Canada Goose Inc.’s South Korean Opportunity Case Study

Six important factors about the culture and four important factors about the ethic in the South Korean market

Ethical Factors

1. Mutual Respect- South Koreans value mutual respect of persons. They frown upon any kind of disrespect and degradation of others. This means that in advertising, Canada Goose should never degrade a competitor’s products. This may give a negative image to their prospective customers.
2. Chain-of Command – in South Korea, hierarchies are very important. People must respect authority. This is quite unlike the West where most companies have flattened their organization charts.
3. Peace – South Koreans value peace. They strive to keep peace with themselves and those around them. This is done mostly through maintaining mutual respect and consideration for others.
4. Trust – These people value mutual trust. They like to feel that the other party is concerned about their welfare as well. Therefore, Canada Goose should find a way to demonstrate care for its customers.

Cultural Factors

1. The family unit – South Korean people consider the family unit to be the basis of their society. Therefore, it is very important to respect one’s family members and put their needs before yours. Canada Goose could leverage this characteristic by portraying their products as family products.
2. Language- The people speak Korean. Therefore, they all understand each other. This has helped to promote national pride and unity (De Mente, 2004). If Canada Goose decides to enter South Korea, it should consider using executives who speak the language.
3. Pride in Family heritage- South Koreans take the time to celebrate their ancestors to the third generation. They also believe that one family member’s actions affect others. Therefore, the easiest way for Canada Goose to gain a foothold is to make positive impressions on important family members such as fathers. The other family members are likely to follow what their leader does.
4. Value of relationships – South Koreans value personal relationships. They believe in doing business with friends and acquaintances. For such a market, it is important to get word of mouth recommendations from customers (De Mente, 2004). Also, the sellers need to treat each customer as an individual and forge a relationship with them.
5. Significance of Age- In South Korea, people are respected based on their age. It, therefore, follows that though the young may be more successful than the old may, the old are still highly respected.
6. Dressing- South Koreans are generally conservative dressers. Men do not normally wear jewelry and women do not wear revealing clothes. This factor should not affect Canada Goose because jackets are worn over clothing.

List five advantages and five disadvantages for Canada Goose Inc. to enter this market and provide rational

Advantages

1. Entering the South Korean market is consistent with Dani Reiss’s goal of growing the company. It will result in increased sales revenue and profit.
2. This market will enable Canada Goose to extend the lifecycle of some of its products. This is because it generally follows the trends of the west.
3. Expansion into South Korea will mean that production capacity needs to be expanded too. Expanding production to a larger scale will result in economies of scale. This will eventually result in reduced costs for Canada Goose.
4. Diversification –South Korea is a different market from the European market. It offers Canada Goose an opportunity to grow in a market outside the home. If the entry is successful, it can also reduce the risk of CG’s business failure by offering alternative customers.
5. Canada Goose makes jackets for extreme weather. The weather cycles in the west are different from South Korea. Therefore, entering South Korea will provide alternative high selling seasons.

Disadvantages

1. Distribution- The Company would have no control over the distribution stores. This means that the storeowners could advance their interest instead of CG’s.
2. Initial investment- Entering a foreign market requires a lot of capital. CG needs money for a complete market survey, for an initial down payment to the distributors, for shipment of the products, and many other expenses. The company does not have any idle money since its working capital is tied up in meeting current orders.
3. Entering the South Korean market would divert resources from current Canadian operations. The problem with this is that the Canadian market is proven. People are loyal to CG. The demand has not been exhausted. CG should consider focusing on the domestic market before entering an unproven foreign market.
4. The ESD president is opposed to this move. Dani has no idea how far he would go to protect his work on the products and therefore prevent South Koreans from using them. His opposition also creates unsolicited business tension that could affect Japanese operations too.
5. The legal environment in South Korea is different from the Canadian environment. Canada Goose may have trouble adjusting to this. They may also be required to hire Korean lawyers with knowledge of this environment. Such a scheme may turn out to be very expensive.

SWOT Analysis

Strengths

The young customers in South Korea who are early adopters already know about the Canada Goose brand from the internet. They might be enticed to but based on CG’s success in Canada and Europe in general. Secondly, CG has a very strong R&D department that is committed to improving its products consistently. This means it is capable of responding fast to customers’ needs. Finally, Down insulator provides a huge competitive advantage. It is efficient and CG controls its legal rights.

Weaknesses

CG does not have a specific fit for the South Korean market. This means it needs to either re-design its products or convince the Japanese to sell to the Koreans. Secondly, CG has no specific knowledge of the new market. An extensive market survey is required to achieve this. Failure to understand the market could lead to business failure in this market. CG is currently facing increased demand in its home market. The company has not found a way to harness this demand. This creates doubt about its ability to handle a new market.

Opportunities

The preliminary market research shows that two distinct groups of consumers exist. There is an opportunity for CG to harness both groups for their benefit. South Koreans are beginning to adopt western styles. This means CG stands a chance of being a South Korean favorite. Finally, CG’s good performance in Canada places it in a good credit position. The company can obtain the funds necessary for expansion quite easily.

Threats

Canada Goose’s current competitors could get wind of the impending expansion and take the competition to Korea too. North Face is already in operation in SK. CG should consider what actions NF is expected to take to defend its market share. Secondly, the ESD manager may refuse to allow CG to sell its designs in South Korea. The Company would then be forced to re-design. CG might find it challenging to find a suitable distribution channel. Once a dealer has been identified, it would be difficult to control their actions.

Marketing Strategy

The South Korean market is segmented into the Early Adopters and the Functional Buyers. The Early Adopters are young and well informed. They use the internet a lot and have high information needs. They also buy goods depending on what is trending currently. Canada Goose needs to find a way of feeding their information needs while making CG goods look cool.

The appropriate marketing strategy for this niche would involve interactive advertising on social media. CG could also consider placing adverts on websites these customers frequent. In terms of distribution, CG should establish the trendy stores visited by these customers and place their products there. If possible, the Company should pay for prime space.

The functional buyers have higher disposable income than the early adopters. Therefore, CG should not ignore this market segment. Online advertising will not be effective for this group. This is because they mostly make their purchasing decisions in the store.

The appropriate marketing strategy for this niche would involve a lot of visual marketing in the stores. CG needs to purchase prime space in stores they frequent. Secondly, store attendants should be trained in customer care. They should be able to convince the customer to purchase a CG jacket over other brands. Alternatively, CG could set up exclusive distribution stores just to target this group.

Should Canada Goose Inc. continue to manufacture its products in Canada?

Canada Goose should outsource its production. Manufacturing within Canada is not sustainable, given the recent increase in demand. Already, Canadian manufacturing operations cannot support the internal market. It will be impossible to sustain an additional external market.

Dani Reiss should consider the cost implications of manufacturing in Canada. Labor is cheaper in China and other developing world countries than Canada. CG’s competitors have already moved some of their production to outside Canada. This means they have lowered their cost. Reiss should ask himself how long CG could survive with higher operating margins than its competitors could.

CG customers are loyal to the product. Their reaction to outsourced production will depend on how they receive the news. Reiss should consider outsourcing, then hiring a good PR firm to deal with the publicity. The customers are likely to understand since the world is becoming more globalized by the day.

Outsourcing would also enable Reiss to manufacture different products for different markets due to lower cost. He would then concentrate on design.

As a Junior International Specialist for CG Inc., you need to provide two other markets that Canada Goose Inc should consider entering

I would recommend that Canada Goose consider entering the Chinese and Japanese markets. These two have geographical proximity. This would ease distribution.

The major competitor operating in China is Moncler. However, the Chinese market is too large for a single company to dominate. It would be easy for CG to cut out a niche for itself. This is in contrast to the South Korean market, which is a small market and already dominated by North Face.

Production in China would also be cheaper than in Canada. If CG were to outsource production, China would be an excellent choice. In this case, it would make economic sense to both produce and sell in China. China has already established itself as a world center for efficient production.

The Japanese market is not a new one to Reiss. I recommend an expansion in Japanese operations. This is possible since CG already has an established distribution partner. Besides, the company has already proven that this market has embraced its products. Expansion in this market would be cheaper and more efficient than entering South Korea.

References

De Mente, B. L. (2004). Korean Business Etiquette: The Cultural Values and Attitudes that Make Up the Korean Business Personality. Seoul: Tuttle Publishing.