Professional Documents
Culture Documents
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Buyer analysis
The Korean consumers traditionally regard honey as a medical substance, not as a food.
They buy honey at herb stores or honey specialty stores. Mainly women are the buyers.
They buy for their husbands, fathers-in-law and mothers-in-law.
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CSAs
Firstly, Canadian honey is regarded by most of Korean customers as a high quality branded
product and preferred favor (country of origin effect). This means that the Korean consumers
surely have trend to consider Canadian honey as the best choice. More specifically, Canadian
honey contains less moisture, more total sugar, finer particles and tastier due to the good
source-flowers and lower level of pollution in Canada. These country specific advantages do
not happen in Korea.
Secondly, Canadian honey has a price advantage due to honey production in Canada less
costly than in Korea.
FSAs
Firstly, it was in the strong financial position with retained earnings of several million dollars.
Secondly, the companys experience dealing with Asian foods concerns had given them
connections in most Asian countries.
Thirdly, there was an existing infrastructure in place to ensure the efficient movement of food
products.
Finally, it cooperates with the largest honey supplier in Canada Bee Star to ensure its
stable supply source.
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Price strategy
In phase 1, Penetration price strategy means that the lowest price is charged so as to get into
more hotels.
In phase 2, the previous pricing policy for hotel market will be continued due to two
reasons. Firstly, the profit from the hotel market is insignificant no matter what the price.
Secondly, its high quality image will be reinforced if its product is widely available in hotels.
As for consumer market, it will charge a premium price owing to two reasons. Firstly, it will
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reassure to customers that its quality is high. Price-quality relation means that customers
will attribute high quality to a product with high price. Secondly, under quota restriction,
products with high prices are more profitable.
In phase 3, in the medicine market, the target retail price will be higher than domestically
produced honey. In the food market, the retail price will be likely set at parity with domestic
honey to avoid the dumping accusation.
(Differences in prices, depending on varied segment market)
Financial analysis
In phase 1, this corporate will allocate up to $500,000 for three-year phase of set-up and
operation of the Seoul office (see more on the Table below). In the meanwhile, one manager
is responsible for initial business and two salespeople will be hired as well.
The lowest price of break-even is $6/kilogram, but it prices as $4/kilogram (? loss).
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1 YEAR
3
YEARS
personnel costs
40,000
120,000
office rental
20,000
60,000
set-up costs
50,000
50,000
2 cars
30,000
30,000
15,000
other expenses
5,000
5,000
sampling program
costs
10,000
30,000
30,000
government
lobbying
225,000
75,000
Total
565,000
In phase 2, it will allocate $50,000 for ten years. This amount of money is used for additional
sales assistant hired, government lobbying and advertising program.
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such. In order to change this perception, it takes time and in the worst case, it would
be unsuccessful. This issue should be discussed carefully by the board of directors.
2. The discrimination of honey producers derived from Communist countries, notably
USSR and China, was detached by Korean government. Whether AFIA could
compete with such the biggest ones?
3. In the case that the pre-assumptions are not followed as expectations (Korean market
did not open, lobbying is not successful, Korean culture cannot be changed), the firm
will get stuck in the phase that it is carrying out and cannot move farther.
Step 4: criteria
1. Profit
2. Market share
3. Good customer relationship
4. No increased costs
Step 5: analysis
Option 1: the profit in the medicine market is seemingly promising. Although small market
shares could be occupied, the Korean customers perception of high quality Canadian honey
is kept intact and costs are spent as least as possible.
Option 2: profits could be shared with the partner. Other three criteria could be achieved.
Step 6: recommendations
The option 2 could be the best choice. Because it has had no experience in the Korean
market; hence, it should find out a trusted partner to cooperate. On the one side, it could
learn from this party and has more time to get acquainted with new market and customers. On
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the other side, it could capitalize on the available distribution channel to save its overhead
costs.
Recommended tactics:
From now it should search for that of partner. When the Korean government relaxes their
restriction on honey imports and its market, it could grasp this opportunity right away and
take action.