.

Economic regionalization is to eliminate trade barriers within the region of the country,

optimizing the allocation of resources countries in the region. VFA in the EU market

than the competition within the EU countries, enterprises are facing more difficulties,

such as the EU trade barriers, the EU will focus on Vietnamese companies charge very

high tariffs, tariff increases and high freight costs will reduce Vietnam's enterprises

competitiveness, there is no advantage in the market of price.

e. Explain the economic implications for the UK of entry into EMU:

1. What is EMU?

A monetary union is an arrangement where several countries have agreed to share a

single currency amongst them. The European Economic and Monetary Union (EMU)

consists of three stages coordinating economic policy, achieving economic convergence

(that is, their economic cycles are broadly in step) and culminating with the adoption of

the euro, the EU's single currency. All member states of the European Union are

expected to participate in the EMU.

The Copenhagen criteria are the current set of conditions of entry for states wanting to

join the EU. It contains the requirements that need to be fulfilled and the time

framework within which this must be done in order for a country to join the monetary

union. An important element of this is the European Exchange Rate Mechanism

("ERM II"), in which candidate currencies demonstrate economic convergence by

maintaining limited deviation from their target rate against the euro.

2. The advantages of an EMU member countries:

If everything goes to plan, by 2002, participating member states of the European Union

will have ditched their national currency in favour of the euro, a single European

currency. The advantages and disadvantages of joining the European Monetary Union

(EMU) will vary from country to country, and are difficult to predict. Within the EU, each

member state has its own financial system; therefore the introduction of the Euro will

make a different impact on each country's economy. But economists say that there are a

number of advantages in signing up to the euro:

+ Currency stability

A single currency should end currency instability in the participating countries

(by irrevocably fixing exchange rates) and reduce it outside them.

Because the euro would have the enhanced credibility of being used in a large

currency zone, it would be more stable against speculation than individual

currencies are now.

+ Cheaper mortgages lower interest rates

A single currency should also result in lower interest rates as all member

countries if the new European Central bank takes on the monetary credibility of

Germany banks.

This should lead to more investment, more jobs, and lower interest rates - and

for home owners to lower mortgages.

+ Tourism

Consumers would not have to change money when travelling within the euro

zone, and would encounter less red tape when transferring large sums of money

across borders.

Travellers will no longer be forced to change money and pay banks the

commission charges.

+ Business benefits

Likewise, businesses would no longer have to pay hedging costs which they do

today in order to insure themselves against the threat of currency fluctuations.

Businesses, involved in commercial transactions in different member states,

would no longer have to face the costs of accounting in different currencies.

3. The pros and cons of joining EMU:

Advantages Disadvantages

Economic policy stability Loss of national control over economic policy

EMU members are required to keep to strict

economic criteria.

Under EMU, monetary policy is largely in the

hand of the new European central bank.

Politicians in member countries are less able

to pursue short-term economic policies

Individual countries fiscal policies also need

to stay in line with European policy criteria.

Facilitation of trade The need to compensate for weaker

economies

Eliminates risk of currency fluctuations

affecting trade and investment between EMU

member countries

Eliminates need to ’hedge’ against such risks

For the UK, the possible benefits of being

economically linked to stronger European

economies are reduced and possibly even

outweighed by the need to compensate for

weaker economies.

Lower interest rates Confusion in the transition to EMU

Enhances ease of trade with non-EU country

Removes risk of inflation and depreciating

currencies, reducing interest rates.

Stabilises interest rates at a level closer to

that of Germany, reducing interest costs for

business and government.

Introduction of a new currency and coinage

can cause confusion to business and

consumers.

Firms have used it as an opportunity to push

through price rises.

Preservation of the City’s position Lower confidence arising from loss of

national pride

If the UK opts out of EMU, the city’s position

as one of the major European financial

capitals will be threatened.

In turn, the city’s role as a leading global

financial market would also be jeopardised.

Sterling is a symbol of national cohesion.

EMU puts its member on the road to the

federal Europe; it is suggested, marking the

UK parliament into the little more than a

regional town hall within Europe, with no

more power than local government. Such a

Inward investment from the rest of the EU

would also be likely to adversely affect

economic performance.

move might dent national pride and diminish

confidence.

The proposal to have national variants of

euro coins and notes is merely a cosmetic

attempt to preserve national identities.

(Resource: BPP, Professional Education, pg 305-306)

4. Should UK entry into EMU?

The European Monetary Union came into being on 1 January 1999, with an initial

contribution of 11 out of the 15 EU countries. The Treaty of European Union (more

commonly known as the Treaty of Maastricht) requires that the national central bank of

the country concerned should be independent; the country's currency should have

participated in the Exchange Rate Mechanism (ERM) for at least two years.

Economic regionalization and economic globalization is today's economic trends. The

WTO was established because of economic globalization, the World Trade Organization

meaning of existence is the maintenance of international trade balance, elimination of

trade barriers and all the factors that impede trade. Regionalization of economic

development is accompanied by economic globalization; the establishment of EU was in

line with world economic development trends.

With the trade expansion, trade competition has become more intense, individual

countries are no advantage in the competition. The government set up trade barriers

between countries, which hamper the rational allocation of resources, production

efficiency can not be optimized. A country want to gain more market share in the world

market, it must allow the rational allocation of resources in market, to pursuit of

maximum output, improve resource utilization. However, Individual countries is

scarcity of resources, for these reasons has caused a number of countries due to the

allocation of resources and join together complementary resources between each other,

improve production efficiency, the EU is a model of economic regionalization.

The EU's science and technology is very advanced, the introduction of the EU's

advanced technology can improve their productivity; the EU market is enormous and

has a significant impact on the world economy, Vietnamese enterprises to enter the EU

market, Vietnamese enterprises can improve competitiveness in world markets.

Vietnamese enterprises try to improve productivity and enhance competitiveness,

Vietnam and other Asian countries should be the establishment of regional economies, a

common economy, to lower tariffs, so that economies of the countries to make better

use of economic resources of the body, using each country's comparative advantages, so

that all countries benefit from the common economy.

Conclusion

After carrying out this report, students are able to assess the variety of micro-economic factors such as the market structures, the relationship between market forces and the importance of international trade. Firstly, through investigation to selected company, VIETNAM’S FRUIT & VEGETABLES ASSOCIATION, students now have a general thought of the guiding ideas in each corporate behavior and competitive strategies, students know the way of how the the competition commission and regulatory bodies work out to control the market. The corporate also knows the importance of the corporate ethic performance whether it follows standardized regulations or not. In addition, knowing how to analyse the impact of two policies of the European Union on VFA, the economic implications for the UK of entry into EMU is obvious and the government policies and monetary policies influence directly to company business as well as shareholders. Thus information about outside environment is essential and necessary for the company, based on them the manager can give correct decisions to deal with the problems arise during the working process.

References1. BPP Professional Education (2004). Mandatory Unit 4 Business Environment. 1st ed.,

BPP Professional Education, London, pp.142, 151, 158

2. Gregory Mankiw – Principles of Economics (2003) – MacMillan publisher

3. Vietnam economic overview- Socialist Republic of Vietnam, Government Wed Portal

- <http://www.chinhphu.vn/cttdtcp/en/about_vietnam05.html/

4. D TOÁN CHI NGÂN SÁCH TRUNG NG THEO LĨNH V C NĂM 2011- C NG Ự ƯƠ Ự Ổ

THÔNG TIN ĐI N T CHÍNH PH - VIETNAM WEB Ệ Ử Ủ

P TAL-Ỏ http://www.chinhphu.vn/cttdtcp/vi/cpchxhcnvn/solieungansach/2011/

dutoan07.html

5. Vietnam ministry of industry and trade web portal-<

http://www.moit.gov.vn/web/guest/legal?

p_p_id=legaltext_view_portlet_WAR_vsi_portlets_INSTANCE_rw9n&p_p_action=1&p_p

_state=normal&>

6. General Statistics Office Of Vietnam- < http://www.gso.gov.vn/default_en.aspx?

tabid=472&idmid=3>

7. VNEXPRESS.NET < http://vnexpress.net/gl/kinh-doanh>

8. “CHÍNH SÁCH XÃ H I TRONG N N KINH T TH TR NG « THÔNG TIN PHÁP Ộ Ề Ế Ị ƯỜ

LU T DÂN S ”- < Ậ Ự http://thongtinphapluatdansu.wordpress.com/2009/07/05/3246/>

9. Financial Times,Companies news ,

FT.com<http://www.ft.com/intl/companies/automobiles>