Conglomerates set sights on Africa, S. America
By Kim Yoo-chul
Korea's export juggernauts are investing an increasing amount of money and efforts on markets in Africa and South America, the once-overlooked regions they now hope will generate a significant part of their growth from now on.
Achieving greater diversity in markets is crucial for the companies as economic uncertainties continue to cloud the forecasts for developed countries in North America and Europe.
The BRIC (Brazil, Russia, India and China) nations have been garnering rapt attention from Korean companies over the past several years, and it now seems that their interest has moved more toward Africa and South America.
And the sense of urgency is evident among the companies to gain an advantage in the new markets as first movers.
Their competition, predictably, will be the American and European rivals.
Most of the Korean companies expanding their business projects in Africa and South America appear to be the ones higher on the corporate totem pole, with mid-sized firms still looking to strengthen their positions in Asian markets.
Technology giants Samsung Electronics and LG Electronics, automotives heavyweight Hyundai-Kia, major steel producer POSCO and shipbuilders STX and GS Construction are some of the Korean business groups that have been particularly active in South America and China.
SK, Lotte and Hanjin, in comparison, are conglomerates that would rather strengthen their focus in Asian markets.
``The new year will be marked by efforts from Korean export companies to boost their international profiles and exploit business opportunities in these new markets will be key,’’ said an official at the Korea Chamber of Commerce and Industry (KCCI).
Samsung, LG aim to inject 'champion's DNA'
Samsung, high on the list of the world’s biggest technology companies, said it plans to boost manufacturing output at its facilities located in Manaus, Brazil, which are considered a crucial asset as its looks to increase its share in the consumer electronics markets of South American countries.
Samsung currently produces flat-screen televisions, monitors and air-conditioners in Manaus and new products could be added to the list over the next few years.
``The company is considering spending to build a second Brazilian plant, which would allow us to be more attentive to the growing consumer demand from Brazil and other South American economies,’’ said a Samsung spokesman.
``The growth momentum in developed countries has stalled due to high labor costs and unfavorable currency situations, so it would be important for us to offset these developments through growth in new markets.’’
Samsung is atop the leader board in televisions and handsets in the African region and intends to sustain its momentum.
The company recently promoted the head of its African business division, Park Kwang-ki, to senior vice president to give him more autonomy.
``Fostering a larger number of reliable distribution networks and introducing more customized products for the markets are crucial for our business plans in Africa,’’ said another Samsung official.
LG Electronics, Samsung’s bitter domestic rival, is also looking to flex bigger muscles in Africa, and the establishing of more efficient logistic channels and improved business-to-business (B2B) strategies are considered priorities.
``Our revenue from Africa this year will rise sharper than the trajectory expected from our Middle East markets,’’ said an LG spokesman.
Hyundai-Kia is planning to sell more of its latest Avante and Accent cars in Brazil, Egypt, South Africa, Zimbabwe and Algeria.
Through the first eleven months of 2010, Hyundai Motor saw its vehicle sales in South America grow 19.3 percent compared to the same period the previous year, while its sales in Africa jumped 6 percent.
Kia Motors saw its South American sales surge by 76 percent year-on-year over the same period and its African sales by 17 percent. Kia officials hope the upcoming models of its Morning, Pride and K5 passenger cars will allow it to grow in these markets.
``Increasing the number of local dealerships will obviously be important for us to implement more aggressive marketing strategies,’’ said a Hyundai-Kia spokesman.
POSCO Chairman Chung Joon-yang has a ticket booked for Africa where he plans to explore the possibilities of raw material-related businesses there, according to a POSCO spokesman.
``We launched a new team dedicated to Africa-related businesses. The networks of our recently-acquired Daewoo International certainly give us an edge in African and South American markets,’’ he said.
Doosan Heavy is looking to explore the turbine markets in Brazil and Chile, while STX intends to push ahead with a $10 billion housing project in Ghana.
Bio-diesel and desalination-related businesses are on the minds of GS Construction as it looks to expand further into North Africa and South America, according to company officials.
Can SK get an oversees clue?
One of the few Korean conglomerates that have underwhelmed in foreign markets is SK, whose list of damage includes floundering projects in the United States, Vietnam and China.
But SK Chairman Chey Tae-won nonetheless declared that the group is now getting a second chance to truly go global.
``We will drive up petrochemical-related projects in China. More investments will be allocated in plant-related businesses in South American and Middle Eastern regions,’’ said an SK executive, who didn’t want to be named.
``It’s crucial that the group doesn’t waste its second chance, and this will be a crucial year for us to gain some sustainability.’’
SK counts SK Telecom, Korea’s top mobile-phone carrier, and SK Energy, among the country’s top refineries, among its key units, while SK Construction has been raising its profile as well.
Lotte has identified the VRIC (Vietnam, Russia, India and China) nations as the markets it is targeting for growth., A major player in retail, Lotte aims to become a top-10 Asian business group by 2018.
``Our focus is on Southeast Asian countries, including the Philippines, and also India and China. We won’t shy away from merger and acquisition opportunities if the deals are right,’’ said a Lotte spokesman.