Is South Korea An Attractive Market For Australian Beef? Essay.

The international business environment is an important consideration for businesses intending to expand across borders.  In this assessment, the students are required to conduct secondary research and produce an essay on international business environment, and make evidence-based recommendations of the market attractiveness, based on their analysis.

The question you need to answer is:

“Is South Korea an attractive market for Australian beef?”

Students are required to focus on this country as a (potential) market for Australian beef, by using relevant theories/frameworks.

An analytical, rather than heavily descriptive, essay is expected.

 Use examples and evidence to support your argument.

 Keep your points clear and make them build towards a conclusion.

The past few decades have witnessed the meticulous growth of Korea as a massive market for Australian beef, an outcome of trade liberalization, resulting to kafta. As of 2016, Korea is one of the best performing markets for Australian beef although it has a tough competition with the US. The essay examines the aspects that have made Korea the third most valued market (Ryan and Cheetham 2017) for beef export for Australia and the largest per capita consumer of beef in the East. The paper follows the analysis of pest and swot to determine the market value of Australian beef in korean arkets and the reasons that make Korea a valuable marketplace for Australian beef export. Pest analysis:

Based on the trade agreements between Korea and Australia, a PEST analysis was conducted for determining the market value of Australian beef in Korea. The findings are as follows:

Political factors: The business climate of South Korea is quite favorable, ranking the country in the fifth position out of 180 economies of the ease of World Bank in business gauge. The Australian exporters have acquired unprecedented liberties for accessing the international markets due to the increasing demand for Australian beef and the free trade agreement signings which is highly favorable for beef exporters. The FTA, which is functioning in full flow between South Korea and Australia, has opened up further opportunities for agronomic exports to Asian countries, the most profitable of which is beef (Hunt et al 2015). The reduction in tariff on the beef market of South Korea for Australian exporters is a benefit that lowers investment and maximizes profit (MacLeod 2015). Australia is therefore in a politically privileged position when it comes to exporting beef to Korea. The laws of the country (Korea) is lenient about trade with Australia.

Economic factors: Korea has emerged as the fourth largest in Asia and the fifteenth largest in the world following a significant economic growth over the past four decades. Growing GDP of Korea has liberalized market which has contributed to a hike in meat consumption since the late 90s. With the evolution of population and economy, meat consumption has also increased (Murphy et al 2015). The growth in beef consumption is accommodated both by imports and bigger domestic production (Lee et al 2013). It must also be asserted that the Korean consumer base had a pre-existing preference for meat (beef in particular) and the trade agreements between the nations further shifted the preference pattern of beef towards Australian exports. The brand image of Australia is comparatively stronger than that of any other country since their campaigns appeal to Korean consumers more (Allen et al 2014). Further, the quality of product offered at the prices by Australian exporters make them more desirable for the crowd of developing Korea.

SWOT analysis

Social factors- The increasing GDP in Korea has leveraged meat consumption, especially that of red meat. Moreover, Korea has perennially been an omnivorous culture, very few of their dishes exclude meat. The superior quality and comparatively cheap Australian beef is high in demand for the Korean consumers (Miranda et al 2014). Unlike many countries that are developing in terms of environmental and ethical consciousness, Korea’s culture is a far cry from vegetarianism and the meaty platters the people prefer is a boon to the Australian exporters as this is one country that is least likely to ban beef or any meat for that matter. The culture and society of Korea makes it a highly profitable market for beef (Wiedemann et al 2016).

Technical factors: The meat industry of Australia is reported to take proper regard of issues concerning sanitation and health. The system of production begins at naturally grown pastures, which is the sole source of cattle sustenance for many farmers and are known to be more resilient than artificially grown vegetation. The decision of targeting the cattle breed at particular markets lies with the farmers. Angus is the most popular breed in the Korean market, following Charaolais and Brahman. The formulated diet with which these cattle are fed make them suitable for consumption and highly preferable for the Korean palate (Grant et al 2015).  

Figure:1 (Agric.wa.gov.au. 2018)

The graph charts the beef exports of Australia to international markets, Korea has been a steady marketplace for Australian beef since 2006.

The production and prospects of the Australian beef industry in Korea can be determined by a SWOT analysis:

Strengths: The production methods of the beef industry of Australia is highly efficient since producers have made investments of significant amounts for improving productivity (Kahn and Cottle 2014). The areas of investments include marketing, genetics and pastures. The ‘clean-green’ image of the industry is another major strength that qualifies the products and completely disease-free, appealing even to health conscious consumers. As evident from the PEST analysis, Australia is a major exporter of beef to Korean markets, which strengthens the preference pattern of consumers. Moreover, Koreans are hardcore meat-eaters and value quality of food intensely, since the meat exporters of Australia take special care of maintaining the quality of beef the market value of Australian beef in Korea is remarkable and has very less potential rivals.

Weaknesses: The major weakness causing hindrance to Australia’s business is the commodity market of Korea which centers on economic sector. This volatile, global market is not favorable for Australian traders since the consumers may switch to better alternatives. The processing capacity of Australian production is concentrated (Ding et al 2014), which might cause deficit in bulk production. Deficit in production during festive seasons when the demand is usually high, can mean great loss to the industry. Australia experiences climatic variability, which can affect cattle rearing, and subsequent meat production. The dependency on climatic factors for production weakens the industry development.

Opportunities: The opportunities of growth and development of the Australian beef industry in the Korean market are plenty. The rising demand of beef in Asian market is an excellent opportunity for meat industries like Australia to expand their business and evolve as large-scale exporters (Lee, Han and Nayga 2014). The huge profit made by beef industries could help them to attain greater and more advanced efficiencies (Hunt et al 2013). The production process can be improved and the industry can adopt ethical ways of rearing the animals. The risk of production can be managed better for higher profits and greater efficiency. As the growing state of beef consumption and exports are two major strength for the beef industries in Australia, they can make provision for new possibilities wherein the industry can capitalize the opportunities accessible to it (Hocquette et al 2014).

Threats: Despite the rapid pace with which the industry has been growing since the trade agreement, some of the threats remain indispensable. No matter the vaccines and the clean-green campaigns, the cattle is still not free of diseases. Growing awareness among the crowd about health issues of beef consumption is a potential threat to the Australian beef industry (Wiedemann et al 2015).  The industry relies on limited number of exporters which can impose serious challenges on the sector. Some trade laws of the Australian government can be another source of threat for exporters, considering that back in 2011, the government of Australia had suspended cattle exports or any trade relating to meat and livestock with Indonesia. The input prices of producing meat can rise to sky-high prices  and the producers may not be able to invest huge amounts on production (Sun and Bosch 2014).

Figure:2 (Agric.wa.gov.au. 2018)  Depicts how beef export have expanded most in 2016, with a temporary fall in year 2012 and 2013.

Conclusion

The environmental and SWOT analysis of the topic indicates the immense profitability of Australian beef in Korean markets. The market might be confronted with hindrances and threats like new government regulations and cattle diseases, but the brand value of Australian products and the trade agreements weigh out the threats and make Korea a valuable marketplace for Australian beef. The only recommendation would be to ensure that the cattle is raised in ethical conditions and are disease-free. This can be done with the help of proper vaccination and sanitary surrounding for the cattle.

References:

Agric.wa.gov.au. (2018). Western Australian Beef Commentary issue 11 October 2015 | Agriculture and Food., 2018 [online] Available at: https://www.agric.wa.gov.au/newsletters/western-australian-beef-commentary-issue-11-october-2015?nopaging=1 [Accessed 6 Sep. 2018].

Agric.wa.gov.au. (2018). Western Australian Beef Commentary issue 12 August 2016 | Agriculture and Food. [online] Available at: https://www.agric.wa.gov.au/newsletters/wabc/western-australian-beef-commentary-issue-12-august-2016?nopaging=1 [Accessed 6 Sep. 2018].

Ash, A., Hunt, L., McDonald, C., Scanlan, J., Bell, L., Cowley, R., Watson, I., McIvor, J. and MacLeod, N., 2015. Boosting the productivity and profitability of northern Australian beef enterprises: exploring innovation options using simulation modelling and systems analysis. Agricultural Systems, 139, pp.50-65.

Hocquette, J.F., Van Wezemael, L., Chriki, S., Legrand, I., Verbeke, W., Farmer, L., Scollan, N.D., Polkinghorne, R., Rødbotten, R., Allen, P. and Pethick, D.W., 2014. Modelling of beef sensory quality for a better prediction of palatability. Meat Science, 97(3), pp.316-322.

Juan Ding, M., Jie, F., A. Parton, K. and J. Matanda, M., 2014. Relationships between quality of information sharing and supply chain food quality in the Australian beef processing industry. The international journal of logistics management, 25(1), pp.85-108.

Kahn, L. and Cottle, D. eds., 2014. Beef cattle production and trade. Csiro Publishing.

Lee, S.H., Lee, J.Y., Han, D.B. and Nayga, R., 2013. Assessing korean consumers’ valuation for BSE tested and country of origin labeled beef products. In Selected presentation in 2013 Annual Meeting of Agricultural and Applied Economic Association, Washington DC, USA, August(pp. 4-6).

Ryan, T. and Cheetham, A., 2017. The Korean beef market: insights and prospects from an Australian perspective. Meat & Livestock Australia Market Information Report, 6(11).

Schnettler, B., Sepúlveda, N., Sepúlveda, J., Orellana, L., Miranda, H., Lobos, G. and Mora, M., 2014. Consumer preferences towards beef cattle in Chile: Importance of country of origin, cut, packaging, brand and price. Rev. FCA UNCUYO, 46, pp.143-160.

Sun, D. and Bosch, O., 2014, April. Systems approaches towards understanding the barriers to innovation adoption in the Australian beef industry. In Proceedings of the 57th Annual Meeting of the ISSS-2013 HaiPhong, Vietnam (Vol. 1, No. 1).

Wiedemann, S., McGahan, E., Murphy, C. and Yan, M., 2016. Resource use and environmental impacts from beef production in eastern Australia investigated using life cycle assessment. Animal Production Science, 56(5), pp.882-894.

Wiedemann, S.G., Henry, B.K., McGahan, E.J., Grant, T., Murphy, C.M. and Niethe, G., 2015. Resource use and greenhouse gas intensity of Australian beef production: 1981–2010. Agricultural Systems, 133, pp.109-118.