Business Cultures In Japan And Korea - Case Study Example

Name: Professor: Institution: Course: Executive summary K.J. Bread Company is a family-owned business located in Perth. The company has provided Perth with a variety of bread products since 2005, and it has recently developed a new bread product named Fruity Delight. The bread has two main target markets: children aged 5-14 years old and the parents of these children. The bread will come in different animal shapes and will contain no artificial preservatives or colourings, as even the flavouring and colouring of the bread will come from fresh fruit juice used in production. The packaging for Fruity Delight is funky and colourful and recyclable. We will like our consumers to perceive Fruity Delight as being highly nutritious, fun and healthy. The product will attract young customers because of its superior taste, texture, and attractive design. Furthermore, the health benefits it can provide for children will attract parents as consumers. Competitors of our product include grocery store brand breads such as ‘Mighty Soft’, local bakery stores, donut and biscuit manufacturers, and food snacks that children can buy at canteens. Such competitors have strengths such as they are priced low (‘Mighty Softy’), have pleasant tastes (snacks sold in canteens) etc., but also have weaknesses such as they are not healthy (donuts and biscuits) or are located in inconvenient places (local bakery shops) etc. Our product, however, is healthy, tasty and sold in convenience locations. Fruity Delight will be sold in supermarkets, grocery stores and canteens and will be priced at $2 per bread. The company hopes to go international. The essay will critically evaluate the cultures of Japan and Korea and device suitable strategies for penetrating into these markets. Table of Content Executive Summary 2 Table of content 3 1.1 Organization and product 4 1.2 History 4 1.3 Market 4 2.0 Situational Analysis 5 2.1 SWOT analysis 5 2.2 PEST analysis 6 2.3 Competition 8 2.3.1 Brand Product competition 8 2.3.2 Product Competition 8 3.0 Strategies for marketing in Japan 9 3.1 Strategies for marketing in Korea 10 4.0 Recommendations 11 4.1 indirect Export Strategy 12 4.2 Direct export Strategy 12 4.3 Joint Venture 13 4.4 Licensing 13 4.5 Franchising 14 5.0 conclusion 14 References 15 Appendix 16 1.1. Organization and product K.J. Bread Company currently manufactures a range of classic breads and products are distributed across Perth. The company is now launching a new type of bread called ‘Fruity Delight’, which combines the flavours of fresh fruits with healthy bread. The bread is made using a combination of wheat, gluten-free flour and selected fruit juices (apple, banana, berries etc.). Fruity Delight is designed to target children of 5-14 years old and comes in all sorts of fun animal shapes. Fruity Delight is baked daily in the factory and is packed in eco-friendly packaging ready to be distributed fresh to its customers. Fruity Delight is unique in its kind as no bread company in Perth has specially designed bread products for children that incorporate healthy and ‘fun’ factors. 1.2. History K.J. Bread Company is a family-owned bread factory situated in Perth Australia. It began operating in June 2005 in Woden. The factory is run by a small number of staff. The owner Mr. John was a former baker at Baker’s Delight and other family members have also worked in the bread industry. 1.3. Market The two main markets are children of 5-14 years old and their parents. 2. 0 Situation analyses 2.1 SWOT analyses Internal environment: Strengths: 1. Our company’s senior management team has worked in various sectors of the bakery industry. Furthermore, the owner Mr. John formerly worked as a baker at Baker’s Delight. This means we have great experience in this industry. 2. We use the most sophisticated and up-to-date machinery. 3. Fruity Delight is nutritious, made from natural ingredients, has a tasty fruity flavor and comes in many fun shapes. This means that not only is the product good for children, it will make eating bread a much more enjoyable experience. 4. Our product matches the healthy living trend that many Australians now follow, which means we can quickly gain parents’ interests and attract them as customers. Weaknesses: 1. The power for us to set the market price is weak, since K.J. Bread Company is still a relatively new business and our products cost more than large companies. 2. The price of foodstuffs keeps increasing. This in turn increases our spending on raw materials, and we may need to pass the cost on to customers. External environment: Opportunities: 1. A gap in the kids’ food market--- there are currently no specific bread products made for children in the ACT. Therefore, Fruity Delight can enter the market easily without close competition. 2. Since 2006, the number of student enrolled in preschool and primary school in ACT have increased steadily every year (ABS, 2010). This means that our target potential market will be growing. Threats: 1. Shift from old product to the new product: customers may turn away from our company’s products due to changing food trends and buying patterns. 2. As a young company, we face strong competition from existing leading brands. At the same time, we have not established a strong reputation for our products, so consumers may be reluctant to try our bread. 3. Other companies may quickly copy our idea, which could lead to a loss of potential market share. 2.2 PEST analyses External Environment Political: 1. The political environment is quite stable in Australia. Economic: 1. Despite the recent global economic crisis, Australia’s economy has been doing well in the past few years. This is evident from ABS data that the Australian GDP has been increasing steadily, at an average growth rate of about 0.2%. 2. ABS data also shows that in Perth the average growth for income is 4.62% per year, while the average inflation rate is only 2.5%. This means our future growth opportunities are optimist due to the higher spending power of Australian consumers. Sociocultural: 1. Australians are known to be eco-friendly conscience, so they will welcome the efforts we make in reducing the use of materials that can be harmful to the environment. 2. The emergence of nutritious-conscious consumers will stimulate demand for bread and bakery products (Denial, 2009). 3. The obese population in Australia has increased to 21.3% compare to 18% last year. This is a health alarm for Australians; so many have began to follow healthier eating patterns. Technological: 1. The internet can now be used to research for a variety of information, such as competitors’ prices and new product introductions. 2. Companies increasingly engage in R&D activities to satisfy customer needs and to expand their market share. 2.3 Competitors 2.3.1 Brand competition Other bread brands Other bread brands such as ‘Helga’s’, ‘Wonder White’, ‘Mighty Soft’, etc. are our direct competitors as they offer the same products as we do. They have the dominant share of the market (Cash cows) as dozens of bread brands can be found on supermarkets’ shelves. Their strength is that they can be preserved for a fair amount of time and are readily available in many locations. Their weaknesses are they have high-carbohydrate levels and are not entirely freshly baked. We, however, will offer our customers healthy, fresh breads. Local bakeries They are also our direct competitors as almost every suburb in Perth has a bakery that offers a range of freshly-made bread and pastries. Their main strength is that they offer freshly in-store baked products. Their weakness is that their products are less accessible for people not living in the immediate surrounding area of the shop. On the other hand, we will make Fruity Delight highly accessible by having them delivered to school canteens, supermarkets and grocery stores. 2.3.2 Product Competition Donut and biscuit manufacturers They have the same target markets as us as they offer products such as animal-shaped donuts or biscuits that can be seen as being similar to our product. Their strength is that donuts and biscuits have better taste and texture than Fruity Delight. Their weaknesses are that they are high in fat and contain many artificial preservatives and colourings. Fruity Delight, however, is made from the freshest and healthiest ingredients. Snacks and hot foods in School Canteens They are very popular among children but have low nutritional values. Snacks and hot foods such as instant noodles or hotdogs are considered as junk foods, so parents generally do not want their kids to consume such products. *(Please refer to Appendix D the BCG growth-market strategy matrix) 3.0 Strategies for marketing in Japan Going global is a good opportunity for K.J. Bread Company as it will be able to expand its market share. For companies like K.J Bread Company hoping to market in Japan, never get to start businesses in the country due to a misconception that was highly spread by the infamous ‘ myths of doing businesses in Japan’ that doing business in Japan is too risky due to its culture. However this is not to say that the Japanese market is an impenetrable barrier to having a successful business in Japan as it has been proved by companies such as BMW, yahoo, Tiffany and Co and many others. Although the Japanese culture is different from other cultures like the Australian culture, these differences do not make it to be at risk to do business in Japan in comparison to doing business in any other part of the world. If anything, some aspects of business culture such as stable long term relationships, as a result of conservative sense of loyalty to their trusted partners can be an advantage for K.J Bread Company that know perfectly how to swim with the cultural tide instead of against it. Since K.J‘s products are still not completely mature, it is crucial that expectations are kept and that there is no over commitment at the expense of losing the business. K.J can consider using continuous improvement as a strategy which is a fundamental culture in Japan. Here, customers as well as other partners expect that all shortcomings are identified and that there is a continuous effort to make the products and services better. They will require a commitment of resources since decision making as well as other processes take a relatively long time. Another strategy that K.J Bread Company should also consider building relationships based on trust as a strategy for marketing in Japan. Japan has a relatively concentrated and homogenous population with long-lasting tight relationship networks which are build on trust which when established firmly form the basis for a fruitful and healthy relationship. Another strategy that K.J Company can use is use of intermediaries. Gaining trust is a pre-requisite for conducting businesses in Japan which then poses a challenge for business like K.J Company that are starting businesses there for the first time. For this purpose, “brokers” or “lend” trust through using informal or formal intermediaries is very common in Japan (Docstoc, 2011). Another strategy that can be used is committing to the market. Since decision making and processes takes a considerable long period of time, it is important that K.J Bread Company be committed to the market for a long period of time and signals this commitment. Another strategy that K.J should consider using is getting support from the board. Entering the Japan market is a trivial affair which requires commitment of the organization resources so as to generate a positive value. For this reason, it is crucial that K.J Bread Company Board of Directors support fully all the investments that are required Docstoc (2011) 3.1 Strategies for marketing in Korea Confucian values heavily influence the business culture of people in Korea more than in any other country. Confucian ethics saturates all aspects of the business life ranging from interpersonal relationships to management system and even if both the Japanese and the Western cultures are becoming increasingly strong, there is a lot of conservatism in the Korean culture which makes change slow, difficult and somehow painful. The Confucian ethics put a lot of emphasis on the value of group harmony collectively, respecting the authority and recognizing the role of a clan, friendship and a family. For this reason, just like in Japan, a lot of emphasis is placed on developing quality long term relationships if a business is to succeed. Korea insists on highlighting the important nature of relationships and networking where making a friend comes first a client comes second. It is therefore important for a business like K.J Bread Company needs to appear honourable, respectable and trustworthy, People from Korea are very curious about goods and services from foreign countries and as expected, the less disruptive a product is, the better it will fare. If the goods and services are disruptive, then it becomes necessary for there to be more of after-sale and selling support (Jeon, 2010). In this case, Koreans naturally will consider if there are cheaper, local alternatives with sufficient Korean-speaking after-sales support. K.J Company should also consider producing safe quality products as an essential part of succeeding in the Korean market. As per capital of the Korea is increasing, many consumer emphasize on quality and attributes of whatever they are buying. Some of this attributes include: appearance, convenience, taste and freshness in the case of food. There is also need to emphasis attributes that are associated with the safety of the products. In the case of K.J Company, the consumers would be concerned about nutritional balance, pesticides residue, food additive and other toxicants (Jeon, 2010). 4.0 Recommendations Entry Methods Market entry occurs when an organization penetrates/enters a market with its current products or services. The best way to attain this is by gaining competitors’ clients, attracting non-users of the company’s product or convincing current customers to use more of the company’s service or product (Viktor, 2010). After K.J Bread Company has decided to go international, it has to decide which market to enter. K.J Bread Company has to define its targets, volume of the expansion and its planned approach. In general, there are different market entry strategies which are Exporting, Licensing, Joint ventures, Acquisitions, franchising, and Management contracts (Viktor, 2010). Each of these strategies have merits and demerits, the choice of the strategy depends on the company’s willingness to accept risk and its claim for return and control. K.J Bread Company can use the following market enter strategies to penetrate Japan and Korea markets. 4.1 Indirect Exporting Strategy This is the easiest way to enter international markets with low risks and costs. Company carries out its exporting activities through a locally located intermediary. The most common types of intermediaries are manufacture’s export agents, combination export, brokers and some group selling activities (Viktor, 2010). K.J Bread Company can use this strategy when it’s starting its operations in Japan and Korea. However, the company will have less control over the marketing activities in the export markets and receives a low return. It is easy to adopt this strategy since when implementing, it does not require significant resources because there is no need for an export department which will organize sales in the foreign countries or to establish contracts with foreign partners. Also, it is less risky since the intermediaries act on their own initiative (Viktor, 2010). 4.2 Direct Export Strategy In this method, a firm handles its export activities by its own and sells the products directly to foreign buyers. This enables the K.J Bread Company to have more control over the Japan’s and Korea’s marketing activities (Viktor, 2010). The company may also appoint agents and distributors which are familiar with the host market, the agent of direct exporting represent the exporter in Japan and Korea by obtaining orders. They also mediate between the importer and buyer and they earn a commission. On the other hand, distributors are importers who purchase directly from the exporter and sell the products on their own in the foreign market after both parties have negotiated on varies basic conditions such as; price, amount and marketing. Exporters get high returns as compared to indirect exporting since the exporter sells its product directly to the foreign buyer but this method is linked with high risks. K.J Bread Company should switch to direct exporting after they have obtained international experience by the indirect exporting method (Viktor, 2010). 4.3 Joint Venture strategy Another strategy for entering an international market is joint venturing. This is a very popular way to foreign market where company establishes a joint venture through ownership and control the production with a local firm (Viktor, 2010). Formation of a joint venture may be desirable for political or economic reasons. Perhaps foreign Digging lacks managerial, financial or material resources or creation of joint venture for an indispensable condition for the penetrating the market. However, joint ventures have some draw backs where partners may differ in opinion regarding marketing, the direction of investments or the use of profits; it may also complicate the implementation of transnational company special manufacturing and marketing policy throughout the world. 4.4 Licensing strategy Licensing is the simplest way to use the advantages of international division of labour. Normally, the licensor at a certain fee gives foreign companies the right to use their trademark, production and trade secrets, i.e. the multi level company gives right to a firm in host country to produce and market. Licenses are signed for a specified period time and these agreements are subject to negotiation and tend to vary considerably from industry to industry and company to company. However, may result to uncertainty of product quality (Viktor, 2010). 4.5 Franchising strategy This is a special form of licensing where the franchiser maker a total marketing program available, including the products, brand name, and method of production (Viktor, 2010). 5.0 Conclusions It is recommended that K.J Company starts internationalizing in one of the countries either Japan or in Korea and then move in to the other later on. It is also recommended that great care should be taken in getting to know the cultures of the foreign market since it will greatly determine if at all the company is going to be successful since elements of culture send indirect or direct message to consumers in regards to selecting goods and services. It is for this reason that K.J Bread Company must understand culture and especially in the international market. References ABS 2010, “Australian National Accounts: National Income, Expenditure and Product”. Australian Bureau Statistics, September 2010. Viewed 20 September, 2011 . ABS 2010, “National Regional Profile: Canberra (Statistical Division) ---- POPULATION/PEOPLE” Australian Bureau Statistics, September 2010. viewed September 20, 2011 Read More