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EnteringTodays KoreanMarket

EdmundLee StellarPride, CEO


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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)
6 Note:(1)AsofMarch21,2013

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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

RealGDP Growth(1) 2012: 2.1% 2013 Forecast: 2.9%

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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%

DirectExporting, 80% OthersIncluded: DistributorsandPartnerships, Manufacturers'Representative, andDirectDealer/Distributor

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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

Koreancontractualagreements: ProtectingIP Reluctanceto payhighroyalty fees Commercialrealestatemarketfor franchisees Marketingstrategy

Business culture Executivemanagement preferencefor Koreancompanies


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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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