INTERNATIONAL MARKETING REPORT

EXPORT MARKETING SCREENING

AND SELECTION FOR TH TRUE MILK

PREPARED BY INSTRUCTED BY
Group 7 PhD. Tran Thu Trang
 LIST OF MEMBERS
No. Full Name Student ID
1 Vũ Thị Thái An 2013550002
2 Vũ Việt Hùng 2013550012
3 Nguyễn Thị Huyền 2013150024
4 Hà Đăng Bảo Minh 2013150033
5 Nguyễn Lâm Phương 2012250056
6 Kiều Diễm Quỳnh 2013550029
7 Trần Huyền Trang 2012550030
8 Tô Lân Vũ 2013550037

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 TABLE OF CONTENTS
TABLE OF CONTENTS ............................................................................................................... 3

LIST OF FIGURES AND TABLES.............................................................................................. 5

INTRODUCTION........................................................................................................................... 6

CHAPTER 1. SCREENING AND SELECTING EXPORT-ORIENTED MARKETS FOR

TH TRUE MILK............................................................................................................................. 7

1.1 Criteria 1: Import value worldwide (Selection) ........................................................... 7

1.2 Criteria 2: Import growth rate (Selection) ................................................................... 8

1.3 Criteria 3: Distance Closeness (Selection) .................................................................... 8

1.4 Criteria 4: Countries that have FTA with Vietnam (Selection) ................................. 9

1.5 Criteria 5: GDP per capita (Selection) ........................................................................ 10

1.6 Criteria 6: Worldwide major product of milk (Exclusion) ....................................... 11

1.7 Select potential markets ............................................................................................... 11

CHAPTER 2. SCREENING OF SEGMENTS TO NARROW DOWN THE LIST OF

POTENTIAL MARKETS ............................................................................................................ 12

2.1 Political stability ............................................................................................................ 12

2.2 Market size .................................................................................................................... 14

2.3 Market growth .............................................................................................................. 16

2.4 Milk import prospect .................................................................................................... 17

2.5 Geographical disadvantages and cross-cultural risks ............................................... 17

2.6 Taxation ......................................................................................................................... 18

2.7 Technical barriers ......................................................................................................... 20

2.8 Conclusion ..................................................................................................................... 21

CHAPTER 3. PESTEL ANALYSIS ........................................................................................... 23

3.1 Political factor ............................................................................................................... 23

3.1.1 Government and administration ................................................................................. 23

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 3.1.2 Foreign relations ........................................................................................................... 23

3.1.3 Import restriction ......................................................................................................... 23

3.2 Economic factor ............................................................................................................ 25

3.2.1 Economic indicators ..................................................................................................... 25

3.2.2 Government policies towards pandamic shock.......................................................... 26

3.3 Social factor ................................................................................................................... 27

3.3.1 Demographic ................................................................................................................. 27

3.3.2 Social trends .................................................................................................................. 27

3.4 Technology factor.......................................................................................................... 28

3.4.1 Production and distribution methods ......................................................................... 28

3.4.2 Research and development .......................................................................................... 28

3.5 Environment factor ....................................................................................................... 29

3.5.1 Carbon footprint ........................................................................................................... 29

3.5.2 Climate ........................................................................................................................... 30

3.6 Legal factor .................................................................................................................... 30

CONCLUSION ............................................................................................................................. 31

REFERENCE ................................................................................................................................ 32

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 LIST OF FIGURES AND TABLES

Figure 1.1 List of importers for the milk and cream product in 2021 ....................................... 7
Figure 1.2 The growth of countries’ imports for milk and cream product ............................... 8
Figure 1.3 Geographic distance between 10 relevant countries and Vietnam .......................... 9
Figure 1.4 GDP per capita of 10 relevant countries in 2021 (unit: USD) ................................ 10
Figure 1.5 Major producers of cow milk worldwide in 2021, by country ............................... 11
Figure 2.1 Political stability of selected countries ...................................................................... 13
Figure 2.2 The market value and per person revenues ............................................................. 15
Figure 2.3 Taxes on international trade (% revenue) ............................................................... 19
Figure 2.4 Profit tax (% of commercial profits)......................................................................... 19
Figure 3.1 Import requirements applied to Milk products (2018) ........................................... 24
Figure 3.2 Custom tariffs on Milk products exported from Vietnam to Indonesia (2021) .... 25

Table 1.1 Trade agreements between Vietnam and 10 relevant countries .............................. 10
Table 2.1 Political Stability and the Absence of Violence/Terrorism ...................................... 12
Table 3.1 Indonesia: Medium-term outlook (2021) ................................................................... 26
Table 3.2 Milk processing company type based on capital ownership .................................... 29

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 INTRODUCTION

The TH Milk Food Joint Stock Company as part of TH Group was established on
24/02/2009. It was the first company of TH Group with an investment project on an industrial dairy
farm, modern milk processing technology, and a methodical distribution system.

TH Group has been equipped with modern technology from Israel and the world's leading
human resources with a view to keeping the essence of nature intact in each product. TH Group
also applies a high-end management system and synchronous closed production process from
farming to distributing products to consumers. The barn system applies the most advanced breeding
techniques in the world. Cows are imported from countries famous for dairy farming such as New
Zealand, Uruguay, Canada... to ensure the best source of dairy cows for the best milk quality.

Vision & Mission: TH Group aspires to become the leading manufacturer in Vietnam in
the field of clean food derived from nature. With severe and long-term investment combined with
the world's most modern technology, we are determined to become a world-class food brand trusted
by everyone and the pride of the nation. With the spirit of being close to nature, TH Group always
tries to nourish the Vietnamese body and soul by providing food products derived from nature.

TH Group's product portfolio currently includes TH true MILK pasteurized and UHT fresh
milk products. In addition to the dairy product line, TH still has other products: TH true yogurt, TH
true nut, TH true water, TH true tea, TH true ice cream, TH true cheese, …

Our group’s focus is TH true MILK pasteurized and UHT fresh milk products. TH true
MILK has become the first Vietnamese enterprise to export fresh milk products to China after its
dairy products have met strict requirements and conditions set by the neighbor with a population of
1.4 billion. In the Russian market, TH already has a company with farms and factories. Currently,
when the TH dairy factory is being built, TH's fresh milk has been ordered by leading European
dairy companies. In addition, the product has also penetrated the markets of ASEAN countries.

Having realized the strength of the company and the product, our group’s report will conduct
research to find new potential export-oriented countries for TH Group to increase its market share
for TH True Milk product line.

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 CHAPTER 1. SCREENING AND SELECTING EXPORT-ORIENTED
MARKETS FOR TH TRUE MILK

1.1 Criteria 1: Import value worldwide (Selection)

As Vietnam is an milk import - deficit country; therefore, in order to identify the idea market to
entry, then figuring out which country has the highsest import value of milk wordwide is crucial.

According to trade map in 2021, the country with the highest import value of milk and diary
products is China with 4.441 billion dollar in value which dominates worldwide milk import value
with 19.8% . Following by this is Mexico with 1.02 billion dollar in value of imported milk and
diary products resulting in a 4.5% of total milk import value of the world. Standing in the 3 ,4 and
rd th

5 place are Algeria with 1.01 billion dollar, Netherland with 857,7 million dollar and Indonesia
th

with 845,2 million dollar respectively.

Here are the list of ten country which has the highest value of import milk of the world: China,
Mexico, Algeria, Netherland, Indonesia, Hong Kong, Saudi Arabia, United Arab Emirates,
Malaysia, Belgium.

Figure 1.1 List of importers for the milk and cream product in 2021

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 1.2 Criteria 2: Import growth rate (Selection)

Another important factor that needed to be considered about is the import growth rate of milk
worldwide. According to ITC, Belgium, China, Mexico are among the countries which have the
highest growth in import of milk and diary with 34, 33 and 30% respectively from 2020 to 2021.
The countries which also have a decent growth in the import value in the mentioned time period
are: Bangladesh, Italy, Netherland with 26%. Lastly, the countries with 15 – above growth rate of
this figure are: Indonesia with 17%, Thailand with 16% and Taipei with also 16%

Figure 1.2 The growth of countries’ imports for milk and cream product

1.3 Criteria 3: Distance Closeness (Selection)

Since TH True Milk is an inexperienced business in the field of exporting, we found that the first
and simplest thing to do to select target countries is to apply geographic criteria. Of the ten
countries, Hong Kong and China are the closest countries to Vietnam, followed by Malaysia and
Indonesia respectively. Mexico is the farthest to Vietnam with a distance of nearly 15,000 km.

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 Figure 1.3 Geographic distance between 10 relevant countries and Vietnam

Unit: Km

1.4 Criteria 4: Countries that have FTA with Vietnam (Selection)

In the current context of opening up to international trade, Free Trade Agreements provide many
opportunities as well as advantages for domestic companies to increasingly export their products.
Of 10 countries that have been previously selected, Vietnam has signed FTA with some countries
and regions as follows:

Algeria None

Belgium EVFTA

China ACFTA; RCEP

Indonesia ATIGA; AFTA

Hong Kong AHFTA

Malaysia ATIGA; AFTA; CPTPP

Mexico CPTPP

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 Netherlands EVFTA

Saudi Arabia None

United Arab Emirates None

Table 1.1 Trade agreements between Vietnam and 10 relevant countries

1.5 Criteria 5: GDP per capita (Selection)

Per capita gross domestic product (GDP) is a metric that breaks down a country's economic output
per person and is calculated by dividing the GDP of a country by its population. Per capita GDP is
a global measure for gauging the prosperity of nations and is used by economists, along with GDP,
to analyze the prosperity of a country based on its economic growth. Small, rich countries and more
developed industrial countries tend to have the highest per capita GDP.
GDP per capita is a dimension that reflects the financial health and the prosperity of nations in a
specific country. Enterprises ought to take this factor into consideration. The following figure will
indicate GDP per capita of 10 countries:

Figure 1.4 GDP per capita of 10 relevant countries in 2021 (unit: USD)

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 1.6 Criteria 6: Worldwide major product of milk (Exclusion)

When choosing a market to entry, it is vital to consider the competitors in the targeted countries.
Therefore, TH should avoid the countries with the strongest producers in the worldwide milk
indusy.

According to Statista, the top 1 producer country of wordwide milk industry in 2021 is the United
States with 102.6 tons in quantity. The top 2 and 3 positions belong to India with 96 tons and China
with 34.6 tons. Next, Russia and Brazil are the top producers with 32.02 tons and Brazil with 24.05
tons of milk.

This is the list of the top milk producer of the world: the US, China, Russia, Brazil, New Zealand,
United Kingdom, Mexico, Argentina,…

Figure 1.5 Major producers of cow milk worldwide in 2021, by country

1.7 Select potential markets

After the above research and criteria, we decide that these following markets would be the most
potential ones to entry: Mexico, Belgium, Saudi Arabia, Netherlands, Indonesia.

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 CHAPTER 2. SCREENING OF SEGMENTS TO NARROW DOWN THE
LIST OF POTENTIAL MARKETS

2.1 Political stability

With the destructive effects of the Ukraine War on the global trade and economy, political stability
is indeed considered to be of the utmost importance. The importance of this driver is linked to its
broad and multifaceted implications, which touch on the various aspects of the political, financial,
and economic features of a country.
Political Stability and the Absence of Violence/Terrorism measures perceptions of the likelihood
of political instability and/or politically-motivated violence, including terrorism. Percentile rank
indicates the country's rank among all countries covered by the aggregate indicator, with 0
corresponding to the lowest rank and 100 to the highest rank.
According to the World Bank Policy Research Working Paper No. 5430, we have a table showing
the related data throughout a 5-year period:

2016 2017 2018 2019 2020

Belgium 61.9 62.4 59.0 60.8 64.6

Mexico 23.8 17.6 23.1 18.9 17.9

Netherlands 77.6 80.5 76.4 75.9 74.1

Indonesia 32.4 29.0 26.9 27.4 28.3

Saudi Arabia 28.1 24.3 24.5 24.1 22.6

Table 2.1 Political Stability and the Absence of Violence/Terrorism

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 Figure 2.1 Political stability of selected countries

As can be seen from the graph above, Netherlands ranked the highest out of 5 countries with the
indicator of around 75 percentile. This means Netherlands is categorized as a country with a low
impact of terrorism or other forms of politically motivated violence; meanwhile, Indonesia, Saudi
Arabia, and Mexico are considered countries with a relatively unstable political system, with the
figures recorded ranging from 17 to over 30 percentile rank.

Classify the score on a scale of 0-4

• From 0 to 20%: 0 = Unacceptable
• From 21 to 40% 1 = Poor
• From 41 to 60% 2 = Average Conditions
• From 61 to 80%: 3 = Above Average Conditions
• From 81 to 100%: 4 = Superior Conditions

Belgium Mexico Netherlands Indonesia Saudi Arabia

Political Stability 64.6 17.9 74.1 28.3 22.6

Score 3 0 3 1 1

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 2.2 Market size

Market size is made up of the total number of potential buyers of a product or service within a
given market, and the total revenue that these sales may generate.
According to information provided by Statista, we can have an overview of the market value as
well as the volume per person in 5 target markets as follows:
- Belgium: Revenue in the Milk segment amounts to US$0.69 billion in 2022. In relation to total
population figures, per person revenues of US$59.12 are generated in 2022. The average volume
per person in the Milk segment is expected to amount to 28.7kg in 2022.
- Mexico: Revenue in the Milk segment amounts to US$4.73 billion in 2022. In relation to total
population figures, per person revenues of US$35.95 are generated in 2022. The average volume
per person in the Milk segment is expected to amount to 34.9kg in 2022.
- Netherlands: Revenue in the Milk segment amounts to US$0.96 billion in 2022. In relation to
total population figures, per person revenues of US$55.82 are generated in 2022. The average
volume per person in the Milk segment is expected to amount to 36.0kg in 2022.
- Indonesia: Revenue in the Milk segment amounts to US$10.20 billion in 2022. In relation to total
population figures, per person revenues of US$36.53 are generated in 2022. The average volume
per person in the Milk segment is expected to amount to 21.9kg in 2022.
- Saudi Arabia: Revenue in the Milk segment amounts to US$2.07 billion in 2022. In relation to
total population figures, per person revenues of US$57.82 are generated in 2022. The average
volume per person in the Milk segment is expected to amount to 53.7kg in 2022.

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 Figure 2.2 The market value and per person revenues

Based on the data presented above, we can conclude that Indonesia is probably the most potential
market as even though its’ per capita consumption/per person revenues is not as high as the other
countries, Indonesia’s market value still ranked the highest. This means that if TH True Milk can
take advantage of the potential growth of volume per person, the market value of this country would
increase significantly.
On the other hand, Belgium, the Netherlands, and Saudi Arabia acquire the per person revenues of
US$59.12, US$55.82, and US$57.82 respectively. The pattern shows a high possibility of milk
saturation in these countries which makes them less desirable to enter.
Classify the score on a scale of 0-4:
• From 0 to 2 billion: 0 = Unacceptable
• From 2 to 4 billion 1 = Poor
• From 4 to 6 billion 2 = Average Conditions
• From 6 to 8 billion 3 = Above Average Conditions
• Above 8 billion 4 = Superior Conditions

Belgium Mexico Netherlands Indonesia Saudi Arabia

Market Size 0.69 4.73 0.96 10.2 2.07

Score 0 2 0 4 1

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 2.3 Market growth

Market growth is considered the ability to sell products in a specific region or area in the future.
Annual percentage growth rate at market prices based on constant local currency. In the other
words, Market growth is defined as the rise in the demand for a product or a service in the market.
According to information provided by Statista, the potential market growth in 5 target countries is
predicted to increase:
- Belgium: The market is expected to grow annually by 3.30% (CAGR 2022-2027). The Milk
segment is expected to show a volume growth of 0.6% in 2023.
- Mexico: The market is expected to grow annually by 2.35% (CAGR 2022-2027). The Milk
segment is expected to show a volume growth of 0.4% in 2023.
- Netherlands: The market is expected to grow annually by 2.12% (CAGR 2022-2027). The Milk
segment is expected to show a volume growth of 0.7% in 2023.
- Indonesia: The market is expected to grow annually by 6.14% (CAGR 2022-2027). The Milk
segment is expected to show a volume growth of 3.7% in 2023.
- Saudi Arabia: The market is expected to grow annually by 5.40% (CAGR 2022-2027). The Milk
segment is expected to show a volume growth of 3.3% in 2023.
Classify the score on a scale of 0-4
• From 0 to 1%: 0 = Unacceptable
• From 1 to 2% 1 = Poor
• From 2 to 3% 2 = Average Conditions
• From 3 to 4%: 3 = Above Average Conditions
• Above 4% 4 = Superior Conditions

Belgium Mexico Netherlands Indonesia Saudi Arabia

Market Growth 3.3% 2.35% 2.12% 6.14% 5.4%

Score 3 2 2 4 4

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 2.4 Milk import prospect

Evaluating the share of imports in the domestic market will bring significant points to the market
selection process. The interpretation gives an import landscape overview of potential countries, and
how much they are purchasing and willing to spend. It also reveals consumers’ preferences,
residents’ openness to foreign products should be included in the understanding of a market.

Classify the score on a scale of 0-4:

• From 0 to 0.012 billion: 0 = Unacceptable
• From 0.01 to 0.02 billion: 1 = Poor
• From 0.02 to 0.1 billion: 2 = Average Conditions
• From 0.1 to 0.5 billion: 3 = Above Average Conditions
• Above 0.5 billion: 4 = Superior Conditions

Mexico Belgium Netherlands Indonesia Saudi Arabia

0.016 bil 0.57 bil 0.625 bil 0.014 bil 0.067 bil
Milk import value
USD USD USD USD USD

Share of milk imported

value in the total global 0.17% 6.32% 6.89% 0.11% 0.74%
market in 2020

Score 1 3 4 1 2

2.5 Geographical disadvantages and cross-cultural risks

There are certain disadvantages to conducting business in a country that is half a world away. An
unavoidable consequence of any international expansion is that many logistical considerations will
quickly become more complicated over time. Shipping from one country to another can take a long
time, and what would you do in the event of delays or even missing consignments? Another
problem is that a different time zone has the potential to disconnect headquarters and subsidiaries.
Although not all time zone conflicts are that severe, it’s important to minimize inefficiencies; if
each place has to wait until the following morning for a reply to an important email or delivery,

17
everything slows to a crawl. This means that Japan might have an edge over other considerations
of ours—being closest to Vietnam.

Next, being an essential product to have in any household, we can safely assume that cultural
differences won’t have any significant impact on the toilet paper business, wherever they are.
Nonetheless, the ongoing trends of environmentally-friendly products should be taken into
consideration as the people of these developed countries care more about the environment and are
willing to pay a higher price for these products.

Classify the score on a scale of 0-4:

• From 20,000 to 25,000km: 0 = unacceptable
• From 15,000 to 20,000km: 1 = poor
• From 10,000 to 15,000km: 2 = average conditions
• From 5,000 to 10,000km: 3 = above-average conditions
• From 0 to 5,000km: 4 = superior conditions

Mexico Belgium Netherlands Indonesia Saudi Arabia

Geographical Distance 14,639 km 9,745 km 9,632 km 5,520 km 6,680 km

Score 2 3 3 3 3

2.6 Taxation

Here we will take a look at two types of taxes that these countries impose on international business:
commercial tax rate which is the amount of taxes and andatory contributions payable by businesses
after accounting for allowable deductions and exemptions as a share of profits and taxes on
international trade including import duties, export duties, profits of export or import monopolies
exchange profits, and exchange taxes.

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 Figure 2.3 Taxes on international trade (% revenue)

Figure 2.4 Profit tax (% of commercial profits)

(1) Commercial tax rate

Classify the score on a scale of 0-4:
• From 60 - 75%: 0 = unacceptable
• From 45 to 60%: 1 = poor
• From 30 to 45%: 2 = average conditions

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 • From 15 to 30%: 3 = above average conditions
• From 0 to 15%: 4 = superior conditions
(2) Taxes on international trade
Classify the score on a scale of 0-4:
• From 20 - 30%: 0 = unacceptable
• From 15 to 20%: 1 = poor
• From 10 to 15%: 2 = average conditions
• From 5 to 10%: 3 = above average conditions
• From 0 to 5%: 4 = superior conditions

Saudi
Mexico Belgium Netherlands Indonesia
Arabia

Profit tax (% of commercial 27% 10.3% 20.4% 18.1% 2.2%

profits) 2019 (3) (4) (3) (3) (4)

Taxes on international trade 1.5% 0% 0% 2.1% 1.9%

(% of revenue) 2019 (4) (4) (4) (4) (4)

Score 3.5 4 3.5 3.5 4

2.7 Technical barriers

In the Netherlands and Belgium, the main technical barrier is the EU's general import regulations
and measures, which are specified in five product standards:
- Quality standard: The ISO 9000 quality management system
- Food hygiene standards: Apply Hazard Analysis Critical Control Point (HACCP)
- Safety standard: EU regulations marking requirements
- Environmental protection standards: Eco-labels, regenerative labels, internationally recognized
certificate
The government of the Republic of Indonesia has been restricting the import of finished products
by manufacturing companies to be traded. The Ministry of Trade (MOT) has issued Minister of
Trade Regulation No. 59 of 2020 (“Regulation 59”) which is an amendment to Minister of Trade

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Regulation No. 118/M-DAG/PER/12/2015 on Import Provisions for Complementary Goods,
Goods for the Purpose of Market Testing, and After-Sales Service.

Mexico: New changes include modifications to the General Labeling Specifications for
Prepackaged Food and Non-Alcoholic Beverages-Commercial and Sanitary Information (NOM-
051-SCFI/SSA1- 2010) and updated Specifications and Phytosanitary Requirements for the
Importation of Natural Christmas Trees of Species From the Genus Pinus and Abies, and the
Species Pseudotsuga menziesii (NOM-013-SEMARNAT-2020)

Saudi Arabia: Importers must have an account with the SFDA and the Food Product must be
registered. Importers must have a valid Commercial Registration Certificate which includes Food
Trade as a registered commercial activity. Expiration Dates of Food Products shall be in line with
the SFDA

Classify the score on a scale of 0-4:

• 0 = unacceptable
• 1 = poor
• 2 = average conditions
• 3 = above-average conditions
• 4 = superior conditions

Mexico Belgium Netherlands Indonesia Saudi Arabia

Score 2 1 1 2 2

2.8 Conclusion

Regarding the weight allocation of these criteria, we consider political stability the most essential
factor. The influence of the Ukraine war on the international business landscape recently has shown
us how geopolitical risk can detrimentally affect global trade. As a result, we allocate the ratio of
0.25 to this criterion.

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Moving on to the next two criteria which are market size and market growth, these two are the basic
indicators showing the potential of our target countries, and whether the market has space for our
dairy product to enter. That’s why market size and market growth are allocated a ratio of 0.2 and
0.18 respectively.

Next is Import prospect with the ratio of 0.15 as the interpretation gives an import landscape
overview of potential countries, and how much they are purchasing and willing to spend. The
following criterion is Taxation, it accounts for 0.1 because of its direct and considerable impact on
an enterprise’s profit when exporting to foreign countries. The two remaining criteria are
Geographical disadvantages and Cross-cultural risk and Technical barriers with the same ratio of
0.06 - the lowest one - due to the reason that these two factors are unavoidable when doing
international trade but they can be prepared and solved less complicated than the others above.

Saudi
Criteria Weight Belgium Mexico Netherlands Indonesia
Arabia

Political Stability 0.25 3 0 3 1 1

Market Size 0.2 0 2 0 4 1

Market Growth 0.18 3 2 2 4 4

Import Prospect 0.15 3 2 3 3 3

Taxation 0.1 4 3.5 3.5 3.5 4

Geographical
Disadvantages and 0.06 3 2 3 3 3
Cross-cultural Risk:

Technical Barriers 0.06 1 2 1 2 2

TOTAL SCORE 1 2.38 1.65 2.15 2.87 2.32

So we choose Indonesia as the target market for TH True Milk Diary Products as it ranked 1st out
of five countries after considering seven factors with allocated weights .

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 CHAPTER 3. PESTEL ANALYSIS

3.1 Political factor

3.1.1 Government and administration

Politics of Indonesia takes place in the framework of a presidential representative democratic

republic and a multi-party system. The president has the complete power of being the head of the
government, head of the state, and commander-in-chief of the armed forces.

3.1.2 Foreign relations

The country adheres to a "free and active" foreign policy, seeking a role in regional affairs in
proportion to its size and location but avoiding involvement in conflicts among other countries.
Indonesia is a member of many trading organizations like World Trade Organization, Organization
of Islamic Cooperation, East Asia Summit, Association of Southeast Asian Nations, Non-Aligned
Movement, and Group of Twenty.

Indonesia and Vietnam relations are currently at the highest level, that is strategic partnership, and
cooperation between the two countries in various fields continue to increase not only bilaterally
and regionally but also in multilateral frameworks. The year 2020 witnessed 65 years of Vietnam-
Indonesia relations showing traditional friendship and close partnership (Kien, 2020).

3.1.3 Import restriction

a) Import requirments

There are 42 import requirement measures applied to the product: Milk when exporting from
Vietnam to Indonesia. However, after being checked, all regulatory requirements are applied for
not only Vietnam but all other countries.

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Figure 3.1 Import requirements applied to Milk products (2018)

24
 b) Custom tariff

Indonesia’s customs tariffs on milk products exported from Vietnam ranges from 0% to 5% based
on the tariff regime, in which preferential tariff for ASEAN countries is more profitable for Vietnam
with only zero-tariff. This can be considered to be a competitive advantage in price of Vietnam
when compared to European countries like France, Germany and Denmark – main milk-exporters
to Indonesia who must suffer 4-5% tariff.

Figure 3.2 Custom tariffs on Milk products exported from Vietnam to Indonesia (2021)

3.2 Economic factor

3.2.1 Economic indicators

According to the World Bank, Indonesia has sustained strong growth in the past decade. GDP
growth averaged 5.7% annually over 2010-2014, with a slowdown to an annual average of 5% over
2015- 2019. Indonesia’s overall strong economic performance was also underpinned by prudent
macroeconomic policies in the face of various commodity and financial cycles and shocks.
However, it can easily be seen that due to Covid-19 pandemic, all economic indicators witnessed a
downward trend.

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 Table 3.1 Indonesia: Medium-term outlook (2021)

3.2.2 Government policies towards pandamic shock

The pandemic shock caused the first economic recession in two decades with an estimated 2.1%
economic contraction leading to a steep fall in private consumption associated with labor income
losses and heightened uncertainty. As of September 2021, there were 49 financial sector policy
measures with banking sector (45% of total); liquidity/funding (27%); financial markets/NBFI
(18%) and payment system measures (10%).

Specifically, Indonesian government implemented emergency fiscal packages equivalent to 3.6%

and 4.2% of GDP (actual spending) responding in 2020 and to 4.2% of GDP (tentative) in 2021 to
deal with the health impact, provide relief to households and firms and support the recovery:
providing tax relief (0.4 and 0.3% of GDP in 2020 and 2021, respectively) in the form of temporary
waivers for personal income tax, corporate income tax, import income tax. Moreover, Bank
Indonesia (BI) loosened monetary policy by cutting its benchmark policy rate to a record low and
providing liquidity, including through a substantial local government bond purchase program (3.7%
of GDP of which 3.0% of GDP in the primary market). Central bank bond purchases have helped

26
maintain financial stability amid capital flight. Continued effective COVID-19 response and
structural reforms are paramount to boost medium-term thus the Indonesian economy is projected
to rebound by 3.7 percent in 2021 and grow by 5.2 percent in 2022 with a corresponding increase
in demand for all kinds of goods which can be considered to be more favorable for the exporting
industries than that in Covid-19 period.

3.3 Social factor

3.3.1 Demographic

Indonesia’s total population in 2020 was 270,203,917 ranking 4th in the world. Approximately
86.70% of the population are Muslim, and they follow Islam, 10.72% are Christians, and 1.74%
are Hindus. Indonesia is also considered to be one of the world’s largest diverse countries,
ethnically and linguistically. Approximately more than 600 ethnic groups live there, and the country
has over 700 spoken languages. According to an estimate, the average life of males and females in
Indonesia is 67 and 71 years old.

The factor related to religion is most notable. It can easily be seen that the majority of Indonesian
belongs to Muslim religion, which have the common standard for all their goods called Halal
standards. These standards have many significant differences compared to general international
standards, which can be challenging to all international firms. However, as regards TH True Milk,
according to Ms. Hoang Thanh Thuy, International Sales Director of TH Group, 2021, up to now,
almost all of its dairy products and dairy foods are stamped with the Halal safety circle in addition
to other important quality certificates such as ISO, FSSC, BRC,... Thanks to all these quality
certifications, this firm can easily conquer most Indonesian consumers.

3.3.2 Social trends

There is a significant increase in the middle class in Indonesia thus shifting the attitude of the
citizens. The Indonesian have interest in many fields like healthy food, frozen processed food, ready
meals, tech products, and western food.

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 3.4 Technology factor

3.4.1 Production and distribution methods

The Indonesian milk industry still relies on small producers for its dairy source. Total population
of dairy cattle in Indonesia in 2017 was about 500,000 head of dairy cattle, most of which came
from small-scale farmers. This milk will then be collected by the dairy cooperatives, making up
about 90% of milk collected in Java. Dairy cooperatives have a role in marketing and facilitating
smallholder farmers.
Due to this, it is difficult for manufacturers and distributors to have stable availability, relying on
the majority of small scale sources. Quality control is also hard to achieve due to the lack of control
over the farmer’s production methods and them not having the technology and infrastructure to
guarantee the desired product quality.

Meanwhile, Vietnam has already established itself as a very strong and steadily growing milk
producer and exporter with their well-established system of manufacturers, collection process and
large-scale production lines. A large number of enterprises in the industry are investing in modern
equipment, updating advanced technology in order to produce high-quality products, ensuring food
safety and competitiveness in the domestic and foreign market, which satisfy the increasing demand
of consumers. Even Though Vietnam also relies somewhat on their farmers as a source for fresh
dairy, the produce’s quality can be maintained through detailed inspections and examinations by
the collecting companies, making sure the farmers have both the knowledge and the technology to
provide milk with the highest quality possible.

3.4.2 Research and development

Efforts to improve technological capabilities can be done through R&D activities undertaken by
the company. In the dairy processing industry in Indonesia, results of the study showed that R&D
activities are intensively carried out by the companies themselves and become one of the key factors
in technology development. However, mechanisms among the companies also differ quite
noticeably. In the case of dairy coopera-tives, some companies have R&D units, although it still
belongs to the linked unit.

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 Table 3.2 Milk processing company type based on capital ownership

This occurs because the dairy cooperatives’ R&D activities are still minimal and there is no specific
budget allocation to do so. R&D activities are carried out only when there is a need to undertake
technology development. Technology improvement efforts are made through R&D activities
carried out in the R&D unit. There are even cases of compa-nies in dairy cooperatives whose R&D
unit are capable of performing imitations of production machinery. These companies are able to
create a prototype from which the production machine is later realized. Nevertheless, the produced
simple, cloned machinery is limited for its own use and there are no plans for mass production.

3.5 Environment factor

3.5.1 Carbon footprint

The Indonesian dairy industry faces a lot of problems, including low productivity and high impact
on the environment. Poor manure management, poor reproduction, poor feeding and animal health
problems are all prominent Indonesian issues hindering the industry as a whole and product quality
control specifically.

In West Java, where a large part of the Indonesian dairy farms are concentrated, milk production
takes place on small-scale dairy farms (about 2-4 cows), with low farm productivity. As most farms
have little or no land for forage production, forage supply throughout the year is a challenge and
waste management is poor. Manure is severely polluting water streams and rivers while only a
small part is utilized for crop production.

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 3.5.2 Climate

Indonesia’s climate is entirely tropical, largely hot and humid, with rainfall occurring mostly in
low-lying areas and mountainous regions experiencing cooler temperatures. Indonesia’s condition
with tropical climate, unstable feed quality and traditional rearing management makes it even
harder for small farmers to maintain product quality without industrial firms’s support and control.

3.6 Legal factor

Recently Indonesian authorities have updated their sets of laws and regulations regarding food and
products with animal origin, including milk and other dairy products. These regulations strongly
emphasized on product sourcing and shipment to ensure everything in alignment with their legal
and religious ways.
This can prove to be one problem for Vietnamese milk exports, unless firms and producers take
sourcing their products and ingredients very seriously and carefully. Only with proper control and
regulating throughout the entire process of raising the cattle, collecting, manufacturing and shipping
the products, will Vietnamese exporters be able to gain access to the Indonesian market.

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 CONCLUSION

The rapid development of globalization has made the import and export of different products
between countries an inevitable trend of the market. In recent years, Vietnam's import and export
has grown rapidly thanks to a series of policies that have been changed in the direction of creating
the best conditions for production and business enterprises.It is also obviously due to the
determining the right direction, specifically selecting a potential market, in accordance with the
conditions of the business. For a company or a business that intends to enter the international
market, we first need to screen the potential markets with the given appropriate criteria that are
suitable with the business's goals, capital, resources of the business, the degree of adaptation of
their product required, marketing and transportation costs. In addition, the issues of factors outside
the business in the global market such as: environment, economy, politics, law, society are also one
of the issues that need to be considered for businesses before they intend to enter a new market.
TH True Milk, a company famous for the quality of dairy products and known for its leading brand
of fresh milk in Vietnam, is one of the companies with enough potential to penetrate the
international market. After a thorough screening section by evaluating many factors including
import value, import growth rate and GDP our group has narrowed down the top 5 potential
countries to enter: Mexico, Belgium, Saudi Arabia, Netherlands, Indonesia. Based on the seven
factors of segmenting the market illustrated above, our team has selected Indonesia as the most
potential location to export TH True Milk. Most of the external factors such as the environment,
society, politics of Indonesia and the partnership between Vietnam and Indonesia are favorable for
the development of export dairy products. However, some stricter regulations on the origin and
materials of products will be challenging for firms. Our team claims that by providing a detailed
overview of the Indonesia market's prospects, the company would be able to achieve not only
operational and strategic goals but also be able to succeed in the international market.
TH True Milk's mission and vision along with a thorough analysis of internal and external factors
when exporting to new markets, our team believes that TH true milk can soon conquer new
customers with the company's product line and at the same time bring the Vietnamese dairy brand
name to the world.

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