I. EXECUTIVE SUMMARY
CD Korea, based in South Korea, plans to set up a store in the district of Shibuya in
Tokyo, Japan which will provide Korean entertainment products. The business expects to profit
from the store in Japan because of the aid of the Hallyu, also known as the Korean Wave. The
movement has been sweeping the globe and has especially garnered interest and support
throughout Asia.
Japan is an industrialized nation with advancing technology. The country is also in the
World Trade Organization and has an Economic Partnership Agreement with South Korea. The
government of Japan is stable seeks to improve relations with Korea, so few problems will occur
when CD Korea sets up the store.
The country of Japan is near South Korea with the Sea of Japan between them. Both
nations are derived from China so they share similar cultural aspects. This will benefit the
business as employees will not have to adapt to different cultural expectations. The store will
adjust to holidays and celebrations of Japan. The major competition of CD Korea will be Tower
Records which is also located in Tokyo.
The business plans to target youth and middle aged women. Youth tend to stay updated
on new technology and trends. These trends include Korean entertainment. Korean dramas also
usually target female youth, housewives, and middle aged women through romantic series. The
company will establish a store in Shibuya because of its popularity as a trendy district.
Japan requires certain documents if products are shipped by air. All goods and documents
must be labeled with metric units. The company will also have to register a company seal.
As a limited liability corporation (LLC), CD Korea will operate similar to a partnership
but exist as a separate body from its members. Renting a space with enough room for storage
will allow the store to replenish inventory with little hassle. The CD Korea store in Japan will be
overseen by one of the company owners who will guide the manager and employees while the
other will stay in Korea to supervise the company and products shipped. This allows the store to
be lead by an international perspective.
CD Korea will sell all types of music CDs of Korean artists and other items related. The
company will also sell dramas and movies as well as their corresponding fan merchandise. All
products will be bought from their respective companies and will be stored in the backroom of
the store. The products will be transported from Korea to Japan through air freight with the help
of Pantos Logistics, a shipping provider.
The store will operate using Japanese yen due to its location. Products will be sold twice
the price of their original Korean retail value. Markdowns will be placed on products that are not
recent or are not popular. Markups will be applied if any shipping delays or accidents occur but
will be removed after the event passes over. CD Korea will use fliers, posters, brochures, a
website, and in-store displays to attract potential customers.
CD Korea is expected to spend roughly 360,000,000 Korean won on the establishment of
the store. The expected earnings of goods sold is roughly 181,000,000 won for the first year.
We hope that our time and effort spent on this proposal has sparked interest over this
business venture as we are very enthusiastic about the operation. We will gladly answer any
questions you may have and hope for your approval to begin operations for the CD Korea store
as soon as possible. Thank you taking the time to look over our plans and we appreciate your
consideration.
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II. INTRODUCTION
CD Korea, based in Seoul, South Korea, manages Korean entertainment products, mostly
concerning pop culture. The products include not only music CDs of Korean artists, but also
drama DVDs, movies, artist photo-books, calendars, collectible merchandise, and magazines.
Our company mission statement is: “Sharing Korean pop culture with the world, one friendship
at a time.” This is representative of our desire to mirror the strong bonds that Korean idols, actors,
and actresses are able to form with their fans between our employees and customers, and also the
bond that we wish for nations to form through building relations by cultural exchange and
understanding.
CD Korea aims to reach the potential Japanese market in Tokyo through the Hallyu. The
Hallyu translates to “Korean Wave” and is the spread of South Korean culture internationally.
Japan is the second frontier for Korean entertainment as artists tend to regularly hold activities in
the country. South Korea neighbors Japan with the sea between them. Tokyo, the largest
Japanese city, is highly populated with districts specifically aiming toward certain age groups.
CD Korea will be able to achieve more in the district of Shibuya because of its ability to attract
the teenage population. Ten-thousand Korean won is equivalent to 655.62 Japanese yen which is
unfavorable, however with the Hallyu thriving in Japan and the general cost of Korean CDs
being significantly lower than Japanese CDs, CD Korea will be able to achieve presence in the
Japanese market. Japan has an Economic Partnership Agreement with Korea which makes it
ideal for business operations due to the cooperation and increase of trade and lack of barriers.
The promotion of the Hallyu is further backed by Japanese and Korean attempts to
promote cultural exchange. Back in 2002, both countries joint-hosted the FIFA Soccer World
Cup. That same year was declared “The Year of Japan-ROK (Republic of Korea) National
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Exchange” in dedication to the newfound relationship, and the Japan-Korea Cultural Exchange
Council was established. The members of the council, leaders in non-governmental sectors, meet
in order to plan the improvement of cultural and artistic aspects of both countries being
transferred. Efforts to stabilize relations between the two countries continue as foreign ministry
leaders stay in regular contact.
III. ANALYSIS OF THE INTERNATIONAL BUSINESS SITUATION
A. Economic, political, and legal analysis of the trading country
1. Describe the trading country’s economic system
With its ever increasing technological innovations, Japan is a highly industrialized nation
with a free market economy that is efficient and competitive. In the 2011 Index, Japan was the
country with the twentieth freest economy. It is sixth of the countries in the Asia-Pacific region.
The GDP (PPP) in 2010 was $4.31 trillion which ranked forth compared to the world. The GDP
per capita (PPP) was $34,000 in 2010 which ranked thirty-eighth compared to the world. The
unemployment rate of Japan was 5% in 2010 which was ranked forty-sixth compared to the
world. The agricultural products of Japan are rice, sugar beets, vegetables, fruit, pork, poultry,
dairy products, eggs, and fish. The country produces motor vehicles, electronic equipment,
machine tools, steel and nonferrous metals, ships, chemicals, textiles, and processed foods in
which they are part of the world’s largest and technologically advanced.
Japan and Korea are part of the Wold Trade Organization (WTO) which allows
governments to negotiate open trade agreements. As opposed to the Japanese reputation for an
extremely closed investment market, the country has grown to be more accepting of foreign
investment. The former Prime Minister of Japan, Naoto Kan, had planned for 2011 to be the year
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in which Japan began to open up trade with the rest of the world. The initial idea was backed by
a plan to grant tax breaks to foreign companies.
Although CD sales have dropped by 7% in 2010, the top sales in Japan belonged to a
Korean artist. In the times that Korean artists travel for promotions in Japan, they are able to top
the music charts overseas. Even without visiting foreign countries to promote themselves,
Korean artists are able to make charts in countries such as Germany, Taiwan, Bulgaria, and more
as they become widely known and more popular.
2. Describe the trading country’s governmental structure and stability
Japan has a stable parliamentary government with a constitutional monarchy where the
Emperor is the symbol of state and appoints the Prime Minister and Chief Justice. The National
Diet is made of the House of Representatives, which is composed of 480 members, and the
House of Councilors, which is composed of 242 members. The houses have the same amount of
power except in certain cases where the House of Representatives becomes more powerful than
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the House of Councilors. The National Diet creates laws, drafts amendments, and approves the
annual budget and ratification of treaties. The government protects the industry and fair trade by
using trade measures that comply with World Trade Organization Agreements and the Customs
Tariff Act. The Ministry of Finance overlooks tax collection, regulates markets, manages bank
insurance systems, and writes the budget of the government of Japan to be approved. It also
controls customs and tariffs and investigates foreign exchange.
The country of Japan is split into forty-seven administrative sections. Each has a
governor and a single chamber assembly that are elected by vote. All sections are required to
uphold departments of general affairs, finance, welfare, health, and labor with departments of
agriculture, fisheries, forestry, commerce, and industry being optional depending on the needs of
the area. The local powers depend on the national government in administrative and financial
ways.
The nickname “Japan Inc.” refers to how Japanese government interests have rested with
protecting businesses. In the past the government has made actions in helping to start new
industries, soften the effects of economic depression, maintain a stable economic infrastructure,
and preserve the standard of living of the Japanese people. This shows that the Japanese
government has held a role in seeking the best for the country’s economic activities.
3. Describe laws/agencies that affect your business
Foreign policy of Japan plans to promote peace for the Japanese people by working with
the West and the United Nations. Japan has relations with many nations and has been a part of
the United Nations since 1956. Reminiscence of historical tensions between Japan and Korea
remain however recently political officials of both countries have made an effort to strengthen
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bonds which has been resulting in a better relationship. This progression of nations helps CD
Korea by encouraging cultural understanding.
The Customs Bureau of the Ministry of Finance manages Japan’s customs duties. There
is a Consumption Tax of 5% on all goods imported into or manufactured in Japan unless the
good is priced under 10,000 yen where it will be exempt from the tax. The Customs Tariff Law
also adds a basic rate on goods which remains unchanged. Japan is a part of the World Trade
Organization which creates a rate that is agreed on by the members of the organization. Goods
from Japan and Korea have a rate that was created as part of the Economic Partnership
Agreement.
Advance Classification Rulings give importers information about tariffs on certain items
before they make an import declaration. This allows procedures to be more problem-free and
quicker which benefits the importers by preparing cost estimates and sales plans. The ruling is
issued by request with an inquiry in writing. The form lasts for three years and is void if the
inquired content of goods does not match the article, the situation has changed by law and
regulations, if the application is incorrect, or if the expiration date has passed.
B. Trade area and cultural analysis
1. Geographic and demographic information
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Map of Japan
Japan is an island nation in East Asia consisting of the main islands known as Honshu,
Hokkaido, Shikoku, and Kyushu, but also includes other tinier islands. The country rests east of
the Korean Peninsula, nearly 30 km away, and has a coastline of about 29,751 km. The total land
area of Japan is about 364,485 sq km. The land is mainly mountainous in rural areas with
dormant and few active volcanoes. The climate differs in the north, which is cooler, and the
south, which has a tropical temperate. Earthquakes are a common threat to the nation along with
tsunamis and typhoons every year. Due to its highly industrialized economy, Japan suffers from
air and water pollution.
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As of July 2011, Japan had a recorded population of over 120 million. 98.5% are
Japanese while 0.5% are of Korean background, 0.4% are of Chinese background, and 0.6% are
of other backgrounds. The capital city of Tokyo itself has a population count of approximately
36.5 million residents and as of 2010, 67% of the Japanese population was residing in urban
areas. About 28% of the population of Japan resides in the Tokyo Metropolis Region. The
majority of Japanese citizens are from ages 15 to 64 with the median age of about 44 years old
for both men and women. Life expectancy rates in Japan are the fifth highest in the world resting
at approximately 82 years old on average. Residents aged 15 and over are able to read, and the
literacy rate of the country is about 99% of the population as education tends to last about 15
years on average.
As Japan and Korea are both derived from China, they share similar cultural aspects. That
being said, the two nations share strict social behavioral values which greatly affect the conduct
of a person while interacting within the nation, which includes business operations. In order to
effectively start and keep up marketing operations of a CD Korea store in Japan, there are few
cultural adjustments that need to be considered as there is no drastic difference in Korean and
Japanese culture for us to take caution in interaction between potential business partners or
consumers.
Both countries apply high context in their communication, meaning that they avoid
directness and do not take words literally. As such communication could be difficult to
understand in some nations, we will have little trouble with the issue, especially concerning
business operations where ideas and actions need to be clearly explained and executed. Although
the spread of international business has made the hand shake greeting a common salutation, we
believe that the shared bow greeting that is customary to both nations’ cultures will aid in
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understanding between our corporate workers, employees, and potential customers. The bow is
still highly regarded in both cultures and is a higher sign of respect and so implementing such a
greeting is to our better interest. Other forms of body language are also shared between culture in
Korea and Japan. Eye contact is not necessary to the people of both countries and is considered
rude. Touching is a sensitive factor in both nations and by all means is not appropriate except in
situations between close friends and family. There is additionally no pressure to speak since
silence is an appreciated form of nonverbal communication on behalf of both cultures.
Japanese and Koreans expect punctuality for all meetings and gatherings so it should not
be a problem as both share the same concern over time. Exchanging business cards is traditional
among business operations between the two nations. The behavior involving the exchange of
cards is also similar. In Japan and Korea, business negotiations rely on mutual trust and strong
relationships. This calls for patience on both sides because meetings may take a long period of
time and many will usually take place before a contract will be written. As this is not unusual for
both countries, it may set back business operations due to the time spent to build relationships.
The social hierarchy is a very dictating factor in Japanese and Korean culture where age
and rank is highly taken into consideration. An elder is always respected in higher regards and
the same would apply to a person of greater working status or title. Equality of status or title is
also taken into consideration in the business world of both countries. The Japanese tend to never
start negotiations with higher executives and both cultures usually hold negotiations between
those of similar company rank. Speaking in formalities is of vast importance when conversing
with a person who is not a friend or part of family. This is especially evident in the common
business world where employees speak formally to customers. How one is addressed in the two
countries is also similar. The given name is reserved for those of closer relation and persons
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should always be called by family names unless given permission otherwise. Titles are crucial in
business conduct as simple honorifics like the Japanese or Korean equivalent of “Mr.,” “Mrs.,”
and others are used in common interaction.
With religion being a prominent aspect of culture to all peoples, we must make sure to
respect the practices of Japanese culture while carrying out business operations there. Unlike
other aspects of culture, the people’s beliefs differ between Japan and Korea. In Japan, the
dominant religions are Shintoism and Buddhism, where a majority of the population practices
both. Only minorities of the Japanese follow Christianity or another religion. This is in contrast
to Korea, where the majority of the population has no religious affiliation, follow Christianity, or
practice Buddhism. However, Buddhism is not practiced to the same extent as it is in Japan.
Religious holidays are also frequently celebrated in the Japanese lifestyle.
The Buddhist festivities known as Obon are held on the 13th to 15th of the seventh month
each year. The festival commemorates one’s ancestors as it is believed that their spirits return
during the week to visit relatives. Floating lanterns are placed in bodies of water to help guide
one’s ancestors back to the spirit world at the end Obon.
The most important holiday for Japan is New Years. New Years provides an opportunity
for a fresh start as years are viewed as separate in the Japanese community. Families spend
January 1st through 3rd with families as businesses close down for the holiday. Before the
beginning of a new year, families must prepare by cleaning houses and clothes, decorating
homes and entrances, and completing all duties. Tradition calls for the visiting of shrines or
temples on the first day of the New Year. It is also common to send New Year’s cards that are
marked to be delivered on New Year’s Day. Special dishes of New Year’s include sweetened
rice wine, soup with Japanese rice cakes, and buckwheat noodles. Traditional games played
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during the holiday are Japanese badminton known as hanetsuki, kite flying, and a Japanese card
game known as karuta.
Golden Week, another busy time of year, is made of four national holidays normally
during the week of April 29th through May 6th. These holidays are Showa Day which celebrates
the birthday of the former Emperor Showa, Constitution Day which celebrates the new
constitution of 1947, Greenery Day which celebrates nature and the environment, and Children’s
Day which celebrates the Boy’s Festival where families wish for their sons success and future.
Golden Week attracts many foreigners and travelers which leads to areas of transportation or
tourist attractions becoming crowded.
Gift giving is an important common custom in both Japanese and Korean culture. First
business meetings in Japan often end with the exchange of gifts. In Japan, the act of giving a gift
is also more important than the gift itself and the present is usually claimed as a “small token,”
whereas in Korea, there is pressure to give a gift of equal value. The presentation of the gift is
also highly considered in both countries, and the symbolism in colors for wrapping is a
contemplating point for Koreans. There is also symbolism behind the gift itself, where knives or
scissors are considered as a sign of “cutting ties” in Korea and sets of four make a reference to
death for both nations.
In the current state of technology that Japan is in, the main threat to our business would
be online sales and sharing and illegal downloading. Though the digital music market had fallen
by 5% in 2010, Japan is worried over the condition of their music industry and is looking more
to export. Recochoku is a Japanese digital music store that holds 65% of the country’s digital
music purchases and 70% of mobile music sales. Tower Records is a popular Japanese store that
specializes in physical music media sales. This will be the strongest of our competition as we
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also plan to set up CD Korea in Shibuya, Tokyo where Tower Records is located. The popular
Japanese store also has its own music ranking chart that recognizes Korean pop music and its
artists.
2. Market segment analysis target market
The primary target of CD Korea is the youth between ages 13 to 25 years old in the
district of Shibuya in Tokyo, Japan. The secondary target market includes women of the ages 30
to 50 years old. About 67.9% of the population is between the ages 15 to 55 years old in Tokyo
as of 2008. The unemployment rate of youth between the ages of 15 to 24 was about 10.07% in
2009.
Many teenagers in Japan and Korea use technology on a daily basis. They keep up with
trends and tend to use a lot of their free time on entertainment. Hallyu brings the pop culture of
Korea into Japan especially. Many Korean artists have Japanese fan clubs, as well as their own
Korean fan clubs, and make their debut into the country, releasing various versions of a single
album that include special items such as photo booklets or their title track’s music video. Korean
artists also host concerts across Asia due to their popularity, some even have their concert ticket
purchasing websites crashing due to the amount of users viewing the website or go as far as
hosting world tours. Through Hallyu also comes Korean dramas which are mostly geared toward
the female youth, housewives, and middle-aged women due to the majority of series with
romantic elements. Other dramas target families with comedy and certain themes. Korean
dramas have become a popular interest with many being adapted or remade in the Japanese
language or with Japanese actors and actresses.
The 2010 average monthly income for workers’ households was 520,692 yen with the
average monthly expenditures at 318,315 yen. The 2010 average monthly expenditures for two
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or more persons’ households was 290,244 yen. The average expenditures for two or more
persons’ households for culture and recreation and other consumption expenditures were 31,879
yen and 65,695 yen respectively.
In a survey conducted in 2006, the majority of free time was spent on mass media or
entertainment, hobbies, and culture at an average of 2 hours and 45 minutes and 41 minutes
respectively. In the same survey, the highest rates in hobbies and amusements were listening to
music, watching movies, and reading books at 52.4%, 45.9%, and 41.9%. Through this
information, we see that the Japanese are taking more of an interest in entertainment media for
their leisure time. This gives CD Korea a stable foundation to build off of as we aim to market
products involved in such activities.
To gain the attention of the target markets, CD Korea will use a variety of brochures,
fliers, and posters around the district of Shibuya. Brochures and fliers will be given out on the
streets around the popular tourist attractions of the district as a method of promotion for the
opening of the new store. Posters will be put up in allowable areas for the first few months
around the opening date of the store. CD Korea will utilize the Internet to gain recognition for
providing merchandise of the Hallyu Wave through Twitter and Japanese and Korean social
media sites such as me2day. In-store displays will also help potential customers find products
they are interested in by organizing the store. Special products and new items will be the
foundation of specific displays. A CD Korea website will also help promote the store.
3. Analysis of the potential location
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Map of the Tokyo Megalopolis Region
The Tokyo Metropolis resides in the southern part of the Kanto region. The Edogawa
River lies to the east while the Yamanashi Prefecture and mountains border the west. The
Tamagawa River also borders the metropolis in the South. The Tokyo Megalopolis Region, or
Greater Tokyo Area, is formed by Tokyo and the prefectures which lie around it, Saitama to the
north, Kanagawa in the south, and Chiba in the east.
Shibuya is situated in the western parts of Tokyo and is one of twenty-three districts, or
wards, in the city. It is known for its popularity amongst youth for its fashion and cultural aspects.
Shibuya also refers to the busy shopping and entertainment areas around Shibuya Station.
Multiple advertisements and bright lights are presented throughout the district which attracts
enough attention to make it a popular area for photographs and videos. Shibuya has many
famous attractions and meeting places including the Shibuya 109 building that hosts multiple
boutiques across many floors, the Tokyu Hands building that offers a variety of products as a
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shopping center, and the statue of Hachiko, the loyal dog in a famous story who waited for his
master every day in front of Shibuya Station.
Japan requires documents such as an import license, an Import Declaration Form, a
commercial invoice, a packing list, a bill of lading if the products are shipped by air, a certificate
of origin, and other documents that may be necessary. The commercial invoice requires the
names of the shipper and consignee and details of the products included. The gross and net
weights of any containers should be included in the packing list. Regulations apply to the product
as well as the packaging, other requirements, testing, transportation, and storage.
All imported goods and shipping documents must be labeled in metric units due to the
Japanese Measurement Law. Labels must be placed on electrical objects, plastic goods, and
miscellaneous products. Labeling of the country of origin is not required except on some foods
and beverages.
Certification of compliance is needed to be able to sell imported products in Japan where
they may be tested. The certification system checks whether or not a product is approved to be
sold.
A company seal must also be created and registered with the Legal Affairs Bureau. The
seal will mainly function as a means to sign documents pertaining to business operations.
Opening company bank accounts and signing contracts is mainly done with the use of the
company seal.
IV. PLANNED OPERATION OF THE PROPOSED BUSINESS
A. Proposed organization
A Limited Liability Corporation (LLC) would be best for CD Korea’s objective. It allows
the business to be operated similar to a partnership except with more flexibility.
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The advantages of a Limited Liability Corporation include the protection from debts and
acts of the members, the option to choose how the company is taxed (as a sole proprietorship,
partnership, etc.), no need for an annual meeting of shareholders, less paperwork and record
keeping required, no double taxation, the ability for the business to live beyond the members,
and the ability to assign membership interests.
The disadvantages of a LLC include the inability to take advantage of stock options, the
possibility of lowered minority discounts, the possibility of members being subject to selfemployment taxes, and the possibility of the business losing the ability of accounting if more
than 35% of losses belong to non-managers.
To operate a CD Korea store in Japan, the company will rent a commercial property in
Shibuya. Renting a commercial property will be cheaper for the company than purchasing one. It
also gives the company a chance to relocate if the area is not as successful as CD Korea would
like it to be. Renting a property will be more favorable due to the amount of stores in Shibuya
which would make it difficult to fully purchase an area. To save costs on extra product
movement, the company will rent an area with enough room for storage.
Staff must be hired to operate the store in Japan. The company will hire a manager and a
regular employee for the store. One of the company’s owners will travel to Japan where they will
position themselves to oversee the store, train any possible new employees, and help manage the
business from an international point of view. The other owner will remain in Korea to maintain
the company and manage the products going to Japan.
B. Proposed product/service
1. Details of the products to be offered
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CD Korea primarily plans to provide music CDs of Korean artists. These will include full
length albums, repackaged albums, mini albums, and singles. The CDs will be most widely
available in the Korean language, however many have been translated into Japanese and some
have even been translated into English.
Merchandise relating to Korean artists will also be sold in CD Korea. Photo-books,
calendars, diaries, stickers, buttons, and other special goods will be included in the CD Korea
store due to the overwhelming popularity of Korean idols. Various Korean magazines will also
be available such as Bromide, BODA, and more.
As Korean dramas become more recognized in Japan, CD Korea will be providing them
in their original Korean form as well as in Japanese versions if available. Although Japan and
Korea are of different regions, many computers allow the viewing of any coded CDs and DVDs.
This may prove hassle-some but customers will still be able to use their original coded purchases.
Along with Korean dramas, their corresponding original sound tracks will be sold in the CD
Korea store to offer customers the complete collection as relating merchandise will also be
available. Relating merchandise will include accessories, plush toys, stickers, buttons, calendars,
and more if available.
All products will be bought from their respective companies such as SM Entertainment,
JYP Entertainment, YG Entertainment, SBS, KBS, MBC, and various smaller companies by CD
Korea in Korea. The products will be sent from Korea to the CD Korea store in Japan. The
entertainment companies will most likely send the products ordered from their manufacturing
companies to CD Korea. As for Japanese products they will also be bought from artists’
respective Japanese companies such as Avex Group, Sony Music Entertainment, Universal
Music Group, and others. Similar to the Korean entertainment companies, the Japanese
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companies will most likely be shipping orders from their CD manufacturers to the CD Korea
store in Tokyo.
Products will be stored in the back room of the CD Korea store to allow ease of access to
replenish the amount in the store. More products will be delivered based on demand and new
releases. Music CDs and artist merchandise will most likely ship more frequently than other
products as music tends to shift trends and change often. Korean artists do not have consistent
patterns to their song releases, nor do they tend to schedule promotions and their ends at similar
times as they are rivals in the music industry. Therefore shipments may be made as often as
every month if possible.
2. How the products will be transported from the home country
CD Korea will transport the products through the method of air shipping. The company
will use air freight for goods in high demand when supply in Japan becomes low as air shipping
provides a quicker mean of delivering items. It is also more secure than other methods, requires
less packaging, gives lower insurance rates, and has few risks. However, shipping through air is
more expensive and cannot carry as much as other means of transportation. Although air freight
cannot carry as much as other means, this should not affect CD Korea because the products that
will be transported to Japan will generally be of small sizes.
Pantos Logistics will aid the store by being the shipping provider for air freight. Pantos
Logistics offers a consolidation service where a forwarder collects the cargo from customers.
The company has multiple offices in Korea and Japan including one in Tokyo which will aid in
the ease of transportation.
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General documents that may be needed for exporting products are certificates of
assurance, weight certificates, post receipts, courier’s receipts, fax shipping advice, and/or an
IATA Shipper’s Declaration.
C. Proposed strategies
1. Proposed pricing policies
As the new store will be opened in Japan, yen will be used, although the Korean Won is
weaker in value. This will mean we will be spending more on store set up in Japan. However, it
also allows us to sell products for twice the price of their original Korean value but still hold a
lower price than the competition. For example, while Japanese CDs retail for 2,300 yen on
average, the Korean CDs to be sold at the CD Korea store will retail for 1,600 yen in comparison.
Markdowns on products will occur once they have exceeded three years of release. By
then, products will be marked down 20% and by five years passed release products will be
marked down 30%. Products will be evaluated to be placed in the sale rack of the store after
reaching five years passed release and have not sold well since entering the store’s stock.
Products on sale will be marked down 40%. If there has been an accident with shipping or a
delay, products from the shipment will be marked up 20% until the next shipment. Top Ten
chart-topping music will be marked up by 40% once they have entered those ranks and will retail
for their regular prices after two weeks of leaving the top listings.
Online music sellers will have the advantage when it comes to prices, however the
physical aspect of Korean music CDs will tip the scale to bring in music sales for CD Korea.
Korean CDs are coupled not only with the standard lyrics book but also a mini photo-book.
Packaging is also more than the standard plastic case and paper cover and back jacket. Most
Korean CDs are usually kept in durable cardboard material cases that are well decorated to
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match the concept that the artist(s) chose. The music discs themselves are also just as decorated
to give the CD package a seamless design. This will also become CD Korea’s advantage over
their physical music retailing competition as there is more offered to the customer at a low price.
Taxes, tariffs, and other such transportation costs have already been considered before
determining the selling price of our products. If changes have been made to any of the policies or
rates, the appropriate adjustments will be contemplated and made to our prices as soon as
possible.
2. Proposed promotional program
CD Korea plans to use brochures, fliers, posters, a website, and in-store displays to attract
the attention of potential customers over the course of a year.
One month before the opening of the store, posters and fliers will be placed around
Tokyo, most of which will be put up around Shibuya, with information on the store’s location
and a small map, the opening date, and the store’s website address. The store’s website will be
created but will first open to a countdown page and will not change until two weeks before the
store’s opening date. Once the website opens, it will include information on the location of the
store, store hours, items sold, items in-stock, upcoming and current sales, and other promotions.
The cost of the website will be a total of 11,514 won for the first year which consists of the cost
for design, which is 1,725,287 won, and the domain name, costing approximately 11,514 won.
The domain name must be paid for annually to allow the website to continue existing. The
website will be designed to attract the designated target markets and to allow ease of use by
organizing information into categories.
CD Korea will make 10,000 prints at the total cost of 433,625 won for the first year.
6,000 of the prints will be used for posters and fliers while 4,000 of the prints will be used for
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brochures. Two weeks before the store opens, brochures will be handed out and available around
Tokyo as many natives and tourists tend to walk to their destinations. Brochures will include
information and pictures of the store’s location, layout, examples of products, and information on
the opening sale.
The store will have an opening sale, seasonal, and holiday sales to attract customers and
promote regulars. The opening sale will last one week beginning on the day the store opens and
CDs will be 10% to 20% off. The duration of seasonal and holiday sales will vary depending on
the event lasting anywhere from one day to one week. Seasonal sales will discount products
relating to the season such as winter dramas or CDs. Special holiday sales will discount the
majority or all the products sold. Special holidays will include Golden Week, New Years, and
Christmas.
In-store displays will be set up for new and/or limited products as well as for seasonal
and holiday items. Displays will remain a factor of the store and will change in appearance as
products change.
The business plans to update the website frequently and plans to keep an amount of
brochures available at public areas for more potential customers. Posters and fliers will not be
placed regularly often but will be put up for sales and events. CD Korea will also attempt to
remove old fliers and posters so passersby do not get misled by outdated information as well as
to keep the city’s districts cleaner.
V. PLANNED FINANCING
C. Description of the planned growth of the business
CD Korea will aid in funding the store in Japan. Roughly 360,000,000 won will be spent
establishing the store and roughly 181,000,000 won will be earned from goods sold for the first
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year which will total to an expected loss of about 176,000,000 won. However, the company
expects to gain profit around the second or third year of business, especially with the increasing
popularity of Hallyu artists.
The store will be approximately 1,400 square feet and will use 200 square feet as a
backroom storage. The cost of the rent per year, including maintenance, will be 8,400,000 yen
which is equivalent to 125,732,348 won. Remodeling fees, store layout cost, and in-store
displays will be approximately 11,792,173 won for the first year. Layout and display costs will
be about 5,752,160 won for other years. Utilities, primarily electricity, will require about
1,380,239 won per year.
The store will hire a manager and a regular employee to maintain the store. The manager
will be paid 51,758,000 won a year and the employee will be paid 23,003,000 won a year. The
store will also spend 11,501,000 won on a legal professional if needed.
The cost of purchasing CDs and other products for the store will be 60% of their average
price as CD Korea is a business. For the first year, the store will purchase minimal inventory to
observe the opportunities as a new store in Japan. The total cost will be 54,259,200 won. For the
second and third years, CD Korea will purchase more products resulting in a cost of 63,302,400
won and 72,345,600 won respectively.
Advertising and promotions for the first year will be approximately 2,170,426 won for
the website and 10,000 prints. Other years will cost 228,326 won to continue the website and
ensure the stock of brochures, posters, and fliers.
As CD Korea will sell products for twice their original Korean retail price, the expected
cost of goods sold for the first year is 180,864,000 won. The expected cost of goods sold for the
second and third years are 211,008,000 won and 241,152,000 won respectively.
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A. Projected income statements for first year’s operation
Items
Year 1 Expected Amount (Korean Won)
Cost of Goods Sold
+180,864,000
--
Expenses
Inventory
-54,259,200
Freight and Delivery
-39,029,760
Rent and Maintenance
-125,732,348
Layout and Design
-11,792,173
Utilities
-1,380,239
Salaries
-74,761,000
Advertisements
-2,170,426
Legal
-11,501,000
Taxes
-36,172,800
Total Expenses
-356,798,946
Total
-175,934,946
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VI. BIBLIOGRAPHY
http://articlespointzero.com/pros-and-cons-of-air-shipping/
http://countrystudies.us/japan/
http://ezinearticles.com/?The-Benefits-of-Sea-Freight&id=3831321
http://jamestakahashi.com/map.html
http://www.billboard.biz/bbbiz/digital-and-mobile/digital-music-sales-decline-in-japan-industry1005060572.story
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http://www.businessweek.com/ap/financialnews/D9KHADB80.htm
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http://www.customs.go.jp/english/summary/tariff.htm
http://www.economywatch.com/world_economy/japan/?page=full
http://www.ediplomat.com/np/cultural_etiquette/ce_kr.htm http://www.ediplomat.com/np/cultur
al_etiquette/ce_jp.htm
http://www.export911.com/
http://www.heritage.org/index/country/Japan
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http://www.indexmundi.com/g/g.aspx?c=ja&v=66
http://www.investopedia.com/articles/pf/07/commercial_real_estate.asp#axzz1bNBGXUYL
http://www.japan-guide.com/e/e623.html
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http://www.k-faz.co.jp/e-faz/tariff/tariff.html
http://www.kantei.go.jp/foreign/constitution_and_government_of_japan/fundamental_e.html
http://www.limitedliabilitycompanycenter.com/articles.html
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http://www.minyanville.com/businessmarkets/articles/zero-interest-rate-policy-zirpus/12/21/2011/id/38513?page=full
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http://www.pantos.com/en/?mainChk=sub
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http://www.shipping-insurance.com/cargo-insurance-types.html
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http://www.startups.co.uk/record-shop.html
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http://www.state.gov/r/pa/ei/bgn/4142.htm
http://www.tokyohive.com/2010/07/japans-cd-sales-drop/
http://www.worldwide-tax.com/japan/japan_tax.asp
http://www.wto.org/index.htm
https://www.cia.gov/library/publications/the-world-factbook/geos/ja.html
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