Running Head: HIMALAYAN JAVA 1

KATHMANDU UNIVERISITY SCHOOL OF MANAGEMENT

Project Report on Himalayan Java

International Business Management

In the partial Fulfillment of MBA

Submitted to
Mr. Binayak Malla
IBM Faculy,
KUSOM

Submitted By:
Sunny Deshar (17308)

Prajwol Mani Dixit (17310)

Swarna Maharjan (17318)

Uttam Rai (17324)

Ankita Shretha (17332)

Bijay Timilsina (17337)

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ACKNOWEDGEMENT
This report is being prepared as a partial fulfillment of the requirement of Masters of
Business Administration (MBA). We take this opportunity as a great chance for learning and
professional development. We are also grateful for having a chance to meet so many
wonderful people and professionals who led us through the preparation of this project report
and enriched our knowledge horizon on several key attributes of International Business.

Bearing in mind previous we are using this opportunity to express our deepest gratitude to
Mr. Binayak Malla, Course Facilitator, International Business Management, who in spite of
being extraordinarily busy with his duties, took time out to hear, guide and keep us on the
correct path and allowing us to carry out our project at its best. We are also thankful of
Himalayan Java and Mr. Diwakar Ojha for providing us with all the information that we
required as well as all the material we might need for this report.

We are thankful to all our friends for the aspiring guidance, invaluably constructive criticism
and friendly advice during the project work. We are sincerely grateful to them for sharing
their truthful and illuminating views on a number of issues related to the project. It is our
radiant sentiment to place on record our best regards, deepest sense of gratitude to our
facilitators and family members for their careful and precious guidance, inspirations and
criticisms which were extremely valuable for the completion of this project.

Any omission in this brief acknowledgement does not mean lack of gratitude.

Thanking You,

Members,

Group Six
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Table of Contents
ACKNOWEDGEMENT............................................................................................................ 2

1. CHAPTER ONE INTRODUCTION ............................................................................... 6

1.1 Coffee ...................................................................................................................... 6

1.2 Himalayan Java........................................................................................................ 6
1.2.1 Products and Services .............................................................................................. 7
1.2.2 Current Market Position .......................................................................................... 7
1.2.3 SWOT Analysis of Himalayan Java ........................................................................ 8
1.2.4 Current Strategies .................................................................................................... 9
2. CHAPTER TWO ASSESSING THE TARGET MARKET .......................................... 11

2.1 Korean Market ....................................................................................................... 11

2.1.1 Outlet Market ..................................................................................................... 11

2.1.2 Merchandise Market .......................................................................................... 11

2.2 Trade Analysis ....................................................................................................... 12

2.2.1 Nepal Export: ..................................................................................................... 12

2.2.2 Korea Import: ........................................................................................................ 13

2.3 Trade Barriers ........................................................................................................ 14
2.3.1 Tariff Barrier ...................................................................................................... 14

2.3.2 Non-tariff Barrier ............................................................................................... 14

2.4 International Standards .......................................................................................... 15

2.5 Coffee Production in Nepal ................................................................................... 15

3 CHAPTER THREE CULTURAL DIMENSION ........................................................... 17

3.1 Hofstede Six Cultural Dimension .......................................................................... 17

3.1.1 Cultural Dimension Analysis of South Korea ................................................... 17

3.1.2 Cultural Dimension: Nepal vs South Korea....................................................... 19

3.2 PESTEL Analysis of South Korean Market .......................................................... 20

4 CHAPTER FOUR STRATEGIES FOR TARGETED MARKET ................................. 21

4.1 Business Strategy................................................................................................... 21

4.2 Corporate Strategy ................................................................................................. 21
5 CHAPTER FIVE STRATEGIES FOR INTERNATIONALIZATION ......................... 22
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5.1 Coffee Beans – Indirect Export ............................................................................. 22

5.2 Outlets – Franchising ............................................................................................. 22
5.3 Structure................................................................................................................. 23
6 CHAPTER SIX CHALLENGES AND CONCLUSION ............................................... 24

6.1 Challenges ............................................................................................................. 24

6.2 Recommendation and Conclusion ......................................................................... 24
Reference ................................................................................................................................. 26
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LIST OF FIGURES
Figure 1: SWOT Analysis .......................................................................................................... 8
Figure 2: Coffee Production in Nepal ...................................................................................... 16
Figure 3: Hofstede Cultural Dimension of South Korea ......................................................... 17
Figure 4: Hofstede Cultural Dimension Comparison between Nepal and South Korea .......... 19
Figure 5: PESTLE Analysis ..................................................................................................... 20
Figure 6: Recommended Organizational Structure.................................................................. 23

LIST OF TABLES
Table 1: Export of Coffee (Roasted, excluding decaffeinated) from Nepal ............................ 12
Table 2: Trend in Export of Coffee (Roasted, excluding decaffeinated) from Nepal ............. 12
Table 3: Import of Coffee (Roasted, excluding decaffeinated) in South Korea ...................... 13
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1. CHAPTER ONE
INTRODUCTION
1.1 Coffee
Around 10000 tons of coffee was consumed all over the world in the 2015/16 (International
Coffee Organization, 2017). Coffee is not just a product or beverage but a culture that has
been engraved into the minds of people irrespective of where they come from. A brewed
drink that is prepared from the roasted beans from coffee plant has been the preferred hot or
cold beverage for the world for years. The culture that started from the Arabian Peninsula in
middle of 15th century has taken huge strides over the last 100 years (Weinberg & Bealer,
2001). From its humble beginnings it has become one of the most consumed item all over the
world.

In Nepal, Coffee culture is relatively new, as compared to the already popular and ancient
Tea. But, coffee has always been a native crop to the hills of Nepal. First coffee plantation
came into existence in Nepal when in 1938 AD, Mr. Hira Giri brought seeds from Myanmar
then Bruma. Till 1970 it was a relatively unknown plant but after 5 decades, its popularity has
grown and Coffee is nowadays a well-established competitor to Tea in Nepal (National Tea
and Coffee Development Board, 2018). Nepal produces the highest quality of Arabica, a type
of coffee. Today around 40 districts produce coffee at an average altitude of 1100 meters
above sea level making it one of the best in the world (Himalayan Java, 2014).

1.2 Himalayan Java

Himalayan java is a 100% Nepali owned company. The founders are Gagan Pradhan and
Anand Gurung. The first outlet was opened in Heritage Plaza in Kamaladi, Kathmandu to
attract the office goers but was later shifted to current outlet in Thamel.

Himalayan Java is the first Specialty Coffee house in Nepal, which excels in quality and
customer service. Himalayan Java has now been doing business in Kathmandu since 1999,
and over the past fifteen years the company has grown and progressed in many
areas. Himalayan Java coffeehouse are designed to promote coffee drinking and to provide a
unique, relaxing, comfortable, clean environment for customers to escape from the pressures
of the outside world and drink coffee beverages, meet friends in totally different atmosphere.
Himalayan Java aims to promote the fledgling Nepalese coffee industry by investing in the
 HIMALAYAN JAVA 7

people from grower to consumer and to create an awareness by promoting Nepalese coffee
domestically and in the international niche market (Himalayan Java, 2014).

Mission Statement: Himalayan Java is the first specialty coffee house in Nepal. With a
strong core belief of socially responsible entrepreneurship. Our mission is to promote the
fledgling Nepalese coffee industry by investing in the people from grower to consumer and to
create an awareness by promoting Nepalese coffee domestically and in the international niche
market. (Himalayan Java, 2014).

1.2.1 Products and Services

Major product that Himalayan java sells is specially brewed organic Nepali coffee but along
with that it also sells coffee equipment and coffee training. Details about the product and
services are listed below:

Himalayan java coffee: Himalayan java sells Nepal grown specialty coffee which comes in
different variations. Along with that they also sell food and other drinks but coffee is its
major product. It sells varieties of drinks mostly based upon the espresso. Himalayan Java
produces above 650 tons of coffee which are roasted and ground. Then around 65 ton are
exported to various outlets consisting of company owned chains, franchise and retail outlets.

Coffee Equipment: Himalayan Java is the sole distributors in Nepal for the various coffee
equipment and products. List of the coffee equipment that they sells are: 1000 Espresso
Machine, Coffee Brewer, Barista Tools, Bodum Mug and Coffee maker, La Marzocco Linea,
Oscar single, Appia (Single and Double), Mazzer : Super jolly grinder , Blendtec blender.

1. Barista Training: Himalayan Java Barista workshops are designed to give the information
and training needed to succeed in today’s highly competitive retail specialty coffee market.
Workshop sessions include lectures and demonstrations followed by hands-on practice. Our
workshop sizes insure a personalized experience led by professional barista’s who have been
working in this field for many years.

(Himalayan Java, 2014)

1.2.2 Current Market Position

Himalayan Java is ruling the coffee scene in Nepal. They have over 10 outlets all over
Kathmandu. They also have an outlet in Pokhara. They plan to extend their services to other
parts of the nation by opening up outlets in other major cities in Nepal with many of these
already in the pipeline. No other major coffee institution has ever penetrated the market like
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them. Himalayan Java with its staple Organic Coffee and Espresso based drink seeming to
have the biggest market share in terms of Coffee. Other competitors in the market like
Himalayan Beanz, Barista Lavazza, Red Mud Coffee, Himalayan Arabica Beans, Himalayan
Mountain Coffee, Chicusa Cafe and other small outlets serving coffee do not stand up to the
size and scale of Himalayan Java. In terms of numbers, Himalayan Java produces 650 tons of
coffee of which 600 tons are consumed in Nepal which is more than 50% of total
consumption (Himalayan Java, 2014).

Himalayan Java may be ruling Nepal but its presence in the world market is non-existent.
Major Coffee chains all over the world such as Tim Hortons, Lavazza, McCafe and Starbuck
are dominant in the world which leaves a very small space for Himalayan Java to maneuver
(Listaka, 2015). But, over the years it has taken steps to globalize its products by establishing
self-owned and franchise in many parts of the world especially United States, Canada, India,
United Kingdom and Thailand. The impact is miniscule but the intricacies of the Himalayan
Java’s coffee and its cheapness compared to bigger brands is making some waves around the
world.

1.2.3 SWOT Analysis of Himalayan Java

Strength
•Organic Coffee at the
highest altitude
•Best quality Arabica coffee
•Standarized product and
process for coffee making
Weakness
•Nepalese brand meaning
no exposure
•Lack of Capital and reach
•Limited production capacity
not enough for massive
exports

Opportunity
•Exotic nature of Nepalese
Coffee in world perception
•Evergrowing Worldwide
Coffee market
•Preferential trade
agreements for Nepal
•LDC and developing nation
protection from huge tariffs
Threat
•Many Huge Brands in terms
of Coffee
•Emerging businesses taking
over with cheap and low-
qulaity coffee

Figure 1: SWOT Analysis

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1.2.4 Current Strategies

Business Strategy
Himalayan Java has positioned itself as Organic and 100% Nepal made coffee provider in
Nepal and all over the world. This means a standard product being used in Nepal and
exported worldwide. We have used Strategic clock to analyze the strategy that Himalayan
Java uses to create and sustain their competitive advantage.

Himalayan Java’s advantage in International market rises from Hybrid Strategy where the
Organic Nepali Coffee made in a specific condition only available in Nepal with prices that
are cheap when considering other Coffee Chains. They created such advantage due to the
country of origin i.e. Nepal where labor is comparatively cheap compared to other major
producers in the world while still being able to produce high-quality coffee due to the
environmental situation of production. Meanwhile in Nepal, this strategy reflects to focus
differentiation due to its prices being a bit too expensive for Nepalese Market. But still, the
officials maintain, the strategy to be hybrid.

Himalayan Java is an experience and is synonymous to true feeling of experiencing coffee.

Java has its unique blend that is its unique manufacturing process of various drinks i.e. its
trade secret that differentiates it from other café Himalayan Java works rigorously tries
maintaining its superior branding in order to establish itself as the pioneer in order to give the
best experience. It actually charges supposed premiums for Nepalese in order to maintain its
brand standard and to position as a luxury chain of café. Along with its trade secret that helps
it to be differentiated, Himalayan Java also uses standard operating procedures such as
perfect ambience(choice of music, employee dress code, furniture specifics) to deliver
perfection in service which differentiates itself from other brand.

In the strategic clock, Himalayan Java lies in the Hybrid section where the prices are low for
the international market while still perceived benefits and quality of the product is high. They
have low cost base of Nepal within the perceived benefits of unique condition of Nepal for
production.

Corporate Strategy
Himalayan Java has been into Market Development Strategy since it started to go abroad.
They are not trying to bring in new products but rather trying to enter new markets with the
same products. For the market development, the company uses Self-owned green ventures to
Franchise approach which it started to do from mid-2012. During this time, Himalayan Java
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has developed markets in United States, United Kingdom, Canada, India, Dubai, Thailand
and Bhutan. They still raring to develop the markets further by establishing new franchise
outlets in these nations, as well as, new ones.

International Strategy
Himalayan Java has already internationalized in various international markets. They have
done this using the Green Venture strategy, as well as, Franchise model. At the beginning the
first internationalization occurred with Green Venture with Himalayan Java putting all the
capital for the development of market in Nebraska, USA. But after this, other outlets were
made under the Franchise model. The non-equity model of Franchise, allows for Himalayan
Java to gain a lot. They do not need to put equity and still reap the rewards of the brand name
being advertised all over the world. They use this fame to sell their merchandise through
other importing partners. With finite resources a lot of reach can be achieved.

In terms of Merchandise, Himalayan Java uses Mocha Trading Pvt. Ltd. to indirectly export
their coffee to various countries where they have outlets. The outlets provide them with the
marketing and then the distributors disperse them in various retail outlets from where
consumers pick them up.

Himalayan Java in all these internationalization uses the same products with some flexibility
provided to the Franchisee. They use a Global strategy in their exports. They send the same
product that is consumed in Nepal to all their outlets and countries importing their good.
What started as an enquiry about the product has now turned into a Global Export network
with a huge potential.
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2. CHAPTER TWO
ASSESSING THE TARGET MARKET
2.1 Korean Market
South Korea is 23rd in terms of coffee consumption per capita at 2.6 kg being consumed by an
average South Korea in a year (Lee & Kim, 2016). Coffee is the most famous beverage in
South Korea with many international coffee brands opening their outlets in numbers in South
Korea. Starbucks, leading coffee outlet, has 1140 outlets in South Korea i.e. around 1 outlet
every 50,000 South Koreans (Starbucks, 2018).

2.1.1 Outlet Market

In terms of outlets, South Korean market is supposedly saturating as over the last 5 years,
many companies are cutting down store all over the nation. This is due to every restaurant
and small eateries providing coffee as an option in their menu. Over the years, Caffé Bene
has scaled down its outlets from 932 to 850 still incurring huge loss. Meanwhile, 7-Eleven
another global brand had to reduce the prices of coffee from 2000 won to 1500 won. Other
coffee businesses are retrenching and some are even closing down shops faster than Caffé
Bene (Lee & Kim, 2016). These struggling coffee chains are searching are high quality yet
cheap coffee upon which they can build their menu. This is something Himalayan Java can
provide.

2.1.2 Merchandise Market

South Korea has multiple brands that provide Merchandise Coffee. This includes Maxim
which is the market leader. They have 6 out of 10 top consumed coffee in South Korea.
Maxim Mocha Gold Mild is their most used product while Maxim Arabica 100 is the direct
competitor to Himalayan Java’s Coffee. Around 3.88% of the total population is supposed to
consume Maxim Arabica 100. Nescafe is the further second. Just 2 out of 10 top consumed
coffee is of Nescafe (Statista, 2017).

The price of cheapest coffee per pound in South Korea is around 8000 won. This leaves a
huge market open for Himalayan Java whose products are far less cheap and of higher
quality. Maxim Arabica 100, the direct competitor has a price of 15000 won per pound (SSG,
2018). Meanwhile, price per pound for exported Himalayan Java Coffee is 10000 won. This
creates a possibility of huge market in itself.
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2.2 Trade Analysis

2.2.1 Nepal Export:
Table 1: Export of Coffee (Roasted, excluding decaffeinated) from Nepal

Total
Average
imports
Growth distance
growth
in between Concentration
Share in value Average Number of
Value exported partner of all
in of tariff non-tariff
exported value countries supplying
Importers Nepal's partner (estimated) requirements
in 2016 between and all countries of
exports countries faced by faced by
($000) 2012- their partner
(%) between Nepal (%) Nepal
2016 supplying countries
2012-
(%, p.a.) markets
2016 (%,
(km)
p.a.)
Total 23 100 -16 5
United
States of 7 30.4 7 3658 0.35 0
America
Korea,
7 30.4 -30 9 9024 0.27 8
Republic of
Netherlands 5 21.7 2 538 0.21 0 15

Austria 3 13 1 481 0.23 0 15

Norway 1 4.3 -38 -2 2285 0.14 0
India -4 8682 0.52 0 26
Italy 6 887 0.48 0 15
From the above table, it can be inferred that Nepal exported 23 thousand USD worth of
coffee in 2016 among which 7 thousand USD was exported to Korea which represents 30.4%
of total export value of coffee. Concentration for Korea is at 0.27 suggesting the high
concentration of coffee for Korea. Looking at the overall picture of the concentration of
coffee we can see that the coffee market is highly concentrated. As we can see the average
distance between partner countries and all their supplying market for South Korea is 9024 km
and distance between Nepal and South Korea is 4158 km which is definitely plus point for
Himalayan Java as the cost of shipping will be lower for Himalayan java compared to the
competitors. Also the ease of doing business ranking of Korea is at 5 suggesting that it is very
easy to business in South Korea.

Table 2: Trend in Export of Coffee (Roasted, excluding decaffeinated) from Nepal

2011 2012 2013 2014 2015 2016

2 6 40 46 6 23

Looking at the trend of export of Coffee from Nepal, it picked up in 2013 and 2014 and
dipped quite a bit in 2015 probably due to earthquake. 2016 saw a rise as compared to 2015
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but still all these numbers are quite low which does not represent true potential of the export
of the coffee from Nepal.

2.2.2 Korea Import:

Table 3: Import of Coffee (Roasted, excluding decaffeinated) in South Korea

Average
Share in Growth in Growth in Growth in
Value tariff
Trade Korea, imported imported imported
imported Quantity (estimated)
balance Republic Unit value value quantity value
Exporters in 2016 imported applied by
2016 (USD of's (USD/unit) between between between
(USD in 2016 Korea,
thousand) imports 2012-2016 2012-2016 2015-2016
thousand) Republic
(%) (%, p.a.) (%, p.a.) (%, p.a.)
of (%)

World 132684 -130255 100 9947 13339 9 17 26

United
States of
America 60281 -59988 45.4 5349 11270 7 13 80 1.6
Switzerland 22263 -22263 16.8 662 33630 1 28 116 0.7
Italy 20831 -20831 15.7 1502 13869 10 11 21 2.6
United
Kingdom 7224 -7224 5.4 452 15982 12 17 9 2.6
Malaysia 7158 -6533 5.4 778 9201 49 59 -71 0
Japan 7023 -7004 5.3 654 10739 14 12 64 8
Germany 4366 -4366 3.3 268 16291 8 5 16 2.6
Spain 1045 -1045 0.8 74 14122 65 74 64 2.6
Australia 619 -617 0.5 29 21345 -3 -8 82 5.7
Viet Nam 363 -318 0.3 58 6259 40 59 70 0
Countries are omitted for the purpose of ease in report
China 16 615 0 1 16000 -17 0 8
Colombia 13 -13 0 1 13000 -57 -58 -93 8
Mexico 8 -8 0 1 8000 -48 -41 -11 8
Singapore 7 73 0 1 7000 1 -7 -42 0
Nepal 7 -7 0 0 -30 -63 8
Jamaica 6 -6 0 0 -48 8

From the above table, we can see Korea imports total of 132,684 thousand USD worth of
coffee which represents the 1.4% of the total import of coffee in the world ranking Korea at
18 on the list of coffee importing company. USA, Switzerland and Italy ranking 1st, 2nd and
3rd respectively as the exporting countries of coffee for Korea representing 45.4, 16.8, and
15.7% of total import of coffee in Korea. USA, Switzerland and Italy are major exporter of
the coffee for Korea three combined represent more than 75% coffee import in Korea.

If we look at the price of the imports, USA is the offers coffee at the cheapest price of
$11,270 among three followed by Italy and Switzerland at $ 13,869 and $33,630 respectively.
But it might be case that the coffee imported from Switzerland might be of higher quality as
HIMALAYAN JAVA 14

compared to the products from USA and Italy. High Price might be the reason that the growth
of imports from Switzerland is quite low at 1% compared to growth rate of 7% and 10% for
USA respectively. Also if we look at the growth rate of imported quantity is higher for every
country compared to growth rate of value at 13, 28 and 11% for USA, Switzerland and Italy
respectively. Hence, prices of coffee import are going down in South Korea. Especially if we
look at the growth rate of imported quantity of Switzerland is quite high at 28% resulting in
growth rate of imported value of only 1% so the price of import from Switzerland has greatly
decreased in recent years.

Nepal has exported only 7 thousand USD worth of coffee to South Korea which is quite
negligible if compare it with the total import of the coffee in South Korea. Korea exports
2429 thousand USD worth of coffee with negative balance of 130,255 thousand USD. Hence,
the export of the coffee form South Korea is quite negligible compared to that of the import
in Korea. This mean that almost all the coffee imported and produced in Korea is consumed
in the Korea itself. Major coffee brands in Korea are Starbucks and Peet’s Coffee & Tea for
USA, Nescafe from Switzerland and Lavazza from Italy.

2.3 Trade Barriers

Every country imposes some amount of restriction in their trades in order to protect and
encourage the local companies’ product and services. South Korea is also not an exception in
this case where it implies some of the trade barriers in their import system. However, in terms
of coffee products, the barriers are seen quite lenient.

2.3.1 Tariff Barrier

Coffee is one of the most consumed products in South Korea; however, the local production
rate there is quite low. Being the 23rd country in coffee consumption and lack of the
production capacity, it has been imposing very basic tariffs in terms of coffee.

The government has fixated a tariff rate of 8% using the Ad Valorem tax method where the
tax amount is based as per the value of the coffee. This rate is imposed at the time of
transaction.

2.3.2 Non-tariff Barrier

The country does not encourage any non-tariff barriers at least in their country for coffee
products. Therefore, they do not have any such barriers for current time being.
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2.4 International Standards

Himalayan Java focuses very much in its quality and never compromises with it in any
circumstances. Therefore, it has been using the following standard to ensure the company and
the product is good to be exported around the world.

IFOAM Standard: The International Federation of Organic Agriculture Movements

(IFOAM) is a grassroots and democratic organization that unites 815 Affiliates in 120
countries. This document is the basis to assess equivalence of organic standards for inclusion
in the IFOAM Family of Standards. - The IFOAM Accreditation Requirements (former
IFOAM Accreditation Criteria). * IFOAM's Organic Guarantee System (OGS) is designed to
a) facilitate the development of organic standards and third-party certification worldwide, and
to b) provide an international guarantee of these standards and organic certification.

International Labor Organization Labor Standards: The International Labor Organization

(ILO) is a specialized agency of the United Nations, which promotes decent and productive
work, focusing on freedom, equity, security and dignity. Founded in 1919, the ILO has
created labor standards, which are formulated in Conventions and Recommendations. There
are 186 member States, and they meet at the International Labor Conference (ILC), held
every year in Geneva, Switzerland, in the month of June. Each Member State is represented
by a delegation consisting of government, employers and workers delegates. The
Conventions and Recommendations are approved during the ILCs. World-wide, the
Conventions and Recommendations are viewed as THE international labor standards.

WFTO Guarantee System: The World Fair Trade Organization (WFTO) is a global network
of organizations representing the Fair Trade supply chain. WFTO is the home of fair traders:
producers, marketers, exporters, importers, wholesalers and retailers that demonstrate 100%
commitment to Fair Trade. The goal of the WFTO is to enable small producers to improve
their livelihoods and communities through sustainable Fair Trade. It does this by delivering
market access through policy, advocacy, campaigning, marketing and monitoring. Members
that passed the GS process attain the ‘Guaranteed Fair Trade Organization’ status and may
use the WFTO Label on their products. However, it is not a product certification system.

(International Trade Center, 2018)

2.5 Coffee Production in Nepal

Coffee production in Nepal has quite a young history which started in 1938 where a hermit
Mr. Hira Giri brought some seeds of coffee from Myanmar and cultivated it in Aapchaur of
HIMALAYAN JAVA 16

Gulmi District for the very first time. Since then the product cultivation has been gradually
increasing due to the favorable climates and increasing demands.

Till date coffee cultivation has been done in the various districts such as Illam, Gorkha,
Rasuwa, Palpa, and so on. The given figure shows the full view for the areas where coffee
plantation has been taking place majorly.

Figure 2: Coffee Production in Nepal

The wholesale price of roasted coffee in the Nepalese market is around NRs.1300-1400.
However, Himalayan Java has been exporting it in NRs. 1800-1900 including all the tariffs.
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3 CHAPTER THREE
CULTURAL DIMENSION
Cultural dimensions are very important aspects to be considered in international business. To
establish, expand and strengthen trade networks and relations in the host country or the
country in which you are exporting, it is vital to understand various cultural dimensions. It
helps us to deal with the people and various parties involved in the trade in host/importing
country.

There are various indexes which reflect the cultural dimensions of a country such as GLOBE,
Hofstede, etc. However, we can use Hofstede and PRETLE for our purpose, which is quite
popular.

3.1 Hofstede Six Cultural Dimension

Hofstede has basically six cultural dimensions i.e. Power Distance, Individualism,
Masculinity, Uncertainty avoidance, Long term orientation and Indulgence.

3.1.1 Cultural Dimension Analysis of South Korea

Each of these dimensions will be discussed with focus on South Korea.

Figure 3: Hofstede Cultural Dimension of South Korea

(Hofstede Insight, 2018)

Power Distance: At an intermediate score of 60, South Korea is a slightly hierarchical

society. This means that people accept a hierarchical order in which everybody has a place
and which needs no further justification. Hierarchy in an organization is seen as reflecting
inherent inequalities, centralization is popular, subordinates expect to be told what to do and
the ideal boss is a benevolent autocrat.
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Individualism: South Korea, with a score of 18 is considered a collectivistic society. This is

manifest in a close long-term commitment to the member ‘group’, be that a family, extended
family, or extended relationships. Loyalty in a collectivist culture is paramount, and over-
rides most other societal rules and regulations. The society fosters strong relationships where
everyone takes responsibility for fellow members of their group.

Masculinity: South Korea scores 39 on this dimension and is thus considered a Feminine
society. In Feminine countries the focus is on “working in order to live”, managers strive for
consensus, people value equality, solidarity and quality in their working lives. Conflicts are
resolved by compromise and negotiation. Incentives such as free time and flexibility are
favored. Focus is on well-being, status is not shown. An effective manager is a supportive
one, and decision making is achieved through involvement.

Uncertainty Avoidance: At 85, South Korea is one of the most uncertainties avoiding
countries in the world. In these cultures there is an emotional need for rules (even if the rules
never seem to work) time is money, people have an inner urge to be busy and work hard,
precision and punctuality are the norm, innovation may be resisted, security is an important
element in individual motivation.

Long Term Orientation: At 100, South Korea scores as one of the most pragmatic, long-
term oriented societies. Notion of the one and only almighty God is not familiar to South
Koreans. People live their lives guided by virtues and practical good examples. The idea
behind it is that the companies are not here to make money every quarter for the shareholders,
but to serve the stake holders and society at large for many generations to come.

Indulgence: With a low score of 29, South Korean society is shown to be one of Restraint.
Societies with a low score in this dimension have a tendency to cynicism and pessimism.
Also, in contrast to Indulgent societies, restrained societies do not put much emphasis on
leisure time and control the gratification of their desires. People with this orientation have the
perception that their actions are restrained by social norms and feel that indulging themselves
is somewhat wrong.
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3.1.2 Cultural Dimension: Nepal vs South Korea

Figure 4: Hofstede Cultural Dimension Comparison between Nepal and South Korea

Power distance and masculinity for both countries is quite similar with both countries having
slightly hierarchical and feminine society. Hierarchical nature of organizations in both
countries will be quite similar. For both countries Nepal and South Korea, individualism is
quite low but South Korea’s individualism is even considerately lower than that of Nepal.
This suggests that South Korea is strongly collectivist community where relationship and
standing for other person is of high priority.

In uncertainty avoidance category, we see the great discrepancy between two countries.
Nepal has moderate uncertainty avoidance whereas South Korea has really high uncertainty
avoidance meaning that South Korean society has much more rigid rules and regulations,
rigid beliefs, more punctual, less innovative, more importance is given to security, people try
to plan their activities properly and so on. Very high score in this category suggest that South
Koreans are reluctant to open up to the new technologies or new innovations. Hence,
Himalayan java can be benefitted if they focus on producing one really good product and
sticking to it for long run. Too much creativity in product might back fire in South Korea.

There is no data available for Nepal in long-term dimension but we can see that the South
Korea has score of 100 in this dimension. This suggests highly pragmatic society and
organizations value values and sustainable growth over the overnight success. Hence,
Himalayan Java should try to build long term sustainable relationship with the companies in
South Korea rather than going for the profit in short term. If Himalayan java can present, the
sustainable future plans to companies in South Korea and back up on that plan then
Himalayan Java may have great prospects in South Korea. Again for indulgence dimension,
there is no data for Nepal. But from our personnel observations indulgence rating of Nepal
HIMALAYAN JAVA 20

should be quite similar to that of Korea. Nepal is also fairly restrained society where any of
the people’s activities are guided by social norms and values. This should be kept in mind
while doing business in South Korea because it is significantly different form USA or Canada
where company is already doing its business.

3.2 PESTEL Analysis of South Korean Market

A detailed analysis of the external environmental factors (political, economic, social,
technological, environmental, and legal) of the South Korean market is used to assess the
market opportunity for Himalayan Java to enter into South Korean market with its product:
Roasted coffee, excluding decaffeinated. These factors affect the performance and business
of the company in the long term.

Political Economic
• Consistent and Mutually Cooperative • Competitive Tax Policy
Government • Powerful export
• Liberal Market • Government Support
• Strong Foreign Relationship • Equitable TAx System
• Free Trade Agreements

Social Technological
• Rapid Urbanization • Innovation at forefront
• Educated and Technically qualified • Promotes commercialization of new
labor ideas
• Coffee Consumption Habit
• Higher wages, literacy and awareness
of human rights

Environmental Legal
• Government Intervention • Attractive Incentives for Foreign
• Environment Management Investors
Guidelines • Relaxed Tax Policies
• Green GDP Initiative • Easy Repatriation
• Free Economic Zones
• Tax Abatement

Figure 5: PESTLE Analysis

HIMALAYAN JAVA 21

4 CHAPTER FOUR
STRATEGIES FOR TARGETED MARKET
4.1 Business Strategy
 Himalayan java is doing quite well in using the hybrid strategy in the local and
international market regarding the business strategy. Talking about the feasibility of this
strategy in the Korean market, we can see through the strategic clock, the perceived high
value for the product with respect to low price comparison to the competitors helps.
 Looking at the cultural point of view, they are long-term oriented that is loyalty but there
is a catch. They require quality products which Himalayan java can suffice with are 1 of
the best Arabica coffee. So once they know the benefits and quality of the coffee, it would
not take much to get them hung on it. In addition through their orientation towards the
long term, we can deduce they love durability and reliably. So the retention of customers
can also be attended.
 Talking about the pricing and cost. On international level they are priced lower than their
competitors on the same level such as, premium product of Starbucks, Café Bene n so on.
On this category they can compete on the price which is lower than theirs. Now for low
cost coffee like Seven Eleven, we have the quality of coffee i.e. Arabica

4.2 Corporate Strategy

For the corporate strategy, the one they are following is the most adequate, i.e. Market
Development, going with the existing product on a new market, i.e. Korea.

Other recommendations for Himalayan Java would be:

 Go with franchise strategy on Korean market, but firstly see the number of people or
parties interested in taking the franchise. This will provide the perceived want need for
the product.
 Apply for the organic certification in Nepal context for the starter; this is not only for the
market, but for the overall. This may include numerous costs which may increase the
price of the product but the increase in value is much higher.
 Also this will help get an upper hand while entering the European market in future.
Because the Europeans are moving organic way of living life and with Himalayan Java
acquiring this certification will definitely help. This will make their products more
desirable.
HIMALAYAN JAVA 22

5 CHAPTER FIVE
STRATEGIES FOR INTERNATIONALIZATION
With Himalayan Java’s products, technologies, management, resources and the intent to enter
into the South Korean market, internationalization strategies need to be formed. The modes
of entry into the new market are not only determined by Himalayan Java’s business intents
and endogenous factors but exogenous factors also come into play here. We have determined
the strategies appropriate for Himalayan Java for its two major areas of internalization;
namely coffee beans (roasted, excluding decaffeinated) and its chain of outlets.

5.1 Coffee Beans – Indirect Export

For placing its coffee beans on the South Korean market, we propose that Himalayan Java
use Simple Indirect Export as the entry mode. This is what the company has been doing
currently via Mocha Trading Company which acts as an Export Management Company.
Mocha Trading Company is an intermediary In Nepal specializing in coffee products from
Nepal, which also acts as an export manager for a wide array of coffee bean producers and
aggregators in Nepal. This typically involves low risk as compared to other modes of entry
into the South Korean market and, in light of Himalayan Java’s resources; scope of
operations and global management efficiency, using Mocha Trading as an Export
Management Company and engaging in Indirect Export seems to be the best alternative. The
lower entry costs and relatively simple extension of sales markets make this approach the
least complicated mode of internationalization for Himalayan Java. Moreover, the marketing
costs for this specific product would also be lower coupled with the fact that it is also
planning to launch outlets in South Korea. Placing its coffee on the market is an initial entry
strategy which can be later strengthened with outlets in the particular nation – which could
work both ways – outlets could create a surge in demand for the coffee beans; both are
equally advantageous to the company.

5.2 Outlets – Franchising

For launching its retail outlets in South Korea, franchising is the best approach for the
company. Himalayan Java already has its franchises in Tibet, Canada, United Kingdom and
the United States of America and these are operating successfully. Correctly identifying the
organizational fit of franchising as an expansion method, Himalayan Java has a “Franchise
Enquiry” page on its website. Due to the scope of capital commitment, scope of control and
potential profits, franchising is the obvious approach to take currently for Himalayan Java.
HIMALAYAN JAVA 23

When scalability issues are not major factors, strategic alliances and wholly owned
subsidiaries can be undertaken in foreign market. With long distance between markets and an
easily adaptable product, the strategic intent of learning the market can be done through
franchising. Moreover, since it is a tried and tested method of foreign expansion for
Himalayan Java, procedural expertise can also help the company in excelling in the new
market.

5.3 Structure

Figure 6: Recommended Organizational Structure

As per the discussion with the representative of the company, organizational structure as
above was found to be the current organizational structure of Himalayan Java. The structure
loosely resembles Worldwide Area Structure and this is imperative for the company since
they want procedural standardization to some extent in their franchises. Moreover, standard
product is also ensured by the area manager that is assigned to a particular area and the
resultant franchise in that area. The representative commented that core products of
Himalayan Java cannot be altered by a franchise but additional products can be added in the
offering with consultation with the designated area manager. This structure has been working
and we recommend it to be continued for further franchises. Since their modes of operations
are similar worldwide, this structure is appropriate for Himalayan Java, until they decide to
branch out with more product offerings which will require some sort of global matrix
structure.
HIMALAYAN JAVA 24

6 CHAPTER SIX
CHALLENGES AND CONCLUSION
6.1 Challenges
The entry into the South Korean market presents a lot of opportunity of Himalayan Java.
They have a lot to get from the Coffee infused culture there but Himalayan Java still faces
some challenges while entering the South Korean market, they are:

 The market is highly concentrated for Coffee with Maxim being the most consumed
brand when it comes to merchandised coffee. 6 of the top 10 instant coffee and
merchandised coffee is of the Maxim brand and with the long term orientation of South
Koreans it would be hard to break this strong bond.
 Himalayan Java follows all the necessary steps to create the best coffee and have
promoted it rightly as “Organic”. But they still lack the certification that makes this claim
official. With the rise of “Organic” as a culture, it would be a threat for Himalayan Java
to not have this certification.
 Although, Nepal is just levied 8% tariff on the export of Coffee, other nations with
greater export capacity like the United States of America, Switzerland and Italy have far
lesser tariff being levied.

6.2 Recommendation and Conclusion

Summing up the entire report here are the major recommendations except the strategies for
Himalayan Java in entering the South Korean Market:

 Focus on retention of loyal customers, as the people of South Korea if valued will provide
their long-term loyalty if treated right.
 Focus on quality product and services, as this would create a feeling of organic growth of
the business rather than fancy one-time marketing trick, South Korean due to their low
score in Indulgence would like this.
 Create good long-term relationship with the various stakeholders that had to be dealt with
by Himalayan Java in South Korea, create a community rather than an individualistic
approach to market development.
 Finally, strong and clear contract with the distributors and franchisee should be done.
South Korean’s hate uncertainty and clarifying all the details up front could help
Himalayan Java blend into the culture.
HIMALAYAN JAVA 25

Himalayan Java should not miss the opportunity of entering into the South Korean market.
South Korea has a huge coffee culture and would love the quality product that is the staple of
Himalayan Java. The strategies that are used currently are to be used and no huge changes are
necessary. The only thing to adapt to is the culture of South Korea which is easier for Nepal
due to the cultural proximity. With proper care, Himalayan Java can flourish in the South
Korean Market.
HIMALAYAN JAVA 26

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