3.

Industry analysis
Trend

1. Executive Summary
As the world entered the 21st century,
well-developed road systems and communication
systems connected the country into one network. Such
enhancements contributed to the rapid development of
direct sales methods where farmers can sell their
products fast and freshly to the customers. Major
retailers who have high buying power such as E-mart
and Home Plus established a system where they can send
regional agro-fisheries directly to customers through
their stores. However, [freshFunction] focuses on small
regional farms in North Korea where they produce
organic, local and seasonal agro-fisheries, rather than
large, enterprise type farms in South Korea that supply
In October 2015, the sales volume of the online
sustainable amounts of agro-fisheries.
market was approximately 39.5 billion dollars,
surpassing offline sales by 3.5 billion dollars. This
2. Company Description
strongly suggests a shift of buying habits and the trends
Currently, finding trustable high-quality food is
companies. However, they offer good prices compared
limited in the current market. The slogan, From Soil,
to other companies due to economies of scale and cost
To You, [freshFunction] aims to resolve this problem.
reductions. E-commerce retailers such as T-mon offer
[freshFunctions] provides high-quality, regional, and
well established online shopping and delivery with good
seasonal agro-fishery products cultivated from North
of the consumers, away from traditional, large-scale
Korea to customers by creating a direct online market
offline retailers such as E-Mart, Lotte Mart, and
platform thus becoming a mediator between customer
Homeplus. The sales for agro-fishery products from
and farmers. Our company will deliver the ordered
2010 to 2015 also had an increased by 400%, that shows
products from farmers to customers with high success
a consumer trend where people have been recently
rates. The company mission statement is we create an
buying agro-fishery products through online store.
online direct market where we sell fresh and high-quality
agro-fisheries to customers and deliver the agro-fisheries
Competitors
when they are their freshest. [freshFunction] will
The three major key competitors in this market
launch its service after the development period that will
are Choroc maeul,' Hansalim,' and T-mon.' Although
take approximately six months to complete.
Choroc maeul and Hansalim offer online order and
[freshFunction] will have two CEOs overseeing the
delivery services, they are store-based, offline retail
marketing, finance, human resources and operations
online deals and promotions.
teams. There will be two headquarters located in Seoul
Potential competitors for our company will be
and Pyongyang. The most immediate goals are to
large-scale retailers and producers of agricultural
successfully create strong connections with our future
products such as E-mart, Chungjungwon and A-Festa.
partners - North Korean farmers. Our primary funding
As our company will produce packaged products,
will rely on borrowing money from the Woori Bank.
companies such as E-mart and Chungjungwon will be
After [freshFunction] has reached its goal, we will be
our main competitors, as they have a large market share
able to operate through the profits created by receiving
in this industry.
20% commission on sales from products of the farmers.
 Barriers
The currently existing barriers in the market are
not strong and limited. This is because the start-up costs
for this business is relatively low and due to the market
being newly established, its players are not firmly
established. However, some factors must be taken into
accounts such as infrastructure conditions and high
freight costs that may be crucial to the cost, management
and profitability.
4. Marketing Strategy & Procedure
Key Message
The key message that our company intends to
deliver to customers is the achievement of fresh and
quality products in combination with an advanced and
efficient supply chain.
Strategies
To meet our intended goals, our company will
execute six different marketing strategies. The first is a
sales strategy where we implement a new type of sales
cycle that corresponds to the Traditional Korean 24 lunar
calendar seasons. The company will create a forecast
analysis system that shows the increase and decrease of
demand for different kinds of products in different
seasons. By using the analysis system, we will supply
products to maximize the sales and reduce stumbling
blocks.' The next strategy will be the product marketing
strategy where our merchandisers visit local farms and
high-quality agro-fisheries through strict selection to sell
exclusive products. The merchandisers will also educate
farmers how to use advanced agricultural techniques to
increase the productivity of farmers, which in turn will
benefit both the company and the farmers. The third
strategy would be a channeling strategy where we
establish our mobile application and website based on
the advanced communications network in order to easily
connect the farmers and customers. After the third
strategy, we will begin the promotion strategy where a
partnership with the farm-based game, Real Farm will
be created. As Real Farm genuinely delivers free crops
to players who grew enough virtual crops,
[freshFunction] will now provide the same crops to the
game company which will be a unique way to advertise
and lay groundwork for people to familiarise with our
business. We will also send North Korean farmers whom
are connected to our company to markets such as Seoul
Farmers Market, which will be an excellent opportunity
to increase the consumers trust in our products and to
advertise the website/application where customers can
buy the same products with equal freshness. On top of
this, we will also instigate viral marketing by partnering
with famous Instagrammers where millions of their
followers will be introduced to our business. The fifth
will be the supply chain management strategy where we
will establish a direct supply chain that can deliver a
small scale order in 1 day. Lastly, the next strategy will
be the pricing strategy. Since our products are
agro-fisheries, the price of the agro-fisheries will be
highly affected by natural disasters and different season.
However, to compete with large hypermarkets such as
E-mart, we will embark on active price competitions.
5. Operations
Business Facilities
[freshFunction]s offices will be located in both
Seoul and Pyongyang where employees will be stationed
and all the incoming calls will be received. These offices
will carry out the necessary functions for the
development of sales, marketing, operations, customer
service, long-term development, management, human
resources, and finance. Since Seoul and Pyongyang are
the largest cities in South and North Korea, they offer
adept geographical locations. Most customers and
farmers can easily access these places within 4 hours via
road.
Stage 0: The initial stage will be the pre-launch
development period. During this period, we will first
seek investors and outsource the creation of our
application and website to web designers and application
designers. These designers will plan and further develop
our mobile application and website. Furthermore, we
will hire two merchandisers who will visit, develop the
partnered small-scale North Korean farms, and conduct
market and supplier research. Lastly, to establish a
unique supply chain management, we will hire four
trucks and four delivery men, with two distribution
stations in the centers of North and South of Korea. The
key participants in our business will be the web and
application designers, investors and merchandisers.
Stage 1: From this stage, we will start to sell our
seasonal, high-quality, local products from our partnered
North Korean farms through our application and website
that were pre-developed in stage 0. After, we will start
our customer loyalty programs such as sending emails
and utilizing the point policy to develop and maintain
strong relationships with customers. Moreover, we will
start our marketing strategies and promotions via SNS to
attract potential customers and increase brand awareness.
Stage 2: After the business has been running for
sufficient amount of time, we will begin to accept
reliable feedback, criticism, and reviews will be taken
into account and used to improve the business. Products
and processes with negative reviews will be investigated,
resolved and noted so that future changes in the business
will be made to ensure that similar problems do not
arise. The website and application will be continuously
developed by the designers and the marketing strategies
will continue.
Compensation & Incentives
Whenever a customer receives a misplaced, damaged, or
a lately arrived product, they will be refunded 100% of
their payment. In addition, farmers who sell the most
will have discounts in their sales commission by up to
5%.
6. Long Term Management
Long Term Goals
[freshFunction]s main goal for the long term is
stabilizing the company and becoming the most
well-known E-commerce platform in the agro-fishery
trade industry. After establishing a reliable and notable
reputation among both the customers and the suppliers,
our next step is to increase the variety of products and to
create a distinct, positive brand image.
Strategies
Our first strategy is to launch our own products.
When North and South Korea are unified, the increase of
nuclear families and working couples will lead to a
higher demand for packaged food. Expecting this trend,
[freshFunction] plans to sell packaged North Korean
traditional food. We will contact famous North Korean
restaurants and produce their signature dishes such as
naengmyeon as packaged food. In return, these
restaurants will receive a portion of our total sales. This
partnership will distinguish our firm from other firms
due to the uniqueness, thus improving brand value and
allowing company growth. Our second strategy is to
extend our channels by turning small-scale local farms
into offline stores. These offline stores will run farm
tours for website users or let them buy farmed products
directly. Hence, these two strategies will inevitably
distinguish our business from other similar firms.
7. Finance
Projection
Our projections cover the first three critical years by
quarter, extending the estimations up to the year 2019.
Though beginning with a significant deficit, we will
break even at around Quarter Four of Year Two.
Cost
Our costs will be evenly distributed to different kinds of
expenses. For the fixed cost, there will be fees for
establishing the IT system and its relevant equipments
such as the website, application, and server, costing
about 20% of our expense. The renting fees for
distribution centers and offices in Seoul and Pyongyang
will cost about 30% of our expense. Variable costs are
costs that are subject to change, such as obtaining
refrigerator trucks and computers, taking up about 30%
of our expense. Other expenses also include salaries for
web designers, merchandisers, and delivery men,
constituting about 15% of our total expense. Lastly,
marketing expenses for promotions and advertisements
through mobile games and SNS will take up to 5% of
our expense.
Revenue
Our revenue stream comes from receiving 20% of
commissions on sales of products from farmers. The
prices of different products will vary from USD 13.59 to
USD 90.59, from cheaper products such as apples to
expensive products such as ginsengs. There will also be
seasonal products such as eels and long legged octopi
that will be sold only during their seasons. Initial
fundings will derive from loaning USD 130,000 from
Woori Bank, which offers the lowest interest rates for
start-up businesses.