MARKET ENTRY

1. Entry strategies to consideration

If our company decides to enter Korea, there are several entry strategies available for us to
consider. One is export, which can be done via direct or indirect route. The former provides
Fruish with direct involvement in, and thus, high management control over its export
operation. Indirect export can be achieved via an agent located in either Vietnam or Korea.
Operation costs for the indirect route may be lower than the former, as the agent will handle
most of the onwards operation in Korea. However, Fruish may have to give up, to a certain
degree, its direct involvement in and control over the marketing activities in Taiwan. Another
drawback for taking the indirect export rout, from Fruish’s view point, is that it will have to
share its margins with the agent as well.

Our company also consider licensing strategy. Licensing allows us to use international
products without significant investment, which ensures that there is no huge commitment to
capital involved. And not only production, the licenser may also gain an immediate
advantage from the marketing and service network of the licensee in some cases. If there
were the same other conditions, licensing could take less risk than establishing a wholly
owned subsidiary. Compared to other modes, there is no need for significant capital to
license. The downside of this style is that the licensor has little influence over licensee
operations and when the contract expires, the licensee may become the potential competitor.

Other choice is Franchising. This strategy is comparable to licensing even though it involves
a prolonged commitment of time. With a relatively small investment in capital, franchising
offers the potential for rapid development. Franchising involves parent companies and
numerous small businesses working together. Parent companies share the right to use their
goods and their trade names and processes with the smaller companies. But there is also
certain disadvantage of this mode, as the franchisee is independent contractor, there is no
hierarchical control over the franchisee’s operation, the franchisee has freedom to manage
their own store. If the franchisee doesn’t have good performance, the customers will be
negatively effected on our products and we will lose this potential market forever.

Another option is joint venture strategy. It means we must find a partner in the host nation to
make an offer. Joint ventures allows partners to share all business elements, including R&D
and patents, with each other. Partners also bear the risks and costs together, on the other hand.
In turn, the local partner is more familiar with consumers’ market situation and perception
and speeds up the business cycle in the host country. However, this is a risky strategy for us
as the cultural differences in management and technology secret. The partner may become an
dangerous competitor in the future.

The last option we can consider is Wholly owned subsidiary. A wholly owned subsidiary can
be set up either by acquisition or by establishing a completely new entity (Greenfield
investment). With the wholly owned Greenfield investment, the parent company is in full
control of the operations but also needs the ability to deliver the necessary assets and
management and take all the risks. Current preferential treatment in import/export tariffs
between Vietnam and Korea within the scope of FTA agreement, may encourage foreign
entrants to set up local assembly/production in Korea in which case Fruish could either
source local fruit to produce the carbonated fruit-based products or ship the products in bulk
and have the packaging done in Korea. However, the high labour cost and constraints of land
act in Korea act as deterrents to foreign entrants setting up local production, while protecting
local producers. Besides, the commitment of resources required by this option represents
greater financial exposure and thus higher potential risk in a totally new business
environment.

After careful discussion, we come to conclusion to choose the direct exporting strategy due to
the following reasons:
 International experience: We are still in early stages of internationalization and have
limited experience in using market entry modes so low control as its presence in small
investment modes.
 Dissemination risk: The risk of providing valuable technological know-how to foreign
companies is low
 Resource commitment: The soft drink market in Korea is growing very fast and
highly competitive so we don’t want to invest too much resource at this stage. Direct
exporting strategy will be a safe option at present but ensure the potential
development in the future when our company has enough capabilities and resources to
expand larger.
 Company size: Despite having established a significant presence in our nation
market, our company is relatively small compared with other big competitors in the
areas.

2. Outstanding activities to make entry:

a. Marketing:

Given increasing competition in the imported soft drink market in Korea, an appropriate
positioning strategy is vital to win buyers. In addition, customers are becoming more health
conscious but those living in the cities do not do much physical activity. Given these
scenario, it seems to position Fruish’s carbonated drink as new revolution of soft drink
segment that’s a healthy carbonated fruit-based drink in the mind and heart of consumers in
the target markets is very appealing.

Brand ambassador plays an important role in the success of lauching campaign to new
market. Luckily, Korea has many global idols, we tend to find out ambassdors who have
positive influence on lifestyle orientation. These guys not only spread out the image of our
product to Korean but also the international fans around the world, which will draw a
potential background for our product in the future.

b. Pricing:

Thanks to preferential treatment in import/export tariffs, we will be allowed to cut down on

operation cost, therefore, we will launch our product at the most competitive price, make
strong advantage over the same foreign products.

c. Importer Selection

There are two routes for our products to reach the retail outlets in Korea. The first route is for
the importer to sell Fruish directly to large retailers. This will most likely enable our product
to achieve higher margins. The second channel is for the importer to sell to distributors, who
in turn sell to retail shops, convenience stores, other more remotely located retail outlets,
restaurants, and department stores, etc. We choose the second channel that through
distributors since we’re new name to Korea’s beverage segment, we need distributors’
resources to have our products placed on korean store’s shelves. Our target distributors are
Seoulution, Jy Trading Corporation.

d. Advertising and Promotion

Communication and promotion are also somewhat tricky. Selection of appropriate media is
also very important in order to reach the targeted audience. Besides advertising, a “below-
the-line” media launch party and an exhibition at a popular venture might be useful to attract
media attention, and to generate publicity for Fruish’s product. Other promotional activities,
including trade and consumer promotions, and point-of-sale materials, etc., will be sorted out
as well.