Entering Korea

7/27/2019 Entering Korea

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ConfidentialandProprietary

1

EnteringTodaysKoreanMarket

EdmundLee

StellarPride,

CEO


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AGENDA

AboutPresenter

AboutSouthKorea

WhatOthersAreDoingandExperiencing

AboutEntry

Modes

HowToChoosetheRightEntryMode

WhatsDifferentAboutKorea

CaseStudies

Questions&Answers

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Presenter:Edmund

Lee

Korean

American

Who

Lived

in

Korea

over

20

years

ProfessionalExperience:

CEOof

Stellar

Pride,

Inc

ATKearney,ExelonCorp,andHostway

Education:

B.S.fromSeoulNationalUniversityand

M.B.AfromtheWhartonSchool,University

ofPennsylvania 3


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StellarPride,

Inc.

Formed

in

2004 Nichemanagementconsultingfirmfocused

onMarketEntryServicesandPurchasingin

NorthAmerica

and

Korea

ClientsrangefromSMEstoLarge

CorporationsinTechnology,Manufacturing,

Distributionand

Automotive

industries

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SouthKoreanMarketA

snapshot

of

the

overall

economy


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CountryProfile

6Note:(1)AsofMarch21,2013

Centerof

Northeast

Asia

MemberofOECD

Population:50million

Area:38,691

square

miles

LiberatedfromJapanin1945

KoreanWardividedthecountry

in1950

Mountainousterrain

Currency:KoreanWon(KRW)

1

USD

=

1,115.66

KRW(1)


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CurrentHappenings

in

Korea

FirstwomenPresident,ParkGeunHye elected

NewmonetarypolicyimplementedbyBankOfKoreainwakeofeconomicstruggles

Highhouseholdindebtednessandlowsavingsrate

Uptickinforeigndirectinvestment(FDI)

Consumer

confidence

highest

since

May NorthKoreacausingissuesontheinternational

front

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GDP:$1.5Trillion

12thinWorld

UrbanizedPopulation. 80%ofpopulationliveinurbanareas

$580BillionServiceMarket(2)

Financial

Legal

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BuyingPower

Retail

RealGDP

Growth(1)

2012:

2.1%2013 Forecast:

2.9%

Source:(1)

Economic

Intelligence

Unit

(2)U.S. SouthKoreaFreeTradeAgreement


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FlagshipIndustries:

Informationand

Communication

Technology

Electronics

Semiconductor

Automobile

Shipbuilding

Steel Petrochemical

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BuyingPower

Commercial


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TradeFriendly

ExportDrivenEconomy

GlobalFTANetworkwith45Countries

GlobalRankingsinBusiness:(1)

#8in

Ease

of

Doing

Business

#3inTradingAcrossBorders

10Source:(1)TheWorldBank,DoingBusinessinKorea2013


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KORUSFTA

12

1st Anniversary. EnactedMarch15,2012

Acrosstheboard,comprehensivebenefits

DutyElimination/ReductiononOriginating

Products Majorboostinmachinery,machineand

precisiontools,medicaldevices,chemicals,

rubberand

plastic

products

to

meat

and

diaryproducts,corn,fruit,vegetables,wearingapparelandservices


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IndustryAttractiveness

Post

KORUS

FTA

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ConfidentialandProprietaryWhatOthersAreDoingand

Experiencing


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StellarPride

Survey

22%

15%

19%11%

33%


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IndustriesOthersIncluded:Dredging,Silicon

Production,SolarPower,Food

Exporting,HVAC,

GeneralIndustrialManufacturing,andLogisticsCounseling

Advanced

Electronics,8%

Automotive&

Assembly,16%

Financial

Services,4%

HighTech,

12%

Media&

Entertainment,

4%Metals&

Mining,4%Oil&Gas,8%

Travel,

Transport,&

Logistics,12%

Other,32%

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Formof

Operations

DirectExporting,

80%

WhollyOwned

Subsidiary,8%Other,12%

OthersIncluded:

DistributorsandPartnerships,

Manufacturers'Representative,

andDirect

Dealer

/Distributor 18


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Workingin

Korea

Yes,

74%

No,

26%

Yes,

81%

No,

19%

Yes,

63%

No,

37%

OfferingAffectedbyKORUSFTA LocalPartner USMarketingTechniques

Workin

Korea?

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MarketingStrategy

Adjustments

WeestablishedourownpeopleinKorea,then

we

let

the

locals

do

the

marketing.

They

developedtheirowntechniquesforsalesthatdifferedfromours

Brandsthat

might

resonate

here

wouldnt

translatewellintothatlanguage,thetaglinewasntappropriate,forexample.Youhavetoaccommodate

it

to

the

customer.

Stayingloyaltoyourpartneristhepriority

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BiggestChallenges

in

Korea

11%

11%

17%

22%

22%

72%

Establishingandmeasuringbusinessmetrics

Currencyexposure

Localpartnerwithamindoftheirownand

questionablebusinesspractices

Intellectualproperty

infringements

Inefficienciesinthesupplychaincausinglong

leadtimesandfrequentstockouts

Culturaldifferencesincludinglanguage

barriers

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OverallExperience

WeloveworkingwithKorea

Wehaveincreasedbusinessthereeachyear

forthelast3years

Koreais

avery

important

market

in

Asia

but

itiswhollyunconnectedtoothers agood

localpartnercanbeanexcellentwayin

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InSummary:

Culturaldifferencesneedtoberecognized

Findagoodpartner

Marketingandsalesissimilarbutneedsto

considerlocal

expertise

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Entry

ModesDefiningandDeterminingwhichModeisRightforyou


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EntryMode

Options

PrimaryDecision

Criteria Levelof

investmentandrisk

Ownershipand

control

SecondaryConsiderations

Product

Maturity

MarketDemand

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SelectionFramework

EntryMode Investment &Risk Ownership &Control Product Maturity&Demand

Exporting Low/Low None/Low AllLevels

Licensing Low/Med None/Low Low

Franchising Med/Med None

/Med,

High Medium

JointVenture Med/Med Upto50%/Med Medium

Strategic Alliance Low/High 10 20%/Low Medium

Wholly OwnedSubsidiary High/High 100%/High High

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InSummary

Exporting:Exportingshouldbeundertakenbysmallercompanieslookingtoinitializetheir

productsentryintothemarket

Licensing:LicensingisbestusedbycompaniesthathaveacomponentofIntellectual

Propertyintheirproductandoperateonsmall/medsizebusiness.Worthwhilefor

companieswhoareunwillingtocommitlargefinancialresourcestounfamiliarmarket

Franchising:FranchisingshouldbeconsideredbylargecompaniesintheU.S.thatcanthat

canofferestablishedbrandnamesanddistinguishedservicetoKoreanconsumers

JointVenture:

Joint

Ventures

should

be

undertaken

by

companies

looking

to

maintain

controlofadivisionorcapabilitythatlacksakeyfactortosuccessandneedsthehelpof

partnership,whilesharingcostandriskofventure

StrategicAlliance:Strategicalliancesshouldbeundertakenbycompanieslookingtotestthe

marketforpartnersandbettergaugetheirpotentialtogrowintothemarketalongwith

providecomplimentary

capabilities

to

each

allied

firm

WhollyOwnedSubsidiary:Whollyownedsubsidiariesshouldbeundertakenbycompanies

lookingtoretainfullcontrolofcompany, andhavelargecapitalinvestmentand

managementresourcesalongwithprovensuccessinthemarketforlongtermsustainability

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Entry

ModesWhatsDifferentAboutKorea?


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WhatsDifferent

About

Korea?

Exporting/Licensing/Franchising JV/ StrategicAlliance/Wholly OwnedSubsidiary

UnderKorus FTA:

ExpeditedCustoms

Procedures

Lower RegulationsandTariffs

UnderKorus FTA:

ProtectedU.S.

Investment

Easieraccess

Koreanconsumer preferences DecreasingInfluenceofChaebols

Increasing governments promotionof

ForeignFDI

Koreancontractualagreements:

ProtectingIP

Reluctanceto payhighroyalty fees

Commercialrealestatemarketfor

franchisees

Koreancontractualagreements:

Preventativestrategy

Protecting IP

Marketingstrategy Business culture

Executivemanagement preferencefor

Koreancompanies

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Entry

ModesCaseStudies


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CaseStudies

31

LargeShipping&LogisticsMultinational

Corporation

MediumSizedCapitalEquipmentExporter


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Conclusion

Thereareseveraloptionstochoosewhen

enteringKorea

Whichoptiontochosedependsoninvestment

andrisklevelandownershippreference

Koreahasneverbeenmorefavorabletowards

imports

Recognizingthe

cultural

differences

and

finding

a

trustworthylocalpartneriscriticalwhateveryou

do

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Documents

Entering Korea