2012년 7월 23일 월요일

Retail Business in Korea - TESCO's Success


Tesco’s entry into the Korean market contains valuable lessons for anyone doing or wishing to do business in Korea. While other foreign brands like Wal-Mart and Carrefour have failed, Tesco’s Korean brand, Homeplus, is moving from strength to strength as it closes the gap with the market leader, E-mart.
From its early partnership with Samsung, to an extraordinary level of office culture localization, as well as matching uniqueness of the Korean consumer market, Tesco and Homeplus have achieved an amazing success.
What has done TESCO in  Korea?
After careful deliberation for Korean retail market TESCO’s head office made the surprising decision to add “Homeplus” to the store’s name, reflecting its heavy emphasis on non-food, household goods.
What happened was a wholesale adoption by TESCO of know-how that had been accumulated in running its Homeplus store, a joint venture with Samsung Corporation, in Korea. The two-door layout, product line selection, product display, and even the name of Homeplus were all imported from the Korean store. The know-how of store management accumulated in the Korean operation had been recognized as superior in efficiency and taken on board whole. 
Korean customers are considered by many to be the hardest in the world to please and are a highly demanding customer group in that they want both the low prices of discount stores, and the high level of service typical of department stores. Wal-Mart and Carrefour, the two main competitors for the top spot in the global discount industry, were unable to meet the demanding requirements of Korean customers, and eventually had to withdraw from the Korean market. Korea was even called the grave of global retailers at one time. Samsung TESCO expanded rapidly despite the tough conditions. In four years, the company jumped from 12th to second in the discount retail segment.

‘Value Store’
Jumping into a Red Ocean as a late comer, Sam-sung TESCO prepared a fresh concept. At the time, other discount warehouse stores emphasized two strategic features to market them-selves: a wide variety of products and low prices. However, this strategy required trade-offs. Reacting decisively to consumer demands, Homeplus executives decided to create a completely new discount market through brand positioning analysis. This led to the new concept of a “Value Store,” which implied a store that provides customers with a new, higher level of value.

‘Artience’
Homeplus’ marketing edge was eventually lost as rivals imitated the concept in their subsequent store openings. The adoption of Home-plus’ innovations by its rivals turned the Blue Ocean into a Red Ocean. This led Samsung TESCO to try to create a new Blue Ocean through another transformation. Homeplus’ third-generation discount store integrated emotion and culture. It was characterized by “Artience,” the integration of art and science.
Homeplus introduced the next generation store with four concepts – Art, Well-being, Touching, and Hi-tech – to appeal to customers’ eyes and hearts. The entire fourth floor was an art gallery that is not operated or intended to generate revenue. This was first for a discount store in the world. The store also contained a culture center, which offers evening and weekend courses. The purpose was not to grab customers, but become a local center for continued education. It was unprecedented to find a store offering fresh produce and organic foods and also provide a fitness club, sauna and golf driving range. Finally, a high-end wine bar allowed customers to enjoy their purchases in the store itself.

Scientific Approach to Distribution
Homeplus is also famous for retaining information and communication technology. The stores introduced a self-checkout system and a smartcard system which automatically counted products in a shopping cart, for the first time in discount industry.
The self-order and self-pay system in a food court was another distinguishing change. Through the product positioning system, by which customers could find the location of products with a touch screen, and an auto product supplement system. TESCO headquarters in England quickly saw the benefits of adopting high-tech in running its stores. Indeed, during 2002-03, Samsung TESCO sent around 70 experts of this high-tech management system to transplant it in TESCO’s operations in other countries.

Customer focus management
Homeplus places great importance on seven types of customer surveys conducted 200 times annually. Homeplus thus listened to the customers’ voices, which competitors had failed to heed attentively, employing many consumer surveys and elaborate analysis. Based on the results, they were able to create new stores with the new concepts that customers wanted.

Synbaration and global management
The pairing of Samsung and TESCO meant two distinctive corporate cultures had to be bridged, as Asian corporate culture stresses personal connection, self-sacrifice and teamwork while Western business culture emphasizes rationality, individual expectations, principles, and transparency. To reconcile the differences, Samsung-TESCO launched “synbaration,” combining the Korean word “synbaram” and English word “rational.” Synbaram expresses the high spirits or high emotion that leads a person to overachieve.
Another important combination is “glocal,”. This reflects the idea that Samsung will pursue localization while making the greatest possible use of the advantages of a global corporation. The example of glocal management is the combination of British store management with Korean-style format and techniques of dealing with customers. A major factor behind the failure of Wal-Mart and Carrefour in Korea was the lack of localization.


Source : "Tesco enjoys a Korea break with homeplus", September 9. 2009  The Sunday Times

2012년 7월 10일 화요일

Groupon's struggling in Korean Market

Service business market in Korea is very tough market for foreign companies. Korean customers want not only cheap price but also high quality services at the same time. This is the same reason that Walmart failed to attract Korean Customers who want both low price and department store level customer service. 
Walmart’s attempt to penetrate into the Korean market in 1998 is considered a classic example of both the failure in localization and a false entry in an already saturated market. The world largest retailer exited Korea in 2006.(I would like to mention it later.). 
Since then, many global companies have followed in the footsteps of Walmart and pulled out of the local market.


Today, I would like to talk about the story of Groupon which still is struggling in the market.


Groupon, the world No.1 Chicago-based daily dealer which was founded just three years ago, has seen its customer base surpass 50 million in over 500 cities worldwide generating record sales of $760 million last year.


However, despite its aggressive low-pricing strategy, Groupon is struggling to grow here due to its local counterparts’ strong footholds. It officially entered the Korean market in mid-March 2011. Many spectators were anxious at that time whether the daily deal giant would dominate the Korean market in a short-period of time like in other parts of the world.


Groupon Korea has targeted sales of 200 billion won or $176 million 2011 and to catch up with two leading local competitors, Coupang and Ticket Monster. Now, it still stays at a distant third in the ever-intensifying social commerce market. 


There are two key reasons why Groupon is struggling in the local market, according to experts. 


First of all, the domestic daily deal sites have already preoccupied the supply-side of the market.
Korean players such as Ticket Monster and Coupang have already secured most major product suppliers, which makes it hard for late comers like Groupon to catch up.
This business is a “winner-gets-all” market because just like any other information-based businesses, suppliers from big manufacturers to mom and pop stores, all prefer to work with the top daily deal sites with larger access to consumers. 

Secondly, Groupon didn’t have an in-depth understanding of the Korean market. The coupon giant was selling high-end products, including tickets for luxury events which are of little interest to most site users in Korea who are looking for cheap real-life products.
“Groupon just implemented the low-cost and high- efficiency strategy to the Korean market without any consideration of the regional characteristics. On the other hand, domestic companies like Coupang are adopting marketing strategies tailored for domestic consumers, hiring famous celebrities for their advertisements and providing female-targeted products,” an official from a local deal site told the Korea Times on the condition of anonymity.


Comparison of business model in Korean Social Commerce market











Source : http://www.koreatimes.co.kr/www/news/biz/2012/06/328_99113.html
http://www.koreatimes.co.kr/www/news/biz/2012/06/334_87863.html
 

2012년 7월 3일 화요일

CJ Cheiljedang Bringing 180 Jobs to Fort Dodge, Iowa



       CJ Cheiljedang, the largest Korean Food Company, decided to invest about $300 million to build its first Bio-production Plant in U.S. As I'm going to start to work as senior manager of bio strategy management team at this company, I would like to mention this new plants and introduce our company.

       Company's major Bio products are amino acids, the ingredients used in providing protein to feed for poultry.  The company runs several bio plants in several countries - Brazil, China, and Indonesia. Due to the high growth in bio industry, CJ Cheiljedang is looking for global expansion for the other regions such as India and Europe.

       This plant is the first attempt to enter U.S. for the company. This new plant will create jobs and offer better price to farm producers in U.S. with high quality products. 

      For this plan, CJ Cheiljedang get the benefits from Local Government due to the job creation and lower cost for farmers. The resolution states that the county will support CJ America by undertaking the following action: construction of a road widening project on Harvest Avenue, of 20 percent of the cost, contingent on a RISE grant, up to $279,000; construction of rail spur extension up to $1,944,000 and reimbursement of site preparation costs, estimated to be $1.5-$2.5 million, up to a maximum of $2.5 million based on actual receipts and invoices.

      However, as mentioned this is its first plant in US, I need to understand different management environments which we didn't fully understand.


I added some online news mentioning this event.




Amino Acid Endeavor Adds 180 Jobs to Iowa

CJ CheilJedang, South Korea’s top food maker, will invest more than $300 million to build its first United States production plant. Located in Webster County, Iowa at North Central Ag Industrial Park west of Fort Dodge, it will employ 180 workers.
Doing business as CJ America, the plant will manufacture Lysine through fermentation technologies—an essential amino acid added to animal feed.
Construction is scheduled to begin in April 2012 and production in December 2013. The company said in a statement that the output from the Iowa plant will have a production capacity of 100,000 tonnes per year for the U.S. market.
“We have to target the U.S. [Lysine] market to grab the top position in the global bio-market,” CJ CheilJedang CEO Kim Chul-Ha said.
“Starting from the end of 2013, we will devote all our energies to dominating the market through aggressive business and marketing activities.”
The company is poised to continue investing until it achieves an annual capacity of 700,000 tonnes of Lysine for animal feed and thus obtains a global market share of 30% by 2014, the statement added.
“The location will be right next to Cargill and it will be the beginning of a whole bio-refinery complex,” Iowa Gov. Terry Branstad said. “I think Cargill envisions this to a be bioscience complex similar to what they already have in Eddyville, Iowa and in Blair, Neb.”
The Iowa Economic Development Authority Board approved $1.8 million in direct assistance and tax incentives for the project, and additional incentives are expected from Webster County and an Iowa DOT RISE (Revitalize Iowa’s Sound Economy) grant.
Branstad and Debi Durham, head of the Iowa Partnership for Economic Progress, met with CJ Cheiljedang representatives in January, Lt. Gov. Kim Reynolds met with them on a trade trip in June and Branstad visited with them again on his September trade mission to Asia.
“It’s a major investment and it is a result of the direct and hands-on effort that we’ve made at economic development,” he said.



Additional Articles :

CJ Bio America groundbreaking Monday