Executive Summary
The current paper is an audit of an international marketing plan for exporting UGG Australia to South Korea. The information in the report is related to the findings made gathered in assignment 1. The market audit entailed a socio-cultural and economic evaluation of South Korea. Results revealed that the nation is an ideal market for Australia UGG. Transportation of the product will involve airways, railways, sea, and road. Marketing channels include television, newspapers, magazines, radio, and the internet. Also, there will be promotions and discount sales to attract consumers. UGG Australia’s distribution avenues will be specialty outlets, department stores, and boutiques. The terms of sale for the boots will be based on cost, freight, and insurance.
Introduction
In this paper, the author will analyze the process of exporting UGG Australia boots to South Korea. The plan to set up a market in South Korea was influenced by the success of the product in such countries as Japan and China. A social-cultural analysis will be carried out to determine if South Korea is an ideal market for the boots. Also, an economic analysis will be conducted to identify if the country has political and legal stability essential for supporting the growth of a new commodity in its market. The marketing plan will entail analyzing marketing objectives, modification, promotion mix, and product adaptation. Also, several factors, such as the distribution process, terms of sale, price, and payment methods will be evaluated.
The Product
The product to be launched in South Korea is UGG Australia boots. The footwear is made from sheepskin. It has fleece on the inside instead of wool. The outer surface is tanned and fitted with a synthetic sole.
Product as an Innovation
Relative advantage
UGG Australia has a relative advantage because sheepskin footwear is authentic in design, quality, and country of origin. UGG Australia can guarantee that its boots are made from the highest quality material. Through proper marketing channels and techniques, South Korean consumers will regard the product as genuine. As such, they will prefer it over other shoe brands in the country.
Compatibility
South Korea has a lower per capita income compared to other markets, such as China and Japan (Wolf, 2013). However, the country is still a suitable market for the product. The reason is that South Koreans have a high interest in international brands. The interest to emulate the western lifestyle will be exploited to create value for the product. Also, UGG boots are popular with numerous celebrities, especially from the United States. As a result, South Korean customers will want to embrace the brand and create a celebrity image.
Complexity
There are no complexities associated with the product’s use.
Trialability
The liability of the product will entail allowing customers to fit the boots and determine the right size before purchasing. Sheepskin comfort and quality will play a crucial role in increasing sales.
Observability
UGG Australia boots will have a unique design compared to other brands in the South Korean market. As a result, customers will be able to distinguish them from other types of footwear by just looking at them. The make, variety of sizes, and colors are expected to attract a big number of consumers.
Major Problems and Resistance to Product
Entry into a new market can be challenging due to intense competition (Daniels, Radebaugh, & Sullivan, 2013). However, no resistance is expected in South Korea. The reason for this is the consumers’ great desire for high-quality international products. The only major problem in the manufacturing of counterfeit brands that are similar to UGG boots.
The Market
Description
Geographical regions
The regions to focus on will be the first-tier cities of South Korea. The cities include Seoul, Taegu, Ulsan, Pusan, and Incheon. The reason for focusing on these areas is due to the large population size.
Forms of transportation and communication in the country
The primary forms of transportation in South Korea are railway, air, land, and waterways. Coyner and Chang (2010) note that South Korea is one of the three countries in the world with a commercial maglev train. All the targeted cities are connected by subways systems. The well-developed nature of the country’s transport system will make it easy to transport UGG Boots.
South Korea has several communication channels that can be used to market the new product. They include telephones, internet, publishing, TV, and radio. According to Kim (2012), South Korea is the most wired country in the world. As a result, marketing will be easy and fast.
Consumer buying habits
Product-use patterns
South Korea is popular for its shopping culture, which is considered to be a national pastime due to increases in personal income. As a result, the country will serve as a good market for UGG Boots. Also, the product is fairly cheap and affordable. The price and quality will attract consumers of all ages.
Product feature preferences
There are several footwear lines in South Korea. However, UGG Australia will have a competitive advantage due to its quality and uniqueness, which match consumer preferences.
Shopping habits
South Korean consumers are hampered by instances of economic uncertainty and high personal debts. However, there has been an increase in purchase rates over the past few years, especially during promotional sales periods. South Koreans buy about 68% of their items during promotion sales. In the United States, the figure stands at 57% (Shukla, 2014). Consequently, UGG Australia will take advantage of such seasons to boost sales.
Distribution of the product
Typical retail outlets
Distribution is an important aspect of the retail business (Dlabay, Burrow, & Kleindl, 2012). The primary outlets will be boutiques, specialties, and department stores. The main reason for choosing these avenues is that they are accessed by many people.
Product sales by other middlemen
Middlemen ensure the effective distribution of goods and services. To this end, UGG Australia will partner with GTS Global Inc., which is one of the leading footwear distributors in South Korea.
Advertising and promotion
Media used
South Korea has numerous advertising platforms. They include magazines, newspapers, radio, television, and online advertising. They will be utilized to market UGG Boots. Television and the internet will be the most widely used means. The reason is that they are the most effective channels for reaching out to the target market.
Sales promotions
Sales promotions enhance purchases and familiarisation with a product (Baack & Harris, 2013). Promotions will entail discount sales and offering consumers such items as free pairs of socks. The aim is to attract more customers and enhance sales.
Compare and contrast with the competition
Competitors’ products
South Korea has numerous local and international footwear lines. UGG Australia’s major competitors will be Fur Boots and Puffer Boots. To effectively compete with these rivals, the company will develop sound marketing, promotion, and distribution strategies. Prices will also be affordable.
The table below is an illustration of the competition:
Table 1. Competitors’ products.
Competitors’ prices
The retail price for Fur and Puffer Boots in South Korea is between $20.00 and $26.00. The cost is almost similar to that of UGG footwear, which is $24.00. However, the quality of UGG boots will be a selling point for the product.
Competitors’ promotion and advertising methods
The competitors use magazines, radio, television, billboards, and the internet. Promotion involves reducing prices during specific seasons.
Competitors’ distribution channels
The competitors have sound distribution channels, which help them ferry their products to different parts of South Korea. Fur and Puffer have retail stores in different cities and vend their beverages through direct selling.
Market size
Estimated industry sales for the planning year
The shoe industry in South Korea has registered positive growth over the past decade. In 2014, the market generated revenues estimated at $1467 million. The annual average growth is 7% (Shukla, 2014). The growth rate shows that UGG Australia will register positive annual sales in the new market.
Estimated sales for the planning year
South Korean footwear industry is competitive due to a large number of brands (Kwon, 2008). During the first year of its launch, UGG Australia aims to achieve 15% of the market share. The figure is expected to grow as the line expands to more cities and creates a bigger customer base.
Government participation in the marketplace
Agencies that can help
Table 2. Helpful agencies.
Regulations to follow
All the regulations provided by the government and other agencies will be followed.
Marketing Plan
Marketing objectives
The objective of UGG Australia is to successfully enter the South Korean market in 2016. Within the first year, the footwear company aims to have a market share of at least 15%. The overall market size is expected to expand through proper advertising and increased awareness.
Target markets
UGG Australia targets customers from different age groups. However, young and middle-aged people will be the main targets. The reason is that individuals from these groups lead to fashionable lifestyles by wearing international designer products.
Expected sales year 2016
In the first year, UGG Australia will focus more on establishing the brand, creating a huge and loyal customer base, and generating sales. The expected revenue for the first year is estimated to be between $3 million and $4 million.
Profit expectations year 2016
During the initial stages, companies make little or no profits (Davenport & Parker, 2011). In the first year, UGG Australia is expected to register minimal profits. To avoid extreme losses, the company has taken several measures, such as extensive marketing and proper distribution.
Market penetration and coverage
The company will target the largest and most populous cities in South Korea. The areas have large numbers of young and middle-aged people. UGG Australia will also be distributed to various small cities where other brands are not popular.
Product adaptation and modification
Core component
The product introduced in South Korea will be the same as that sold in Australia and other markets. The core components of UGG Australia are two-faced sheepskin, fleece, synthetic sole, and tanned outer surface. The reason for using the materials is to offer maximum comfort and warmth.
Packaging
UGG’s brand name and logo will be the official trademark for the product. The features will help in promoting footwear and creating awareness for the brand. The boots will be packaged in stylish and unique black and brown boxes with the UGG logo and tags. Also, the packaging will be of high quality to match the product inside.
Support services component
Consumers will be provided with the company’s telephone numbers, email addresses, and websites. The platforms will be manned round-the-clock. The objective is to ensure that all queries about the product are addressed. Also, there will be instructions on how to maintain the footwear.
Promotion Mix
Advertising
Objectives
To succeed in a market, companies should have the targets they wish to attain (Hutt & Speh, 2010). The objectives of UGG Australia include building a brand and good company image, creating awareness, and becoming a leader in South Korea.
Media Mix
In such markets as China and Japan, UGG Australia employed outdoor advertising, television, and newspapers. The corporation plans to use the same media mix in South Korea. The aim is to sustain the success witnessed earlier. Also, the platforms are the most popular advertising channels in South Korea.
Outdoor advertising will entail the use of billboards. Television adverts will be aired in the evenings. UGG Boots will be published in popular papers, such as Busan Ilbo. Also, there will be a 15s radio commercial in leading stations.
Message
The message will be simple and to the point. The components used to make the boots and comfort levels are the main selling points.
Costs
The estimated budget for advertising will be $500,000.
Sales promotions
Objectives
The primary objectives include developing interest in the product, gaining competitive advantage, building customer loyalty, and stimulating demand.
Coupons
Due to the success witnessed in China and Japan, the technique will be employed in South Korea. Coupons will be set in newspapers and magazines for readers to cut out. Consumers will then present them to stores selling UGG boots to get offers.
Premiums
The premium to be used in South Korea entails awarding customers price discounts if they purchase more than two pairs of boots.
Costs
The cost of sales promotions will be determined by the number of consumers who purchase more than two pairs of boots.
Personal selling
In South Korea, personal vending will entail the use of retailers set in big cities across the nation. Some of the products to be sold besides boots include care products and accessories. The commodities are used to take care of the sheepskin used to make the footwear.
Other promotional tools
The primary support promotional tool will be on the internet. The medium is cheap and most South Koreans have access to it.
Distribution from origin to destination
Port selection
The selected Australian harbor will be Port Botany. The port offers a wide range of facilities. In South Korea, the harbor to be used is Port of Busan. The port has a strong workforce and connections. The Port of Busan is the major dock in South Korea (Wolff, 2013). It has six sister harbors.
Mode selection: Advantages and disadvantages
Table 3. Advantages and disadvantages of selected modes.
Packaging
Like in Australia, each carton will contain 24 pairs of UGG boots. Each pair will be in its packaging.
Documentation
The primary documents required by Australian authorities include a certificate of origin, bills of landing, insurance certificate, and airway bills (Strydom & Smith, 2011). Documents needed to export to South Korea include trade permits and delivery verification.
Insurance claims
Insurance will be organized both in Australia and South Korea. Factors to be considered when signing insurance contracts will include import duty and size of containers.
Freight forwarder
The freight forwarding company to be used to ferry products from Australia to South Korea will be Cargo Australia. The company is one of the leading forwarders to South Korea. Also, Cargo Australia offers quality services at low costs (Mercurio, 2010).
Channels of Distribution
Retailers
Like in Australia, the main retailers in South Korea will be boutiques, specialty outlets, and department stores.
Wholesale middlemen
GTS Global Inc. will be the primary middleman for UGG in South Korea. The company was chosen because it is one of the leading suppliers of shoe and leather products in the country.
Export and import agents
Export and import agents will be from Cargo Australia. The officers have connections in both Australia and South Korea.
Warehousing
GTS Global Inc. will be responsible for warehousing. The reason is that the company is UGG’s main distributor.
Price Determination
Cost of shipment
The cost of shipping to South Korea will be determined by the size of containers (Kim, 2012). Size of cartons ferried to the country will be similar to those exported to other countries, which is 2500. The estimated cost will be around $10,000.
Transportation costs
Transportation costs will also be determined by the number of cartons. The estimated outlay for 2500 packages is $15,000.
Handling expenses
Handling costs are expected to be $2000. The amount comprises of port surcharge, security levy, equipment, and origin fees.
Insurance costs
The cost is based on the quantity of cargo shipped (Kim, 2010). Insurance in South Korea will be calculated at a rate of 2% of the value of the product.
Custom duties
No customs duties are expected to be paid. The reason is the Korea-Australia Free Trade Agreement. The agreement was signed in 2014.
Import taxes and value-added tax
Import taxes and VAT to import to South Korea are expected to be high. The country has a fixed VAT rate of 10% (Daniels et al., 2013).
Wholesale and retail mark-ups and discounts
The wholesale price will be $19.50 per carton of 24 pairs. The retail price will be $24.00. Small discounts will be made to the wholesale price when large quantities are purchased.
Company’s gross margins
UGG expects to generate minute gross margins or a small loss in the first year. The reason is that most finances will be used in marketing, staffing, and other start-up procedures.
Retail price
The recommended retail price will be $24.00 per pair.
Terms of Sale
The terms are determined by evaluating such factors as cost, insurance, and freight (Mullins & Walker, 2013). The components stated will be the ones used in South Korea.
Methods of Payment
The main method of payment will be letters of credit. However, other means, such as cash on delivery and advance, will also be considered.
Pro Forma Financial Statements and Budget
Appendix 1 is an illustration of the company’s financial statements and budget for the first year.
Resource Requirements
Starting the new business in South Korea will require similar resources to those needed in Australia. They include finances, personnel, and production capacity.
Personnel
The personnel required in South Korea include salespersons, distributors, and marketers. Employees hired to take up the duties will be locals. The reason for choosing them is because of their familiarity with the country’s market structure.
Finances
Lack of sufficient funds can hinder progress and fail in a venture. To raise the required capital, UGG will seek loans from financial entities, such as commercial banks.
Product capacity
At this stage of the business, production will take place in Australia. The reason for this is that the company does not have the power to start a production plant in South Korea. However, a plant may be opened later based on the success of the product.
References
Baack, D., & Harris, E. (2013). International marketing. Thousand Oaks: SAGE.
Coyner, T., & Chang, S. (2010). Doing business in Korea: An expanded guide. Seoul, Korea: Seoul Selection.
Daniels, J., Radebaugh, L., & Sullivan, D. (2013). International Business: Environments and operations. Upper Saddle River, NJ: Pearson.
Davenport, S., & Parker, D. (2011). Business and law in Australia. Pyrmont, N.S.W: Thomson Reuters Australia.
Dlabay, L., Burrow, J., & Kleindl, B. (2012). Principles of business. Mason, OH: South-Western Cengage Learning.
Hutt, M., & Speh, T. (2010). Business marketing management: B2B. Mason, OH: South-Western Cengage Learning.
Kim, H. (2012). Korean business law. Cheltenham, U.K: Edward Elgar.
Kim, J. (2010). Korean business law: The legal landscape and beyond. Durham, NC: Carolina Academic Press.
Kwon, O. (2008). International business in Korea: The evolution of the market in the globalisation era. Cheltenham, UK: Edward Elgar.
Mercurio, B. (2010). International business law. South Melbourne, Vic.: Oxford University Press.
Mullins, J., & Walker, O. (2013). Marketing management: A strategic decision-making approach. New York: McGraw-Hill.
Shukla, A. (2014). Consumer: A king of market economy. New Delhi: YS Books International.
Strydom, J., & Smith, M. (2011). Principles of business management. Cape Town: Oxford University Press.
Wolff, L. (2013). The law of cross-border business transactions: Principles, concepts, skills. Alphen aan den Rijn: Wolters Kluwer Law & Business.
Appendix
Appendix 1: Annual profit and loss statement- first year.