Opportunity Costs Essay

Opportunity Costs
Opportunity Costs

              Opportunity Costs

Opportunity costs stem from trade-offs that exists as a result of scarcity of resources. It is necessitated by decisions to make choices between one or several options that must be given up for one alternative to prevail (Bouman, 2011). Opportunity cost in economics is the costs of the opportunity missed as a result of the alternative given up. It can be expressed in monetary terms or in any other terms of time and it includes both implicit and explicit costs (Mankiw, 2014).

The opportunity costs of watching Good Times are the costs that would be forgone as a result of the choice made to watch Good Times in concert. The alternative costs of watching Good Times are watching the Hot Stuff that basically costs $150 as the entry fee besides the time required to drive to the concert. The implicit and explicit costs of watching Hot Stuff have been valued at $225 while other costs include the hours needed to drive to the location to watch the Hot Stuff concert.

Since the explicit costs have been estimated to be $150 then the implicit costs would be $225 – $150 which equals to $75. The opportunity cost of watching Good Times can be estimated to be $75. But the cost of the hours that would be forfeited in case of travelling to watch the Hot Stuff would also have to be considered. The hours required to prepare for the exam are also valuable and the choice of watching Good Times means that those valuable hours would be saved. The opportunity costs of watching Good Times is watching Hot Stuff.

Opportunity-cost analysis has a lot of practical applications in business operations as long as scarcity of resources exists. The value of the next second best alternative must be considered when deciding the product to be rolled up from the factory. Opportunity costs are never reflected on the Balance Sheet nor in the income statement but the costs are real and must be considered (Mankiw, 2014). The only problem is that quantifying opportunity costs is rather difficult as it relates mostly future events besides most people overlook it (Waggoner, n, d).

To conclude, the opportunity costs of making any decision is literally what is given up as a result of the decision. Opportunity costs are made up of implicit and explicit costs. In economics, profits are calculated based on opportunity costs while in accounting, only explicit costs are used. It is worth noting that opportunity costs is the value of the best alternative, for example the opportunity costs of going to college would be the wages that may have been earned, or the value of the experience that would have been gained or the value of all the activities that one may have missed while studying, or the money paid for tuition or the interest that would have been earned.

The opportunity cost is the value of one alternative not the value of all the aggregate hence the opportunity costs would be one of the most valuable alternative listed. Due to scarcity, resources are limited and only one alternative among many others must be selected. Either the time or the income is always limited due to scarcity hence the opportunity cost in economics is the costs of the opportunity missed as a result of the alternative given up. 


Bouman, J. (2011). Principles of Microeconomics, Columbia, Maryland.

Mankiw, N. G. (2014) Principles of Economics, Cengage Learning

Waggoner, D. (n, d) Opportunity Costs retrieved July 5, 2016 from http://www.referenceforbusiness.com/management/Ob-Or/Opportunity-Cost.html

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Canadian honey in the Korean market

Canadian honey
Canadian Honey

Question 1

The Korean honey market is having a challenge giving their customers quality honey. The market is flooded with poor quality honey and this does give the Korean Food a chance to penetrate the market if they focus their production on quality honey. The cost of quality honey in the market is also so high reaching a price range of $ US 100. The introduction of cheaper quality honey from the Korean Food company will increase their market share in the industry (Lee et al., 2010, p. 25).

 Moreover, the Korean’s who have visited Canada often send to their families 20 to 30 kilograms of honey when they visit (Tavares, 2014, p. 22). This is an indication of positive reception of the Canadian honey by the people in Korea. It therefore, means that entry into the market will work in favor of the Korean Food as they already have a ready market for their product.

On the unfavorable aspects, the Korean government still has a restriction on open trade policy, especially when it comes to the agricultural sector. This policy does make it hard for the company to venture into the country, despite the optimism that the Korean government is considering withdrawing the restrictions (Hayakawa et al., 2013, p. 499). Moreover, the Korean honey producers have enjoyed a monopoly in the market and may place a lot of hurdles that will make the market unfavorable for Korean foods.

Question 2

The uncertainties in the strategy arise from the fact that the company has limited experience in the export market in Korea. This does pose a huge challenge for the company as they need to conduct an intensive market research before they step into the country. This will cost them a lot of finances, considering that the maximum amount of profit that they are to make from this venture is by a margin of 20%. The Korean market is centered on their culture where most of the consumers consider honey as a medicinal rather than a food product (Sydkorea, 2017). This will pose a challenge for the company when it comes to extending their market share from the hotels to selling the products to the consumers.

Additionally, the Korean market does work on the perspectives that the company will require an intermediary to be able to penetrate the market (Yoon, 2017, p. 387).  The involvement of the middleman does pose an uncertainty on the manner to ensure that the company does achieve the objective of making a profit. The company has been working directly with the suppliers, and the changes of the operations structure to relying on the middlemen to foster their agenda will force affect the management of the company.

Lastly, despite their being hope that the Korean government will open up the agricultural market to allow imports, there is uncertainty on the resistance of the Korean honey producers (Hayakawa et al., 2014, p.499).  The Korean honey producers have a monopoly in the honey market and they, therefore, have the strength to influence the government not to open up the honey market (APHIS’ website, 2017). Moreover, they might consent the opening of the market, but place a lot of hurdles for the new entrants an aspect that will uneven the competition making the market unfavorable.

The uncertainties can be reduced by identifying a company in Korea and entering into a joint merger to enable them to penetrate the market. The merger will be a shield for them as they understand how the market operates and will provide them the needed information to venture into the market (De Mooji, 2013, p. 36).  Additionally, it will enable the company to navigate any hurdles that will be posed by the Korean honey producers in a bid to protect their influence in the market. Furthermore, the merger does reduce the cost of market research that the company will have to incur in their bid to penetrate the market.

I believe that the company has an opportunity to achieve immense success if they apply the suggested solutions in reducing the uncertainties. The company will be able to increase their margin and market share from a maximum of 20% and 60% respectively. This is an opportunity that will be effective for the company.

Question 3

Canadian honey: Marketing

In looking for ways to improve the marketing plan to make it acceptable to all the management team members, the 3 phases that form the foundation of the plan will be evaluated.  In the first phase, the distribution strategy needs to be altered to involve using the networks established by the company they decide to merge with to penetrate the hotels. The local company has been in operation in the country they, therefore, have connections in different sectors of the economy like the hotels. This will make market entry easier for the company instead of having two salespeople positioned in Seoul (Lee et al., 2015, p. 32).

Additionally, the advertising strategy in the first phase will cost the company a lot of finances. To ensure that the company saves money, the use of free samples to the hotels coupled with media advertising is sufficient. The provision of recipe booklets and carrying out person-to-person advertisement will cost the company a lot of money.

In the second phase, the company needs to focus on regulating the prices of the honey with time as they extend their control of the hotel honey market. The penetrating price strategy is used to enter the market but needs to be readjusted to ensure that the company can make more profit from this sector (De Mooji, 2013, p. 12). The minimum price is an introduction to the Korean hotel industry to the purity of the Canadian honey. Increasing the price will not alter the purchase, as they would have managed to create a customer base in the industry that is attracted to the new flavors of the honey.

Additionally, the distribution channel is effective, but the involvement of the company that they will merge with will inject efficiency in the operation. The partner comprehends the Korean honey distribution network this will, therefore, ensure that the products can reach the target customers on time.

Furthermore, the company needs to concentrate more on introducing the Canadian honey as food rather than a medicinal product. This will play a role in increasing their target market more effectively. The Korean’s already have had a negative conception of honey due to the poor quality that is present in the market. Their culture compounded with the bad honey experience has made them consider that the product can be used only as a medicinal product (Lee et al., 2010, p. 18). Emphasizing on the other uses of honey will not only revolutionize this perception but also provide them with mileage in the industry.

In the third phase, introducing different qualities of honey in the market will cast doubt on the type of honey that the customers are purchasing for medicinal purposes. It will cast a shadow on the qualities of the Canadian honey that the company is introducing in the market, hence reducing their penetration. The company needs to concentrate on high-quality honey solely to get the customers goodwill in their product (Tavares, 2014, p. 25). I will recommend the company to use the warehouse of their partner as this will save them the cost of setting up one. They can then capitalize on the sales representative of their partner to increase their market penetration in the country.

Question 4

Kevin Lee at the beginning of the case study identifies pertinent issues that are linked to the difference between their way of operations and the new marketing plan. The company has immense knowledge in importing business and limited knowledge in the exporting business. They have managed to comprehend the needs of the North Americans when it comes to the Asian foods which have enabled them to raise the business to $30 million. The exportation of the Canadian honey to Korea is a new business venture as they do not know how to navigate the Korean industry with its restrictions (Anania, 2013, p. 25).

Additionally, despite the fact that the Canadian honey is loved by Korean visitors who send it to their families, this is not a guarantee that they will penetrate the market with ease (Tavares, 2014, p. 12). On the other hand, the Asian product is loved by North America and the company has managed to create a customer base that loves their products (Shaw, 2017). The company encountered challenges but managed to establish a reputable brand. Contrariwise, the only similarity is that the company has dealt with Korea on an international business level as discussed in the essay.


Anania, G., 2013. Agricultural export restrictions and the WTO: What options do policy-makers have for promoting food security. Draft paper prepared for informal ICTSD policy dialogue on, 25.

APHIS’ website. (2017). Korea Product Brief: Honey. [online] Available at: http://www.aphis.usda.gov/regulations/vs/iregs/products/ [Accessed 9 Sep. 2017].

De Mooji M., 2013. Global marketing and advertising: Understanding cultural paradoxes. Sage Publications, 2013.

Hayakawa, K., Kim, H., and Lee, H. H., 2014. Determinants on utilization of the Korea-ASEAN free trade agreement: margin effect, scale effect, and ROO effect. World Trade Review, 13 (3), pp.499-515.

Lee, M.Y., Hong, I.P., Choi, Y.S., Kim, N.S., Kim, H.K., Lee, K.G. and Lee, M.L., 2010. Present status of Korean beekeeping industry. Korean Journal of Apiculture.

Lee, Y.K., Kim, S.H., Seo, M.K. and Hight, S.K., 2015. Market orientation and business performance: Evidence from franchising industry. International Journal of Hospitality Management, 44, pp.28-37.

Shaw, M. (2017). Korea Food Trading | Canadian Business Executive. [online] Canadianbusinessexecutive. Available at: http://www.canadianbusinessexecutive.com/food-drink/case-studies/korea-food-trading-expanding-asian-foods-market-a-non-traditional-audience [Accessed 9 Sep. 2017].

Sydkorea. M. (2017). Korean Business Culture. [online] Available at: http://sydkorea.um.dk/en/the-trade-council/korean-business-culture [Accessed 9 Sep. 2017].

Tavares, A., 2014. Statistical overview of the Canadian honey industry 2013. Government of Canada, Canada.

Yoon, S. J., 2017. Cultural Brokerage and Transnational Entrepreneurship: Entrepreneurs in Beijing’s Koreatown.”  Korea Observer, 48 (2), p.387

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