Zhi Li, Yuwei Dun, Maryia Marynich, Margaux Wagner, Changlei Song, Prashanth Ramachandran

 IMM program 2014

INTERNATIONAL MARKETING CASE

Table of Contents

INTRODUCTION ................................................................................................... 1

OUR TEAM 1THE SUBJECT 1

MARKET PROFILE ................................................................................................ 1

POLITICAL ENVIRONMENT 1ECONOMICAL ENVIRONEMENT 2SOCIAL ENVIRONMENT 2TECHNICAL ENVIRONMENT 3LEGAL ENVIRONMENT 3ENVIRONMENT ASPECT 3

SWOT ANALYSIS ................................................................................................. 4

COMPETITORS ANALYSIS: .............................................................................. 6

MARKETING STRATEGY ........................................................................................ 8

SEGMENTATION & TARGETING 8

POSITIONING 10

OPERATIONAL PLAN .......................................................................................... 11

PRODUCT 11PLACE 11PRICE 12PROMOTION 12

CONLUSION ...................................................................................................... 13

SOURCES ......................................................................................................... 14

APPENDIX ......................................................................................................... 15

INTRODUCTION

OUR TEAM

The team is composed of six members with a different personal background, knowledge and

specificities in the way of seeing business. This diversity of profiles brings in new perspectives

and enlarges the fields of competencies in order to fit with Les Rigolettes Nantaises expectations.

THE SUBJECT

The main objective of this report is to consider the export, the concept and the culture of Les

Rigolettes Nantaises as a sugar confectionary product in South Korea.

MARKET PROFILE

POLITICAL ENVIRONMENT

South Korea had a turbulent political past, characterized by frequent changes in government, little

political freedom and military coups.

- Centralization of power :

In South Korea, the president plays a key role in both the economy and polity of the country. The

president has the power to execute and amend any laws or policies of the country. Due to the

centralization of power in the hands of the president, he has to regulate and solve all

administrative issues. The new president, Lee Myung- Bak, aims to expand growth to 7% and

double per capita income to $40,000. One of the main challenge is to make the country the

seventh largest economy in the within the next ten years.

Many reform measures were employed to guard against the weakness that led to the crisis.

Because of swift and effective political intervention, the country's growth curve quickly returned to

normal and the Asian financial sector stabilized.

- Strong foreign relationships

South Korea concluded a free trade agreement with the US in June 2007. Furthermore, the

country also has very strong ties with China, Japan and Russia. South Korea has been a member

of the United Nations since 1991 and has diplomatic relations with almost 170 countries.

ECONOMICAL ENVIRONEMENT

As most advanced economies slowed down in 2012 due to the prolongation of the Eurozone

sovereign debt crisis, and the spread of its effects to emerging market economies, the downside

risk of Korean economic growth increased. Although South Korea's GDP growth rate declined

from 3.7% in 2011 to 2.3% in 2012, it was the only country in the world whose sovereign credit

rating was adjusted upward by the world's top three credit rating agencies, as they assessed its

macroeconomic stability to be good.

In 2013, the GDP growth rate was 3.0% up from 2.3% the year before. The current account of

export flows recorded as a historic high 79.9 billion dollars surplus and the rate of consumer price

inflation hovered at 1.3% - down significantly from the previous year.

The growth of manufacturing rose to 3.3 percent from 2.4 percent the year before. In addition, the

Food, beverage & tobacco growth rate had a positive increase in 2013. (See appendix N°1)

Producer Prices shift to a downturn producer prices fell by 1.6% (annual average) compared to

the year 2012. Prices for the former product group, and notably fruit, fell sharply due to increased

shipments by virtue of favorable weather conditions. This can be both a risk and a hope.

Decline of the Export/Import Prices also helped to start the new business in South Korea. (See

appendix N°2)

SOCIAL ENVIRONMENT

- High wages

South Korea has one of the highest wage levels in Asia. High wages also mean that there are a

large number of people willing to join the industry and this continuous flow of people into the

sector ensures that there is continuous production, and a consistent output. High wages have

also enhanced the standard of living in the country, which is higher than any regional economy in

Asia.

- Highly educated workforce

In terms of growth of productivity, South Korea was ranked second. More than 97% of the labor

force in South Korea possesses either a college education or vocational training backgrounds.

The work force at senior levels has an immense exposure to international experience and the

country ranks fifth in terms of educated workforce in Asia.

- Rapid urbanization

After the Korean War, rapid industrialization brought on a massive population shift from rural to

urban areas (Seoul). Furthermore, the country was supported by the US since the time of

attainment of independence from Japan. This longstanding relationship with the US provided the

country with strong infrastructural support, which contributed to the development of its cities.

TECHNICAL ENVIRONMENT

The South Korea has a very high level of technology development. However, as the products of

Rigolettes Nantaises are all hand-made, the entering barriers for the business will not be high.

LEGAL ENVIRONMENT

A sound legal framework is in place, although corruption continues to undermine equity and trust

in government.

The framework of Korea's modern legal system was laid out under the Japanese occupation of

the first part of the 20th century. Like Japan, South Korea follows the civil and commercial codes

of Continental Europe.

ENVIRONMENT ASPECT

South Korea has modest natural resources. Government policies and directives on environmental

development have led to the formation of national eco parks (where most forms of development

are prohibited) and environmentally friendly technology. The government has adopted several

control measures in urban areas regard to water pollution and tried to freeze its greenhouse gas.

The implementation of environmental program in schools and in business communities play an

important role in population’s environment education However, South Korea’s high emission

levels are a cause for concern.

SWOT ANALYSIS

Strength

Old brand and excellent image

Unique craftsmanship

Channel advantage

Weakness

A non-well-known company

Lack of international business experience

Locational disadvantage

Opportunity

An open market

High purchasing power

Foreign influence changes eating habit

Threats

Fierce competition

Trade system

Opportunity:

1. An open market

According to the bulletin of United Nations Conference on Trade and Development, after Japan

and Singapore, South Korea has become the third develop country in Asia. S Korea has

complete industrial structures and integrated social system. With its open-minded ideology, S

Korea will be a very potential market to accept fresh things.

As a country with a speedy development of science and technology .An estimated 98% of

South Koreans own mobile phones and use them not only for calling and messaging but also for

watching live TV, viewing websites and keeping track of their online gaming statuses. However, in

the opposite, development of its hand-made product industry remain a low status. The entering

barriers of business will not very high.

2. High purchasing power

In addition, high wages level means high consumption level. This is a list of countries or regions

according to GDP per capita (in purchasing power parity terms) arrangement. The purchasing

power in Korea is nearly 35,000 dollars. (See appendix N°3)

Tourist industry is also well developed in S Korea and it enjoyed pivotal location, countless

tourists arrive in each year and numerous international businesses finished. In 2013, there were

over 248.0 million international tourist arrivals to Asia and the Pacific, an increase of 6.2% over

2012. In S Korea, there is a 9.3 increase in 2013 than 2012. It will also promote the high

purchasing in Korea.

3. Foreign influence changes eating habit

South Korea has been highly influenced by ancient Chinese culture while in recent years by the

Western world, particularly the United States and Western Europe. The influence of Western

culture and rapid modernization has changed peoples' eating habits as well; many people now

enjoy Western and other Asian foods in addition to traditional Korean food. The dessert product

from France obtained a high reputation in Korea.

Threats

1.Fierce competition

As Rigolettes Nantaises is a small company which occupy a small market share. It will face the

competition from other famous company with huge turnover. Not only the tycoon as Nestle

(47billion dollar), Unilever (40 billion dollar), Mars (14billion dollar). But also because of the local

companies. Lotte Confectionery is a South Korean company set to lead chocolate confectionery

with a 30% value share in 2013 and want to be a global company which situated in Seoul, Korea.

Crown Confectionery, another company in Korea which emphasize that they have been on the

market more than 50 years and leads sugar confectionery, holding 20% of value sales in 2013.

Orion Confectionery – is a confectionery company situated in Seoul, Korea focused on sweets

including nine kinds and also wants globalization. The rapid development and expand of tycoon

leads to the dilemma of Rigolettes. How to overcome this problem and break up the ‘ice’ are the

key points of the business plan.

2.Trade system

Korea propose the export-oriented development strategy in the 60’s last

century. Exports development achieved rapid economic growth since then. By the end of

1964, Korea exports exceeded $100million and exceeded $100billion in 1995.But the import less

than the export. Trade in Korea accumulated to11 thousand billion dollar with an increase of

0.7%. Imports have a total volume of 5 thousand billion with a decrease of 0.8% compared to the

volume of export of 6 thousand billion dollar.

COMPETITORS ANALYSIS:

Lotte Confectionery - is a South Korean company situated in Seoul, Korea. Lotte Confectionary

is a subsidiary company of Lotte Group which consists of more than 60 companies. Lotte

Confectionery is set to lead chocolate confectionery with a 30% value share in 2013.

The motto on web-site of this company “Lotte confectionery will become Asia’s number 1

Confectionery company”. Now they want to conquer Asia`s market and finally to become a global

company. Their philosophy is based on “aiming to contribute to the health and happiness of

people”, they provide products for people of all ages. The main Asia`s markets that they work with

now are China, Russia, India, Vietnam. They try to adjust their products according to the local

needs. They care about eco-friendliness of their products (to reduce greenhouse gas emissions).

This company provides products with no national links. They want to become a global company,

so possibly they are mainly focused on providing products with beyond cultural borders. They

care about ecology trying to reduce gas emissions, but at the same time there is no information

about the package, additives and dyes on their web-site. Sweet category of the company includes

22 kinds of sweets

Crown Confectionery – is a confectionery company situated in Seoul, Korea. The company

was established in 1947. It is historically an old popular biscuit brand. Crown Confectionery leads

sugar confectionery, holding 20% of value sales in 2013.

Crown is abbreviation for Creating Resources for Optimizing Wellness through Nutrition. So, the

company promotes itself through healthy living. They emphasize that they have been on the

market more than 50 years. Therefore, the company has “the spirit of craftsmanship” with unique

manufacturing processes. The feel of any “spirit of craftsmanship” looking at the products that

they provide, the package, their web-site, but the products are well-known among local

customers. They allocate their three main parts of their business – satisfaction of customers,

employees and the society. Crown confectionery supplies their products in 14 countries. The

biggest markets except of South Korea are in China, Taiwan, Japan, and America. And they also

want to go to the global market. Sweet category includes only 6 kinds of products.

The company has more or less global strategy. They have such products that can be easily sold

throughout the world without significant changes in products or strategies of promotion. The only

notional difference comparing to Lotte Confectionery can be promotion of the company with

healthy life-style.

Orion Confectionery – is a confectionery company situated in Seoul, Korea. The company was

established in 1956 as Tongyang Confectionery Corp.  One of the most famous products of Orion

Confectionery is biscuit Choco Pie.

The motto of the company is “Creating a sweeter future through spirit of innovation”. The

company has been on the market for more than 50 years. Their philosophy is built on the

understanding of the concept “different is beautiful”. They want to become a global company.

They try to think “smart” (smart management method), act “strong” (healthy environment for

employees). They want to concentrate on most profitable products. Four main markets of the

company except of South Korea are China, Russia, Vietnam, and Japan.

Sweet category includes nine kinds of sweets. Except of mass-market products, they have

sweets for people with weak teeth, and sweets with vitamin C.

We can define some general traits of our main competitors: all companies are South Korean, they

are oriented to mass market products, which go beyond cultural borders, all these companies

want to become global companies. Some differences between them are eco-friendliness in terms

of reducing gas emissions, “contribution for health and happiness of people” for Lotte

Confectionery, “wellness through nutrition” for Crown Confectionery, “the spirit of innovation” for

Orion Confectionery.

So, if we compare our product “Les rigolettes nantaises” we can build our strategy by considering

the below factors:

- Providing a niche market product. We can`t compete with big South Korean

confectioneries in terms of price, variety and brand proliferation, but our product has

bigger added value and can be sold for consumers who appreciate handmade or craft

made packaged products with a long history and who are interested in French culture.

We should emphasize the uniqueness of our product comparing to the products of our

competitors. The original packaging of Les Rigolettes sweets is also unique filled with it

rich and age long history. These traits will surely raise the curiosity factor of customers

- One of our main advantages is that all ingredients are natural. We should also promote

our “naturalness” of the product, because we use only natural coloring without artificial

additives. Although our competitors try to produce healthy products, they still use artificial

ingredients.

- As additional advantages of our product, we can also be focused on ecological aspects of

products, providing recyclable package, and thereby showing eco-friendliness of our

product.

MARKETING STRATEGY

SEGMENTATION & TARGETING

Market segmentation by income

The average salary in South Korea is about $2,174.36. For example, the average salary in

France is $2,761.99. We can define it as a relatively high-income country. We can conditionally

divide the market into categories low-income consumers, middle income consumers and high

income consumers. According to the information that the sweets in France are sold for special

occasions and defined as premium confectionery, we can assume that our product will be also

mainly sold for consumers with middle income and high income.

Age segmentation

We can define such categories as 12 - 17 children that have spending power, 18 - 24 – young

adults (students and young professionals), 24 - 34 – professionals, 35 - 54 –adults with children

below 18, 55+ - senior citizens

Because of consumers spending power we can assume that our main categories would be

consumers 35 - 54 years old.

Psychographic segmentation

This involves grouping people in terms of their attitudes, values, and lifestyles. Usually, In France

people buy Rigolettes Nantaises for traditional family occasions. We can assume, that our

product will be mainly sold for people who have families and share family values. For South

Korean market, consumers of this product can be also those who are interested in French culture.

French deserts have obtained a high reputation in South Korea. Exclusive French bakeries in the

city of Seoul have grown in the recent years. Korean bakers trained in France and Germany have

opened a succession of small bakeries, more concentrated in the city of Seoul. In doing so,

they've stated the European case for bread.

Education segmentation

We can relate our product to traditional and family values, our consumers has middle and high

income and probably certain cultural background. So, we can assume that our product can be

mainly for market with high-educated consumers. More than 97% of the labor force in South

Korea possesses either a college education or vocational training backgrounds.

Behavior segmentation focuses

This is on whether or not people buy and use a product, as well as how often and how much they

are used or consumed. Our product in Nantes is usually sold for special family occasions. If we

do not dramatically adjust our product and positioning for South Korea, we can suggest that our

product will be also sold for special occasions and will be perceived as premium French sweets.

Market segmentation by religion

Predominant religions in South Korea are Buddhism, Catholicism and Protestantism. Christians

compose about 30% of population. We could rely on Christians as this product is usually sold in

France for such special occasions as christenings and confirmations.

After market segmentation we can define our target consumers as: 35-54 years old, people who

have families and probably children, people who share traditional values, family values, well-

educated and with well-paid job. South Korea has one of the highest wage levels in Asia. This

also indicates that there more people who are employed either in the middle or top management.

The work force at senior levels has an immense exposure to international experience and the

country ranks fifth in terms of educated workforce in Asia. With “Rigolettes Nantaises” already

possessing an international background, the target age of consumers is ideal and best fit. The

purchasing power of this age group is roughly estimated to be 3500 dollars per annum. As

“Rigolettes Nantaises” is not a luxury product, the purchasing power will definitely prove to be

beneficial. The influence of Western culture and rapid modernization occurring in South Korea are

key factors when considering the future of “Rigolettes Nantaises”.

We could also add to the fact that the population in South Korea is ageing. It has been mentioned

before but yes, the target is a mature market. The factor of understanding plays a key role for this

market. The general population is open to alternate sweets of Chocolate. With the long history

and the meticulous packaging technique of the original box belonging to family for over a century,

will help in acquiring this mature population of South Korea.

POSITIONING

We propose to promote “Les Rigolettes Nantaises” as a luxury segment of market. We want our

product to be based on family-focused traditions of upper class. There are some types of

confectionery which are bought as a reward or to reduce stress, but we see our product as a

premium class product which people buy for such occasions as gifts for weddings, birthdays,

anniversaries, Christmas or any other special occasions. It should be our main line of promotion

the product.

As it was mentioned in pestel analysis, South Korea is a country with rapid urbanization and high

level of technologies. There are a lot of mass market oriented confectionery competitors in the

country, so, to differentiate from our competitors we should propose a product with more

traditional and cultural value than mass market. We should emphasize handmade production

methods for people who are tired of faceless and impersonal products.

Additional options for promotion (accompanying the main line of promotion):

The level of gas emissions (air pollution) in South Korea is rather high and people have numerous

diseases because of ecological problems. Dust pollution, especially in the city of Seoul, has been

increasing and is reported to go even more in 2014. That`s why people care a lot about their

health and main confectionery companies in South Korea use this issue in their strategies.

Therefore we should promote our product as healthy product. Firstly, all colorants of “Rigolettes

Nantaises” are natural and we should use it in our promotion.

While prevalence of obesity among Koreans remains low, prevalence of metabolic disorder,

hypertension, hyperlipidemia (↑ total cholesterol, ↓HDL, ↑ LDL, ↑TG), and diabetes have been

increasing. Strokes, heart diseases and diabetes are among top causes of deaths in South

Korea. Medicated confectionery has had a rapid growth in the confectionary market due to these

diseases. So, we will have to emphasize that the calorie and sugar content is low or we could

even use natural sugar substitutes in the making of the sweet, emphasizing benefits for people

who have cardiovascular diseases and diabetes.

According to our environmental analysis, people are concerned about ecological situation in

South Korea and support eco-friendly products. So, we can promote our sweets as organic

confectionery. Recyclable packaging is required as a first step to bring in the sense of awareness.

Our ingredients should have been obtained without persistent pesticides and fertilizers. And our

product should be without artificial ingredients, preservatives, or irradiation to maintain the

integrity of the food and without use of GMOs.

OPERATIONAL PLAN

PRODUCT

We want to save the unique traditional pristine taste and flavor of the sweets and the design of

their package as much as possible, because our concept of promotion is based on the long

history of this French brand. That`s why we still view our product as sweets that are made from a

thin shell of steamed sugar that is then filled with real fruit pulp with five flavors: lemon,

blackcurrant, raspberry, tangerine and pineapple. We want to highlight for our South Korean

customers that sweets have the same recipe and the same original production methods as it was

from the beginning of the brand, with the only change in the replacement of all artificial colorants

by the natural ingredients. The only adjustments of the product for South Korea market we want

to make: to launch a special line of sweets with reduced level of sugar and calories for people

who care a lot about their health. This would be the additional line of the product – supplemental

to the traditional line. And we also want to retain traditional design of the package, but the

package should be made of recyclable materials as people in South Korea care a lot about

ecological problems in their country.

PLACE

As Rigolettes is an old handmade confectioner company and two high-end department stores in

Tokyo have accepted to stock its products, there are some Place factors and strategies which

need to be noticed and set.

Location factors and economic levels should be taken into account when selecting a place for

business. Gangnam district is the most wealthy and prosperous area in Seoul. There are many

grand high-end malls can be chosen. For example, Galleria is one of the top remarkable

shopping centers including numerous famous brands, even it is popular with foreign customers.

COEX Mall is another kind of shopping center which is located in the Gangnam District’s World

Trade Center. It is the biggest underground mall of S. Korea, has a variety of independent shops

operating different specialties. Both kinds of sites can be a good choice for Rigolettes to take their

first step.

To keep the original tradition and style of Rigolettes, the company should continue to make

products in France and transport them to South Korea markets rather than manufacture locally.

At the beginning, Rigolettes can find a franchiser as an agency to test the market in case of blind

expansion even causing huge loss. For example, they can find a candy boutique in Seoul to put

their products on the shelf. When the market in South Korea has been opened thoroughly the

company can establish their own exclusive stores at the center of Seoul or even other main cities

of South Korea.

PRICE

Les Rigolettes Nantaises, already established in France, reach a certain segment of people and

make their entire price strategy based on them in order to satisfy but also to attract new

customers and keep their place in the market. Actually, Les rigolettes nantaises sell their

Rigolettes (500g) for 15.90€.

Our strategy, based on our previous researches (segmentation & targeting), is to penetrate the

South Korean market as a prestigious brand representing the French luxury. In order to be

credible and be in coordination with our positioning, we will fix the price at 23,580KRW for 500g

(17.10€); A little bit more expensive than in France to highlight the French touch and the luxurious

aspect of our products.

Unfortunately It was impossible to find exactly the price of our competitors in the sense that they

are not selling exactly the same product and do not offer the same service, but thanks our

analysis we can affirm that our product and brand will be competitive in term of price.

PROMOTION

Several ways would be used in promotion process.

1. Advertisements in media and product launch

Media broadcast can be divided into 3 parts. First, it is traditional media including newspaper and

magazine. In South Korea，<CeCi> is the leader of magazine and <East Asia> is the newspaper.

To publish advertisements is worth. Second, it is new media including internet and network.

Facebook and Instagram are famous in Korea while Korean still use 'Me2day'，a popular local

network. Besides ， to invite influential media such as ' Naver' and 'DAUM' to attend product

launch is another useful method to promote sales in Korea.

2. Invite Korean s tars to be spokesman

First is using the local film stars as entertainment industry in South Korea is a relatively perfect

mechanism. The young people always follow the trend from superstars. In 2012，a TV shows

named <missing you> becomes the modern style that year, as the actress called Yun Eun Hye

using Chanel no.49 in the show, then this product was out of sales not only in Korea but also in

most Asia countries. Last year another hot TV called < The man from stars > inspire another

trend in Korea，because of the charming character，the leading actor called Kim Soo Hyun and

Jun Ji-hyun bring over 100 million dollars to company in 2013. To invite hot stars to become the

spokesman is one of the most crucial parts of the promotion. The famous company 'DOVE'

invited Kim Soo Hyun to be the ambassador as finding the huge commercial value.

3. Cooperate with c elebrities and tycoon in Korea

Since Korea is a developed country, SAMSUNG and LG are the tycoons of whole industry chain.

The stakeholders and executives become the celebrities in Korea. If co-operate with this

enterprises and increase brand reputation among the group, of course it will promote sales and

bring huge profit.

CONLUSION

South Korea, as a burgeoning developed country that enjoys an advance social system and a

high level of living standard, its market would be attracted by the product with a rich heritage of

Nantes, France: the Rigolettes Nantaises. Based on an extensive research on the confectionery

market in South Korea, it shows that operators of the Rigolettes can implement and set up their

brand in South Korea confidently. The operational plan, as part of this report, contributes on the

four key factors required for a successful implementation of Les Rigolettes in South Korea with a

key focus on the promotion of the product to enable the business successful in the future.

SOURCES

http://www.ats-sea.agr.gc.ca/inter/5804-eng.htm

http://lcweb2.loc.gov/frd/cs/profiles/South_Korea.pdf

http://www.u21health.org/sites/u21health.org/files/27_0.pdf

http://www.theecologist.org/green_green_living/food_and_drink/1336766/

top_10alternatives_to_sugar.html

http://www.mindbodygreen.com/0-9825/the-5-best-natural-substitutes-for-sugar.html

http://www.pewresearch.org/fact-tank/2014/08/12/6-facts-about-christianity-in-south-korea/

http://www.korea.net/AboutKorea/Korean-Life/Religion

http://www.confectionerynews.com/Markets/Functional-confectionery-opportunity-for-aging-S-

Korean-population-says-Leatherhead

https://www.crown.co.kr/english/

http://www.crown.co.kr/english/product/productList.asp?pi_class=6

http://www.orionworld.com/ENG/main.asp

http://www.orionworld.com/ENG/power_brand/productinfo.asp?icodeNo=4

http://www.lotteconf.co.kr/eng/

http://www.lotteconf.co.kr/eng/product/Product_list.asp?mn=010200

http://www.bok.or.kr/eng/engMain.action

http://www.referenceforbusiness.com/encyclopedia/Kor-Man/Korea-Doing-Business-in-the-

Republic-of.html#ixzz3GuDVIgYX

APPENDIX

Appendix N° 1 = Growth rate of manufacturing by sector

Appendix N° 2 = Rate of increase in export/ import prices

Appendix N° 3 = GDP per capita