International Business Report: Primo's Market Entry to South Korea

This report analyzes the potential for Primo, an Australian producer of processed meats, to enter the South Korean market. It begins with an overview of Primo and the South Korean meat market, highlighting market trends and growth potential. The report then assesses the external business environment using PESTLE analysis, evaluating political, economic, social, technological, environmental, and legal factors. It also examines Primo's organizational readiness to internationalize, considering its partnership with JBS. Porter's five forces analysis evaluates the competitive landscape. The report estimates sales potential, analyzes entry mode options, and identifies potential business partners. Ultimately, the report recommends market entry for Primo, concluding that the South Korean market presents a favorable opportunity for the export of processed meats, supported by the KAFTA agreement and the growing demand for such products.

Running head: INTERNATIONAL BUSINESS
International Business
[Primo or Hans]
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Executive summary
The study is aimed at understanding the possibility of market entry for Primo into the South
Korean Meat Market. Primo is the largest producer of bacon, ham and smallgoods in Australia.
The study finds that the external business environment in South Korea is favorable for exporting
of processed meats. The study also identifies industry potential as in the favor of a market entry.
Moreover, the paper recommends an entry to the South Korean market for Primo.

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Table of Contents
1. Overview of chosen company.....................................................................................................3
2. Global market opportunity assessment:.......................................................................................4
2.1 PESTLE analysis...................................................................................................................4
2.2 Organizational readiness to internationalize..........................................................................7
2.3 Porter’s five forces.................................................................................................................8
3. Estimate company sales potential..............................................................................................11
4. Entry mode analysis...................................................................................................................11
5. Potential business partners considering recommended market entry strategy..........................12
6. Recommendations......................................................................................................................13
5. Conclusion:................................................................................................................................13
References......................................................................................................................................14

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1. Overview of chosen company
The study is about the Primo which is widely popular and is the largest manufacturer in
Australia for ham, salami, bacon and deli meats. The success story had begun back in the year
1957 by Hungarian migrant Andrew Lederer when he used his homeland traditional recipe to
prepare delicacies as such as smoked hams, sausages and salamis. Since then, Lederer had
continuously focused on buying up the neighboring butcher shops in Sydney to strengthen up its
network. Additionally, Lederer had also focussed on improving its manufacturing facilities with
the help of latest and innovative technologies. As a consequence of such strategies, Lederer was
able to develop a strong network in Sydney and hence, this has laid an official establishment of
Primo as a brand. Primo as a brand was launched in the year 1985 (Primo.com.au. 2018).
Primo is itself an established name and is the largest producer of bacon, ham and
smallgoods in Australia. JBS which is the largest meat processing company worldwide had
acquired Primo Smallgoods in 2014 (Ausfoodnews.com.au 2018). The study is focussed on
understanding whether the decision to move to the South Korean Meat Market will be beneficial
from the Primo’s perspectives. Processed meat is notably popular among the South Korean
Adults. Notably, the market for processed meat grows by 2.8% every year. On the other hand,
the market for sausages grows by 6 percent on an average. The market for bacon increases by an
approximate 9.6% every year (Worldwatch.org 2018). Such trends are attributed to a reduced
size of family and increasing popularity of camping. This is also because a reduced family or a
family of two love being in homes and enjoy their drinks as well.

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The trend as of now on the basis of the discussion which has continued suggests that it is
a good idea for Primo to enter the South Korean Meat Market. However, the study finds in the
later sections whether the stated facts remain the same.
2. Global market opportunity assessment:
Foreign market entry happens after an extensive thought process which is put to the
ample of areas such as marketing, external business environment analysis, competitor analysis,
consumer behavior and lot more. This particular study is not focused on a business that has
decided to enter a particular market but rather, finds the answers to suggest whether the South
Korean market will be a good choice or else. To fulfill the purpose of the study, it is important
that every important factor in terms of a foreign entry is effectively studied. Hence, the section
covers specifically the external environment (PESTLE) analysis, Porter's five forces analysis and
consumer behavior analysis of the target market “the South Korean Meat Market”.
2.1 PESTLE analysis
Political: The World Bank has rated South Korea a lot higher for governance in every
area. Approximately, 72% of exporters from Australia are expecting a fair and a lasting business
performance in South Korea (Quansah and Ahn 2017). A free trade agreement with Australia is
another boost to the Australian businesses in the South Korean market. Understandably, trade
tariffs will not be a case meaning that the imported goods will retain its uniqueness which
usually gets affected by trade tariffs and other government policies (Jensen and Snaith 2016).
However, the instability in North Korea is identified as a major security threat (Doucette and Lee
2015).

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Considering the fact as stated above, threats and opportunities in the South Korean
market can be identified. The free trade agreement is a boost for Primo as their exported goods to
South Korea will be freed from traded tariffs. Hence, the different varieties of processed meat
will remain cost-effective to the South Korean customers (Quansah and Ahn 2017). This is
necessary as well to compete with the local service providers.
Economic: South Korea is the fourth largest trading partner of Australia and the third
largest market for exports. This means that doing business with South Korea by means of
exporting the processed meats should never be a constraint to Primo Smallgoods. From the
economic perspectives, South Korea is the 12th largest economy worldwide. There has been a
gradual transformation from middle-income economy to high-income in the last 50 years.
However, the per capita income lags behind to many developed nations (Efic.gov.au. 2018). The
transition from a middle-income economy to a high-income just suggests that buying capability
of people living in the country is higher and that it is nothing but appears like an opportunity for
Primo. However, this further depends on the South Korean culture whether they like the concept
or else. The country may face the economic challenges due to an over-reliance on exporting
practices, aging population and a less productivity growth (Efic.gov.au. 2018).
Social: The local language, culture and the way of doing business differ a lot from other
parts of the world; hence, these are most frequently viewed as risks for doing business in South
Korea. South Korean consumers are very health conscious and are often selective with the range
of brands. They are more inclined to the product quality and the brand image. They also seek an
impeccable customer service from the brand. South Korean customers search their required items
for its quality and price-competitiveness on the internet, especially on the social media platforms.

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It means they love to be well informed before they actually make the purchase (Import-
export.societegenerale.fr 2018).
Social trends in South Korea can be divided into two parts like medium shoppers and
high-end luxury shoppers. The medium shoppers due to their increased debts and the reduced
income growths are highly concerned with product pricing. On the other hand, high-end luxury
shoppers have no such limitation. They are rather fond of showing their assets in public which
means making a public image with every new purchase. Both the medium shoppers and the high-
end shoppers are highly passionate about internationally made products due to its quality and
price competitiveness (Import-export.societegenerale.fr 2018).
Technological: South Korea is one of the most connected nations worldwide. Online food
and drink purchases are already very high with an existing figure of $4.8B which is expected to
grow even further and touch $7.7B by 2020 (Agr.gc.ca 2018). The per capita spending on food
and drinks products is $2,321 and the online spending for the same is $94 (Agr.gc.ca 2018).
There are verities of methods which the South Korean people use to access the internet for
shopping. The number of mobile phone users in South Korea is 34 million. Approximately, 29
million people have their personal computers (Agr.gc.ca 2018). The total number of tablet users
is equal to 9.9 million (Agr.gc.ca 2018). A close to 46% of the online purchase is made through
mobile phone (Agr.gc.ca 2018). There are places for technological improvements as local
retailers have become increasingly inclined to introduce the e-commerce models (Agr.gc.ca
2018). These all mean that Primo will get a favorable business environment in South Korea as
the local people are very tech savvy and also that the online booking is the most preferred form
for booking the varieties of food and drinks items.

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Environmental: There are huge environmental impacts of foods especially of the varieties
of meats. Beef supposed to emit the largest greenhouse gases in its entire life cycle which is
equal to 26.61 kg (Weforum.org 2018). Lamb stands at the second position with 25.58 kg
(Weforum.org 2018). Pork is at the third spot in regards to emitting the greenhouse gas
(Weforum.org 2018). Chicken, fish and eggs are simultaneously equal to 3.65 kg, 3.49 kg and
3.46 kg (Weforum.org 2018). This just suggests that animal farming and breeding is seriously
threatening to environment considering a fact that animals are a strong contributor to greenhouse
gas emissions and also that the incrementing greenhouse gas emissions are a serious threat to the
environment. However, in context of the proposed exporting business of Primo, this has probably
no relevance at all. This is because a fact that food products will only be exported, they will not
be processed. Hence, it has better chances of being safe from legal proceedings and also from
rising awareness in people for environmental sustainability.
Legal: The free trade agreement between Australia and South Korea which is known as
Korea-Australia Free Trade Agreement (KAFTA) can expectedly support the Australian
exporters (Efic.gov.au. 2018). Korea has failed to meet the rising demands for beef in recent
times due to its lower production of beef. Subsequently, the KAFTA had come to the existence
in 2014. KAFTA is a world-renowned bilateral agreement between Australia and South Korea
which eliminates the barriers to trade and investments in between the two countries. The trade
agreement was made to provide an equal footing to Australia in the South Korean Market and
also to safeguard it from the extensive competitions in the form of the United States, South East
Asian Nations (ASEAN), Chile and the European Union (Quansah and Ahn 2017).
2.2 Organizational readiness to internationalize

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Primo has had its foundation laid in 1957. A close to 61 years in the industry, the
company has learned a lot from its mistakes and also from its supremacy to dominate the meat
processing industry in Australia to become the leading service provider of bacon, ham and
smallgoods (Primo.com.au. 2018). There can be many aspects of goodness which the company
possesses; however, seeking a continuous change in regards to infrastructural development and
the modernization of production facilities is one of those assets. The study is based on
identifying whether the entry in the South Korean market will be feasible to Primo. This looks
much evident from a fact that Primo and JBS are now partners. JBS, the world’s largest meat
processing company, has now acquired Primo (Mercyforanimals.org 2018). It looks a sensible
partnership indeed. JBS has its roots at the global level which also includes the Asian countries.
On the other hand, Primo is relatively small and has restricted market growth in terms of
exporting foods to other markets. The export business of Primo is very small as stated and lacks
to have the support of extensive and superior distribution infrastructure. The partnership with
JBS will expectedly fulfill the much-needed distribution infrastructure and hence, will support in
expanding to markets beyond Australia as an exporter of processed meats (Jbs.com.br 2018). The
fact also suggests that Primo is now ready to look beyond the Australian market and that the
purpose will be supplied from the partnership venturing between Primo and JBS.
2.3 Porter’s five forces
Bargaining power of suppliers (Medium)
Suppliers of meat in South Korea can be classified into two categories such as local
suppliers and the foreign suppliers. Local suppliers, in context to this study, are the local
manufacturers of processed meats. Foreign suppliers are the countries that export processed meat

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to South Korea. Local production of meat is not sufficient to fulfill the market demands for the
processed meat of beef, pork and others (Grasso et al. 2014). Hence, the urgency has encouraged
for free trade relationship with the United States and Australia. The free trade relationship
between the United States and South Korea is popularly known as KORUS. The free trade
relationship between Australia and South Korea is known as KAFTA (Quansah and Ahn 2017).
This is due to the initiatives taken by the local government of South Korea that the foreign meat
supply to South Korea has increased (Quansah and Ahn 2017). The stated facts indicate that the
market demands for meat in South Korea are fulfilled by both the local manufactures of
processed meats and the foreign suppliers. The imports are on the increase which means
dependency on local manufacturers will consequently decrease. Hence, local suppliers of meat
who are working with local manufacturers will also get weakened (Kr.usembassy.gov 2018). On
the other hand, the rising market demands for meat in South Korea are getting increased
(Kr.usembassy.gov 2018). The fact has created enough interests and is attracting the foreign
suppliers of meat. In either of the cases, the suppliers are getting affected by market behavior.
The local suppliers are losing their bargaining capability whereas the foreign suppliers are
dependent on the market behaviour.
Bargaining power of customers (High)
Processed meat is increasingly popular in the South Korean market. Adults love the
varieties of processed meat such as bacon, ham, smallgoods and others (Kr.usembassy.gov
2018). They are the drivers for market trends which can be understood from a fact that the
domestic processed meat market in Korea is decreasing. The trend has now shifted more towards
the varieties of processed meats such as bacon and ham imported from the foreign countries in

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specific from the United States (Trade.gov 2018). Consumers always have the high bargaining
capability and their choice for taste set the trends for the market (Roe and Bruwer 2017).
Industry rivalry (Medium)
There are few local meat processing companies such as Buchi, Watson-Marlow, Tomra,
Kahl and Honeywell. Local companies are not able to meet the rising demands of customers.
Hence, the fact has provided the opportunity for business to foreign suppliers such as to the
United States. In fact, the United States of America is the world’s largest beef supplier to the
South Korean market (Trade.gov. 2018). Hence, in context to Primo, the industry competition
will be a lot higher because the US is an established and successful trade partner of South Korea.
On the other hand, the demands for processed meats are incrementing which suggest that there
are still spaces left for others to take the advantage from. The demands in Market for processed
meats increase by 2.8 percent every year (Mercyforanimals.org. 2018). The demands for bacon
rise by 9.6 percent every year (Mercyforanimals.org. 2018). It just suggests the incrementing
opportunities for foreign suppliers.
Threat of new entrants (Medium)
It is always there as the demands for processed meats is growing in popularity among the
South Korean adults. The United States is currently the biggest exporter of beef to South Korea
(Trade.gov. 2018). However, Australia is also a potential country which is in high demands for
beef. In fact, the Australian beef is in huge demand for its export to other parts of the world.
Threat of substitutes (Medium)

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This is quite possible as the South Korean adults have already shown their drift from
using bacon as a side dish to actually love it the most.
3. Estimate company sales potential
Primo possesses an image of being the largest producer of bacon, ham and smallgoods in
Australia (the Guardian.com, 2018). Now, it is partnered with JBS, the world’s largest
manufacturer of processed meats. JBS already exist in different parts of the world which also
includes the Asian market. The venturing is thought as profitable for Primo for a fact that JBS
with its efficient distribution channel will provide extensive opportunities to Primo enter the
different markets. Additionally, Primo is relatively a small player in terms of exporting
relationship with foreign countries (Primo.com.au. 2018). Hence, it is expected that the
partnership deal between Primo and JBS will work for Primo and help to enter a few of potential
foreign markets. Hence, the sales will expectedly increase.
4. Entry mode analysis
There are various modes of market entry (De Villa, Rajwani and Lawton 2015):
Exports: This is one of the modes of entry to the foreign market. It is advantageous
because it does not facilitate the direct entrance of company in the form of physical existences.
Physical existence can incur big losses to business and market reputation of the company, if not
handled appropriately and strategically. Exporting includes small consignments as a starter for
exports. Even if it does not work, the loss will be much lower than opening a subsidiary branch
in the target country.