Debrief of Export Market Intelligence Platform

Market Intelligence Study Tour to Shanghai China – Combination Research Travel Grant and Industry

Dr Jo-anne Freeman

University of the Sunshine Coast

Project No. 2010/713

Copyright Australian Seafood CRC and University of the Sunshine Coast 2010

This work is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owners. Neither may information be stored electronically in any form whatsoever without such permission.

Debrief of Export Market intelligence Platform

Note: this report is based on 2 pilot studies executed in Seoul, South Korea 2009 and Shanghai, China 2010

Complete by Dr Joanne Freeman, University of the Sunshine Coast

5 May 2010

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Table of ContentsPage No.

1.Introduction1

2.Focus of the Project2

3.Research Justification3
3.1Contribution of SME to Australia’s Export Performance3
3.2Capability Development4
3.3Reducing Export Risk5

4.Pilot Study 1: Seoul, South Korea6
4.1Field Research6
4.2Snapshop of Pilot Study 1 (full report available through CRC)10

5.Pilot Study 2: Shanghai, China11
5.1Field Research12
5.2Participants’ Reflection17

6.Industry Capacity Building (outputs)26

7.Communication and Sharing of Knowledge27

8.Recommendations for Future Market Intelligence Projects28

Tables

Table 1 South Korea Research Teams6

Table 2 Trader Data Collection Locations (Sth Korea) 7
Table 3Interviews and Meetings (Sth Korea)7
Table 4 China Research Team11
Table 5 One-on-one Meetings (China)13
Table 6 Retail Outlets (China)14
Table 7 Trade Dta Collection Locations (China)14

Figures

Figure 1 Trader Survey (Sth Korea)8
Figure 2 Consumer Survey (Sth Korea)9
Figure 3 Trader Survey (China)15

Pictures

Picture 1 Jonas Woolford atShanghai Oriental International Fisheries Market17
Picture 2 Collecting data at Tong Chung Aquatic Product Market18
Picture 3 Meeting at Austrade, Shanghai19
Picture 4 Meeting at Lans Club organised by The Grey Group20

Appendices

Sunshine Coast Daily Sunday 6 September 2009

Sunshine Coast Daily Monday 19 October 2009

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1.Introduction

Due to the importance of export to the seafood industry, CRC members identified an export market intelligence project as a priority project. The project engagesthe University of the Sunshine Coast, an industry leadership group (CRC members) and CRC industry participants to generate industry led research. Through the recruitment of 3rd year, international business students (note: only students that have maintained a high level of attainment throughout their university studies are accepted into the program) and industry participants as primary data collectors, the project will not only develop a new generation of potential seafood industry personnel into the industry but will also extend the knowledge and experience of the seafood industry. Furthermore, the project will provide CRC members the forum to develop other export market related skills through the expert leadership group.

2.Focus of the Project

The largest percentage of Australia’s seafood is directed towards the Asian region with Hong Kong being the largest market and worth approximately $AUD447 million, (a major percentage of this trade ends up in China) followed by Japan (AUD305 million), United States (AUD115 million), China (AUD59 million) and Taiwan (AUD50 million). Of the sectors within the industry, prawns, abalone, rock lobster and tuna are the main export earners (ABARE 2007). In line with CRC’s priority focus on Asia and particularly the China initiative, this project is therefore supporting current CRC projects but more importantly adds further value by providing the following outputs to the CRC members:

(i)A CRC industry export leadership group will be created that consists of experienced CRC export participants along with additional members from new emerging exporting businesses. The formation of this group will provide the platform for continual professional development opportunities for CRC members. Furthermore, the leadership group will be working in collaboration with the University of the Sunshine to determine priority markets for the whole of industry.

(ii).Consolidated secondary market intelligence that highlights general market characteristics and demographics, an overview of the export market seafood industry incorporating the general structure, trade and production statistics and other related information.

(iii)Interpretable export market intelligence reports through in-depth field research involving the University of the Sunshine Coast working collaboratively with CRC industry participants. The reports not only include informative primary data collected in the market but also provide recommendations and strategies for future CRC seafood exporters.

Essentially the overall aim of the Export Market Intelligence project is to not only identify export opportunities for CRC members but to provide export intelligence and strategies to reduce the risk of doing business in a globally competitive environment.

3.Research Justification

3.1Contribution of SME to Australia’s Export Performance

Export provides a way to assist nations improve their balance of payment, trade deficit, employment rate and overall standard of living. However, due to the rapid globalisation of markets, the pace of technological change and the decline of government imposed barriers, it is becoming increasingly difficult for Australian small to medium (SMEs) seafood businesses to isolate themselves from export markets and foreign competition(Andersson, Gabrielsson & Wictor 2004; Fillis 2007). In fact, Balabanis, Theodosiou and Katsikea (2004, p. 353)states “virtually all firms, irrespective of size, industry or national origin, are now confronted with the consequences of this new commercial reality, and have realised that choosing not to participate in global markets may no longer be an option”. As the SME sector is a major contributor to the overall performance of the Australian economy and indeed the global economy the practical implication of research that enhances SME performance is critical. The significance of SMEs in job creation, technological innovation, and economic rejuvenation is generally recognised among economists, management theorists, and policy makers (Westhead et al. 2002; Westhead, Wright & Ucbasaran 2004; Yeoh 1994). By exporting a proportion of their sales abroad, SMEs can reduce the dependence and saturation and/or shrinkage of the domestic market(Leonidou 1998). Seafood business managers can thus adopt exporting as a strategy to increase corporate growth, production capacity and financial performance, strengthen their competitive advantage and ensure company survival in a highly globalised marketplace (Julian & Ali 2009; O'Cass & Julian 2003).

More specifically to the Australian seafood industry, improving the export performance of seafood businesses in regional locations has become an area of emerging importance to governments and researchers alike (Department of Transport and Regional Services 2003; MacGregor & Varazalic 2005). It has been argued that the solution to reinvigorating the economy in regional locations is to stimulate the growth of existing small businesses through exporting (Larsson, Hedelin & Garling 2003; Vatne 1995). Regional SMEs are growing more slowly than metropolitan SMEs and on average are half as profitable as their metropolitan counterparts (Department of Transport and Regional Services 2003). In addition, people living in metropolitan areas on average enjoy higher incomes than people living in the regions and this gap is increasing (Lloyd, Harding & Hellwig 2001). Yet regional business contributes 50 percent to the nations export income which implies that SME exporters have the potential to become a major contributor in developing regional economies (MacGregor & Varazalic 2005). Regional Australia can only survive with strong, growing businesses that in turn create strong, energetic regional communities and SMEs have been identified as the wealth generators and job providers for regional Australia (Department of Transport and Regional Services 2003).

Exporting therefore is fundamental to sustaining and developing Australia’s regional locations as exporting has the potential to provide jobs, income, infrastructure and production facilities which in turn provides flow on benefits specific to these locations (Department of Foreign Affairs and Trade 2002). In Australia, the federal, state and territory governments, all play important roles in determining the business environment affecting SMEs, as well delivering programs and services to assist businesses to grow and prosper. Growing the Australian exporting community including the SME seafood export sector will in effect help more Australian businesses grow, benefit from knowledge transfers and ultimately become more internationally competitive. As a result the spillover effect will contribute to improving employment, productivity and the standard of living. It is important therefore that strategies developed and facilitated by policy makers (such as the Seafood CRC initiative) can be both improved and better directed through the identification of appropriate projects that can in fact effectively assist the seafood SME community (eg The Export Market Intelligence Platform).

3.2Capability Development

Arguably,experience and knowledge (information capability)are critical factors for firms engaging in exporting where competitive practices are generally more sophisticated than those employed domestically (De Toni & Nassimbeni 2001; Manolova et al. 2002). Nakos, Brouthers and Brouthers (1998) assert that knowledge and experience gained from international business generates business opportunities as managers with extensive foreign knowledge and experience can draw on their network to expand abroad. Therefore firms with reasonably high levels of information capability knowledge and experience possess a more comprehensive understanding of export market forces and are more likely to achieve higher export performance levels than others (Wolff & Pett 2006). Information capability has been accepted in the literature as a critical component in making effective and efficient export market decisions (Leonidou & Theodosiou 2004; Toften 2005). In fact, Eisenhardt and Martin (2000) and Keh, Nguyen and Ng (2007) claim manipulation of information capability is critical for sustained competitive advantage. In fact, the accumulation of specific market information has the ability to increase a firm’s international competitive advantage (Goll, Johnson & Rasheed 2007; Loane & Bell 2006; Srivastava, Shervani & Fahey 1998).

However, increasingly, exporters consistently rate lack of information as a major barrier to entering new markets (Diamantopoulos et al. 2003; Kropp, Lindsay & Shoham 2006; Leonidou 2004). In many instances exporting firms face challenges in identifying export opportunities, conducting research into foreign markets and interpreting such information (Rundh 2003). Market research activities imply that information acquisition is a precondition for SMEs to make rational market entry decisions to achieve high export performance (Wolff & Pett 2006). Due to many SMEs’ haphazard approach to export market information acquisition and use, the firm’s risk to exporting increases as decisions are often based on purely gut feeling and/or personal experience as opposed to informative decision making (Fung, Chen & Yip 2007).

3.3Reducing Export Risk

Reducing export risk would therefore increase a firm’s willingness to allocate more resources to developing export markets which create positions of advantage over time (Gripsrud, Solberg & Ulvnes 2006). To that end, relevant, accurate and timely information is a vital capability that enables SMEs to respond to changing export markets (Katsikeas & Morgan 1994). Having the capabilities necessary to access market intelligence in more diverse and turbulent environments helps minimise unfamiliarity with export markets and to a greater extent helps to decrease uncertainty in the export venture (Gumede & Rasmussen 2002; Jones & Crick 2004; Shoham, Rose & Kropp 2005). Consequently, information is an important capability in order to deliver consistently high quality products and services as well as creating superior customer value (Balabanis 2001; Key, Nguyen & Ng 2007; Trabold 2002).

In fact in a more recent study by the researcher (Freeman 2009), which focused on the challenges of SME exporters, which included seafood exporters, international market knowledge was found to be crucial for firms to be successful in export market activities. Firms accumulate knowledge of foreign marketsthrough experience (such as market visits)(Cavusgil & Zou 1994; Li & Ogunmokum 2001). Therefore the betterthe understanding of an export market, the more an SME can develop planning activities that suits the characteristics of the market, which in turn will be more likely to boost overall export performance. There is strong consensus across the literature and in the SME community acknowledging that increased market intelligence is becoming critical for SMEs operating in export markets due to the increasing level of uncertainty and complexity that exist across national boundaries (Hart, S. & Tzokas 1999; Lim, Sharkey & Kim 1996; Toften 2005). Since lack of knowledge of the changing conditions prevailing in export markets has been identified, efforts must be made to develop relevant, comprehensive and useful market intelligence tools readily available to SME businesses.

Previous research and supported by the results of the study by Freeman (2009), established that superior export performance is influenced by a firm’s ability to monitor and make adjustments when required, to the conditions in the export market environment. First firms need to be provided with current in-market and industry information and second, specific opportunities in export markets could be presented which include, industry events, networking opportunities, trade missions, trade shows and also outbound and inbound market visits. Consequently, SMEs need more relevant assistance from government agencies to provide them with the necessary export market related information which includes market knowledge and identification of appropriate networking associations and updates regarding the business activities and opportunities available in specific targeted export markets.

4.Pilot Study 1: Seoul, South Korea

All costs for Pilot Study 1 were funded by the University of the Sunshine Coast and the research teams.

The first pilot study was run as part of an existing course within the International Business Program. The pilot study required the submission of a team report that investigated, through secondary and primary sources, the export potential of Australian seafood products into South Korea. This pilot project was designed to give students an opportunity to undertake practical export research for the Australian seafood industry along with testing the viability of collecting, analysing and reporting quality research outcomes that provide valuable insight into the Korean market for CRC members. The research team consisted of 14 research students and the Research Leader, Dr Joanne Freeman (see Table 1).

Table 1 South Korea Research Teams

Seafood Sector / Research Teams
Southern and Western Rock Lobster / Chelsey Parish
Thalia Van den Boogaard
Lee Kyeonghun
Metin Sulimani
Abalone / Marion Gironnet
Ben Manning
Rachael Mackay
Tuna / Firas Zein
Mathilde Wadoux
Moea Theroux
Natalia Tintori Costa
Yellowtail Kingfish / Annika Luscombe
Paul Von dohren
James Elsayed
Research Leader / Dr Joanne Freeman

4.1Field Research

The results from the pilot studyare based on both primary data, which was collected in South Korea (Korea) and secondary research findings. Primary data was gathered through the use of surveys conducted in fish markets (Refer to Table 2), and meetings with high-end hotels and restaurants in Seoul and Incheon. Data was also gathered through one-on-one meetings with government agencies in Seoul which included, Austrade, Korea Trade-Investment Promotion Agency (KOTRA), Trade Queensland and Korean Maritime Institute (Refer to Table 3). Finally data was also collected from seafood consumers in order to elicit market perceptions ad choices regarding seafood purchases. Refer to Figure 1 for Trader Survey and Figure 2 for Consumer Survey.

Table 2 Trader Data Collection Locations

Date / Location
15 September 2009 / Namdaemun markets
17/18 September 2009 / Noryanjin fish markets
19 September 2009 / Garak markets

Table 3Interviews and Meetings

Interviews and Meetings
Date / Name / Position / Company
16 September 2009 / Mr. T. C. Jeoung / Executive Chef / Miyabi Restaurant, Sheraton Hotel, Incheon
15 September 2009 / Mr. J. S. Sin / Executive Chef / Under the Sea, Seoul (large seafood buffet restaurant)
15 September 2009 / Unknown / Executive Chef / The Pacific Hotel, Seoul
(4 star hotel)
22 September 2009 / Mr. C. R. Park / Executive Chef / Sejong Hotel, Seoul
(5 star hotel)
21 September 2009 / Dr. Joo / Team Leader / Korean Maritime Institute
15 September 2009 / Ms. Young Yu / Trade Commissioner / Australian Trade Commission (AUSTRADE)
15 September 2009 / Ms. Myung-Hwa Lee / Business Development Manager / Australian Trade Commission (AUSTRADE)
17 September 2009 / Ms J Bae / Importer / Aqualink
18 September 2009 / Mr. Todd Sample / Manager, Public Relations Team / Korean Trade-Investment Promotion Agency (KOTRA)

Have you ever traded Australian seafood products? Yes  No 

If yes, what types of Australian seafood products have you traded?
If no, is there any specific reason you have not traded Australian seafood products?
Please state the name of the country where you purchase most of your seafood products?
Who do you buy your seafood products from?
How much seafood product do you import? In percentage term.
What seafood products sell the best?
What comes to mind when you think about Australian seafood? Probe for positive and negatives responses. Also ask the trader what he thinks about your specific product (do they think there is any potential in South Korea)
Who do you sell your seafood products to? / Please  / % Percentage of Sales
Direct to retail buyer
Direct to food services buyer
Direct to consumer
Direct to another wholesaler
Other (please specify)
When purchasing seafood products please indicate the importance of the product attributes you look for? Please note “7” is very important. / Rating of Attributes
Not at all Very
Important Important
1 / 2 / 3 / 4 / 5 / 6 / 7
Good value for money
Quality
Good food safety record
Consistent product supply
Caught/Grown in pristine clean waters
Responsive suppliers
Different/Exotic species
Available live
Available frozen
Available chilled
Recognised brand or country of origin
Other (specify)