Canada Goose: The South Korean Opportunity Essay.
Question 1: The six important factors to consider about South Korea’s culture is their values, norms, religion, education, social mobility, and American influences. South Korea was built up by many core values, however the most important being Confucianism. Confucianism was founded over 2000 years ago in the fifth century BC and was the official ethical system of China (Hill, Rihcardson, & McKaig, 2009).
The value of Confucianism was profound in the Korean culture and it still continues to pervade amongst South Korean’s consciousness today.
Confucianism shapes the Korean moral system, national laws, and business culture by placing an obligation towards relationships with others. The basic theories are based upon five different relationships: ruler and subject, husband and wife, parents and children, brothers and sisters, and friend and friend. This is important to consider when making decisions due to their high regards for respect amongst others. In addition, norms are also another component that shapes ones culture.
Norms are the social rules and guidelines that define the behaviours of individuals (Hill, Richardson, & McKaig, 2009). South Korea possesses many norms, however, the most dominant is kibun, which has no literal translation that describes the pride, mood, or state of mind of an individual (Key Values and Norms, 2011). In business context, it is vital for one to show respect for others, especially those of your elders. Also, to determine one’s kibun by eye is called nunchi. Managers must be able to identify their subordinate’s nunchi to make sure they do not cross over the line of disrespect.
Kibun is the facet of every Korean’s life, so it is vital to understand this norm when considering marketing Canada Goose in South Korea’s economy, specifically the distributers. The third factor to consider is South Korea’s ethical system and religion. Many scholars have argued that business implications of religion are surrounded on the extent of how different religions shape attitudes toward work and the degree to which religious ethics affect the costs of doing business in a country (Hill, Richardson, & McKaig, 2009).
Statistics show that Korea’s dominant beliefs are consisted of 26. % Christianity and 23. 2% Buddhism. This accounts for a majority of different behaviours and ethics of individuals in the work force. Moreover, education plays a significant role in the Korean market because the level of education shows a good index of how well the Canada Goose product can be sold. Typically, if the education level of a country is high it is in correlation with a high economy. South Korea’s academics are highly competitive and show a 99. 8% literacy rate. This concurs that South Korea’s market is definitive for Canada Goose.
In addition, the fourth factor includes the social mobility of the country, which refers to the extent to which individuals can switch their social strata from which they are born (Hill, Richardson, & McKaig, 2009). The social mobility and social strata that exist within Korea has increased since the 1960s. There has been a significant increase in the middle class after the Korean War. The middle class grew from 6. 6% to 17. 7% between 1960 and 1980 (Social Classes in Contemporary Society, 2008). The rise in middle class is an important factor of South Korea’s culture since it is in line within Canada Goose’s target market.
The last cultural factor is America’s heavy influence on South Korea. Recently, South Korea has adopted American culture through its food and fashion. With the increase in Internet activity and popular Hollywood films, Korea is responding by opening coffee shops and Western hamburgers. Abercrombie & Fitch Company are viewed highly in South Korea, the inaccessibility of American brands creates an exclusive bracket for early adopters to become determined to desire the product. The four important factors of ethics in South Korea are corruption, pollution, code of ethics, and corporate responsibility.
A poll by the South Korean Anti-Corruption and Civil Rights Commission found that 76. 8% of middle and high school students considered South Korea to be corrupt due to nepotism (Irwin, 2010). Corruption can never fully be nonexistent, thus it must be taken into consideration when starting a business in a foreign country. Furthermore, environmental pollution raises ethical issues when host nations are more inferior to the home nation (Hill, Richardson, & McKaig, 2009). South Korea had significantly evolved in urbanization since the 1960s, and it is evident that their environmental standards have evolved as well.
The government launched the “Green New Deal” in 2009 that committed to establishing environmental projects (Irwin, 2010). This aligns with Canada Goose’s corporate standards in environmental ethics. In addition, South Korea had taken on the initiative to create a code of ethics for almost all major businesses. A great challenge would be to match with the standards of Korea’s code of ethics for Canada Goose. Lastly, corporate responsibility management is another factor to consider when entering a new market. Most South Korean businesses are adopting corporate responsibility by focusing more on philanthropy and community engagement.
This correlates with Dani Reiss’ corporate responsibility as the leader advocate for Polar Bear International (PBI). Question 2: The five advantages of entering the South Korean market are the exclusivity, demographics, climate, larger economies of scale, and reduced risk of over dependence. Exclusivity is vital when entering a new foreign market, because if the product was easily available to the country, consumers will devalue the product. As well, South Korea’s demographics are suitable to create overall profits for Canada Goose.
There are approximately 17 million people in South Korea that includes early adopters and functional users (Silvertown, 2011). This demographic corresponds to Canada Goose’s target market, thus showing prospect for success. Moreover, South Korea’s climate is concurrent with Canada Goose’s niche market of extreme outerwear. South Korea shows an average temperature of -2. 5 degrees Celsius of the coldest month (Silvertown, 2011). This coincides with the need for a high quality, warm parka. Another advantage of entering the South Korean market is to reach larger economies of scale by selling products to more customers.
This in turn creates an increase in profits for Canada Goose by expanding into different markets. Also, by entering into another market, the company reduces the risk of over dependence. It is always a benefit to spread your company across different markets to reduce the liability and dependence of failure. The five disadvantages of entering the South Korean market are the competitors, supply and demand, control of distributers, imitations, and the inherent disadvantage of foreign firms. Competitors are always present when entering into a market, North Face and Montcler are the largest competitors for Canada Goose in the South Korean market.
Many consumers are highly familiar with the popularized products from North Face and the high-end products of Montcler. Therefore it is crucial for Canada Goose to upscale the competitors and bring in a different form of innovation and creativity in their products. In addition, the disadvantage for entering the South Korean market is the increase in demand for supply. Canada Goose manufactures only within Canada to keep its authenticity. However, with the rise of globalization in different markets, there is an over demand for products.
The lack in manufacturing factories creates a slow down in production, therefore causing distributors to consistently wait for delayed shipments of products. Another disadvantage is the difficulty of controlling distributors from foreign countries. This is due to the language and cultural barriers to communicate and control how they represent the brand name. In addition, with the rise in popularity of a product, there also exist counterfeits and imitations. Canada Goose would need to know how to cope with the counterfeits and make sure they are creating the awareness of such imitations.
Lastly, there is an inherent disadvantage of foreign firms in host countries due to their non-native status. There will always be a disadvantage entering into a new foreign market due to the vast cultural and geographical differences. Question 3: SWOT Analysis Strengths: Canada Goose possesses many strengths, some of these strengths include a strong reliable brand name, large focus on quality and design, strong company culture, and commitment to sustainability. Canada Goose had created a great name for itself because of their strong reliability.
The company is known to have a resilient quality product and is starting to become worldly recognized as a luxury name brand for sports outerwear. This is due to their strategic marketing plan to create a brand name by making the brand exclusive. Moreover, Canada Goose has sustained itself to be a reliable brand name due to its authenticity of a Canadian designed and manufactured product. Consumers are more engaged to Canada Goose because of the make of the product. The term, “made in Canada” is noted as a reliable product to many countries and consumers across the world.
As well, Canada Goose puts a great amount of effort into their quality and design of their products. One of the goals for Canada Goose is to provide consumer’s with the best quality to keep them resistant to the cold Canadian winters. This also adds to the authenticity of the Canada Goose product since all Canadians need a good quality parka. In addition, Canada Goose possesses a great company culture through Reiss as the CEO (Silvertown, 2011). The company was founded in 1957; it was family-owned and was brought down Reiss, who was able to reinvent Canada Goose to become internationally known for their durable parkas.
Reiss had evolved Canada Goose, and in turn he also evolved the company culture to be ethical, loyal, and respectful amongst it’s employees. Lastly, Canada Goose has shown commitment to sustainability and the community by being the leader advocate for Polar Bear International (PBI) which is a not-for-profit group dedicated to preserve the polar bear population (Silvertown, 2011). As well, Canada Goose continues to support local Canadian economy markets by manufacturing their products within Canada. Therefore, Canada Goose’s overall strengths show that it is a leading market brand in the department of outerwear products.
Weaknesses: Canada Goose has existing weaknesses that must be considered. The weaknesses include the issue of having more demand than supply, use of coyote fur, and the problems faced with distribution rights. Canada Goose is having significant issues on moving forward in growth. The company had expanded to over 700 employees while sourcing from twelve different factories in Canada (Silvertown, 2011). This created the dramatic outpace of the supply that the company could produce. The manufacturing companies are simply not creating Canada Goose products fast enough for the distributors and retailors.
If Canada Goose does not make a change to maintain enough supply over demand, then distributors will be upset and the company will consistently lose sales in their market. As well, another existing weakness is the problem with animal activists and the use of coyote fur. The coyote fur is only used as a trim for the parka, however, it has gotten many negative outbursts from animal activists. Canada Goose claims to make their products for the extreme cold and justifies using coyote fur as one of the warmest materials to use for a sub zero climate.
Activists had retaliated and claimed that most Canadians live in urbanized cities that do not necessarily need the additional coyote fur lining. Canada Goose must continue to respond to the activists and create awareness to consumers that the coyote fur they use is safe and not harmful to the coyotes themselves. Last, Canada Goose must be conscious of which distributors to source their product. There needs to be trust with the distributor that they can make suitable decisions to outsource the product to certain retailors without spoiling the Canada Goose’s image.
This has become a challenge as seen in Reiss’ Letter from Ryusuke Tevu from Empire of the Sun Distributors (Silvertown, 2011). Opportunities: There are many different opportunities for Canada Goose, this includes global expansion, environmental friendly trends, and the extension of new products. As of now Canada Goose is selling products in over 40 different countries. It has significantly become recognized over the past years as an established high-end brand. This calls for greater expansion through either entering in new markets or expanding in current markets. There is always opportunity for Canada Goose to grow in stores and in profits.
Secondly, Canada Goose has the opportunity to become more environmentally friendly by using recycled products to create water resistant outerwear. Trends show that people are increasingly supportive of environmental friendly products. By introducing an environmental friendly material, it opens for the opportunity to create a new extension of products. Unlike its competitor North Face, Canada Goose does not offer a wide variety of products outside of their outerwear parka. There is a huge potential growth opportunity for Canada Goose to expand their products into spring and summer wear that focuses on outdoor activities.
The extension of different products will also allow for growth to exist within hotter climates such as South America or Australia. Threats: The threats that are associated with Canada Goose are existing competitors, threat of new entrants, and counterfeit products. The existing competitors of Canada Goose are internationally wide known brands such as North Face, Nike, and Montcler. North Face in particular is an American outerwear company and is one of Canada Goose’s closest competitors. Additionally, Canada Goose must be conscious of the threat of new entrants entering the same market.
There is always someone with a new innovative idea that may enter into the same market for outerwear. Thus, it is essential to focus on continuously developing innovating products to provide growth and sustainability for the company. Finally, Canada Goose must also be aware of counterfeit products. China is currently the largest counterfeit producer for Canada Goose parkas. Although, it is complimentary to be imitated by the design and brand, it in turn lowers the amount of sales and genuine authenticity. It is vital for Canada Goose to fight for it’s branding rights and to create awareness of the counterfeit products being sold.
Question 4: The components of the South Korean market include: market segmentation, distribution strategy, push strategy, and pricing strategy. First, market segmentation is defined as identifying distinct groups of consumers whose purchasing behavior differs from others in important ways (Hill, Richardson, & McKaig, 2009). The goal of market segmentation is to find target markets in each foreign country that make a good fit with the product being introduced. In this case, Canada Goose’s target market are for early adopter’s aged 17 to 27 who are highly influenced by new fashion trends across the world.
They normally will decide on a clothing purchase in advanced (Silvertown, 2011). Another target market are the functional users who generally have a greater amount of disposable income and are between the ages of 30 and 50. The functional users generally enjoy outdoor activities and are interested more in the quality of the product more so than the style. The market segmentation is developed through numerous ways, for example, through geography, demography, and social factors. It is a safe assumption to say that the South Korean market is similar to that of the Japanese and Canadian market due to its large middle class consumers.
Another marketing component is the distribution strategy that is defined as the means it chooses for delivering the product to the consumer (Hill, Richardson, & McKaig, 2009). There are many different types of channel lengths for distribution, however, it is Reiss’ belief to continue manufacturing within Canada. Therefore, the chronological channel of distribution would include a Canadian manufacturer, import agent, wholesale distributor, retail distributor, and final customer. The most important line of channel is determining a trustworthy distributer to implement Canada Goose’s corporate strategies.
In addition, a fragmented retail system must be taken place due to its differences in concentration of retail stores. South Korea is known to have retail stores scattered throughout Seoul rather than in mall clusters such as America. Furthermore, it is strategic to adopt a push strategy, which is a marketing strategy emphasizing personal selling rather than mass media advertising (Hill, Richardson, & McKaig, 2009). To maintain it’s branded reputation of high-end products, it is viable for Canada Goose to use a different method of marketing rather than the traditional methods used by its competitors.
Canada Goose heavily relies on word-of-mouth advertising to have customers feel like they are part of an exclusive group. If Canada Goose were to market their products through TV, radio, or magazine ads, it would cause buyers to view Canada Goose as generic and less authentic since commercial advertising is not seen in a good light. Thus, by using a push strategy it will create an exclusive, high-end depiction for customers of Canada Goose’s target market. Finally, pricing strategy is important to consider when marketing a new product in a foreign country.
Factors to consider are price discrimination and strategic pricing. Price discrimination occurs when consumers in different countries are charged with different prices for the same product (Hill, Richardson, & McKaig, 2009). Canada Goose faces price discrimination when the “gray area” occurs. This is happens when a distributer or wholesaler sells the product at a lower price than the overall given price. It is important to be cautious and aware of such discrimination, as some countries find it more susceptible than others.
As well, strategic pricing must also be considered when entering a new market due to the effects of competitors, specifically North Face. The multipoint pricing strategy may occur between Canada Goose and North Face due to it’s similar market. Although Canada Goose offers only high-end products and prices, North Face offers a wide range of products and prices from low-end to high-end. Thus, North Face will adopt a multipoint pricing strategy, where it will change prices according to Canada Goose’s prices. It is important to recognize this, so that Canada Goose can counter act this pricing strategy.