MARKETING CASE STUDY ANALYSIS_CAMTU

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Step 1: situation audit

Corporate mission and objectives
Its mission is to exporting Canadian honey to Korea.

Business unit analysis

Asian Food Importers of America (AFIA) was a San Francisco firm specializing in the
import, distribution and wholesaling of foods from Asian Pacific countries. It had a Canadian
office in Vancouver and its plans were in place to open in Toronto to serve the large Asian
market share, including Korea.

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.

Market target strategy (SWOT analysis)

In order to achieve the competitive advantage across country markets, global
marketers are supposed to be aware of the Country Specific Advantages (CSAs)/Comparative
Advantages and Firm Specific Advantages (FSAs) that their firms are enjoying as compared
to other competitors. CSAs are attached to the particular position; in other words, the special
or unique products that could be existed and developed in a given geographic location. For
example, certain kinds of plants (coffee, cacao) or raw materials (mineral sources, fuel) that is
available in given countries as such. In order to expand this theory, Porter introduced his
diamond of national advantages including factor conditions, demand conditions, firm
strategy, structure and rivalry, and supporting and related industries. The factor production
includes skilled labor and infrastructure. Demand conditions are defined as the nature of
home demand for the industrys product or service. The firm strategy, and structure govern
how the firms are created, organized and manage, and the nature of the domestic rivalry
involved. The supporting and related industries assist and stimulate it to be developed
sustainably. One particular advantage or disadvantage of a nation is so-called country-oforigin effect. That is, the made-in label or brand of a country impacts the decision-making in
particular goods of customers. In the case that there is a positive image, the customers
favorably choose that of branded goods and vice versa. Referring to the FSAs, they are
belonging to a firm only and could not be replicated by others. They might be a patent, trademarks, know-how and distribution outlet controls.

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Furthermore, so as to analyze the competitive advantage in each country, the Porters

five forces model is seemingly a best analytical method. This identifies the five sources of
competitive pressure on the firm in a given country consisting of rivalry, new entrants,
substitutes, buyer power and supplier power. Due to the case study related to two first
sources, it is so necessary to discuss them thoroughly. Unavoidably, any firm has its foot on
the ground of a new market has to concern of the competitive rivalry. This competitive
pressure derives from three sources including strategic groups (similar resource and target
market groups), domestic or local competitors and foreign competitors. With respect to the
new entrant, the key point that should be taken into consideration herein is the first mover
advantage. The first mover is defined as a pioneer in a new market and a demand creator.
That is, it realizes that the domestic competition standing in the weak position or being
nonexistent. Its marketing tasks are to provoke the implicit demands of customers,
demonstrate its supply capacity and educate them to use its products and services. This
strategy is expensive and risky; however, in turn its benefits are significantly great. They
embrace the higher brand recognition, more positive brand image, more customer loyalty and
longer market experience.
From what discussed above, I will go into details of the case study. Generally
speaking, there are 6 strengths of AFIA. In the meanwhile, two of them are classified into
CSAs and the four ones left are grouped into FSAs.

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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There are two weaknesses.

Firstly, the company has no experience exporting to Korea.
Secondly, AFIA is a trading house or the middleman, not the supplier. Therefore, it has little
control over suppliers to provide consistent product quality.

There are five opportunities.

Firstly, Koreans becomes more health conscious. Namely, household expenditure was
decreased; by contrast, medical and health-related expenditures had increased.
Secondly, honey was becoming more affordable. This means that price of honey has a
tendency to be down; therefore, customer demands for honey are likely increasing.
Thirdly, as anticipation, following the globalization drivers in terms of market drivers
(common customer needs and global customers) and cultural convergence, Koreans
gradually consider honey as a food, rather than a medial substance. In order words, Koreans
will adopt the Western culture which regards honey used for everyday life. This, for sure, will
increase the demands for honey in Korea.
Fourthly, the growing demand for honey in Korea was not being met by domestic producers
(per capita consumption increased from 0.2 kg to 0.45 kg). This is due to the fact that the
average of Korean honey farmer kept only 9 hives, unit production per hive was low and
many Korean beekeepers were still using non-improved bees, which are not highly
productive.
Lastly, the regulatory changes, notably relaxed import restriction and tariff reduction will
pave the way for Canadian honey imports. In addition, the honey is not the major income
source of Korean farmers; hence, it is unlikely that Korean government will impose
protection policy on honey imports.

There are two threats.

Firstly, there are the domestic competitors or present local honey distributors for hotels such
as Dong Seo and Han Yang. They gather honey directly from producers, process and then
distribute it through their own channels.
Secondly, once Korea opens its market, many new entrants come such as USSR, China,
Canada and Australia.

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Marketing program activities

Waterfall scenario applied means that the firm gradually moves into overseas markets. Two
advantages include order manner and less resource requirement. Disadvantage is the time
consumption. This marketing plan takes place into four phases within at least 10 years.
Product strategy
(Define different segments)
In phase 1, in order to serve the foreigners and high income Korean customers in Korean
hotels, the high quality liquid honey only (Canadian No.1 White) will be offered.
In phase 2, it still exports two different kinds of Canadian honey. Specifically, liquid honey is
for hotel, as usual, and creamy honey is for consumer market. It is worthy to take note that
difference in packaging of hotel and consumer markets will be charged in varied prices.
In phase 3, it aims to the food market segment by providing medium quality honey (Canada
No. 2 and 3), due to the fact that No.1 is reserved for the medicine market.

Channels of distribution strategy

In phase 1, this company will set up its office with two salespeople in Seoul. Based on this, it
will open direct channels to hotels in other main cities.
In phase 2, channels for the hotel market will continue. In addition, it begins to distribute
Canadian honey to customers through herbal medicine dealers and focuses on the largest four
big cities. Moreover, the department store channel with high quality and expensive
commodities, which is consistent with its product strategy, is also be emphasized. Through it,
it could monitor the change in perception of honey (from medicine to food) of Korean people.
In phase 3, it requires a warehouse (either our own or a joint venture with a large local
distributor) and increases the number of sales representatives. In the medicine market, the
traditional herbal distribution system will continue to be followed. In the food market, the
department stores, supermarkets and the larger distributions will be used.

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)

Advertising and sales promotion strategies

In phase 1, it will pursue three different promotion strategies. Firstly, it is the strategy of
person-to-person and door-to-door. Main targets are the restaurant managers and/or cooks by
close relationship establishment between salespeople and them. Secondly, it is the free
sample distribution to hotels. The sample will be same size and shape as the honey will be
sold. The salespeople will carry them whilst visiting that of hotels. Thirdly, it is the recipe
booklet print and distribution. They give hotel cooks new ideas for using honey.
In phase 2, one more office with two salespeople in Busan will be established. The
advertising strategies will be paid attention. Firstly, the advertisements will base on a
chemical analysis of honey and the recommendations of herbal medicine doctors to use
Canadian honey. Secondly, it will advertise on womens magazines because women make
most honey purchases. Lastly, recipe booklets, as phase 1, will be distributed to department
store customers.
In phase 3, in the medicine market, the promotion strategy as previously is remained. In the
food market, magazine advertising, introductory discount coupons and posters in department
stores will be used. Promotions will aim at the middle and high income earners as the price of
honey still relatively high.

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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Table of the costs over three-year plan

ITEM COST

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

furniture & fixtures 15,000

15,000

other expenses

5,000

5,000

sampling program
costs

10,000

30,000

recipe booklet costs 10,000

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.

Step 2: problem/decision statement

1. The traditional perception of Korean people from considering honey as a medical
substance to food would be changed as expectation of AFIA? This means that the
core benefit, which is defined as what product represents generically, of the honey
varied depending different nations or cultures. Korean people focus on the medical
attributes of honey; on the contrary, Western people simply regard it as a daily food as

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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 3: identification of alternatives

Option 1: In the worst scenario, it could choose the niche market as the safest place (the
medicine market) due to its acceptable profit and competitor avoidance.
Option 2: It could cooperate with a domestic distributor via joint venture (equity strategic
alliance) to share exposure risks and take advantage of the firms available distribution
channel.

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.