Economic Analysis
You are required to provide a 2000 word report on the specific factors likely to impact upon your client’s marketing strategy.
Expanding the business in any new and emerging country plays an important role in the growth and development of an organization. When a company plans to expand its operations in any emerging market, it needs to analyze the attractiveness of market. Market attractiveness of the company can be evaluated by considering different aspects in that country. These aspects include economic analysis, political analysis, cultural analysis, legal analysis and consumer behavior analysis. This report includes the marketing attractiveness analysis of South Korea as a hypothetical Australian Cider Producer wants to expand its business operations in this country. Cider is an alcoholic beverage that is made of fermented juice of Apples. It is most popular in commonwealth nations like Australia, Canada and New Zealand. In Australia, Cider is 6th fastest growing export product (Becot, Bradshaw & Conner, 2016). The cider producer is planning to enter into South Korea as it is one of the fastest growing international markets of Australia. The report analysis different aspects like economic, political, cultural, legal and consumer behavior which can affect the marketing strategy of Australia cider producer. The analysis indicates the attractiveness of South Korean market for Australian cider producer.
Economic Analysis plays an important role in the process of analyzing attractiveness of a targeted market. It includes different economic aspects of that country which need to be considered. The economic structure of South Korea is totally supported by the government policies. Due to strong economic changes, the nation is experiencing stable economic growth. The country has a strong export factor that is the major reason behind the economic growth in this country. South Korea is developed in terms of overall economic health and it can provide a better climate to the cider producer to make investment (Dunning, & Dunning, 2014). The nation also liberalized the restrictions in the foreign exchange rates and capital that is beneficial for this Australia cider producer. In this nation, the wages are comparatively higher than other nearby nations and the workforce is technically qualified and well-educated. It indicates that South Korea is one of the nations in terms of highest literacy rate. These factors can support the business of cider producer.
Furthermore, the economy of the country is expected to witness a major growth during next 5 years and it will be growing to 1.72$ trillion by the year 2018 (Stainkamph, 2016). It will have positive impact on the growth of Cider Producer Company in South Korea. The steady economic growth of this country provides higher disposable income encouraged the younger generation to live active lifestyle. Due to this, people have higher capacity and buying power to spend money on leisure and entertainment. There is an increase in the demand for beverages with low alcohol by volume and people are searching for options of alcoholic beverages. They can get Cider as alternative that can give them taste of both fruit juice and alcoholic beverage. Looking at the higher purchasing power of people, the organization can use competitive pricing strategy. In the beginning, it should offer the cider on affordable prices and then it should increase the prices of product. Eventually, it will increase the sale of Cider in South Korea (Chuljunsung, 2016). Under this strong economic environment, the company can offer cider by emphasizing on product development and develop cider in different packages like cans and bottles. Stylish packaging designs will have important role in increasing sales of this alcoholic beverage over the estimated period. It will assist the organization in promoting the cider and attracting people towards cider. Thus, economy of South Korea provides a better economic environment to the Australian cider producer (Ojha, 2017).
Political Analysis
South Korea had a violent political past that was characterized by the changes in the government and political freedom. Because of centralization of authority, policy formulation has become straight forward. In this nation, president is chairman of all committees that makes it easier to communicate and operate the entire system. In addition to this, South Korea has strong political support from United States that will be a positive indicator for establishment and growth of cider in this nation (Jewett, et al, 2015). United States of America is a developed nation that can support the businesses both financially and geographically. The government in the country is making investment in improving the country’s infrastructure and businesses (Ho, 2014). In the country, the government has developed some rules and regulations like alcohol beverage supplier needs to take license. The political environment of South Korea is beneficial for the sales of alcoholic beverages with the increase in the number of customers. There is an increase of international drinks in the convenience stores. The government of country does not have strict rules and regulations against drinking alcoholic beverages that can increase the sale of Cider. It has a high level of drink driving incidents because heavy drinking is very common there due to dominant drinking culture at social gatherings and events. The company needs to emphasize on promotional activities through convenience stores and hypermarkets as awareness of cider is very low among South Korean people (Ojha, 2017).
In South Korea, one of the major attractions for investing companies is different incentives which are offered by South Korean government. Among OECD nations, South Korea gives foreign investors with the best incentives. In this country, the government has implemented anti-bribery law in the year 2016 that weighed on the on-trade sales especially on the alcoholic beverages like beer, wine etc. In this country, Cider producer needs to comply with the new laws and regulations of government. A decrease in the frequency of business meetings in business premises may also affect the sale of cider in the country. There is one benefit for the organization that advertising of cider is allowed in South Korea under specific conditions. Promotion of products with alcohol content of 17% or over is prohibited and promotion with less than 17% is constrained between certain hours (Fabien-Ouellet & Conner, 2017). The Australian Cider producer can take the benefit of this as Cider contains a large content of fruit i.e. apple. In order to attract more foreign direct investment, the nation has adopted favorable tax policies. There are various Fortune Global 500 companies which have invested in South Korea. The major reason behind this is its relaxed tax policy (Pollock, 2015). The high export earning of country makes its one of the most attractive place to export or make investment in. Thus, the legal environment will be moderate for Cider producer to expand business operations in South Korea as there is no any strict policy for beverage industry.
Legal Analysis
Under the business expansion of Australian Cider producer, cultural analysis can play a significant role in South Korea. In Korean businesses, social gatherings and meetings are generally in bars or restaurants. Drinking is the major part of Korean culture as the people think that drinking assists them to develop bonds with their colleagues and relatives. If any offered drink is refused by another person then it is considered to become rude so no one refuses to drink (Zastrow, 2016). As mentioned above, Cider is an alcoholic beverage that is made from fruit juice and generally from the apples. The people can serve it as fruit juice also that can increase the sale of Cider in country. In addition to this, country has highly educated work force which will assist the organization in developing its business in South Korea. Urbanization and industrialization of this nation have made changes in the life style of Korean people. The people have started to go outside and enjoy their life. Some of the people prefer to drink low-alcoholic and cocktails and these are very famous among young adult customers. The popularity of these drinks has increased the demand for fruit beverages and non-alcoholic beverages. It has increased the sales of these drinks by 18% (Euromonitor International, 2017). Cider can be the best alternative to these people who prefer to drink low-alcoholic and cocktails. The culture of South Korea will definitely assist in increasing the sales and revenues of Australian Cider Producer.
Consumer behavior analysis is the study of groups, individuals and organizations and their all the processes which are related to the purchase, usage and disposal of products and services, including customer’s mental, behavioral and emotional responses which follow and precede these processes. It is very important to understand the way people purchase and reasons behind their purchases. Before expanding the business, Cider manufacturer will analyze the customer’s behavior and interest in South Korea (Lea, 2015). It will evaluate their buying patterns towards alcoholic beverages and other drinks.
From the analysis, it can stated that in South Korea, young adult people from 20 to 34 years is the largest customer group and this market segment covers 22% of the total population of the country (Euromonitor International, 2017). This is the major group that purchases and consumes alcoholic beverages as legal drinking age in the country is 19 or over. In addition to this, South Korean people drink twice as much beverage as Russians and more than four times as much as American people. Considering the health issues and concerns, people are shifting to low alcoholic, cocktails and non-alcoholic drinks. Under the popularity of lower alcoholic content in beverages, cider manufacturer can actively renew the drinks containing lower alcohol (Sa, et al, 2015). The organization can target the young customers under this business expansion. By targeting this group, fruit drinks and juices are predicted to enhance in both off and on-trade terms over the forecasted period. For Australia Cider producer, it will be better to expand in South Korea as there are very few players which are serving apple cider to the customers (Solomon, et al, 2014). In this country, The Hand and Apple is the organization that first launched the apple cider in South Korea. Australian cider producer can provide four types of cider in South Korea considering different demands and preferences of Korean customers. These types of ciders may be Hard Apple cider, Pecan Cinnamon Apple cider, Hopped Apple cider and Raspberry Apple cider.
Cultural Analysis
To understand the customer attitude towards cider, the organization can conduct survey of customers of South Korea. On the basis of this information, it can be said that drinking is the major part of Korean culture. The above analysis shows that cider will be major choice of the customers among different brands of alcoholic beverages. Australian Cider producer needs to initiate it business by developing different marketing strategies that can assist in expanding the promotion of products in different regions of South Korea. Moreover, pricing is also an important factor that determines the brand preference of customers in competitive market conditions (Sungwon, 2017). As mentioned above, the company can charge higher prices for ciders as there are not many players in the same industry. Under promotion strategy, the company needs to consider four different components which affect the attitude of customers towards ciders. These factors are such as advertisement, effective pricing, packaging and promotional schemes. It will assist the Australian cider manufacturer in establishing its business in South Korea.
Conclusion
This is hereby concluded that South Korea will provide a favorable external environment to Australian Cider Producer. Political and economic analysis of the company shows that there is stability in the political and economic environment of South Korea. It is the good indicator for cider business in South Korea. Strong financial and economic reforms assist in countering the downturn and put back the nation on a growth path. Legal factors of the company are moderate for this business. Cultural analysis is the most favorable for thee cider business as drinking is one of the major component of South Korean culture. This is the major factor that will contribute to the establishment and growth of cider business in South Korea. From the above analysis, it can be concluded that this organization should enter into South Korea and operate its business in the country. The external environment of this country will support in enhancing the business of cider and making awareness about this beverage. By the use of effective marketing strategies, the organization will be able to establish its brand image in the country that will assist it increasing its cider’s sales in South Korea.
References
Becot, F. A., Bradshaw, T. L., & Conner, D. S. (2016). Apple market expansion through value-added hard cider production: Current production and prospects in vermont. HortTechnology, 26(2), 220-229.
Chuljunsung. (2016). Korea’s first craft apple cider. Retrieved from https://www.timeout.com/seoul/bars/koreas-first-craft-apple-cider.
Dunning, J. H., & Dunning, J. H. (2014). Economic analysis and multinational enterprise. UK: Routledge.
Euromonitor International. (2017). Alcoholic Drinks in South Korea. Retrieved from https://www.euromonitor.com/alcoholic-drinks-in-south-korea/report.
Euromonitor International. (2017). Beer in South Korea. Retrieved from https://www.euromonitor.com/beer-in-south-korea/report.
Fabien-Ouellet, N., & Conner, D. S. (2018). The Identity Crisis of Hard Cider. Journal of Food Research, 7(2), 54.
Ho, J. K. K. (2014). Formulation of a systemic PEST analysis for strategic analysis. European academic research, 2(5), 6478-6492.
Jewett, A., Shults, R. A., Banerjee, T., & Bergen, G. (2015). Alcohol-impaired driving among adults—United States, 2012. MMWR Morb Mortal Wkly Rep, 64(30), 814-7.
Lea, A. (2015). Craft cider making. UK: Crowood Publications.
Ojha, S. (2017). Pestle Analysis Of South Korea. Retrieved from https://www.sachdevajk.in/2017/09/08/pestle-analysis-of-south-korea/.
Pollock III, P. H. (2015). The essentials of political analysis. US: CQ Press.
Sa, J., Seo, D. C., Nelson, T. F., Lohrmann, D. K., & Ellis, N. T. (2015). Binge drinking and drinking and driving among South Korean international college students in the USA. Health Education Journal, 74(1), 84-95.
Solomon, M. R., Dahl, D. W., White, K., Zaichkowsky, J. L., & Polegato, R. (2014). Consumer behavior: Buying, having, and being. UK: Pearson Education.
Stainkamph, M. (2016). Australian cider industry to be worth more than $404 million in 2021: Research. Retrieved from https://www.smartcompany.com.au/growth/australian-cider-industry-to-be-worth-more-than-404-million-in-2021-research/.
Sungwon, Y. (2017). Globalization and language policy in South Korea. In Language policy, culture, and identity in Asian contexts (pp. 47-64). UK: Routledge.
Zastrow, M. (2016). Why South Korea is the world’s biggest investor in research. Nature, 534 (7605)
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