COUNTRY ANALYSIS REPORT

Student Name
HIGHHILLS ESTATE  
Table of Contents
1. Introduction.........................................................................................................................................1
2. Economic Environment........................................................................................................................1
3. Political Environment and Risk............................................................................................................3
 Local language, culture and/or business practices..........................................................................3
 Tariffs, quotas and import duties.....................................................................................................3
 Regulations that favour local firms..................................................................................................3
 Foreign competitors........................................................................................................................3
4. Business Environment.........................................................................................................................3
5. Country Choice....................................................................................................................................4
6. Conclusion...........................................................................................................................................5
References...................................................................................................................................................6

1. Introduction
As the exports plays a vital role both in the development of an individual organization and a country,
Australian company High Hill Estate also have intentions to benefit from this. This report analyses the
economic, political and business environments of Japan and South Korea and their market potential for
fine wine. High Hill Estate was founded nearly a century ago and is serving in the market while being
known for the best wines it have in the market. The facilities provided by the company includes
production, packaging and distribution of wine. The company not only have regional but also
international offices.

2. Economic Environment
Japan ranks 7th on a per capita basis, ahead of Korea, China and Malaysia. With the exception of certain
regions, Japan's climate and soil conditions do not contribute to wine cultivation, so the country must
rely on imports that provide opportunities for foreign producers. The Japanese wine market is
dominated by the still wine segment, which accounted for more than 89% of the market share in 2016.
In addition, the certified wine sector is expected to record rapid volume growth of over 6% per annum.
2016-2021 years. It will reach about 9.5 million liters by 2021.[ CITATION Cis18 \l 1033 ].

The number of unemployed persons in October 2020 was 2.15 million, an increase of 510 thousand from
the previous year. The unemployment rate, seasonally adjusted, was 3.1%[ CITATION Sta20 \l 1033 ]
According to Global Compass 2020, released by Wine Intelligence in August, Korea is the second most
attractive wine market in the world after last year's 10th place.

Previous experience with infectious diseases such as SARS in 2003 means that Korea is well prepared to
cope with the COVID-19 outbreak. This does not mean that Korea is likely to escape the devastating
effects of the epidemic. The International Monetary Fund (IMF) expects gross domestic product (GDP) to
fall 1.2% by 2020. However, of the 50 markets analyzed by Wine Intelligence, South Korea still ranks 6th
in projected GDP growth. In comparison, the IMF reported that the UK's GDP would decrease by 6.5%
and the United States (US) by 5.9%.[ CITATION Win20 \l 1033 ].

The participation rates of men and women in Korea are about 71% and 52% respectively in 2019. The
male proportion is very stable, increasing and decreasing by 71% year over year. On the other hand, the
level of women has seen steady growth over the past decade. The status of women is expected to
continue to grow in the future.[ CITATION Sta201 \l 1033 ].

  2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Japan 1.2 0.5 2.2 0.3 0.7 -6.4 1.7 1.2 1.1 1.3
South 2.8 2.9 3.2 2.9 2.0 -1.2 2.8 2.6 2.4 2.5
Korea
                     

5.0 Percentage change in real GDP, (% real change pa) over

previous year.
3.0
GDP (% real change pa)

1.0

Japan
-1.0 South Korea

-3.0

-5.0

-7.0
2015 2016 2017 2018 2019
Years 2020 2021 2022 2023 2024
 3. Political Environment and Risk
The consumer price of wine is higher compared to other types of alcohol because most wines are
imported. Due to the combination of import taxes, taxes, high distribution costs and markings, wine
prices are two to four times higher than in Australia. The tax and tax plan is as follows:

Import tax-9.4% (compared to 15% in other countries excluding Chile 3.5%)

Liquor tax-80,000 yen per 1000 litres

Excise Tax (VAT)-8%[ CITATION Aus18 \l 1033 ]

The World Bank puts South Korea in the top 50% of all administrative positions, but North Korea's
instability poses serious security risks. The free trade agreement signed between Korea and Australia in
April 2014 is expected to make it easier for Australian companies to do business in Korea. The challenges
we face when shipping wine to Korea include.

 Local language, culture and/or business practices

Over 50% of respondents identified their mother tongue, culture and/or business practices as major
barriers to doing business in Korea. Using an interpreter can be useful when entering the Korean
market.

 Tariffs, quotas and import duties

11% rates, rates and income tax are potential issues. The newly implemented KAFTA significantly
reduces tax rates and jobs, making it easier for Australian traders to enter the market.

 Regulations that favour local firms

A key factor in the development of Korea is the chaebol (a combination of family-owned enterprises)
that participates in many businesses. These powerful corporations, which can cause problems for
competing Australian and foreign Australian companies, the Australian Government's trade and
investment institutions, have detailed information on the potential risks that can arise when doing
business in Korea and how these risks can be mitigated. Information.

 Foreign competitors
11% of respondents cited foreign competitors with good free trade agreements with South Korea as a
major obstacle to success. The Korea-Australia Free Trade Agreement (KAFTA) agreement, which
entered into force in December 2014, is expected to equalize Australian exports.[ CITATION Exp20 \l
1033 ]

4. Business Environment
Australian wine sales in 2018 rose 39.2% from 1,500 to 1,999 yen, but total sales of imported wines
declined. This price range offers another opportunity for Australian wines. There are also sparkling
Australian wines for less than 2,000 yen, given that this range accounts for about 60% of total sales, and
Japan is starting to pay attention to Australia as a source of good sparkling wine. Japanese wine market,
moving in exchange for respect for high quality products (especially still in the wine market) Australia is
struggling with product stands in the market. This is because Australian retailers, with poor position to
compete with low-cost wine producers, have not established a major position in premium range wines
with adequate product awareness or awareness of Australian wine quality compared to France, Italy and
the United States. , New Zealand, etc.[ CITATION Exp201 \l 1033 ].

Koreans rapidly increased their wine consumption at a rate of 20% per year compared to 1996,
excluding the 1997-1998 Asian economic crisis. It is estimated that Koreans will consume 20,000,000
liters of wine by 2006, a 36% increase over the 14,632,000 liters of wine consumed in 2000.

For global wine marketers, wine exports to Korea may be attractive as the Korean government has
begun to remove tariffs on imported wines. For example, according to the recent Korea-Chile Free Trade
Agreement (FTA), the South Korean government is set to remove a 15% tariff on Chilean wines within
five years. The Korean wine market has great growth potential for the global wine industry.[ CITATION
Res18 \l 1033 ].

5. Country Choice
Japan South Korea
Variable Weighting Score Adjusted Sore Score Adjusted Sore
Economic
Environment 20% 27 5.4 20 4
Political Environment
and Risk 14% 15 2.1 11 1.54
Local language,
culture and/or
business practices 9% 3 0.27 4 0.36
Tariffs, quotas and
import duties 8% 4 0.32 4 0.32
Regulations that
favor local firms 9% 7 0.63 6 0.54
Foreign competitors 10% 6 0.6 3 0.3
Business
Environment 30% 25 7.5 21 6.3
Total 100%   16.82   13.36

By looking at the data given above data it seem that there are several advantages of one country over
other that needs to be considered before deciding between the country to which the export has to be
done in order to maximise profit.

There are less political barriers in Japan for external companies to bring in their product of wine in the
market. Although South Korea too has made programmes that facilitate foreign companies in importing
wine to the country but that is in its initial stages and has been identified with a few countries so it will
take time.

The consumers are ready to pay more for the Australian wine in japan and this could be proved from the
above mentioned data that even double the amount paid for Australian wine as compared to the local
wine has been seen. South Korea in this regard is at the same level with the Japan as their taste buds for
Australian wine has also been developed more.

South Korea intends to secure the local manufacturers and for this they have created regulations which
promotes the locals in business, so for conducting business a foreign party will have to take the cover of
the local person whereas this has not been observed with so much severity in Japan. Although they too
tends to favour their local but they have got fair means for this rather than making hurdles for the
foreign companies.

As the market is very heart welcoming for every foreigner in Japan this makes the market too
competitive for High Hill Estate. Several other foreign companies have already jumped into the market
and many other are forward looking for it. In such circumstances it would be a little challenging for High
Hills to create a good space among the existing competitors. On the other hand there are but not this
much competitors in South Korea that could erect a strong barrier for the High Hill Estate.

6. Conclusion
By looking at all the facts and figure along with the pros and cons of both the countries, it seems in the
best interest of both the investors and management to inverts in Japan as this will not only yield a high
return for the investors but also remove difficulties for the management of the company. As the
demand has already been built up to a certain degree of the Australian wine High Hills Estate will benefit
from this in a favourable way.
References
Austrade. (2018). Retrieved from https://www.austrade.gov.au/Australian/Export/Export-
markets/Countries/Japan/Industries/Wine

Cision. (2018). Retrieved from https://www.prnewswire.com/news-releases/top-growth-opportunities-

wine-in-japan-300592133.html

Export Business. (2020). Retrieved from https://export.business.gov.au/market-

profiles/briefs/Wine/Japan/demand-trends

Export Finance. (2020). Retrieved from https://www.exportfinance.gov.au/media/6219/export-finance-

australia-exporting-to-south-korea.pdf

Research Gate. (2018). Retrieved from

https://www.researchgate.net/publication/247753430_Exploring_the_Korean_Wine_Market

Stat. (2020). Retrieved from

https://www.stat.go.jp/english/data/roudou/results/month/index.html#:~:text=The%20number
%20of%20unemployed%20persons,seasonally%20adjusted%2C%20was%203.1%25.

Statista. (2020). Retrieved from https://www.statista.com/statistics/1027699/south-korea-employment-

rate-by-gender/

Wine Australia. (2020). Retrieved from https://www.wineaustralia.com/news/market-bulletin/issue-221