Supply of fresh fruit from Australia to South Korea – Term Paper

Introduction

In Asia, South Korea is the fourth largest economy in ranking (Korea, 2010). South Korea hosts many world-class companies; the country uses advanced technology in goods and service production. South Korea also has open trade policies, which gives the country access to global markets. The South Korean government has signed a free trade agreement with other nations to promote business in the country; for instance, the government of China. South Korea labour market is well placed to attract foreign firms (Korea, 2010). There is a high number of skilled workers available in South Korea providing significant resources to the employer. Another factor that makes South Korea to be an international market is due to open trade and investment policies facilitated by the South Korean government. South Korea offers a healthy environment for both local and foreign investors in production, manufacturing and importation industries. South Korea has a sound financial sector which builds confidence for investors. The investment sector is also encouraged by moderate tax rate charged by South Korea government, good bureaucracy and the strong business rule of law.

Politics of South Korea

South Korea practices democracy where the power is distributed to the executives, judiciary, and legislature. The South Korean citizen gets freedom in 1987 from editorship for of leadership. In political climate, South Korea is listed by World Bank in the top 50% in all the area of governance (Australia & Australia, 2005). However, the political instability in North Korea possesses a trade challenge especially the risk of security threat; these scare away potential investors. The political climate boosts South Korea as international market, by the introduction of a free agreement that was signed between South Korea and Australia government in April 2014, the importance of this agreement is to make easy for investors from Australia to carry out their business in South Korea. According to Australian International Business Survey, 72% of Australian exporters are confident that business in South Korea will improve after the signing of the agreement between the two countries and are optimistic about a very positive outlook of South Korea market (Making Strategic Investment Decisions, 2015).

Economic climate

Globally, South Korea economy is ranked number 12th in largeness (Conlon, 1988). The economy of South Korea has successfully moved from being a middle income to the high-income economy over the last 40 years, despite the income per capita list lags behind other developed countries. South Koreas historical growth rate has been satisfactory and secure; however, in the past years its exporting sector of the economy has suffered due to the global recession (Dispute Settlement under Free Trade Agreements: The Proposed (Australia-China Free Trade Agreement, 2010). The government is taking many economic strategies to address the exporting challenges including expanding its fiscal and trade policies. In addition, South Korea as the country faces some problems that affect the economic growth such as aging population, low productivity growth and a strategy of balancing the economy away from exports (Australian Trade Commission, 2011).

South Korean market is Australian 4th largest trading partner. In 2013, Australian goods exports to South Korea were estimated to worth US$ 19 billion; the merchandise consists mainly of iron ore, fuel, and coal. Current research survey indicates that Australia is the 3rd largest supplier to South Korea for Agricultural-foods products, due to this bilateral relationship between South Korea, and Australia leads to the signing of free trade in April 2014. The deal open up business opportunities for Australian business people in different sectors: biotechnology, constructions, defence, dairy and lastly in fruits and vegetables.

Exporting Australian fresh fruits to South Korea

In 2010, the total market size of South Koreas fruit market was 3.3 million metric ton. Locally grown fruits are plums, grapes, tangerines, Asian pears and apples. The signed deal of free trade in April 2014 between Australia and South Korea open up opportunities for Australian fruits exporters to supply to South Korean market. The South Korean market also has other suppliers of the same product (Peter, 2010). Therefore, there is a need to evaluate the market and leading competitor. In competition analysis, it is important for Australian exporters to check on product quality; in South Korea consumers are highly health-conscious and demand for an organic food product is growing. Therefore, that is a plus competition advantage for Australian fresh fruit supplier. Australian fresh fruit exporters should target the right market group; according to the research on food done in South Korea, the demand for organic food for children and babies is expected to grow. Therefore it is important for exporters to include fruits that have nutritional value for children and babies.

Australian exporters should also look at the test of their products since the consumer tests are changing over time and there is an increased demand for high, quality food products. Fruits to be supplied should be fresh and of good quality (Baker, Minnis, Australian Horticultural Corporation & Australian Horticultural Exporter’s Association, 2003).

Another competition advantage that Australian fresh fruit supplier to South Korea has is that Korean consumer considers Australia as a clean and green environment, which able to produce quality and fresh fruits. Due to Australias reputation on clean, fresh and safe supply provide an opportunity for the delivery of fresh fruits to South Korea.

The key fresh fruit competitors in South Korea Market

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;;;;;;;;;;;South Koreas fresh fruit imports are raising significantly due to improvements from economic downtown and good import policies. Principal imports are United State, who dominate largest market shares for citrus and fresh cherries, in 2010 United States post $ 205 million from fresh fruit export to South Korea. The introduction of the free trade agreement is expected to boost the business and resolve the issues of import barrier (Australian Horticultural Corporation, 2005).

;;;;;;;;;;;Chile also supplies fresh fruit to South Korea,;the government of South Korea and Chile signed the agreement (Korea-Chile FTA, 2014);allow Chile exporters to provide the grapes. For the domestic supply of grapes in South Korea includes Campbell, Sheridan, and Kholo, for Chilean grape importers to South Korea value at $74.6 million in 2010 (Australian Horticultural Corporation, 2005).

Strategies to supply fresh fruits to South Korea

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Pricing strategy

The price of the fruits should be affordable to the South Korean locals. The first thing the fresh fruit exporter needs to do is to analyse the pricing of the same commodity from his competitors. The price of the product should not be too high or too low but should be within the market price. Australian exporters to sell directly to retailers such as department stores and hypermarket, remove the middlemen. These practices have the potential to lower the costs and improve the product assortment, which leads to increase of market size, reduce price and assuring the safety of the product (Australia Asia Worker Links, 2009).

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Distribution strategy

For distribution strategy, air transportation is convenient for Australia to South Korea fresh fruit trade. Fruits are highly perishable and need to be transported very fast to the market. When they arrived at the airport, there should be trucks with refrigerated boxes to maintain the fruit freshness to the market (Dispute Settlement under Free Trade Agreements: The Proposed Australia-China Free Trade Agreement, 2010). For promotion the advert should focus on the nutritional value of the fruits, the fact that fruit is organic will boost its demand. The television advertisement is necessary since it covers large population. The company can also employ local advertising agents to do the work of advertising the product during its launching. Fresh fruit supply companies from Australia can approach celebrities, or ministry of health of South Korea to endorse the product since local endorsement boost the confidence of the local to purchase the product (Australia Asia Worker Links, 2009).

;;;;;;;;;;;The retail industry- the majority of fresh product sold in South Korea market is through retail sector, this include traditional markets. The imported fresh fruits like grapes, banana, oranges, are sold in stores, from high-end grocery stores to the traditional markets places. While those that are considered to as premium quality like mangoes, cherries, and avocados are only available in elite grocery stores in supermarkets, and department stores. Other fruits such as cherries are sold by street vendors (Australian Horticultural Corporation, 2005).

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;;;;;;;;;;;In South Korea, as tariff and volume quota reduces, the issue of food safety often arises and restrict imports. Its, therefore, important for Australian exporters to respects food import regulation of South Korea and ensures the fruits they are supplying are of high quality and safe for consumption. The signing of free trade agreement between Australia and South Korea provide great opportunities for exporters from Australia to increase their market share and increase bilateral relation between the two countries.

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Baker, J., Minnis, D., Australian Horticultural Corporation., ; Australian Horticultural Exporter’s Association. (2003). Fresh fruit and vegetables market report: Republic of Korea. Australia: Australian Horticultural Corp.

Australian Fresh Fruit and Vegetable Survey Mission to South-east Asia., & Australia. (1984). Report of the Australian Fresh Tropical Fruit and Vegetable Survey Mission to South-East Asia, May-June 1984. Canberra: Australian Government Pub. Service

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Minnis, D., & Australia. (1984). Report: Australian fresh fruit, vegetables and flowers exported to South East Asia and Japan in 1984. Canberra: Dept. of Primary Industry

Korea (South). (2010). Economic survey of the … Korean economy. Seoul: Economic Planning Board, Govt. of the Republic of Korea.

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