By Kim Jae-kyoung
For foreign enterprises, South Korea is known as one of the toughest markets to break due to strong local players, the unique characteristics of consumers and the government’s strategic policies to protect local industries.
Even if they successfully settle here, they face bigger challenges in winning market share. Against this backdrop, many global players, which compete effectively against local majors in other markets, either position themselves as a small but competitive local player or give up this market in the end.
Wal-Mart is a case in point. The world’s No. 1 retail giant tried to make forays into the Korean market but it failed to gain a foothold here and eventually left the country empty-handed. Since then, many global companies have followed in the footsteps of Wal-Mart.
General Motors (GM), which has managed to get out of bankruptcy protection, is gearing up to break this tradition. GM Korea, the Korean arm of the U.S. auto giant, has pledged to break the monopolistic hold by Hyundai Motor Group in the coming years.
“We have a five-year long-term plan dubbed “Plan 2015.” Our business plan is to make sure that we are a tough competitor to break the monopolistic hold in the Korean
market,” Mike Arcamone, president and CEO of GM Korea, said in an interview with Business Focus held at the Millennium Seoul Hinton on July 6.
In June, Hyundai Motor Group dominated the local market with a market share of 78.2 percent — 43.5 percent for Hyundai Motor Company and 30.7 per for Kia Motors Corp., — followed by GM Korea with 10 percent, Renault Samsung with 6.9 percent and Ssangyong Motor with 2 percent.
“Our plan is to offer Korean consumers products and designs manufactured for consumers in Korea. We want to offer real production cars, not prototypes, in Korea. By using this business strategy, we will certainly remain in the top three (in 2015).”
But the Canadian CEO indicated that the firm is not aiming at becoming a major player in the short term here to compete against Hyundai but did not conceal GM’s ambitious vision to be a leading player in the longer term.
“Do we want to be the number one in Korea? I think we have to be realistic. We need to have achievable goals,” he said. “Our goal is to achieve a double-digit market share. Double digits range from 10 percent to 99 percent.” GM Korea’s market share recovered to the 10 percent mark in June for the first time since it posted 12.6 percent in September 2008.
GM’s bold move to expand its presence here is based on its belief that it can stand shoulder to shoulder with local majors if it fully understands Korean consumers and provides them with vehicles that its competitors do not offer.
To that end, GM Korea announced its new corporate name on March 1. It had previously been known as GM Daewoo Auto & Technology. GM Korea has also used “Chevrolet” as its brand for vehicles produced and sold in Korea.
“We just became GM Korea in March. It’s not a legal identity change but a change of culture and portfolio. We are now a different company. We will bring the best consumer products to Korea in terms of technology, quality and difference,” he said.
“We want to be a different company by offering new products in new segments. We will continue to bring vehicles with a very strong brand that Korean consumers is demonstrating that’s what they want. That’s our business strategy.”
Greater competition in Arcamone’s words can break the monopolistic hold over the industry and make the market cheaper. “The market will be evened out. Eventually, the winner is the consumer. The company that knows and meets what customers want will win,” he said.
Arcamone, who took the helm of GM Korea in 2009, stressed that its business strategy has been developed through the understanding of Korean consumers, which he believes are unique in their behavior.
“Korean consumer behavior is much different from any other country in the world. At first they always look for a new product and new technology. You don’t see that in other countries, you don’t see that in Japan. Innovation comes from here (Korea),” he said. “Korean consumers get tired fast. They want new things all the time.”
He also cited culture as another factor that sets the Korean market apart from those in other countries.
“I think it’s the culture. Koreans are very passionate and dedicated. If they put their minds to products, services and changing, they get it done. Koreans are behaving in eastern countries but with very Westernized thinking. You don’t see that passion and drive in other countries,” he said. “(To achieve success here,) you should understand consumers in Korea and exceed their expectations.”
The chief executive said that Korea should work on improving its image and brand as a place to live and do business in order to attract more foreign capital and businesses. According to him, people outside of Korea do not have the context to understand issues here, such as militant labor unions and protests against the free trade agreement (FTA).
“The reputation of militancy with unions, that has to be changed. I’m not saying elimination. I’m saying cooperation. When people watch fights, strikes, militant protests and occupation on TV in Canada, the U.S. and Europe, they must think, ‘Why do I want to go invest there?’” he said.
“It’s branding. What does Korea want to be known for? What is the brand of Korea? That’s what the Korean government should figure out,” he added.
In the eyes of Arcamone, Korea is still gazing inward and has yet to embrace globalization in policy and business practices despite the Korean government’s efforts to open up the market. In other words, Korea still doesn’t see things in the global context.
“For any company, the government needs to understand global competition. You have to become a global player, which means that ‘this is the way you play in Korea’ doesn’t work. You have to create an environment for a free marketplace. There is too much intervention (in Korea),” he said.
GM, a mighty American automaker, filed for bankruptcy on June 1 in 2009. Many people criticized labor unions for the fiasco, claiming that it was the result of the unions resisting change and chopping their own ice at the expense of the firm’s interest. This unfortunate incident sent important messages to Korea’s automakers, including Hyundai, which are always struggling to handle its militant unions.
Surprisingly, Arcamone, a life-time GM man who joined the company in 1980, said that the disaster was management’s fault, not the union’s, because management is the one that controls the union.
“We control negotiations with the union. We control our employees. It might be difficult to challenge militant unions. It (the one that controls things) is the company. In Korea, it’s me. No matter how militant or whatever we want to talk about in negotiations, my boss holds me accountable,” he said.
“The same applies (to the GM case). Only U.S. went into bankruptcy. One country pushed GM into bankruptcy. Management is accountable and responsible. We went into bankruptcy protection because of bad management. Our stakeholders — employees, dealers and union — learned a lesson.”
“My focus is how we came out and became financially strong in terms of sales, the balance sheet, market share and new products. The new GM has become very strong and focused in a short period of time. I think that’s what we need to focus on. Management now knows how to manage the company.”
Regarding threats posed by China, Arcamone said that Korean companies will manage to remain as the world’s leading manufacturing powerhouse as China has a different business model from Korea.
“Korean companies will be challenged by Chinese counterparts but China is outsourcing technology. That is their business model. On the other hand, Korea invents and develops. I don’t see Korea losing share as much as a lot of people say,” he said. “Korea will keep its edge. However, it has to become even more agile and faster in terms of technology.”