Strategic international report perkii probiotics

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Introduction

Internationalization of production and marketing has continued to thrive globally as the businesses are realizing their ability to compete at international arena enabled by fading barriers to globalization. The process of internationalization, as described by Kotler & Armstrong (2001) includes the five stages i.e. deciding whether to go international, choosing the host country to enter, considering the mode of entry, formulating the global marketing procedure and then deciding on global marketing organizations. This report is written to provide the recommendation to PERKii Australia for exploring business and internationalization opportunities in South Korea. The report will provide the scope of going international, rationale of plan, macro & micro analysis of South Korea and the recommended mode of entry. 

Scope

PERKii is an Australian based small firm that is offering probiotic water-based drink purported to contain 1 billion micro-encapsulated probiotics for the consumers along with only 37 calories (PERKii, 2020). This beverage was developed in 2009 using the ProGel technology patented by University of Queensland for improving the probiotic stability using tiny beads called microgels. The beverage is available in five different flavors. Each probiotic in the drink is micro encapsulated for increasing the survivability and delivering goodness to the guts of consumers (Tay, 2018). The beverage is primarily produced for providing enhanced immune response and for shortening the duration of common flu symptoms in the consumers.

PERKii belongs to the food and beverage industry in Australia with a sub-industry of functional foods & beverages. Functional foods are like conventional foods but with a focus on providing physiological and psychological benefits to consumers by reducing the risk of chronic diseases through use of omega 3 fatty acids, phytochemicals, beta-glucon, probiotics and dietary fibre (Jędrusek‐Golińska, et al., 2020). The growing consumer awareness and the public’s interest in diet and health have recently spurred the demand for functional foods and nutraceuticals in Australia (Lim, 2019). It is expected that given the demand, the functional foods and supplements will be contributing AUD25 bn in Australian market latest by 2030. The protein and sustainable products are forecasted to hold 18% market share while the 28% of the share will be held by premium convenience meals and the luxury brands  (Lim, 2019). The industry is also expected to get domestic consumption for functional foods of around AUD5.5bn by 2030 with increasing opportunity to export. The estimated growth rate of the functional and fortified foods in Australia is around 3% per annum  (Lim, 2019). Given the latest trend towards consuming functional foods to improve health, South Korea has been chosen as the destination/host country to be considered for expansion.

The free trade agreement between Korea and Australia (KAFTA) reduced the barriers to investment and trade between South Korea and Australia. The given trade agreement benefits the Australian & Korean traders while protecting and enhancing the competitive position of Aussie & Korean goods and services businesses in both countries (Quansah & Ahn, 2017). KAFTA set the Korean tariffs at zero of almost 84% of Aussie goods with a target of 99.8% within 10 years. Similarly, it set tariffs of Australia at zero for 86% of Korean exports with a target of achieving 100% within eight years  (Quansah & Ahn, 2017). It is expected that by 2021, 100% of the Korean exports will be tariff free while 99.7% of Australian exports will be tariff free by 2033  (Quansah & Ahn, 2017). Based on KAFTA, the tariffs are removed on major exports to South Korea especially for beef, wheat, wine, oil seeds, cherries, mangoes, sugar and manufactured goods (including packaged food & beverages)  (Quansah & Ahn, 2017). Hence, the intended business expansion plan is protected by KAFTA and is trade-able.

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