business expansion plan fauji fertilizers

8/3/2019 Business Expansion Plan Fauji Fertilizers

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ABSTRACT

In this project the goal was to identify and select two countries for the

purpose of Fauji Fertilizers Companys Business expansion plan. There are

five major parts to country identification and selection: general analysis,

country identification, preliminary selection, in-depth screening, and final

selection.

Initially 4 countries were identified Zambia, Vietnam, India and Mauritania.

Finally Vietnam and India were selected; methodology used for country

selection was in-depth screening. Final selection was followed by marketingplan for each country and finally sales for each country were forecasted, on

the basis of which we recommend Fauji Fertilizers Company to expand its

business to Vietnam and India.


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Table of ContentsABSTRACT ...................................................................................................................................................... 0

...................................................................................................................................................................... 7

FAUJI FERTILIZERS COMPANY; AN INTRODUCTION ...................................................................................... 7

MAJOR HIGHLIGHTS: ................................................................................................................................. 7

POSITIONING: ............................................................................................................................................ 8

STRENGTHS: .............................................................................................................................................. 8

WEAKNESSES:............................................................................................................................................ 9

COUNTRIES CONSIDERED FOR EXPANSION: ................................................................................................. 9

ZAMBIA: .................................................................................................................................................... 9

VIETNAM: .................................................................................................................................................. 9

INDIA: ........................................................................................................................................................ 9MAURITANIA: .......................................................................................................................................... 10

SELECTED COUNTRIES: ............................................................................................................................ 10

........ 11

INDIA; AN OVERVIEW .................................................................................................................................. 11

PEST ANALYSIS OF THE AGRICULTURE INDUSTRY OF INDIA: ...................................................................... 11

POLITICAL ANALYSIS: ............................................................................................................................... 11

ECONOMIC ANALYSIS:............................................................................................................................. 12

SOCIAL ANALYSIS: ................................................................................................................................... 12

TECHNOLOGICAL ANALYSIS: ................................................................................................................... 13

PRELIMINARY ANALYSIS: ............................................................................................................................. 13

MACRO ECONOMIC DATA: ..................................................................................................................... 13

GDP - COMPOSITION BY SECTOR: ....................................................................................................... 14


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AGRICULTURE - PRODUCTS: ................................................................................................................ 14

INDUSTRIES: ........................................................................................................................................ 14

EXPORTS - COMMODITIES: ................................................................................................................. 14

EXPORTS - PARTNERS: ......................................................................................................................... 14

IMPORTS - COMMODITIES: ................................................................................................................. 14

IMPORTS - PARTNERS: ........................................................................................................................ 14

DEMOGRAPHIC DATA: ............................................................................................................................ 14

POPULATION: ...................................................................................................................................... 15

AGE STRUCTURE:................................................................................................................................. 15

POPULATION GROWTH RATE:............................................................................................................. 15

URBANIZATION: .................................................................................................................................. 15

CULTURAL SIMILARITIES BETWEEN INDIA AND PAKISTAN: .................................................................... 15

OCCASSIONS:....................................................................................................................................... 15

FAMILY STRUCTURE: ........................................................................................................................... 15

FOOD: .................................................................................................................................................. 15

LANGUAGES: ....................................................................................................................................... 15

MARRIAGES: ........................................................................................................................................ 16

ART: ..................................................................................................................................................... 16

IN-DEPTH SCREENING: ................................................................................................................................ 16

SIZE AND STRUCTURE OF MARKET ......................................................................................................... 16

MARKET GROWTH: ................................................................................................................................. 16

COMPETITION: ........................................................................................................................................ 16

PUBLIC SECTOR ................................................................................................................................... 16

COOPERATIVE SECTOR ........................................................................................................................ 17

PRIVATE SECTOR ................................................................................................................................. 17

PAKISTANS TRADE WITH INDIA.................................................................................................................. 18

TRADE BARRIERS ......................................................................................................................................... 18

TARIFF BARRIERS IN INDIA ...................................................................................................................... 18

Additional Customs Duties: ......................................................................................................... 18

Customs Act Of India: .................................................................................................................. 18

A Special Additional Duty ............................................................................................................ 18


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An Additional Surcharge ............................................................................................................. 18

An Educational Cess .................................................................................................................... 18

WTO & SAFTA .......................................................................................................................................... 18

NON-TARIFF TRADE BARRIERS IN INDIA ................................................................................................. 18

Technical Regulations And Standards: ........................................................................................ 19

Import Licensing: ......................................................................................................................... 19

Local Content Requirement/Rule Of Origin Issues: .................................................................... 19

Import By State Trading Enterprises: .......................................................................................... 19

Customs, Shipping And Port Procedures/Regulations: ............................................................... 19

Government Procurement Regulations: ..................................................................................... 19

Clearance Of Goods: ................................................................................................................... 19

Travel Restrictions:...................................................................................................................... 19

Inadequate Infrastructure:.......................................................................................................... 19

Excessive Red Tape: .................................................................................................................... 19

Direct Political Opposition: ......................................................................................................... 19

MARKETING PLAN: ...................................................................................................................................... 20

SITUATIONAL ANALYSIS AND MARKET TRENDS: .................................................................................... 20

FORECASTING DEMAND: ........................................................................................................................ 20

COMPANY PROFILE: ................................................................................................................................ 20COMPETITION: ........................................................................................................................................ 20

CHOICE OF COMPETITION: ..................................................................................................................... 21

Reasons For Choosing DSCL ................................................................................................................ 21

FIRM SPECIFIC ADVANTAGE: ................................................................................................................... 21

SWOT ANALYSIS: ......................................................................................................................................... 21

STRENGTHS: ............................................................................................................................................ 21

WEAKNESSES:.......................................................................................................................................... 21

OPPORTUNITIES: ..................................................................................................................................... 21

THREATS: ................................................................................................................................................. 22

India keeps on revising its tariff plans. In past it had its tariffs ranging from 20-182%. A raise in

the tariff will result as a threat to FFC exports. ...................................................................................... 22

MARKETING MIX ......................................................................................................................................... 23


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PRODUCT OFFERINGS: ............................................................................................................................ 23

SONA UREA ......................................................................................................................................... 23

DAP ...................................................................................................................................................... 23

FFC SOP ............................................................................................................................................... 23

PRICE: ...................................................................................................................................................... 23

FERTILIZER INDUSTRY PRICE IN INDIA:.................................................................................................... 24

PLACE/ DISTRIBUTION:............................................................................................................................ 24

PROMOTION: .......................................................................................................................................... 24

MARKETING STRATEGIES: ........................................................................................................................... 25

FORECASTING COST/REVENUE: .............................................................................................................. 26

DISCOUNT: .......................................................................................................................................... 26

VIETNAM; GENERAL COUNTRY ANALYSIS: .................................................................................................. 27

POLITICAL SITUATION ............................................................................................................................. 27

ECONOMIC SITUATION ........................................................................................................................... 27

SOCIO CULTURAL SITUATION .................................................................................................................. 28

TECHNOLOGICAL SITUATION .................................................................................................................. 28

REASON FOR CHOOSING VIETNAM: ........................................................................................................... 29

PRELIMINARY ANALYSIS: ............................................................................................................................. 29

MACROECONOMIC DATA ....................................................................................................................... 29

DEMOGRAPHIC DATA ................................................................................................................................. 31

POPULATION: .......................................................................................................................................... 31

AGE STRUCTURE: .................................................................................................................................... 31

POPULATION GROWTH RATE .................................................................................................................. 31

URBANIZATION: ...................................................................................................................................... 31

IN-DEPTH SCREENING ................................................................................................................................. 31

MARKET PROFILE .................................................................................................................................... 31

MARKET SEGMENTATION: ...................................................................................................................... 31

FERTILIZER MARKET SIZE, CONSUMPTION PATTERNS, AND GROWTH .................................................. 32

COMPETITION: ........................................................................................................................................ 32

Big nitrogenous fertilizer producers ........................................................................................... 32

Big phosphate producers ............................................................................................................ 32


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NPK fertilizer producers .............................................................................................................. 33

State-owned enterprises ............................................................................................................. 33

Proportion of top 10 fertilizer importers to Vietnam: ................................................................ 33

IMPORT TARIFFS ..................................................................................................................................... 33

TRADE BARRIERS ..................................................................................................................................... 34

Import prohibitions: ............................................................................................................................ 34

Quantitative restrictions and non-automatic licensing: ..................................................................... 34

Special authority regulation: ............................................................................................................... 34

Foreign exchange system: ................................................................................................................... 34

Customs: ............................................................................................................................................. 35

Taxes: .................................................................................................................................................. 35

Automatic licensing: ............................................................................................................................ 35

Trading rights: ..................................................................................................................................... 35

MARKETING PLAN FOR VIETNAMESE FERTILIZER MARKET ........................................................................ 36

EXECUTIVE SUMMARY ............................................................................................................................ 36

SITUATIONAL ANALYSIS .......................................................................................................................... 36

OVERVIEW ............................................................................................................................................... 36

COMPANY: .............................................................................................................................................. 37

CUSTOMERS: ........................................................................................................................................... 37

COMPETITION: ........................................................................................................................................ 37

SWOT ANALYSIS: ......................................................................................................................................... 38

STRENGTHS: ............................................................................................................................................ 38

WEAKNESSES:.......................................................................................................................................... 38

OPPORTUNITIES: ..................................................................................................................................... 38

THREATS: ................................................................................................................................................. 38

MARKETING OBJECTIVES ............................................................................................................................ 38

FINANCIAL OBJECTIVES ............................................................................................................................... 38

MARKETING MIX ......................................................................................................................................... 39

PRODUCT OFFERED: ................................................................................................................................ 39

PLACE: ..................................................................................................................................................... 39

AGENTS: .............................................................................................................................................. 39


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PROMOTION: .......................................................................................................................................... 39

PRICING: .................................................................................................................................................. 39

INDUSTRY PRICES: ................................................................................................................................... 40

Formula used: ..................................................................................................................................... 40

Payment: ............................................................................................................................................. 40

Discount: ............................................................................................................................................. 40

Determined Price: ............................................................................................................................... 41

TARGET MARKET ..................................................................................................................................... 41

Mekong River Delta and southeastern region: ........................................................................... 41

Southern region: ......................................................................................................................... 41

Northern region: ......................................................................................................................... 41

POSITIONING IN VIETNAM ...................................................................................................................... 41

GENERAL MARKETING STRATEGIES ............................................................................................................ 41

MARKETING ORGANIZATION: ................................................................................................................. 42

REVIEW AND CONTROL: .......................................................................................................................... 42

SALES FORECAST: .................................................................................................................................... 42

FFCs FSA: ............................................................................................................................................ 42

Choosing competition: ........................................................................................................................ 42

1st years sale:..................................................................................................................................... 42

Calculating for industry sales: ............................................................................................................. 42

Calculating for market share: .............................................................................................................. 43

PROFIT CALCULATIONS: .......................................................................................................................... 43

REFERENCES: ............................................................................................................................................... 44


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FAUJI FERTILIZERS COMPANY; AN INTRODUCTION

FFC was incorporated in 1978 as a private limited company. The initial authorized capital of thecompany was 813.9 Million Rupees. The present share capital of the company stands at Rs. 3.0

Billion. Additionally, FFC has Rs. 1.0 Billion stakes in the subsidiary Fauji Fertilizer Bin Qasim

Limited (formerly FFC-Jordan Fertilizer Company Limited). There is oligopoly in the fertilizer

industry of Pakistan lead by Fauji Fertilzer Company and followed by Engro chemicals, Fauji

Fertilizer Bin Qasim and Dawood Hercules.

The marketing area is divided into 3 sales zones, 14 sales regions and 65 sales districts with a

network of 3,300 well trained dealers. This network is spread over 1500 locations. Due to

seasonality of fertilizer consumption, the Company has a network of 157 field warehouses with

a capacity of over 300 Kt to meet its storage requirements.

The company markets over 3.4 million tons of fertilizers annually comprising 2.8 million tons of

urea and 0.6 million tons of locally manufactured as well as imported phosphatic / potassic

fertilizers. The company has also started marketing Boron to address the micro-nutrient

deficiency in the soils, under its brand name SONA. The company has also exported urea to

China, Iran, Philippines, India, Bangladesh, Sri Lanka, Thailand, Tanzania and Afghanistan in the

past and holds around 60% share of the domestic urea market.

FFC has so far contributed an aggregate of over Rs. 94 billion to the Government by way of

taxes, levies, custom duties, excise duty/ surcharge on gas purchases besides providing

employment to hundreds of individuals.

MAJOR HIGHLIGHTS:

FFC commenced commercial production of urea in 1982 with annual capacity of 570,000metric tons.

Through De-Bottle Necking (DBN) program, the production capacity of the existing plantincreased to 695,000 metric tons per year.

Production capacity was enhanced by establishing a second plant in 1993 with annualcapacity of 635,000 metric tons of urea.

FFC participated as major shareholders in a new DAP/Urea manufacturing complex withparticipation of major international/national institutions. The new company Fauji

Fertilizer Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company Limited)

commenced commercial production with effect from January 01, 2000. The facility isdesigned to produce 551,000 metric tons of urea and 445,500 metric tons of DAP.

This excellent performance was due to hard work and dedication of all employees andthe progressive approach and support from the top management.


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In the year 2002, FFC acquired ex Pak Saudi Fertilizers Limited (PSFL) Urea Plant situatedat Mirpur Mathelo, District Ghotki from National Fertilizer Corporation (NFC) through

privatization process of the Government of Pakistan.

This acquisition at Rs. 8,151 million represents one of the largest industrial sectortransactions in Pakistan.

Operations at the company's projects are conducted in a safe manner. This is reflectedby the several awards given to FFC by National Safety Council of USA. FFC plants are

energy efficient and considerable efforts and investments have been made to ensure

that they are environmentally and ecologically friendly.

FFC from the very beginning was able to meet the challenges and market the entireproduction of FFC plants, even at the time of first plants startup when the country was

surplus in urea. FFC captured the desired market share and has constantly been

increasing it even more than the production share. FFC established SONA as a premium

brand which is widely accepted by the farming community and is synonymous with high

quality. The company ensured guaranteed correct weight to the farmers. This brought a

very positive qualitative change in the fertilizer business.

POSITIONING:

FFC is listed on all the Stock Exchanges of the country and is one of the most tradedscrip. The company has been placed in the list of top 25 companies of Pakistan for

sixteen years consecutively since 1994.

FFC has so far contributed an aggregate of over Rs. 94 billion to the Government by wayof taxes, levies, custom duties, excise duty/ surcharge on gas purchases besides

providing employment to hundreds of individuals.

FFC understands the collective responsibility towards achieving a greener earth anddirects all its energies and efforts to achieve this. Over the years, FFC has built and

preserved an innovation-adept culture that promotes transparency & accountabilitythrough honesty, integrity and diligence in its dealings with employees, customers and

all other stakeholders. FFC considers diversification as a major factor behind corporate

sustainability in the future economic/ business scenario.

Fauji Fertilizer will only sell the highest quality fertilizers, recognizing that there arealready many fertilizer imports already going on in India and it can achieve the desired

position in the market by keeping In view the quality standards. Fauji Fertilizers will

leverage its competitive edges to achieve the desired positioning.

STRENGTHS:

FFC is the market leader in the urea sales and is expected to maintain its dominantposition till 2010.

FFC holds a market share of 50% in Urea production and over all share of above 63%including the DAP share by FFBL.

FFCs brand SONA holds the position of premium brand of Pakistan.


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FFC is one of the cheapest blue chip stock being traded with a strong dividend historyand healthy earning potential.

FFC among all its competitors lower than average Cost Of Goods Sold per ton. Its entity FFBL is the only DAP fertilizer producer in the entire country. FFC holds 3 plants in major ends of Pakistan that not only decrease the distribution costsbut also produce above their capacity at 115%. FFC has its own Marketing Division responsible for all marketing activities such as sales,

distribution, field warehousing, planning, farm advisory services, finance,

advertising/sales promotion and administration.

WEAKNESSES:

It produces limited types of fertilizers on its own. Fauji Fertilizers despite of being the market leader depends on imports for fertilizers

other than Urea DAP to fulfill the countys demand.

FFC is less volatile than the market. Normally FFC has not out performed the index.

COUNTRIES CONSIDERED FOR EXPANSION:As per CIA fact book data; Pakistan along with Zambia, Vietnam, India, Kiribati, and Mauritania have a

GDP nominal per capita of 1000 US$ according to the 2009 estimates. However from detailed analysis

we came up with the following observations:

ZAMBIA:

Zambia in fact is a poor country and is a major importer of fertilizer as majority of its

population depends upon agriculture for livelihood. However this GDP representation is

at 1000 only because of its declining population trend. It is not a true representative of

its economic situation. Also there is not much political stability in Zambia so it is not a

good idea to expand the business there.

VIETNAM:

As for Vietnam it has a huge potential market for fertilizers there. Generally speaking,

Vietnam is considered a politically and socially stable country. Vietnam seldom faces

religious issues and race conflict in comparison with other ASEAN countries such as

Indonesia, Philippines and China.

INDIA:

India being the neighboring country to Pakistan and sharing its border with it is a good

market for expansion of fertilizer business. There are many cultural, social and


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economical similarities between India and Pakistan. Also India is the worlds largest

importer and consumer for fertilizer. So it is a hot spot for expansion of business.

MAURITANIA:

Mauritania has its half the population still depends on agriculture and livestock for a

livelihood. However there are no major agricultural exports on its part. The agricultural

products comprise of its sea food mainly hence not leaving it dependant on fertilizers

imports.

SELECTED COUNTRIES:On the basis of the detailed analysis FFC has come up with following two countries for expansion of

business:

1. Vietnam; For exporting Urea only2. India; For exporting of both Urea and DAP


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BUSINESS EXPANSION PLAN FOR FAUJI

FERTILIZER COMPANY LIMITED FOR

INDIA

INDIA; AN OVERVIEWIndia is developing into an open-market economy, yet traces of its past autarkic policies remain.

Economic liberalization, including reduced controls on foreign trade and investment, began in the early

1990s and has served to accelerate the country's growth, which has averaged more than 7% per year

since 1997. India's diverse economy encompasses traditional village farming, modern agriculture,

handicrafts, a wide range of modern industries, and a multitude of services. Slightly more than half of

the work force is in agriculture, but services are the major source of economic growth, accounting formore than half of India's output, with only one-third of its labor force.

An industrial slowdown early in 2008, followed by the global financial crisis, led annual GDP growth to

slow to 6.5% in 2009, still the second highest growth in the world among major economies. India

escaped the brunt of the global financial crisis because of cautious banking policies and a relatively low

dependence on exports for growth.

PEST ANALYSIS OF THE AGRICULTURE INDUSTRY OF INDIA:

POLITICAL ANALYSIS:Realizing the importance of Indian agricultural production for economic development, the centralGovernment of India has played an active role in all aspects of agricultural development. Planning is

centralized, and planned priorities, policies, and resource allocations are decided at the central level.

Food and price policy also are decided by the central government. Thus, although agriculture in India is

constitutionally the responsibility of the states rather than the central government, the latter plays a key

role in formulating policy and providing financial resources for agriculture. The main objectives of the


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Government's price policy for agricultural produce, aims at ensuring remunerative prices to the growers

for their produce with a view to encourage higher investment and production. Government of India has

also approved proposals for joint ventures, foreign collaborations, industrial licenses and 100% export in

or with the agricultural sector. One of the most critical obstacles of policies applications in agricultural

sector is in ensuring food security - access of the population to sufficient food to meet nutritional

requirements. Food security issues tend to cover not only issues related to availability and stability of

food supplies but also issues of access to this supply. This last is related to the resources needed to

procure the required quantity of food which include fertilizers, farmer literacy and proper irrigation.

ECONOMIC ANALYSIS:India is a two-tier economy, with a cutting-edge and globally competitive knowledge-driven service

sector that employs the brightest of the middle classes on the one hand, and a sprawling largely rain-fed

agricultural sector that employs the majority of the vast and poorly educated labour force, on the other.

The agricultural sector, with fishing and forestry, accounts for around 20% of GDP, services 53% and

manufacturing 27%. Agriculture represents an important economic activity for a large population of the

developing world Indias agricultural sector provides employment for about 60% of the countrys work

force and accounts for one-fifth of GDP. Both in terms of foreign investment and number of joint-

ventures / foreign collaborations, the consumer food segment has the top priority. The other attractivefeatures of the Indian agro industry that have the capacity to lure foreigners with promising benefits are

the deep sea fishing, aqua culture, milk and milk products, meat and poultry segments. In 1990s the

Government cut the fertilizer subsidy to reduce New Delhi's fiscal deficit by removing grants and

subsidies from the budget. The government action led to a reduction in the use of chemical fertilizers

and protests by farmers and opposition from political parties. The government was forced to continue

the subsidies but at a somewhat lower level. Agricultural exports from India were 44 percent of total

exports in FY 1960, decreasing to 27 percent in2003. Over the period 1994-2005, the drive for market

liberalization and globalization has severely imposed on the rural household economies. The traditional

mode of agricultural practice has been destroyed. The government allocations on the agriculture sector

constantly register a decline. The recent economic system giving a free hand to multinational

corporations in agriculture sector has further caused a rapid shrinkage of the traditional practices andreplacement of folk crop varieties with high yielding and hybrid varieties, which escalated the cost of

agricultural production while stagnating productivity. The farm credit system in Indian agriculture,

evolved over decades has been instrumental in enhancing production and marketing of farm produce

and stimulating capital formation in agriculture.

SOCIAL ANALYSIS:Since its independence in 1950s, foreign aid has made a significant contribution to the agricultural

progress in rural India. Increasingly since independence, India has been sharing its agricultural

technology with other developing countries. Numerous foreign scientists have received special and

advanced training in India; hundreds of foreign students have attended Indian state agricultural

universities. In the late 1980s and early 1990s, India provided short and long-term training courses to

hundreds of foreign specialists each year under a variety of programs, including the Technical

Cooperation Scheme of the Colombo Plan for Cooperative Economic and Social Development in Asia and

the Pacific and the Technical Cooperation Scheme of the Commonwealth of Nations Assistance Program.

India is one of the oldest civilizations with a kaleidoscopic variety and rich cultural heritage. During the

period of 55years independence, it has achieved multifaceted socio-economic progress and is now the

tenth industrialized country in the world and the sixth nation to have gone into outer space to conquer

nature for the benefit of the people. However, those people employed in agricultural sector, are those


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Data for

YearGDP

GDP

(official

Ex Rate)

GDP(Real

Growth

Rate)

GDP

(PPP)Exports Imports

Exchange

Rates

Natural

Gas

Imports

2009

$3.68

trillion

$1.237

trillion

7.40% $3,200$168.2

billion

$274.3

billion

46.78

12.62

billion cu

m

2008

$3.427

trillion7.40% $3,000

$198.6

billion

$323.1

billion43.319

2007

$3.191

trillion9% $2,800 41.487

Comparis

on to

world

5 10 $165 22 14 17

GDP - COMPOSITION BY SECTOR:agriculture: 17.1% industry: 28.2% services: 54.6% (2009)

AGRICULTURE - PRODUCTS:rice, wheat, oilseed, cotton, jute, tea, sugarcane, lentils, onions, potatoes; dairy products, sheep, goats,

poultry; fish

INDUSTRIES:textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum,

machinery, software, pharmaceuticals.

EXPORTS - COMMODITIES:petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles, apparel

EXPORTS - PARTNERS:UAE 12.87%, US 12.59%, China 5.59% (2009)

IMPORTS - COMMODITIES:crude oil, precious stones, machinery, fertilizer, iron and steel, chemicals

IMPORTS - PARTNERS:China 10.94%, US 7.16%, Saudi Arabia 5.36%, UAE 5.18%, Australia 5.02%, Germany 4.86%, Singapore

4.02% (2009)

DEMOGRAPHIC DATA:Demographic data is the key towards identifying is there is a market existing in the country or not. The

greater the number of population greater is the dependency on agriculture ultimately resulting in

fertilizer requirements.


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POPULATION:1,173,108,018 (July 2010 est.)

country comparison to the world: 2

AGE STRUCTURE:0-14 years: 30.5% (male 187,197,389/female 165,285,592)

15-64 years: 64.3% (male 384,131,994/female 359,795,835)

65 years and over: 5.2% (male 28,816,115/female 31,670,841) (2010 est.)

POPULATION GROWTH RATE:1.376% (2010 est.)

country comparison to the world: 89

URBANIZATION:

urban population: 29% of total population (2008)

rate of urbanization: 2.4% annual rate of change (2005-10 est.)

CULTURAL SIMILARITIES BETWEEN INDIA AND PAKISTAN:India and Pakistan due to the reason of being tied in the same region for hundreds of years before the

independence have same looks, skin colours, median age along with several cultural commonalities

between them.

OCCASSIONS:As the occasions like Eid and celebrations like Independence have traditionally united all of Pakistan,

similarly celebrations like Holi and Diwali would show the world true colours of india. Just like we in

Pakistan do not differentiate between Muslims and non-Muslims at the time of Eid, similarly, in India

everbody plays Holi and everybody enjoys Diwali.

FAMILY STRUCTURE:The majority of Pakistani and Indian women are homemakers, and men are generally referred to as the

breadwinners. The largest percentage of working women in both the countries are nurses or

teachers. The joint family remains popular.

FOOD:The spices and the type of dishes made in both the countries are almost similar.It can be found in the

culture of both the countries that either there is lunch or a time of dinner all the family members sit

around the table and enjoy their meals, chit chat together even in such type of busy life.

LANGUAGES:There are multiple languages spoken in both the countries . Punjabi, Gujrati, Pushto, Kashmiri and Urdu

are the common languages of both the countries and are also the most widely spoken.


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MARRIAGES:

Marriages often are arranged, and caste plays an important role. Both unrelated and cross-

cousin marriage trend in prevalent in both the countries.

ART:

There is a huge similarity between the literature, graphic and performance art of both thecountries. The folklores that both countries share are also common.

IN-DEPTH SCREENING:

SIZE AND STRUCTURE OF MARKETThe agricultural sector has always been an important contributor to the India GDP. This is due to the fact

that the country is mainly based on the agriculture sector and employs around 60% of the total

workforce in India. The agricultural sector contributed around 25% to India GDP in 2009. Agriculture in

India is the means of livelihood of almost two thirds of the work force in the country. It has always

been INDIA'S most important economic sector.

Dependence on India agricultural imports in the early 1960s convinced planners that India's growing

population, as well as concerns about national independence, security, and political stability, required

self-sufficiency in food production. This perception led to a program of agricultural improvement called

the Green Revolution and the growth in food-grain production is a result of concentrated efforts to

increase all the Green Revolution inputs needed for higher yields: better seed, more fertilizer, improved

irrigation, and education of farmers. Since then government has taken several steps to encourage the

imports of fertilizers to increase the capacity of the arable land.

MARKET GROWTH:Agriculture Growth Rate in India GDP has slowed down for the production in this sector has reduced

over the years. The agricultural sector has had low production due to a number of factors such asilliteracy, insufficient finance, unavailability of sufficient fertilizers and inadequate marketing of

agricultural products. Further the reasons for the decline in Agriculture Growth Rate in India GDP are

that in the sector the average size of the farms is very small which in turn has resulted in low

productivity. Also the Growth Rate of the Agricultural Sector in India GDP has declined due to the fact

that the sector has not adopted modern technology and agricultural practices. Agriculture Growth Rate

in India GDP has also decreased due to the fact that the sector has insufficient irrigation facilities. As a

result of this the farmers are dependent on rainfall, which is however very unpredictable.

COMPETITION:Following is the list of competition that FFC will have to face entering the Fertilizer market in India.

PUBLIC SECTOR

1. National Fertilizers Limited2. Fertilisers and Chemicals Travancore Ltd.3. Rashtriya Chemicals & Fertilizers Limited4. Madras Fertilizers Limited5. Paradeep Phosphates Limited


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6. Pyrites, Phosphates & Chemicals Limited7. Fertilizer Corporation of India Limited8. Projects & Development India Limited

COOPERATIVE SECTOR

1. Indian Farmers Fertiliser Cooperative Ltd.2. Krishak Bharati Cooperative LimitedPRIVATE SECTOR

1. Gujarat State Fertilizer Company Limited2. Coromondel Fertilisers Limited3. Shriram Fertilisers & Chemicals Limited4. Zuari Industries Limited5. Southern Petrochemicals Inds. Corpn. Ltd.6. Mangalore Chemicals & Fertilizers Limited7. Gujarat Narmada Valley Fertilisers Co. Ltd.8. Duncans Industries Limited9. Deepak Fertilizers & Petrochemicals Ltd.10.Indo-Gulf Fertlizers & Chemicals Corpn. Ltd.11.Godavari Fertilizers & Chemicals Limited12.Nagarjuna Fertilizers & Chemicals Limited13.Chambal Fertilizers & Chemicals Limited14.Tata Chemicals Limited15.Oswal Chemicals & Fertilizers Limited


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PAKISTANS TRADE WITH INDIAThe Pakistan and India feud dates back to 1947 and is deep rooted in the economic, political and

religious conflicts between both nations. Even though trade between both countries has improved it has

mostly been in the favor of India.

2003-2004 Pakistani exports $93.68 millions, Imports from India $382.67 million 2008-2009 Pakistani exports $391.61millions, Imports from India $1.20 billion

This increase in exports/imports has occurred mainly due to the additions in the list of items for free

trade between both countries.

TRADE BARRIERS

TARIFF BARRIERS IN INDIADespite the efforts to open up for trade, average tariffs of both countries remain relatively high. Indias

average tariff stands at 22.2 percent, while Pakistans is 14.9 percent. These can be viewed in

perspective of a developing country median of 11.2 percent. The imports in India are subject to various

types of duties. The highest rate of basic customs duty in India is 70 percent. Some agricultural products

are subject to import duties as high as 80 to 150 percent. Other duties include:

Additional Customs Duties: which are levied on all items imported into India, and areequivalent to the excise duty payable on goods manufactured in India;

Customs Act Of India: A special duty equivalent to 5 percent of the value of goods onspecific articles mentioned in the Customs Act.

A Special Additional Duty which is levied on all articles with varying rates;

An Additional Surchargewhich is levied from time to time with varying rates but for

most goods equal to 1 percent;

An Educational Cess of 2 percent levied on all imports in the 2004 budget. After thegoods are landed, imports are also subject to taxes by the Indian states-octroi, local

sales tax and local government sales tax and toll tax, etc.

WTO & SAFTAWTO guidelines required India to grant Pakistan most favored nation status which they did 10 years

ago. This entitled Pakistan all trade advantages that other countries receive (same tariff rates.) Pakistan

however has not done the same for India.

South Asian Free Trade Agreement (SAFTA) calls for both nations to lower their tariff rates to zero by

2012.

NON-TARIFF TRADE BARRIERS IN INDIAAccording to the World Trade Organizations (WTO) definition, non-tariff barriers (NTBs) include all

measures, other than tariffs, that are used to protect domestic industry. The WTO considers the

following to be major NTBs:


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Technical Regulations And Standards: that has sampling or customs inspection,requirement of technical/standard certification. India employs sanitary and phyto-

sanitary rules in the agricultural sector, and other health and safety regulations (e.g. in

pharmaceuticals), which may in part serve the purpose of discouraging trade.

Import Licensing: one of the major barriers as import licensing has been largelyabandoned since 2001

Local Content Requirement/Rule Of Origin Issues: including labeling and markingrules, packaging rules specification and local content/rule of origin schemes,

Import By State Trading Enterprises: Government-mandated import monopolies inthe areas of agricultural and petroleum products are also in place.

Customs, Shipping And Port Procedures/Regulations: Cumbersome customsprocedures because of limited number of ports & inland custom ports for imports, Sea

and land transportation between the countries is also difficult. Ships plying between

Indian and Pakistani ports are obliged to first touch a third country port before being

allowed to harbor.

Government Procurement Regulations: In addition, the misuse of WTO provisionsregarding domestic industry protection (e.g. laws pertaining to anti-dumping,countervailing, and safe guard measures, subsidy to agriculture and industry, etc.) also

constitute very effective non-tariff barriers.

Clearance Of Goods: hurdles in inter-provincial movement of goods because ofsecurity checks and delays in clearing consignments,

Travel Restrictions: Trade through Attari can only be done by rail while trade thoughWagah can only be done by road. Gates are only open from 8:00 am to 4:00pm. It is

closed at 4:00pm for the borderceremony.

Inadequate Infrastructure: Poor transportation linkages within roads and railways,sea port restrictions and bureaucratic regulations

Excessive Red Tape: Constraints on Visas. Due to the non-availability ofrepresentatives of local banks from either country in the other, LC opening is another

major problem, since India allows opening of LCs only in the banks recognized by the

Indian government.

Direct Political Opposition: continuously changing political parties focus on theshort-term goal rather than the long-term.


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MARKETING PLAN:

SITUATIONAL ANALYSIS AND MARKET TRENDS:Today, India stands as the third largest fertilizer consumer and producer of the world. It has been

observed that the subsidies on Indian fertilizer have been rising at constant rate. This is due to the rise in

the cost of production and the inability of the government to raise the maximum retail price of thefertilizers. The population of the country is rapidly increasing at 1.5% annually. This requires higher

production of food grains. The total cropped area is only 30% of the net geographical area, which is not

enough for increasing the agricultural productivity. Now, the main focus is on the improvement of the

farm income, for which the fertilizer industry needs to lay more stress on the agricultural activities in the

country.

The Fertilizer Association of India (FAI) has been set up a model which is based on several factors that

include fertilizer prices, high yielding areas, irrigated areas, fertilizer nutrient prices and previous years'

fertilizer consumption.

FORECASTING DEMAND:

An estimate of the demand and supply till the end of the 11th five year plan is given in the chart below:

Year

Supply DemandDemand

Supply Gap

N+P+K

(IMPORTS)

Demand of K

N+P N+P+K

2007-08 16950 23125 8835 2660

2008-09 17585 24085 9305 2805

2009-10 18595 25035 9405 2965

2010-11 19912 25960 9178 3130

2011-12 19965 26900 10235 3300

COMPANY PROFILE:Fauji Fertilizers Companys overview is given in the beginning.

COMPETITION:Already mentioned in In-depth screening.


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CHOICE OF COMPETITION:FFC has chosen DSCL DSM Shriram Consolidated Limited to be its competitor. DSCM is amongst the first

urea manufacturers in India starting way back in the 1960's. Their fertilizer operations are

characterized by highly optimized production process delivering high capacity utilization & proven

abilities in erection, commissioning, operation & troubleshooting of Ammonia/Urea plant.

Reasons For Choosing DSCL

1. Over the last 4 decades of operations, SHRIRAM' has developed a strong presence inthe rural market and is identified with premium quality reliability and high trust. Their

positioning in the market is the same as FFC plans to position itself so on this basis it has

chosen this particular company.

2. Secondly as FFC is going to take first entry in the market, DSCL have also recently madean entry into the Southern region where they are working on their products to gain

acceptance. And somewhat by the initial feedback from the farming community there,

they plan to further strengthen their presence in that market. So FFC plans to compete

on the same parameters i.e. Brand Recognition, Brand Acceptance and High Volume

Profitable Sales.3. DSCLs Urea plant, has a Production capacity of 379,000 tons per annum whereas

aggregate capacity of FFC by all its plants sums up around 2,100,000 tons. After fulfilling

the demands of the country 379,000 tons per annum is a very suitable target for FFC to

set for exports.

FIRM SPECIFIC ADVANTAGE:FSA of FFC lies in urea production as it is the market leader in Pakistani fertilizer industry holding 50%

share in the entire market for urea and its combine share with FFBL is 63% where FFBL is the only DAP

producer in Pakistan capturing 30% shares. And its profit margin is the highest as compared to all the

companies which sell imported DAP. FFC has its plants in the major regions of the country and thus has

the lowest Sales and Distribution cost.

SWOT ANALYSIS:

STRENGTHS:FFCs strengths have been mentioned in the beginning while giving companys introduction.

WEAKNESSES:FFCs weaknesses have been mentioned in the beginning while giving companys

introduction.

OPPORTUNITIES:

The growing demand for fertilisers makes the Indian market highly attractive fordomestic and foreign manufacturers. Recent policy changes by the government are a

welcome step and will open up opportunities for local companies to strengthen their

domestic presence and meet global aspirations.


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In FY 08, India imported 6.8-mt of urea, making it one of the largest urea importers inthe world. Urea demand is forecast to increase by about 3% per annum to reach 29-

mt by 2011, The planned capacity additions are not sufficient to meet even this

forecast. The main reason for insufficient capacity addition is the unavailability of

natural gas at competitive rates. This gives an edge to FFC as Pakistan is self sufficient in

terms of Natural Gas. India currently imports about 2-mt of DAP per annum. Indian DAP demand is expected

to increase by about 5% per annum till 2012. But the planned capacity additions are not

expected to match the projected demand, increasing Indias dependence on imports.

Also, unavailability of rock phosphate is a major roadblock for capacity addition.

The current dependence on imports of fertilisers, which will only increase further, hasvirtually turned India into a sellers market for global manufacturers.

By 2015, India is expected to face a demand-supply deficit of 8-9-mt of urea. The recentinitiatives may result in relieving its heavy dependence on imports in the near future.

In the case of phosphatic fertilizers, the raw materials and intermediates are importedin large scale. With the aid of the imported raw materials, phosphatic fertilizers areproduced to meet the requirements for the domestic market. The requirement of

potash (K) is met entirely through imports. No fertilizer unit of India has any reserve of

potash. FFC SOP has major chances to flourish given the scenario.

Good monsoonal showers have led to the growth in agriculture, inadvertently increasingthe consumption rate of fertilizers. The capacity of India to produce fertilizer again is not

sufficient enough to meet the demand ultimately resulting in imports from its part.

The Government of India is also deregulating the fertilizer industry as to make it asflexible as possible which is a welcoming act for Exports, Foreign Direct Investment and

Joint ventures.

As the rate of Urbanization increases the demand of fertilizers has also boosted up at atremendous level and there has been an impressive excess in the consumption of

fertilizers in India. Its gives a good chance to Fauji Fertilizers Company to open up export

in India having the potential for producing export quality Urea, DAPS and SOP.

Since the consumer prices of both indigenous and imported urea are fixed uniformly,subsidy is also paid on imported urea in order to bridge the difference between the cost

of imports and statutorily fixed consumer price. We can say that the Government there

is willing to pay for the increasing fertilizer demands.

THREATS:

India keeps on revising its tariff plans. In past it had its tariffs ranging from 20-182%. Araise in the tariff will result as a threat to FFC exports.

The market may be reluctant to adopt a Pakistani brand due to the relationshipbetween both the nations.

Having USA and China also importing India fertilizer their might be a doubt about thequality of fertilizer being imported from Pakistan.


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The political situation between both the countries keeps getting bitter and there is acontinuous threat that trade might be shut down at any point in time.

The demand in Pakistan for fertilizers is also rising it might leave FFC behind its exportcapacity.

MARKETING MIX

PRODUCT OFFERINGS:

SONA UREASona Urea is the most concentrated solid, straight nitrogenous and most widely used fertilizer in the

country. Mostly it is manufactured in the form of prills, but FFC is producing in prilled as well as granular

forms. Prilled and granular fertilizers are white in color, free flowing, readily soluble in water and both

contain 46% Nitrogen. Because of its high solubility, it is suitable for solution fetilizers and foliar

application.

DAPSona DAP is the most concentrated phosphatic fertilizer containing 46% P2O5 and 18% Nitrogen. From

nutrients' concentration point of view, it has got the highest quantity of total nutrients in a 50 KG bag

i.e. 32 KG of nutrients / bag. The highest concentration of plant nutrients in a bag helps saving costs of

transportation, handling, storage and application. It is the widely used phosphatic fertilizer in the world

as well as Pakistan. The solubility of DAP is more than 95%, which is highest among the phosphatic

fertilizers available in the country. Due to high solubility it can also be used through fertigation as well as

by foliar application. Its nitrogen to phosphoris ratio ( 1 : 2.5 ) makes it an ideal fertilizer for Basal

application to meet the initial requirement of most of the crops.

FFC SOPThis fertilizer is an important source of Potash, which is a quality nutrient for production of cropsespecially fruits and vegetables. Potash is an important nutrient for activation of enzymes in the plant

body and helps increasing sugar and starch contents. Potash improves the resistance of the plants

against pests, diseases and stresses like water / frost injury etc. FFC SOP contains 50% K20 in addition to

18% sulfur, which is also an important nutrient especially for oil seed crops and it also has an

ameliorating effect on salt-affected soils. As readily soluble in water so it can be used through fertigation

as well as foliar application. SOP is well suited fertilizer for all types of crops and soil. Use of potassic

fertilizer in Pakistan is minimal, which needs to be promoted for qualitative as well as quantitative crop

production.

PRICE:The cost of goods sold per ton for most manufacturers is similar. Only FFC has clearly exhibit lower than

average COGS per ton. This has more to do with older plants with lower depreciation rather than

manufacturing efficiency.

FFBL, manufacturing cost is very high as compared to the others FFC. This is due to the fact that FFBL is

the only company to manufacture both Urea and DAP fertilizers and DAPs manufacturing process is


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costlier. But as long as India completely relies on Imports for DAP and SOP so that may also be a positive

step towards expansion of FFBL abroad.

In PKR Cost Of Goods Sold/Tn Cost Of Goods Mfg/Tn ROE

2010 2011 2012 2010 2011 2012 2010 2011 2012

FFC 10143.48 11433.05 12916.67 5663.08 5933.91 6230.33 40% 36% 35%

FFBL 9821.92 9958.34 10097.42 9821.92 9958.34 10097.42 48.46% 46.69% 45.34%

In USD

FFC 118.194 133.22 150.507 64.822 69.1432 72.59 40% 36% 35%

FFBL 114.447 116.036 117.657 114.447 116.036 117.657 48.46% 46.69% 45.34%

FERTILIZER INDUSTRY PRICE IN INDIA:The import price parity that includes the price plus tariff plus transport cost to the purchasers location

going along in India in the current time as set by the (Government of India Ministry of Chemical and

Fertilizers Department of Fertilizer) is

For Urea 12861.03 Indian rupees which is equivalent to 286.518 US$. For DAP this rate is set to be 35789.38 Indian rupees which is equivalent to 797.318

US$.

PLACE/ DISTRIBUTION:FFC plans to hold DIRECT EXPORTS of fertilizer that constitutes Urea DAP and SOP to India. Being the

market leader in Pakistan and the owner of gigantic plants in the major parts of the country it is strong

enough to continue using its own name in India as well. The brand name that FFC holds for its fertilizers

is Sona which means Gold. The word is present both in Hindi and Urdu language. FFC would forward

the freight through Wahga Border and by means of Samjhauta Express train service between Lahore and

Attari upto Dehli. In India it will hire a local agent who will be responsible for carrying out distribution in

different regions mainly in:

1. Punjab2. Gujrat.

Reason behind this is that these are the nearest to border and highly arable and thus would reduce

transportation cost.

PROMOTION:FFC has its own Marketing Division. This organization is responsible for all marketing activities such as

sales, distribution, field warehousing, planning, farm advisory services, finance, advertising/sales

promotion and administration.


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The Company is also marketing half a million tons of Sona urea granular manufactured by Fauji Fertilizer

Bin Qasim (formerly FFC Jordan Fertilizer Co. Ltd).

FFC would join hand with other fertilizer producers to promote use of Fertilizers throughfertigation on various crops.

It would prepare Crop schedule and circulated to farmers through news bulletin toenhance farmers knowledge.

Through Press, T.V. advertisements & wall posters FFC product offerings would bedepicted in local languages for usage of these for large areas & for increased yield and

quality through increased fertilizer use efficiency.

The dealers and extension staff would also be trained in promoting use of Water SolubleFertilizers.

Promoting balanced and efficient use of fertilizers It plans to carry out below line promotion activities (exhibitions, fair, competitions etc) Training programs for dealers are also a part ofFFCs promotions strategy It might plan to Provide of value added services at some point in time Use of information technology networks in India for example establish (kisan call

Centres)

It would carry out promotional campaign under Aman ki Asha which is expected to beviewed and appreciated.

MARKETING STRATEGIES:With the development of means of transport and storage facilities in India, agriculture has become

commercial in character, the farmer those fertilizers that grow better crops and ultimately fetch a better

price. Marketing of agricultural products including fertilzers is considered as an integral part of

agriculture, since an agriculturist is encouraged to make more investment and to increase production.Thus there is an increasing awareness that it is not enough to bring out a product in market; it must be

marketed as well.

The motto/slogan of FFC is very easy which is FFC believes in selling a program rather than just products and will adopted a customer

oriented strategy by marketing quality products backed by efficient and effective

support services. Special emphasis will be paid on developing the market through

practical and innovative farmer education.

The company will provide agricultural experts, a year before the commencement ofcommercial production. This free of cost and on the spot service to the farmers will be

provided in the form of crop demonstrations, field days, farmer meetings, groupdiscussions and farm visits. Technical literature on important crops in regional languages

will also distributed during these activities. In-addition free soil/ water testing through

most modern laboratories will be provided and computerized recommendations will be

given from five Farm Advisory Centers. The company pursues an innovative policy


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towards educating the farmers utilizing electronic, print and roadside advertising in

Native Languages.

FFC understands the collective responsibility towards achieving a greener earth anddirects all its energies and efforts to achieve this. Seeing this it will hold seminars and

workshops promoting the Green Revolution campaign going on in India with its Brand

name Sona FFC considers diversification as a major factor behind corporate sustainability in the

future economic/ business scenario. It will adapt to and benefit from all the related

technological advancements possible in this field.

FORECASTING COST/REVENUE:FFC and FFBL initially plan to start at the same prices as the prices prevalent in Indian industry.

The difference between the manufacturing price of urea by FFC in the current year andthe import parity price in Indian industry is 286.518-64.822=221.696 US$ per metric

ton. It can be called as the profit of FFC ceteris paribus.

And in case of DAP it the difference is 797.318-114.447=682.871US$ per metric ton. Itcan be called as the profit of FFC ceteris paribus.

Out of 445,500 metric tones of DAP per annum FFC will export 70,000 metric tons to India hence the

revenue generated through DAP per annum would be:

70000*682.871= 47,800,970 US $

Out of 1881000 metric tons of Urea per annum, FFC will export 309000 metric tons to India as to

complete the total export figure of 379,000 metric tons of Urea and DAP both. Hence the revenue

generated through export of Urea would be:

309000*221.696= 68,504,064 US $

DISCOUNT:The maximum applied discount rate for a single contract is 1% of contract value (excluding VAT),

following below discount levels:

- From 10,000 tons or above: 0.5 %

- From 20,000 tons or above: 0.75 %

- From 30,000 tons or above: 1 %

The discount will be deducted directly from contract price.


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BUSINESS EXPANSION PLAN FOR FAUJI

FERTILIZER COMPANY LIMITED FOR

VIETNAM

VIETNAM; GENERAL COUNTRY ANALYSIS:

POLITICAL SITUATION

Vietnam is a Single Party Communist State. There is more likely to be higher government

control and less autonomy for the organization wanting to enter the Vietnamese market. There

is a growing sense of grass-roots democracy in Vietnam. A slow but steady move towards a

more open and transparent system based on the rule of law is expected, within the context of a

one party state. The Vietnamese Government will continue to pursue a policy of gradualeconomic reform, covering state enterprise, banking, foreign trade and public administration.

Implementation, however, will remain a challenge, potentially slowed by vested interests.

ECONOMIC SITUATION

Vietnam is a densely-populated developing country that in the last 30 years has had to recover

from the ravages of war, the loss of financial support from the old Soviet Bloc, and the rigidities

of a centrally-planned economy. Vietnamese authorities have reaffirmed their commitment to

economic liberalization and international integration. They have moved to implement the

structural reforms needed to modernize the economy and to produce more competitive

export-driven industries. Vietnam joined the WTO in January 2007 following more than adecade-long negotiation process. WTO membership has provided Vietnam an anchor to the

global market and reinforced the domestic economic reform process. Agriculture's share of

economic output has continued to shrink from about 25% in 2000 to about 21% in 2009. Deep

poverty has declined significantly and Vietnam is working to create jobs to meet the challenge

of a labor force that is growing by more than one million people every year. The global

recession has hurt Vietnam's export-oriented economy with GDP growing less than the 7% per

annum average achieved during the last decade. In 2009 exports fell nearly 10% year-on-year,

prompting the government to consider adjustments to tariffs to limit the trade deficit. The

government has used stimulus spending, including a subsidized lending program, to help the

economy through the global financial crisis, and foreign donors have pledged $8 billion in new

development assistance for 2010. Domestic investment grew 16% while committed foreign

direct investment fell 70%, a steep reduction after 5 years of growth. Nevertheless, the weaker

economy, current account deficit, and subdued foreign investment environment means

Vietnam's managed currency, the dong, faced downward pressure through 2009, leading the

government to devalue it by more than 5% in December. Vietnam is a developing economy. To

cater for the largest demographic, it is best to use a price leadership strategy rather than rely


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on product differentiation. Sell a cheaper, and more basic product or service, rather than offer

a premium quality or novelty product.

SOCIO CULTURAL SITUATIONThe Culture ofVietnam, an agricultural civilization based on the cultivation ofwet rice, is one of

the oldest in East Asia; the ancient Bronze age Dong Son culture is considered to be one of itsmost important progenitors. Due to the long-term Chinese influence on its civilization, in terms

of politics, government and Confucian social and moral ethics, Vietnam is considered to be part

of the East Asian Cultural Sphere.

Following independence from China in the 10th century, Vietnam began a southward expansion

that saw the annexation of territories formerly belonging to the Champa civilization (now

Central Vietnam) and parts of the Khmer empire (today southern Vietnam), which resulted in

minor regional variances in Vietnam's culture due to exposure to these different groups.

During French colonial period, Vietnamese culture received merchant influences from the

Europeans, including the spread ofCatholicism and the adoption ofLatin alphabetto this day,Vietnam is the only non-island nation ofIndochina which uses the Latin alphabet to write the

national language.

In the socialist era, the cultural life of Vietnam has been deeply influenced by government-

controlled media and the cultural influences of socialist programs. For many decades, foreign

cultural influences were shunned and emphasis placed on appreciating and sharing the culture

of communist nations such as the Soviet Union, China, Cuba and others. Since the 1990s,

Vietnam has seen a greater re-exposure to Asian, European and American culture and media.

Some elements generally considered to be characteristic of Vietnamese culture include

ancestor veneration, respect for community and family values, handicrafts and manual labour,and devotion to study. Important symbols present in Vietnamese culture include dragons,

turtles, lotuses and bamboo.

For a foreign organization, there are bound to be language barriers (most obvious factor).

Ensure that the labels on the packaging is in Vietnamese if you're selling a product. Vietnam is

also predominantly Buddhist (85% of the population). It is better to offer a product or service

that respects the local values and culture, and is compatible.

TECHNOLOGICAL SITUATIONThe access and use of information and telecommunication technology (ICT) is considered

essential for the development of the Vietnamese society, both from an economic and socialviewpoint. ICT is growing at a fast rate in Vietnam but statistical indicators to measure this

development are falling behind. Current indicators are few and compiled on an ad-hoc basis. In

agriculture field there is lack of updated technology and technical skills to apply to the working

field. By failing to invest in research and development, Vietnamese companies are missing out

on new technologies and falling behind in the rapidly changing global marketplace, officials say.

Technology development in Vietnam has been hindered by several factors, including an
http://en.wikipedia.org/wiki/Vietnamhttp://en.wikipedia.org/wiki/Vietnamhttp://en.wikipedia.org/wiki/Wet_ricehttp://en.wikipedia.org/wiki/East_Asiahttp://en.wikipedia.org/wiki/Bronze_agehttp://en.wikipedia.org/wiki/Dong_Son_Culturehttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Confucianismhttp://en.wikipedia.org/wiki/Sinospherehttp://en.wikipedia.org/wiki/Champahttp://en.wikipedia.org/wiki/Central_Vietnamhttp://en.wikipedia.org/wiki/Khmer_Empirehttp://en.wikipedia.org/wiki/French_Indochinahttp://en.wikipedia.org/wiki/Catholicismhttp://en.wikipedia.org/wiki/Latin_alphabethttp://en.wikipedia.org/wiki/Island_nationhttp://en.wikipedia.org/wiki/Indochinahttp://en.wikipedia.org/wiki/Vietnamese_languagehttp://en.wikipedia.org/wiki/Cubahttp://en.wikipedia.org/wiki/Ancestor_venerationhttp://en.wikipedia.org/wiki/Dragonhttp://en.wikipedia.org/wiki/Turtlehttp://en.wikipedia.org/wiki/Lotushttp://en.wikipedia.org/wiki/Bamboohttp://en.wikipedia.org/wiki/Bamboohttp://en.wikipedia.org/wiki/Lotushttp://en.wikipedia.org/wiki/Turtlehttp://en.wikipedia.org/wiki/Dragonhttp://en.wikipedia.org/wiki/Ancestor_venerationhttp://en.wikipedia.org/wiki/Cubahttp://en.wikipedia.org/wiki/Vietnamese_languagehttp://en.wikipedia.org/wiki/Indochinahttp://en.wikipedia.org/wiki/Island_nationhttp://en.wikipedia.org/wiki/Latin_alphabethttp://en.wikipedia.org/wiki/Catholicismhttp://en.wikipedia.org/wiki/French_Indochinahttp://en.wikipedia.org/wiki/Khmer_Empirehttp://en.wikipedia.org/wiki/Central_Vietnamhttp://en.wikipedia.org/wiki/Champahttp://en.wikipedia.org/wiki/Sinospherehttp://en.wikipedia.org/wiki/Confucianismhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Dong_Son_Culturehttp://en.wikipedia.org/wiki/Bronze_agehttp://en.wikipedia.org/wiki/East_Asiahttp://en.wikipedia.org/wiki/Wet_ricehttp://en.wikipedia.org/wiki/Vietnam


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unskilled labor force, low capital and a fledgling market economy. Many foreign manufactures

only consider Vietnam a place to assemble products where they can benefit from cheap labor

and preferential investment policies. As a result, they rarely transfer technology to factories in

Vietnam.

REASON FOR CHOOSING VIETNAM:

Most obvious reason was similarity between GDP-per capita of Pakistan and Vietnam,

additionally we found from macroeconomic data that fertilizers are major import of Vietnam.

Generally speaking, Vietnam is considered a politically and socially stable country. Vietnam

seldom faces religious issues and race conflict in comparison with other ASEAN countries such

as Indonesia, Philippines and China. Vietnam has achieved high GDP growth rate and has

maintained political and macro-economic. Renewal policies have gained enormous support and

the transition to a market economy is still underway. In the context of recent terrorism-related

events, Vietnam is regarded a safe investment destination.

Following are the other major reasons:

Vietnam, firstly, is a young country with abundant human resource, aspiration and avision to attract investments. Vietnam has large amount of real estate, extremely

favorable location for production, export activities, especially the proximity to the sea

would be an advantage for storage and transportation. It is not easy for other countries

to have this favorable location of land.

Secondly, Sembcorp (which owns, develops, markets and manages landmark integratedtownships and industrial parks in Vietnam, China and Indonesia) has been

accompanying Vietnam in developing this field of business. Investment of Sembcorp in

Vietnam itself has been the trustful certificate for other businesses to believe inVietnam. Moreover, the partners will invest in Vietnam on the lands developed by

Sembcorp and Vietnamese partners. They therefore have the advantages of

infrastructure, human resources and a good location for developing businesses.

PRELIMINARY ANALYSIS:

MACROECONOMIC DATA

Gross Domestic

Product

2009 Country comparison to

the world

GDP (PPP) $256.5 billion 42

GDP(official exchange

rate)

$93.16 billion ---


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GDP(real growth rate) 5.3% 26

GDP-per capita(PPP) $2,900 167

GDP-agriculture 21.3% ---

GDP-industry 40% ---

GDP-services 38.8% ---

Industries Export-

commodities

Export-Partners Import-

commodities

Import-

Partners

garments marine products US 21.43% machinery and

equipment

China 16.42%

shoes rice Japan 11.44% petroleum

products

Singapore

9.61%

machine-

building

coffee China 7.27% fertilizer Japan 8.96%

mining rubber Australia 4.43% steel products Taiwan 8.23%

coal tea Germany 4.27% raw cotton South Korea

7.72%

steel garments grain Thailand 6.41%

cement shoes cement Hong Kong

4.45%

food

processing

crude oil motorcycles US 4.27%

chemical

fertilizer

Glass, paper

Tires, oil


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DEMOGRAPHIC DATA

POPULATION:

89,571,130 (July 2010 est.)country comparison to the world: 13

AGE STRUCTURE:



65 years and over: 5.6% (male 1,892,505/female 3,039,078) (2010 est.)

POPULATION GROWTH RATE:

1.096% (2010 est.)country comparison to the world: 117

URBANIZATION:Urban population: 28% of total population (2008)

Rate of urbanization: 3.1% annual rate of change (2005-10 est.)

IN-DEPTH SCREENING

MARKET PROFILE

MARKET SEGMENTATION:

Geography is a key factor in segmenting Vietnams market. This includes not only the regionalsegmentation of North-Central-South, but also the segmentation of urban versus rural markets.

Vietnam is roughly separated into three economic regions surrounding core urban centers: the

South centered on Ho Chi Minh City, the North based in Hanoi, and the Center focused on Da

Nang. The main distinctions among these regions are consumer purchasing ability, brand

awareness and recognition. Vietnam's per capita GDP stands at around $1,024, while unofficial

estimates put HCMC's and Hanois per capita GDP at well over triple the national average. The

actual disparity is probably even greater, as certain income elements that are not well captured

in official statistics (such as remittances from overseas relatives and private sector activity) are

centered more in the South. Currently, consumer purchases are strongest in Ho Chi Minh City

(and the contiguous provinces of Binh Duong, Dong Nai, and Ba Ria-Vung Tau), where there is a

concentrated and growing population of consumers with disposable income. Consumers in the

South also tend to exhibit a greater degree of brand awareness than do consumers in the North

and Central regions, although this is changing. This is principally due to extensive contact with

Westerners prior to 1975 and the influence of returning overseas Vietnamese. These defining

factors have had an impact on market demand disparities, market entry strategies, product-line

segmentation and marketing mix. For many consumer goods companies, the first marketing
https://www.cia.gov/library/publications/the-world-factbook/docs/notesanddefs.html?countryName=Vietnam&countryCode=vm&regionCode=eashttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2119rank.html?countryName=Vietnam&countryCode=vm&regionCode=eas&rank=13https://www.cia.gov/library/publications/the-world-factbook/docs/notesanddefs.html?countryName=Vietnam&countryCode=vm&regionCode=eashttp://../Population%20growth%20ratehttp://../Population%20growth%20ratehttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2002rank.html?countryName=Vietnam&countryCode=vm&regionCode=eas&rank=117https://www.cia.gov/library/publications/the-world-factbook/docs/notesanddefs.html?countryName=Vietnam&countryCode=vm&regionCode=eashttps://www.cia.gov/library/publications/the-world-factbook/docs/notesanddefs.html?countryName=Vietnam&countryCode=vm&regionCode=eashttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2002rank.html?countryName=Vietnam&countryCode=vm&regionCode=eas&rank=117http://../Population%20growth%20ratehttps://www.cia.gov/library/publications/the-world-factbook/docs/notesanddefs.html?countryName=Vietnam&countryCode=vm&regionCode=eashttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2119rank.html?countryName=Vietnam&countryCode=vm&regionCode=eas&rank=13https://www.cia.gov/library/publications/the-world-factbook/docs/notesanddefs.html?countryName=Vietnam&countryCode=vm&regionCode=eas


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