Professional Documents
Culture Documents
EnteringTodays KoreanMarket
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AGENDA
AboutPresenter AboutSouthKorea WhatOthersAreDoingandExperiencing AboutEntryModes HowToChoosetheRightEntryMode WhatsDifferentAboutKorea CaseStudies Questions&Answers
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Presenter:EdmundLee
KoreanAmericanWhoLivedinKoreaover20 years ProfessionalExperience: CEOofStellarPride,Inc ATKearney,ExelonCorp,andHostway Education: B.S.fromSeoulNationalUniversityand M.B.AfromtheWhartonSchool,University ofPennsylvania
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StellarPride,Inc.
Formedin2004 Nichemanagementconsultingfirmfocused onMarketEntryServicesandPurchasingin NorthAmericaandKorea ClientsrangefromSMEstoLarge CorporationsinTechnology,Manufacturing, DistributionandAutomotiveindustries
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SouthKoreanMarket
Asnapshotoftheoveralleconomy
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CountryProfile
CenterofNortheastAsia MemberofOECD Population:50million Area:38,691squaremiles LiberatedfromJapanin1945 KoreanWardividedthecountry in1950 Mountainousterrain Currency:KoreanWon(KRW) 1USD=1,115.66KRW(1)
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CurrentHappeningsinKorea
FirstwomenPresident,ParkGeunHye elected NewmonetarypolicyimplementedbyBankOf Koreainwakeofeconomicstruggles Highhouseholdindebtednessandlowsavings rate Uptickinforeigndirectinvestment(FDI) ConsumerconfidencehighestsinceMay NorthKoreacausingissuesontheinternational front
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BuyingPower Retail
GDP:$1.5Trillion 12thinWorld UrbanizedPopulation.80% ofpopulationliveinurban areas $580BillionService Market(2) Financial Legal
Source:(1)EconomicIntelligenceUnit (2)U.S. SouthKoreaFreeTradeAgreement
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BuyingPower Commercial
FlagshipIndustries: InformationandCommunicationTechnology Electronics Semiconductor Automobile Shipbuilding Steel Petrochemical
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TradeFriendly
ExportDrivenEconomy GlobalFTANetworkwith45Countries GlobalRankingsinBusiness:(1) #8inEaseofDoingBusiness #3inTradingAcrossBorders
Source:(1)TheWorldBank,DoingBusinessinKorea2013
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TradeFriendly(Continued)
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KORUSFTA
1st Anniversary.EnactedMarch15,2012 Acrosstheboard,comprehensivebenefits DutyElimination/ReductiononOriginating Products Majorboostinmachinery,machineand precisiontools,medicaldevices,chemicals, rubberandplasticproductstomeatand diaryproducts,corn,fruit,vegetables, wearingapparelandservices
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KORUSFTACaseExample
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IndustryAttractivenessPostKORUSFTA
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WhatOthersAreDoingand Experiencing
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StellarPrideSurvey
Revenue BusinessInKorea 22% 33% 15% 11% 19% 88% 12%
<$10M >$1B
<$100M Confidential
<$500M
CurrentlyBusinessinKorea NoCurrentBusinesswithKorea
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Note:27participantsintotal
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Industries
OthersIncluded:Dredging,Silicon Production,SolarPower,Food Exporting,HVAC, GeneralIndustrialManufacturing, andLogisticsCounseling Advanced Electronics,8% Automotive& Assembly,16%
Other,32% Financial Services,4% HighTech, 12% Travel, Transport,& Logistics,12% Media& Entertainment, 4%
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Oil&Gas,8%
Metals& Mining,4%
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FormofOperations
WhollyOwned Subsidiary,8% Other,12%
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WorkinginKorea
OfferingAffectedbyKORUSFTA LocalPartner USMarketingTechniques WorkinKorea? No, 19%
No, 26%
No, 37%
Yes, 74%
Yes, 81%
Yes, 63%
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MarketingStrategyAdjustments
WeestablishedourownpeopleinKorea, thenweletthelocalsdothemarketing.They developedtheirowntechniquesforsalesthat differedfromours Brandsthatmightresonateherewouldnt translatewellintothatlanguage,thetagline wasntappropriate,forexample.Youhaveto accommodateittothecustomer. Stayingloyaltoyourpartneristhepriority
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BiggestChallengesinKorea
Culturaldifferencesincludinglanguage barriers Inefficienciesinthesupplychaincausinglong leadtimesandfrequentstockouts Intellectualpropertyinfringements Localpartnerwithamindoftheirownand questionablebusinesspractices Currencyexposure 22% 72%
22%
17%
11%
Establishingandmeasuringbusinessmetrics
11%
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OverallExperience
WeloveworkingwithKorea Wehaveincreasedbusinessthereeachyear forthelast3years KoreaisaveryimportantmarketinAsiabut itiswhollyunconnectedtoothers agood localpartnercanbeanexcellentwayin
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InSummary:
Culturaldifferencesneedtoberecognized Findagoodpartner Marketingandsalesissimilarbutneedsto considerlocalexpertise
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EntryModes
DefiningandDeterminingwhichModeisRight foryou
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EntryModeOptions
PrimaryDecision Criteria Levelof investmentand risk Ownershipand control Secondary Considerations Product Maturity MarketDemand
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SelectionFramework
EntryMode Investment &Risk Ownership & Control None/Low None/Low None/Med,High Upto50%/Med 10 20%/Low 100%/High Product Maturity& Demand AllLevels Low Medium Medium Medium High Exporting Licensing Franchising JointVenture Strategic Alliance Wholly OwnedSubsidiary Low/Low Low/Med Med/Med Med/Med Low/High High/High
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InSummary
Exporting:Exportingshouldbeundertakenbysmallercompanieslookingtoinitializetheir productsentryintothemarket Licensing:LicensingisbestusedbycompaniesthathaveacomponentofIntellectual Propertyintheirproductandoperateonsmall/medsizebusiness.Worthwhilefor companieswhoareunwillingtocommitlargefinancialresourcestounfamiliarmarket Franchising:FranchisingshouldbeconsideredbylargecompaniesintheU.S.thatcanthat canofferestablishedbrandnamesanddistinguishedservicetoKoreanconsumers JointVenture:JointVenturesshouldbeundertakenbycompanieslookingtomaintain controlofadivisionorcapabilitythatlacksakeyfactortosuccessandneedsthehelpof partnership,whilesharingcostandriskofventure StrategicAlliance:Strategicalliancesshouldbeundertakenbycompanieslookingtotestthe marketforpartnersandbettergaugetheirpotentialtogrowintothemarketalongwith providecomplimentarycapabilitiestoeachalliedfirm WhollyOwnedSubsidiary:Whollyownedsubsidiariesshouldbeundertakenbycompanies lookingtoretainfullcontrolofcompany,andhavelargecapitalinvestmentand managementresourcesalongwithprovensuccessinthemarketforlongtermsustainability
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EntryModes
WhatsDifferentAboutKorea?
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WhatsDifferentAboutKorea?
Exporting/Licensing/Franchising UnderKorus FTA: ExpeditedCustomsProcedures Lower RegulationsandTariffs Koreanconsumer preferences JV/ StrategicAlliance/Wholly Owned Subsidiary UnderKorus FTA: ProtectedU.S.Investment Easieraccess DecreasingInfluenceofChaebols Increasing governments promotionof ForeignFDI Koreancontractualagreements: Preventativestrategy Protecting IP
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EntryModes
CaseStudies
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CaseStudies
LargeShipping&LogisticsMultinational Corporation MediumSizedCapitalEquipmentExporter
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Conclusion
Thereareseveraloptionstochoosewhen enteringKorea Whichoptiontochosedependsoninvestment andrisklevelandownershippreference Koreahasneverbeenmorefavorabletowards imports Recognizingtheculturaldifferencesandfindinga trustworthylocalpartneriscriticalwhateveryou do
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