Scenario Analysis and Justification

Macadamia Australia is a family business that has operated for over 60 years. The company has invested in growing and creating premium macadamia nut products. Macadamia Australia operates locally and internationally by selling its products to other countries, such as New Zealand. The business has a variety of academic products such as honey roasted macadamia, macadamia pieces, milk chocolate macadamias, roasted salt macadamia, dry roasted macadamia, nut in shell, and whole raw macadamias. Recently the company has developed a 400 mg dry roasted macadamias variety retail pack currently available in Australia. By 2026, the business wants to expand its market share by targeting customers outside Australia. These papers investigate and identify a new export market opportunity for Australian macadamia nuts in Seoul for the 2026 launch. In South Korea, Walnuts are known as the most premium nuts and are even served on first-class airlines. In the past Australian Macadamia had a good market as they are well known for their unique flavors. This paper aims to conduct a scenario analysis and justify Macadamia Australia’s expansion into South Korea. These reports will analyze the market viability and justify why Macadamia Australia should accept the insights to inform its strategic plan.

Scope

This study aims to investigate and identify a potential market opportunity for Macadamia Australia’s new (400 mg Dry Roasted variety retail pack) in Seoul, South Korea, focusing on launching the new product in 2026. The study aims to conduct a scenario analysis and justification for targeting the South Korean market, focusing on consumer preferences and the competitive landscape. The secondary research will address that task, and the report will use the PEST model to analyze the market. Through the model, it will be possible to identify opportunities and risks Macadamia Australia may face when venturing into the identified need. The investigation will justify targeting the South Korean market, highlighting this expansion’s potential benefits and risks.

PEST Model

The PEST analysis tool is a tool used to evaluate external factors that can impact a company. These factors include political, economic, social, and technological factors affecting business operations and profitability. These contexts will consist of a PEST analysis of the Seoul, South Korea market to determine the feasibility of Macadamia Australian expansion into this market.

Political Factors

South Korea is a democratic country with a stable government. Through democracy, governments have adopted policies that significantly promote foreign investments and encourage the growth of the private sector. Additionally, South Korea has established trade especially favor trade agreements between South Korea and other countries such as Australia. The South Korean government has also established regulations to protect the rights of consumers and ensure that all imports are safe and of good quality. However, there are various political challenges Macadamia company can face when exporting to the South Korean market, such as import taxes and product labeling requirements. Another challenge in South Korea is corruption. The country has rampant cases of bribery and abuse of office by political officers, among other prominent government officials, who have revealed the enormity of the concern (Jun et al., 2019). Political corruption poses a significant risk to businesses that want to set up their businesses in the country.

Economic Factors

South Korea is one of the countries that have expanded remarkable growth and progress in the past four decades. Today the country is classified as one of the world’s most advanced and developed countries. In 2020 the country’s GDP was $1.586 trillion, the 10^th world highest (The World Bank, n.d.). The earning per capita income was approximately $30644, the 26^th world highest (The World Bank, n.d.). The majority of the country’s population is middle-class; thus, there is high disposable income, making the country much more attractive for premium products such as Macadamia Australia nuts. In South Korea, there has been an increased demand for healthy snacks, and the market is projected to grow by 6.37% from 2023 to 2027 (Statista, n.d.). This relates to the increasing demand for healthy and organic snacks such as nuts. For instance, from 2009 to 2019, almond imports increased 2.3 times (Zhu, 2023). Moreso, the country has limited domestic nut production; hence they are forced to supplement the deficits through importations. Additionally, the country has a well-established distribution channel that facilitates the import and distribution of products. However, there may be various economic risks, such as inflation, currency fluctuation, and changes in consumer power, which Macadamia Australia should consider when venturing into this market.

Social Factors

South Korea has a population of approximately 51 million, and Seoul is the largest city with the highest population (Aralbayeva et al., 2018). Most of the population are not believers, but Christianity and Buddhism are the main religions practiced in this country. South Korea is well known for its emphasis on health and wellness. The country has a high life expectancy and low chronic illnesses, which has led to a growing demand for healthy food products (Zhu, 2023). Moreover, the South Korean market values high-quality and unique products, and Macadamia Australia has a unique flavor profile; thus, it can appeal to consumers in this market. However, society is influenced by respect for their ancestors, seniority, and age. Social hierarchy, marital status, and economic status are other social factors impacting purchasing behavior. Therefore, Macadamia Australia has to consider cultural affluence and cultural differences when marketing its product.

Technological Factors

South Kores is one of the world’s leading technologically and digitally developed countries. The government has significantly progressed in various emerging technologies, such as robotics. In addition to that, Incheon, which is the largest airport uses emerging technologies such as artificial intelligence and facial recognition to ensure security. Incheon Airport is close to Seoul, the largest city in South Korea, and a potential target market for Macadamia Australia nuts. The country has made much progress in biotechnology, aerospace engineering, and robotics. Approximately 85% of the population also uses social media platforms (Savolainen et al., 2020). The level of internet penetration and robust e-commerce provides an excellent opportunity for Macadamia Australia to leverage these digital channels to promote and sell their product. The country has a high level of innovation in the food industry; thus, the Macadamia company has adapted its product offering to meet the local market preferences. Babulaket al. (2020) posits that most people, government organizations, businesses, and media have experienced cybersecurity concerns, such as cyber-attacks in South Korea.

PEST Framework

Analysis

Following the PEST model, Seoul or South Korea is an attractive market for Macadamia Australia expansion. The country has a stable political environment, and its economy has been experiencing consistent growth. According to The World Bank (2020), the country’s GDP was $ 1.586 trillion, and earning per capita income was $30644. In addition, most of the population is in the middle-class level of income; thus, they have a high purchasing power for premium products such as Macadamia Australia nuts. The country has a population of about 51 million, and Seoul has the most significant population (Aralbayeva et al., 2018). Thus, Seoul can provide the Australian company with a large customer base and potential market size. Additionally, South Koreans are becoming more health conscious with an increasing demand for healthy and organic foods such as nuts (Zhu, 2023). From 2009-2019 almond imports have increased 2.3 times (Zhu, 2023). The health knack market is also expected to grow 6.37% between 2023 and 2027 (Statista, n.d.). This shows tremendous potential growth for healthy and organic food, such as nuts, in South Korea shortly. Additionally, the country has made a lot of progress in technology innovations and internet penetration. The movements and businesses have invested in emerging technologies such as artificial intelligence and robotics to improve the efficiency of their operations.

Moreover, 85% of the population can access social media platforms (Savolainen et al., 2020). The high internet penetration and innovation allow Macadamia Australia to promote and market its products using digital channels. However, the business must consider various challenges such as corruption, cultural differences, economic risk, regulatory requirements, and technological challenges. For instance, political corruption poses a significant risk to businesses that venture into the South Korean market (Jun et al., 2019). Cybersecurity is another concern that has significantly affected businesses in South Korea (. Babulaket al., 2020).

Based on the PEST analysis, Macadamia Australia should consider Seoul, South Korea, as a potential market for their 400gm Dry Roasted variety retail pack in the future. This is because the country has a high population, and Seoul has the most significant population. Seoul is also close to Incheon Airport, which is technologically and digitally advanced in ensuring security. However, the company should consider adopting cybersecurity measures to avoid cyberattacks. Additionally, the organization should adopt an excellent organizational culture and abide by all legal requirements for importing products into South Korea. This will help the business avoid legal implications with their exportin operations.

References

Aralbayeva, S., Tao, S., & Kim, H. S. (2018). A study of comparison between restaurant industries in Seoul and Busan through big data analytics. Culinary Science & Hospitality Research, 24(7), 109-118. https://www.dbpia.co.kr/Journal/articleDetail?nodeId=NODE07537089

Babulak, E., Hyatt, J., Seok, K. K., & Ju, J. S. (2020). COVID-19 & Cyber Security Challenges US, Canada & Korea. International Journal Transaction on Machine Learning and Data Mining, 2020(2), 43-59. http://www.ibai-publishing.org/journal/issue_mldm/2020_October/mldm_13_2_43_59.php

Jun, I. W., Kim, K. I., & Rowley, C. (2019). Organizational culture and the tolerance of corruption: The case of South Korea. Asia Pacific Business Review, 25(4), 534–553.

Savolainen, I., Kaakinen, M., Sirola, A., Koivula, A., Hagfors, H., Zych, I., … & Oksanen, A. (2020). Online relationships and social media interaction in youth problem gambling: A four-country study. International Journal of environmental research and public health, 17(21), 8133. https://www.mdpi.com/1660-4601/17/21/8133

Statista. (n.d.). Snack food – South Korea | Statista market forecast. https://www.statista.com/outlook/cmo/food/confectionery-snacks/snack-food/south-korea

The World Bank. (n.d.). GDP growth (annual %) – Korea, rep. World Bank Open Data | Data. https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=KR

Zhu, X. (2023). Demand elasticity of import nuts in Korea. Heliyon, 9(3). https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9976206/#:~:text=Korea%20import%20nuts%20market,-Table%201%20shows&text=Almond%20import%20increased%20from%2011%2C363,imports%20in%202009%20and%202019).