Korean Firms Expand New Frontiers Overseas
By Ryu Jin
South Korean enterprises are trying to be the global leaders with new strategies and plans for innovation, as their rivals also make their utmost efforts to keep pace with the rapid changes in the global markets.
In a recently released BusinessWeek-Boston Consulting Group’s list of the ``World’s Most Innovating Companies,’’ California-based Apple claimed the top place for the third year in a row, followed by Google, Toyota, General Electric (GE) and Microsoft. Among South Korean companies, Samsung Electronics and LG Electronics were ranked as 17th and 49th, respectively, in the annual announcement.
Toyota Motor outstripped GM, which has held the reputation as the world’s largest carmaker for the past 76 years in the first quarter of this year. While GM has seen an accumulated deficit due to failures in price competition, the Japanese automaker wiped out the moniker of a ``second-rate’’ company with its Lexus luxury cars and a global investment strategy with production bases in 52 countries around the world.
Google’s performance was also outstanding. It was ranked as the highest value brand ($66 billion) in the ``Brand Top 100’’ study by research firm Millward Brown. Now Google is the market leader in the Internet search with a 50-percent market share, while Yahoo and Microsoft combined have 40 percent.
In the era of globalization, South Korean companies are also waging an all-out war to become global leaders. Chief executive officers (CEOs) of the country’s leading business conglomerates including Samsung, Hyundai, LG and SK, are pursuing more aggressive strategies both at home and abroad, while making overseas trips for insight, information and lessons.
Samsung Group Chairman Lee Kun-hee, in particular, has indulged in global business. He made a tour of Europe and Dubai of the United Arab Emirates (U.A.E.) last year. He also visited Europe again in April and reviewed the group’s mid- and long-term investment strategy in China.
Hyundai Motor, the country’s top automaker, and its affiliate Kia Motors are also making endeavors for the global strategy. Chairman Chung Mong-koo recently attended the ceremony for the completion of a Kia Motors factory in Slovakia and a groundbreaking ceremony for another plant in Czech. Hyundai-Kia, which is operating a factory in Alabama of the United States, now has an ambition to build a ``global belt’’ of its production lines linking Europe, Americas and Southeast Asia.
LG Group, which suffered a setback with poor business showings last year, has also taken up the ``global business’’ as a remedy to break the deadlock. Chairman Koo Bon-moo visited Japan in April with some 20 CEOs of the group’s affiliates, including LG.Philips LCD and LG Telecom, to look around Toyota factories and learn from their innovation efforts. Koo is also scheduled to visit Poland this month on the occasion of the completion of the LG.Philips LCD’s factory in the European country.
SK Group has often invited criticism for ``making money only at home.’’ But the group is also trying to transform itself to adapt to the globalization era. Last year, the combined ratio of exports by the group’s manufacturing arms exceeded 50 percent of all for the first time in its business history, a shot in the arm for the group seeking to change the brand image.
Efforts for global business by the leading conglomerates stem from the rapidly changing business environment represented by telecommunication and informationization _ from countries to companies, communities and individuals. Business leaders now recognize that they cannot find an engine for further growth if the companies remain simply as the No. 1 local enterprise that only seeks to satisfy domestic customers.
And the changing trade environment, characterized by free trade agreements (FTAs), is also forcing domestic companies to globalize themselves _ not only their bodies but also their minds. Experts say the recently struck free trade pact between South Korea and the United States would serve as both challenges and opportunities for the local businesses.
Opportunities & Challenges
In April, South Korea and the United States struck an FTA, the largest deal ever completed that would ensure South Korean products preferential access to the world’s largest market ahead of Japan and China. Businesses by and large welcomed the deal as they expected it would create a better environment for exports to America.
While the accord is expected to bring about substantial benefits such as an increase in exports, it would also have some indirect but more significant effect on the nation’s economy, which has paid ``invisible costs’’ due to trade friction.
Business leaders also hope that their companies will be able to enjoy improved brand-recognition in America, which is the country’s second-largest export destination. South Korea saw a trade surplus of about $9.53 billion with the United States last year.
By industry, automobile, textiles and footwear are expected to have the largest benefits. While the stock-raising farmhouses are expected to suffer relatively big damage, the machinery, synthetic chemistry and pharmaceutical industries also seem to be displeased with the KORUS FTA. Companies in each industry are trying to cope with the changes.
Reacting fast is the automobile industry. The removal of the 2.5-percent tariff would be the most positive factor for domestic carmakers. Hyundai, which expects cost reductions in its American factories thanks to the deal, is planning to develop small-sized trucks for export to the U.S. market. But the domestic firms would also be pressured to lower prices of their cars up to 10.5 percent at home since the American firms would also try to advance into the South Korean market.
In just a month after the conclusion of the pact with the U.S., South Korea launched free trade talks with the European Union (EU) Monday. Once signed, the deal would create the biggest trade block. South Korean companies are advised to continue their innovation efforts to meet the global standards, while developing more aggressive investment and marketing strategies.