Section 1: Country Overview

The United States is a country in the Western Hemisphere. It consists of forty-

eight contiguous states in North America, Alaska, a peninsula which forms the
northwestern most part of North America, and Hawaii, an archipelago in the
Pacific Ocean. There are several United States territories in the Pacific and
Caribbean. The term "United States", when used in the geographical sense, means
the continental United States, Alaska, Hawaii, Puerto Rico, Guam, and the Virgin
Islands of the United States. The country shares land borders with Canada and
Mexico and maritime (water) borders with Russia, Cuba, and The Bahamas. The
United States has total resident population of 310 715 000 as of 2010. In terms of
natural resources, the United States has potential and diversified natural resources
such as coal, copper, lead, molybdenum, phosphates, uranium, bauxite, gold, iron,
mercury, nickel, potash, silver, tungsten, zinc, petroleum, natural gas, timber.
Therefore, petroleum, steel, motor vehicles, aerospace, telecommunications,
chemicals, creative industries, electronics, food processing, lumber, mining and
defense are main industries within the United States.

Section 2: Political and Legal Analysis

1. Political system
The official name of America is the United States. Firstly, the United States
is a Federal constitutional republic, in which the President, Congress, and
Judiciary share power reserved to the national government, and the Federal
Government share sovereignty with the State Governments. Since American Civil
war, two parties, the Democratic Party and Republican Party have dominated
American politics. Nowadays, after two presidencies of Gorges W. Bush and the
dominance of Republican Party with aggressive policies, Barack Obama is the
incumbent President and Democratic Party is the dominant Party of the United
States. He and his Government have executed more moderate policies than Bush’s
Government. Secondly, the United States is the Democratic Government with
wide participation. Therefore, it makes and maintains stable business
environments for both domestic and foreign enterprise that want to do business in
this market. This is one of advantageous opportunities for our company to do
business in American market.

2. Political risk
Table 1: The United States’ political risk rating over the period from 2/2009 to
1/2010
Yea 2/0 3/0 4/0 5/0 6/0 7/0 8/0 9/0 10/0 11/0 12/0 1/1
r 9 9 9 9 9 9 9 9 9 9 9 0
Rat 83. 83. 84 84. 85 84. 84. 84. 84.5 83.5 83 82.
e 5 5 5 5 5 5 5

Unit: %
(Source: An Extract from International Country risk guide, Copyright, 1984-
Present, the PRS Group, Inc.)
The table above indicates the changes in the political risk rating of the
United States from February 2009 to January 2010. Through one- year period, the
United States experienced a stable trend in political risk rating, which fluctuated
between 82.5% and 85%. Overall, the political risk of the USA as of January 2010
was over 80%, thus the United States is evaluated as one of the lowest political
risk countries. This proportion shows a stable business environment which
facilitates to any businessmen conducting business in the United States.
Although there is low political risk for enterprises, many foreign companies
still face with many problems from internal conflict and socioeconomic conditions
in American market. These are two main sources of political risk in the United
States. As An Extract from International Country risk guide, copyright, 1984-
Present, the PRS Group, Inc., the United States witnessed 2.5 point in terrorism
and violence, and 2.0 point in unemployment, two relatively high figures of
political risk.
These risks bring some negative effects on international business
conducting in the United States. First of all, terrorism and violence threaten both
physical asset and the lives of employees. Many foreign companies have to face
with fire, strike, terrorism and violence, which can causes the destruction of their
offices, buildings, factories or production equipment. Therefore, it is difficult for
them to operate in this market. In addition, this creates unsafe environment for all
employees working in this country, they could be kidnapped or killed surprisingly.
These negatively affect not only foreign enterprises but also the whole society in
general. Secondly, high rate of unemployment in the United States leads to
decrease turnover and revenue of international companies indirectly. After great
crisis in 2009, the unemployment rate of the United States is very high (2009:
10%, 2010: 9.6%). This affects Government’s policies such as taxes, subsidies,
demand stimulus and the like, which causes Budget deficit. Therefore, the
Government will apply many policies to reduce Budget deficit by increasing
import tariff, import licenses, and quotas and the like to import activities.
Moreover, this affects consumption of individuals and organizations. As a result,
there are negative impacts on our turnover and revenue.
However, foreign enterprises could deal with these problems by doing some
solutions. Firstly, they should do business in some areas, which are safe and
suitable with their business and activities to avoid terrorism and violence.
Secondly, they should cooperate with local partners to extend market and become
more and more active in selling goods, produce mass (high quality, competitive
price). Furthermore, by partnering, foreign investors and local companies will
share the risk of loss. Thirdly, insurance or so-called risk transferring is one of the
most popular and effective ways to manage risk. It can be defined as the reduction
of risk exposure by sharing the risk with a third party. Using this strategy, the
physical property is retained but the “financial part” of the risk is transferred.
3. Legal system
Before starting any business with a foreign nation, a company must be well-
prepared in case disputes happen. To make preparation, the first thing they should
do is to study the legal system of the target country, which is the United States in
this case, to find out if there are any differences between the two legal systems and
how to survive in the new environment.
The law of the United States consists of many levels of codified and
uncodified forms of law, of which the most important is the United States
Constitution. Thus, a special feature in the legal system in the US is the
combination of common law and civil law.
Generally, Vietnamese people do not care too much about legal systems
and only few of them know about the existence of different types of legal systems,
so careful research on legal systems is even more important to Vietnamese
companies before entering a new market. Moreover, because the civil law in the
US is applied mainly in the scope of federal government while in states, courts’
decisions are mainly based on precedents, which is a strange notion to most
Vietnamese people, it becomes more vital to learn more about the differences
between the two systems, then to find ways to adapt to it.
Basically, there are 3 main differences between the two systems. Firstly,
common law is the law developed by judges through decisions of courts and
similar tribunals rather than through legislative statutes as in civil law. Therefore,
it can be said that the two systems display two different approaches to one issue.
In civil law, the collection of the law applied to citizens and followed by judges is
written and can be accessed by anyone, while in common law, the law is
precedents, which originate from real courts, not any written thing. Thus, it results
in the differences in the responsibilities of judges. In civil law, they interpret the
law but in common law, they themselves create the law.
 Secondly, there is an effective binding among precedents and later courts in
common law, which does not exist in civil law. It means that in common law, a
court’s decision is relevant to not only parties but also to previous or later
tribunals. If a case is proved similar to a precedent, then the decision of the
precedent must be applied to the case. If the court finds that the current dispute is
fundamentally distinct from all previous cases, judges have the authority and duty
to make law by creating precedent. Thereafter, the new decision becomes
precedent and binds future courts. In contrast, in civil law, similar cases may have
different results depending on the way judges interpret the legal code.
The third basic difference is the source for people to study law. In common
law, it is precedents but in civil law, it is the legal code.
With the three basic differences, to survive in the US market, Vietnamese
companies must make some adaptations. Firstly, people doing business should
study cases relating to importing, exporting and the industry they are working in to
avoid possible disadvantaged situations. Secondly, a company had better hire a
professional lawyer to take care of its legal issues. Because learning various
precedents and locating relevant statutes and cases are not easy to a normal person,
this also explains why America is one of the countries with the highest proportion
of lawyers among citizens. Thirdly, because the US also apply civil law and
written rules and regulations, Vietnamese companies must pay close attention to
changes in it trade laws, especially requirements to imported goods, which is
becoming stricter and stricter.
In conclusion, despite those political risks and differences in legal systems,
a Vietnamese company is still able to survive and prosper in the US market if they
can make suitable adaptations.

4. International relations
 The US is the largest economy and among the freest market in the world, so
almost all countries want to maintain a good relationship and do business with the
nation. However, due to the Chinese policies on exchange rate, there is a conflict
between America and China. It is also a good chance for Vietnamese exporters,
especially in textile industry because China is the largest exporters of the products
to the US. If Vietnamese companies can seize the chance, they can build a good
base for future development.
Since 1995, when the formal normalization of diplomatic relations between
Vietnam and America was announced, the relations of the two countries have
become deeper and more diverse in many aspects including business. As
diplomatic ties between the nations grew, the United States opened a consulate
general in Ho Chi Minh City and Vietnam opened a consulate in San Francisco. In
July 2000, they signed a Bilateral Trade Agreement, which went into force in
December 2001. In 2003, the two countries signed a Civil Aviation Agreement
and a textile agreement, which brings many advantages for Vietnamese exporters
especially those of textile industries. In January 2007, the US Congress approved
Permanent Normal Trade Relations (PNTR) for Vietnam. With those progresses of
two nations, we have reasons to believe that the access for Vietnamese exporters
to the US market is becoming wider and the economic relations between Vietnam
and America will become better and better in future.

Section 3: Economic Analysis

The United States has the largest, most technologically-advanced, and
diverse economy in the world. While the United States accounts for only about 4
percent of the world's population, its GDP is 26 percent of the world's total
economic output. After the slight recession in the recent years, the US is now
reverting to its potion as the leading economy in the world; it still remains the
richest nation on the planet in terms of GDP with the gross domestic products of
$14.003 trillion in 2009. People in US, therefore, enjoy a high quality of life with
a per capita GDP of $46,900. However, services dominate in the American
economic activity. Financial services, health care, and information technology are
among the fastest growing areas of the service sector. Services account for
approximately 80 percent of the country's GDP while manufacturing accounts for
only 18 percent, and agriculture accounts for 2 percent. Subsequently, the
American is in need of a large amount of consumer goods such as foods, drinks,
clothing, etc. Our company, hence, chooses to export high-grade silk products
including scarf, shoes, wallet, purse and quilts to this developed market.
The American economy is a free-market, there’s only limited government
intervention in areas such as health care, transportation, and retirement. Prices of
goods in the market are determined by the interplay of two forces, supply and
demand. That is to say, this is a fairly healthy competitive environment for all
suppliers regardless of which nation they come from.
Moreover, the United States’ economy freedom score is 78.0 making its
economy the 8th freest in the 2010 index and at the 2nd place in the North America
region. That means the possibility of penetrating into this leading import market is
highly likely feasible.
Firstly, in terms of trade freedom, the America scores 86, 9 point, which
reflecting a high openness of this economy to imports of goods and services from
around the world because the barriers with foreign product importing into the US
have somehow eliminated as much as possible. United States import quotas may
be divided into two types: absolute and tariff rate. Absolute quotas strictly limit
the quantity of goods that may enter the commerce of the United States for a
specific period. Tariff rate quotas permit a specified quantity of imported
merchandise to be entered at a reduced rate of duty during the quota period. Once
the tariff-rate quota limit is reached, goods may still be entered, but at a higher rate
of duty. Currently there are no commodities subject to absolute quotas and/or
associated visa requirements. Tariff-Rate Quotas is levied on the following listed
commodities:
 Brooms (9603)
 Whiskbrooms (9603.10.05)
 Other Brooms (9603.10.40)
 Ethyl Alcohol (9901.00.50)
 Milk and Cream (0404.20.20)
 Olives
 Satsuma (Mandarins) (2008.30.42)
 Tuna (1604.14.22)
 Upland Cotton (9903.52)
Our company exporting products are not suffered from quotas from the
US’s legislation, which can be considered a slight advantage to improve our
competition. Moreover, trade relation between Viet Nam and the United States is
improving much in the past 20 years. The two countries have worked a lot to
promote economic and political normalization since 1989. On July 13, 2000, U.S.
and Vietnamese negotiators signed a sweeping bilateral trade agreement (BTA).
The BTA entered in into force on December 10, 2001, when the two countries
formally exchanged letters implementing the agreement. Under the deal, the U.S.
extended temporary most-favored nation (MFN, also known as normal trade
relations [NTR] status) status to Vietnam, a step that will significantly reduce U.S.
tariffs on most imports from Vietnam. Accordingly, Vietnam’s exports to the U.S.
rose to $1.3 billion – 60% higher than 2000 levels – in the first year of MFN
status, as U.S. tariff rates on Vietnamese exports fall from their non-MFN average
of 40% to less than 3%. Besides there’s an agency called “Trade Council’s
affiliate” which provides technical assistance to Vietnamese exporters on issues
related to the BTA, WTO, and international integration.
 Secondly, monetary freedom index is also at high level of 78.1. Monetary
freedom is reflected in a stable currency and marketed-determined prices.
American inflation has been relatively low, averaging 3.5 percent between 2006
and 2008 potentially ensures exporters a stable USD to rely on.

In addition, although there are some price controls to some regulates

monopolies like for agricultural sectors, dairy products, and some forms of
transportation and government interventions in housing, automotive, and financial,
clothing business line will not have direct badly effects of price distortion from US
government.
However, there is a slight difficulty in exporting into the United States,
because this nation’s about to apply a currency control. These mechanisms can
control the inflows of money into a country or money leaving the nation. As of
2013, foreign banks will be required to withhold 30% of any withdrawals from an
American’s account, effectively turning bank employees into US tax agents.
Privacy is totally gone, as financial institutions will be compelled to report
detailed information about all American account holders. If foreign institutions do
not wish to comply, or cannot because of national law, they will be required to
close the account. The exemptions to this rule are holding a combined overseas
balance of less than US$50,000, or being an individual that the Secretary of the
Treasury deems a low risk for tax evasion - a clause that is ripe for abuse. The law
also makes foreign life insurance policies or annuities reportable for the 2010 tax
year. This means a little inconvenience in transiting benefits from US to our
country for reproduction and investment.

Section 4: Market Potential

1. Identify basic appeal
The US market is one of the world’s largest importers of garments, interior
decoration fabrics and accessories, so it proves to be an appealing market for
Vietnam. Thus, we do the market potential analysis to assess our potential for
exporting silk to the US.
USA is a big country, which varies tremendously in climate conditions.
Generally, the Western and Southern of this nation has an overall warmer weather,
as compared to the Eastern and Northern with heavy snowfall, and has pleasant
summers. Therefore, it may be a potential market for silk products.
Fortunately, our silk products fully meet the demand of such a climate-
varied market. Firstly, we have quilts for winter. Mulberry silk, which contains
about 38% “twinning interspaced of silk”, can keep the temperature of the quilt as
high as that of the body in a long time. They are the best choices for the winter.
Secondly, we supply silk products for mild climate. By using the high quality of
tie-dyed fabric, the mulberry silk quilts can be more comfortable. Moreover, other
products such as scarf, shoes and wallet are also suitable for this mild climate
because of its convenient use. Finally, we also offer silk product for summer,
which contains a substance, named “hydrophilic side-chain amino acid”. That
special silk helps absorb and pump the excessive moisture out the quilt, while
supply the skin with water from the moisture in the quilt when the body skin is dry
because of the high temperature in summer.

2. Measure market potential

2.1. USA market potential
Recently, ties of bilateral trade in goods between Vietnam and United
States increasingly developed, especially since 2007, when Vietnam became an
official member of the World Trade Organization (WTO).
Customs Statistics
2006 2007 2008 2009
Vietnam’s total commodity export 7.83 10 14.5 11.36
turnover of to the U.S (USD billion)
(Source: http://www.customs.gov.vn)
Customs Statistics showed that, if in 2005 and 2006, the total commodity
export turnover of Vietnam to the U.S. market reached 5.91 billion USD
respectively and then to 7.83 million USD, in 2007, the total value of goods that
Vietnam exported to the United States exceeded 10 million USD. In 2008, despite
being heavily influenced by the economic recession started in the United States in
12/2007 and followed by the global economic crisis since mid 2008, trade
relations between the two countries still have positive signs. Total turnover of the
two-way merchandise trade in 2008 reached 14.5 billion USD, rose 23%
compared to 2007. In 2009, despite continuing difficulties caused by economic
slowdown, the total export turnover of Vietnam to the largest market of
consumption achieved 11.36 billion USD, decreased slightly 4.3% compared to
the results of implementation a year earlier. The U.S. market continues to be
among the main destinations of Vietnam’s exports.

2.2. Silk product market potential

Textile is one of the Vietnam’s principal exports, which brings the second-
largest export turnover to our nation. This is also the group constituting the largest
proportion of the total export value of Vietnam to the United States (about 43% in
the period 2005-2009). Moreover, Vietnam earned $8 billion export revenue from
textile and apparel in the first nine months of this year 2010, increasing 20% on
year, according to http://tuoitre.com.vn reported on September 30, citing the
Vietnam Textile and Apparel Association (VITAS). Vietnam could earn more
export revenue from textile and apparel because the world textile and apparel will
continue to recover in the year-end of 2010, local senior economists forecast. Silk
product is concluded in textile. They are increasingly attracting the attention of US
importers. International Trade Commission United States (USITC) assumed that
Vietnam is one of the leading countries in Asia that has ability to compete with
China in the silk sector. The US Association of Textile Imports also said that
Vietnam is the second choice of U.S importers to China when searching for
supplies of goods from Asia. Besides, research showed a noteworthy in this
category is the proportion of highly processed goods, like embroidered quilts,
scarves and wallets from silk, accounting for over half of the total value of this
group that Vietnam exports to the US.

3. Select the market

3.1. Competitor analysis
In USA, silk processing capacity is virtually nonexistent. Imports of silk
goods of the US were valued at about US$ 2 billion in 1997; 10% was for home
furnishing. So, there is a great potential for exporting silk to the US. However, to
promote our export of silk products to the US market, we have to face many other
competitors such as China, France, Italia, etc. The United States has been a
pioneer market for imported Chinese knitted silk products, initially mainly thermal
underwear, and now elegant casuals in the form of T-shirts, polo neck sweaters,
etc, representing over 40% market share. Easy care is a “must” in the United
States, so it is important to develop fabrics with easy-care properties to compete
with other fibers. In the period from January to July / 2009, silk clothing exports to
the U.S. China reached 22.05 million units, down 34.45%. Export turnover to U.S
reached 286 million, down 30.44%, by year, the average unit price of $ 12.95, up
6.12% year on year). Moreover, Italy is also well-known in the US market for
highly developed skills in silk processing (finishing, dyeing and printing silk
fabrics). Exports of silk scarves to US rose by about 15% between from 1996 to
1997, to 586 tons. Exports of silk neckties reached 1230 tons the same year.
Another bid competitor to Vietnam is France. France is another country with a
considerable silk processing industry with 10% market shares of imports silk
products in USA. For centuries, Lyon has produced silk fabrics of the highest
quality for domestic consumption and for export. More than 70% of silk fabrics in
the French market have been traditionally used for clothing. There are signs that
silk may have a growing market also for interior decoration use as curtains, wall
covers, bedspreads and upholstery. France exports top quality silk fabrics to the
US market, with unit prices reaching 30 USD per m2.
Although there are many competitors in the silk market of the US, Vietnam
still has many advantages over other competitors such as cheap labor,
diversification in colors, weave, and quality. It helps highlight a distinctive feature
of Vietnamese culture. Mr. Diep Thanh Kiet, Deputy President of the Vietnam
Leather and Footwear Association, forecast at the 29th International Footwear
Conference (IFC) that with cheap labor costs, Vietnam would be able to take over
a large volume of orders in silk products.

3.2. Substitute products

 Currently, artificial fibers are revolutionizing the market for their
versatility, strength, lightness and durability. They look and feel like silk, but are
easier to care for. Viscose and polyester have also taken some of silk’s market
share. Indeed, dress made by Synthetic Fibers is cheaper, warmer, and more
resistant against fiber-stress. The synthetic fibers "revolution" took place over
several decades and involved many people, not only scientists, engineers, and
technicians, but also consumers. However, the disadvantage of synthetic fibers is
they do not allow the skin to "breath", especially the ones made from plastics
(polyester), so it makes customers feel like wearing a garbage bag. Not only is it
uncomfortable but it also can have negative health effects such as skin allergies,
skin cancer, or regulation of skin disorders, etc. Consumers nowadays really care
about their health so they focus on using natural fabrics than artificial fibers. Thus,
those substitute fibers does not affect our products much.

Section 5: Bibliography
http://www.usvtc.org/trade/bta/text/full_text.htm

http://vietnam.usembassy.gov/sum-textileagr.html Trade Relations, Vietnam -

U.S. Textile Agreement Summary

http://www.indiaagronet.com/indiaagronet/sericulture/contents/sericulturenews.ht
m

http://www.customs.gov.vn/Lists/TinHoatDong/ViewDetails.aspx?ID=17644

http://invention.smithsonian.org/centerpieces/whole_cloth/u7sf/u7materials/sfTess
ay.html

http://www.theodora.com/wfbcurrent/united_states/united_states_economy.html

http://hdrstats.undp.org/en/countries/country_fact_sheets/cty_fs_USA.html

http://fellowshipofminds.wordpress.com/2010/03/31/obama-quietly-imposes-
currency-controls/
International Country risk guide, copyright, 1984-Present, the PRS Group, Inc.