Australian Beef in South Korea

Because it incorporates many business variables such as technology and production, international business is a crucial manifestation of the modern economy. To summarize, international business provides a platform for commercial transactions to take place across different nations around the world. In this case, global commerce is examined by looking at the market availability of Australian beef in South Korea. Australia is one of the world's leading producers of meat and cattle. In 2015, it ranked first in the world for beef exports. On the other hand, South Korea is among the nations that import the Australian beef. However, the exportation of this beef has attained various limitations and advantages in the global market, for instance, the increase in competition from various countries especially the United States of America (USA) has led to reduced volumes of the beef transaction between the two countries. The beef industry in Australia would not exist were it not for foreign investment and so an examination using various economic theories, frameworks, and regulations is necessary for expressing such a commercial transaction.


The South Korean Meat Market


Analyzing the Korean meat market will help in assessing whether it is an attractive market for Australian beef. There has been growth in South Korean meat demand as a result of the long-term demographic and economic shifts. An outlook of the beef consumption, local production, and imported beef leads to various conclusions. First, the Korean beef has recently recovered registering growth since the year 2013. In addition, the beef industry in the country has a demand that cannot be sustained by the production (Cravino and Levchenko 2016, p. 934). However, there is no guarantee that such a projection is attainable since the beef market is underpinned by the economic growth. Some import regulations including tariff reduction on import products facilitated the penetration of Australian beef in South Korea. With the rapid population growth in Korea, the beef consumption was expected to rise. Due to the population growth, the beef import is expected to rise since the local production cannot meet the demand in the country. In the year 2016, 600 000 of tonnes of beef from Australia were imported to South Korea. 50% of South Korean market share is facilitated by import products (Fang et al., 2017, p. 112). Nonetheless, the short-term exports are often limited due to the low cattle herd, high prices and tight beef clients.


Further, the Australian supplies are boosted by the Korea-Australia Free Trade Agreement (KAFTA), a deal, which is expected to safeguard beef. Such an agreement is expected to counter the competition by the USA beef since the cut availability will favor the Australian beef pricing. The South Korean beef market outlook is expressed by the figure below:


Market Statistics of the meat industry


(Schneidewind 2016, p. 82)


South Korea has been a major market for Australian beef in the past one a half decades. The figures show the local beef production, consumption, imports and market access in the years 2016, 2025 and 2030. The beef consumption in the country has been on rise and is expected to continue rising in the years 2025 and 2030. However, the local production has maintained and is expected to decline by the year 2025. The statistics on imports shows a rising trend that will favor Australian exports (Schneidewind 2016, p. 67). The country’s market has been fairly accessed since the tariffs set have been favoring the Australian beef export. Further, in the coming year, South Korea intends to have no safeguards and tariffs on the imports. Such kind of trade liberalization can be supported by the beef market statistics shown above. Also, the Korea-Australia Free Trade Agreement (KAFTA) can assert the beef market state between the two countries. The continued growth in the meat imports to Korea relies on consumer appreciation due to increased population (Kim and Mark 2017, p. 5). Besides, the consumers in the country appreciate quality beef from Australia. The above-mentioned factors show that the short-term Korean beef supplies and the enthusiastic buying from traders were critical and necessary. Australian export to Korea has improved over time with more than 150000 tonnes currently exported to the country (Asongu 2017, p. 223).


Factors that favored the Expansion of Australian Beef to International Business


According to Meyer and Peng (2016), international business is quite complex and costly however the Australian product has managed to penetrate into the foreign markets especially South Korea. The beef industry must have applied different frameworks and strategies to achieve such a state. International concentration is among the measures taken by an economy to achieve the desired expansion (Buckley et al., 2016, p. 76). It suggests that the beef product attained a competitive concentration in Korea. The competition in the Korean beef industry might have been relatively scarce to enable a foreign product to penetrate the market. Also, global synergies including organizational marketing structures enabled the Korean beef market to be attractive to foreign products. However, the beef industry in Australia had developed structures and competencies that are easily scaled making them expand globally. Finally, the global strategic motivations offered by South Korean made its market to be attractive. For instance, the foreign companies were able to efficiently develop their new sourcing sites for production. In addition, the foreign companies in the country were availed with the necessary assets hence the foreign product managed to penetrate the market (Ryan and Cheetham 2017, p. 19).


Economic Growth and a Transitioning Population in South Korea


Over the past three decades, there has been a substantial economic growth in Korea. The country is the third largest in Asia and its Gross Domestic Product (GDP) as often grown at a rate of 7.1 percent. The economic boom between Australia and Korea up to the year 2015 is illustrated in the below graph:


Comparison of South Korean and Australian Economy


(Picciotto and Mayne 2016, p. 93)


The graph shows fluctuations in the GDP of the two countries. For example, the previous Global Financial Crisis in Korea led to a fall in the country’s gross domestic product. Besides, both countries’ GDPs have declined from the year 1960 to 2015. The two economies supported the beef market, for instance, South Korea had an average growth rate of 5.1 percent. The Korean economy supported the importation of meat product (Picciotto and Mayne 2016, p. 97). The population of South Korea has increased over the past three decades. Referring to economic development, the population has provided the necessary workforce and liberalized the market for different products. Therefore, the Korean market has been attractive in different aspects for the Australian meet. The demand for meat in Korea has been on the rise since the past two decades (Nowak 2017, p. 8).


The trade agreement between South Korea and Australia has often reduced the tariffs on beef import and they intend to completely take away the tariffs in coming years. The reduced tariffs will be enjoyed by both the meat importers and exporters. Such a scenario makes the Korean market attractive especially to the meat industry. For instance, the reduced tariffs on the import prices of Australian meat would fall. As a result, the product easily penetrated the Korean market. Przygoda (2017) reveals that there certain economic and social factors that favored the export of Australian meet. Evolving diets is among these factors; meat consumption in Korean market has increased since the population and economy have evolved. The continued affinity of the consumers, especially on pork, improved the competitiveness of the imported product. Also, the relative price difference between meat products affected their demand in certain ways. For example, an increase in the tariffs of beef products would make its price to rise. Therefore, the demand is as a result of the customer’s tastes and preferences (Hahn and Choi 2017, p.1226).


In conclusion, the international business expressed between the two countries (Australia and South Korea) reveal the platforms necessary for a product to penetrate a foreign market. First, demand is an important aspect since the people must be ready to consume the imported product. The population is another factor and this is evident by the rapid population growth in South Korea. Therefore, the country had the market and the workforce required. A country’s import and export regulations are of great importance since they might affect the products traded. For instance, South Korea reduced its Tariffs making the price of the meat in the country to go down. The expansion of the Australian meat industry is attributed to three main factors including global strategic motivation, global synergies and global concentration. Further, the economic growth, especially in Korea, facilitated the entrance of the imported product. Nevertheless, the competition from other meat exporting nations might affect the volumes of transactions between the Australia and South Korea.


References


Asongu, S.A., 2017. Knowledge Economy gaps, policy syndromes, and catch-up strategies: Fresh South Korean lessons to Africa. Journal of the Knowledge Economy, 8(1), pp.211-253.


Buckley, P.J., Burton, F. and Mirza, H. eds., 2016. The strategy and organization of international business. Springer.


Cravino, J. and Levchenko, A.A., 2016. Multinational firms and international business cycle transmission. The Quarterly Journal of Economics, 132(2), pp.921-962.


Fang, Z., Zhao, Y., Warner, R.D. and Johnson, S.K., 2017. Active and intelligent packaging in meat industry. Trends in Food Science & Technology.


Hahn, C.H. and Choi, Y.S., 2017. Trade Liberalisation and the Wage Skill Premium in Korean Manufacturing Plants: Do Plants’ R&D and Investment Matter? The World Economy, 40(6), pp.1214-1232.


Kim, G. and Mark, T., 2017. Impacts of corn price and imported beef price on domestic beef price in South Korea. Agricultural and Food Economics, 5(1), p.5.


Meyer, K. and Peng, M.W., 2016. International business. Cengage Learning.


Nowak, W., 2017. Trade competition between Asia and the European Union in Africa. In Country Experiences in Economic Development, Management and Entrepreneurship: Proceedings of the 17th Eurasia Business and Economics Society Conference (pp. 3-15). Springer International Publishing.


Picciotto, S. and Mayne, R. eds., 2016. Regulating international business: beyond liberalization. Springer.


Przygoda, M., 2017. The Role and Importance of Australia In The South Pacific Region. Economic and Social Development: Book of Proceedings, p.54.


Ryan, T. and Cheetham, A., 2017. The Korean beef market: Insights and prospects from an.


Schneidewind, D.K., 2016. Economic Miracle Market South Korea: A Blueprint for Economic Growth in Developing Nations. Springer.

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