Best Buy's challenge to find a way out

I read an article about US retailer Best Buy's challenge to the European market. They recently 50% of Britain's Carphone Warehouse. And it cost them about $2.1 billion. They are a great electronic retailer and they achieved high performance in US, even in the recessions. Then what made them so urgently? It's because of their globalization. The world is changing day by day and markets of the world are integrating. Though Best Buy is a giant retailer, the advantage can disappear within a few years. The integrated labor force and supply chain can make a great retailer company. If Best Buy satisfy themselves and don't try to change their strategies, they will fail in business.

Best Buyer's choice is European market. Europe's customers have slow buying tendency and they don't change their elecronics rapidly. Because of these difficulties, they decided to progress their strategy step by step. Though they shared most of Europe retailers, they will not use their name immediately. Actually, they use other European retailer's brand. Of course, a few years later, they will use their own brand names. But in the market development process, companies have to inform customers their brands. If they just injected their name through ads, they cannot get positive image.

But there are many criticisms about Best Buyer. Critics say that the planned process can be harder than first thought. Firstly, European customers buy electronics less frequently than US customers. And also recessions of European economies are obstacles of Best Buy's challenge. Thirdly, the main product of Best Buy is carphone. And carphones are not translated into mainstream products.

I think Best Buyer's challenge is essential to the future of Best Buyer. If they don't do any challenges they will fails soon. Korean companies also face situations like Best Buyer. Many of our global companies are now facing some difficulties in competing with world class companies. We have to find the Blue Ocean. If we cannot do things like that, we will lose in global competition. Change is dangerous but necessary to the survival. It's time to change and innovate our entire structures.

Author: Mark Scott

Title: 'Best Buy Barges into Europe'

Date: May 8, 2008, 1:28PM EST

Page: 1

reference: http://www.businessweek.com/globalbiz/content/may2008/gb2008058_717135.htm?chan=technology_technology+index+page_top+stories

20700067 entry # 9

Park Ji - Sung in EPL

I recently read an article which informs us that South Korean international soccer player Ji – Sung Park scored a goal during his team’s English Premier League (which is one of the world’s best football league) football match against Fulham. I was really excited about this event because Ji – Sung Park is one of our national football team members, and simply, because he is Korean. However, there are some business issues that we should look at and study in Park Ji – Sung playing in EPL, not just caring about nationality.

Most of people do know that Ji – Sung Park earns tons of money playing in EPL. We all love him not just because he is Korean, but also he has made lots of deeds that no other Asian player can ever do again. He is our national pride. However, even though he is earning lots of money and he is our pride, it has nothing to do with our money and our business. There are some other factors that make Park playing in EPL a business, which we should not neglect to look at.

Manchester United, the team that Park Ji – Sung plays for, gives about 5,000,000,000 Won to Park per a year. Well, even though ManU is a rich club, that amount of money is not small. However, ManU gets even more money than that by having Park Ji – Sung as one of its players. First, Korea broadcasting companies such as ‘MBC espn’ pay for the relay fee to ManU and EPL when they relay matches that Park plays in. These days, other Asian countries like China and Japan are also relaying it on live. Second, ManU gets somewhat significant amount of money by letting Korean Firms to participate in marketing Ji – Sung Park in Korea. For example, the uniform of Park and the soccer shoes of Park are on sale in Korea. In short, all these factors enable ManU to feel that it’s worth to pay Ji – Sung Park lots of money. Not just because he plays well, but also he is a business icon.

Lots of Korean organizations paying money to ManU gets enough money to afford it, too. Several broadcasting systems that relay Ji – Sung’s matches gain profit by advertisement fees. Because lots of people are willing to watch Park playing in EPL, even though in late nights, many firms do think that it is really effective to put advertisements on that time. In fact, there are a few commercials that actually feature Ji – Sung Park in it. They turned out to be really influential on sales

So now, from all these factors, I am sure we all agree to the fact that Park playing in EPL is not just about his honor and wealth, but is also a profitable business to many organizations.



Reference : http://news.naver.com/main/read.nhn?mode=LS2D&mid=sec&sid1=108&sid2=211&oid=040&aid=0000050115


20700273 – Entry 9

Social Networking Sites Losing Energy

          What Cyworld does best is that it connects people all across the contry (now, all over the world) and allows people to share their personal photos, post journal, play videos and more. Since its capacity to search and pupularity among younger generation, it became Korea's number one social networking site very quickly.
          Although it's almost like a daily routine for cyworld users to check their so called "minihomepy" and post and scrap pictures, the popularity is now losing its power as people are now so used to it and have a full connection between people. This is not only Cyworld's problem, as MySpace launched its first service in Korea end of last month, it hasn't influenced many Korean users yet, having only 29,000 people had visited for the first week of its launch.
          SK Communication who owns Cyworld, reported "its revenue from the service decreased by 6 percent in the first quarter of the year, compared to the same period last year. Its sales were 19.3 billion won in the first three months of the year, down from 19.8 billion won in the previous quarter" (KoreaTimes).
          However, SK Communication stated that they will open up a new service in June which would have a 3D graphic interface allowing people to interact realistically in third-dimension world. Some experts are doubting that since few companies had already introduced such services but did not do well, Cyworld's new business plan has to be considered seriously to satisfy users' demand.
          I noticed that Cyworld recently has lowered its virtual currency called "dotori" so that people now can purchase songs and decorating items for their homepies. Affordability is an important purchase driving force in the business and lowering dotori might help SK Telecommunication. However, I really expect Cyworld to differentiate their services because these days many web-based social-networking sites offer very similar functions and services. Being the first in the market does not always guarantee the success.

Reference;
http://koreatimes.co.kr/www/news/biz/2008/05/123_23547.html

20601008 - 8th Entity

M&As, Restructuring to Sweep Delivery Services Industry

I read an article about M&A on businesses on deliver service industry. The quick delivery service companies are having difficulties on doing business due to fierce competition in its market. It seems inevitable to offset worsening profitability and the Analysts expect a huge number of mergers and acquisition (M&A) among those companies. The problem is that there are too many players in the market share which is becoming limited for each company to earn profit. Also, a growing interest by conglomerates to jump into the parcel services is igniting competition in the market. This adds pressure on small or mid-tier firms to fold their businesses.
Kim Sung churl, an analyst of Hyundai securities stated that the market is overflowing with players in addition to conglomerates launching delivery business. Also, everyone, including the Big Four is going through rough times. He mentioned Big four as Hanjin Corporation, CJ GLS, Hyundai Express and Korea Express. It is respectively in terms of the number of packages they delivered to customers. Those four companies dominate 60 percent of the market which their businesses are not authentically verified by any organizations.In order to face the tough competition in the limited market share, CJ GLS has recently merged with CJ HTH. This signals that the market will once again be swept by M&As and restructuring. Until now, M&A have always been highly active in the market with small or mid-tier size firms and most of the times, they were acquired by conglomerates.
One of the examples of this is that before CJ had bought Samsung Corporation, they acquired mid-sized company. They bought Samsung Corporation before liquidating most of its retail and logistics businesses. For further examples, Eugene took over logen, Dongbu acquired Aju Logistics and KTlogis, and shinsegae launched sedex while Lotte is also consider jumping into the parcel business. Most companies are trying to survive and make it through the day by offering low delivery prices. The price competition is adding downward pressure on companies’ operating profits even though they managed to increase the volume of parcel deliveries. Those companies are in trouble for the prices are already too low and further lowering will bring less profit. For customers, this phenomenon benefits them and they will certainly shun companies that raise prices. Therefore, companies are expected to either put up for sale or restructure in the near future.
My opinion about this phenomenon is that the companies should make an agreement to stabilize the price to avoid reduction on profit. Also, for mid-size and large companies, they should either focus on searching for other market (new service) or compete fiercely until they acquire majority of their market share on quick delivery service. Since companies earn profit through services, they should improve or should come up with innovative strategies on their services to gain customer’s loyalty and win their competitors.

http://koreatimes.co.kr/www/news/nation/2008/05/123_23509.html

20620042 entry # 8

What is a great board?

I read an article about building a great board. You may think that a great board is an architecture composed of talented people. The article refute to the common truth. A great board is not a composition of geniuses. Actually, it's like a sports team. You know the USA basketball team in 2004 Olympic. The team was composed of great super stars. They were all NBA's super stars. But their record was just a bronze medal. Then what was their problem? The problem was that they didn't play like a team. They were so self-admired that they didn't do excellent team play. I think the board also has to do team play. If they trust their name value and do things individually, they will eventually fail in business.

Then how can we make a great board? I want to compare boards between USA and Korea. In Korea, becoming a board of director means that they get honor. As a result, they often do their work without any pay. But in USA the wage structure is so strict that even directors get payed from company. But Korea's problem is corruption of boards. For example, korean directors often try to receive black money and give important position to their relatives or families. There are few good points of Korean directors, but I want to catch one point. This is the cooperation. Actually, American directors perform their work individually and do their work very well. Even though, their results sometimes bad or fail. I think the core of problem is lack of cooperation. You know the IMF in Korea. When IMF invaded Korea, many people thought that Korea will bankrupt within a few years. But Korea survived from the economic crisis. What was the motive power of Korea? I think it was great cooperation. Many big companies' directors made great cooperation and overcame the crisis. In this reason, the cooperation of board is so important.

In general, there are many good things in American boards. Also, Korean board members have to learn the efficiency and talent of American boards. But I think that there are always competitive advantage in each country's board. If we want to make a great board for our company, we have to benchmark other companies. Instead of making a board with super stars, we have to make a board with shaded players and super stars.

reference: http://www.businessweek.com/managing/content/apr2008/ca20080429_920167.htm?chan=careers_managing+index+page_top+stories

20700067 entry # 8

Areas in Seoul, other than Gangnam

I recently read an article which gives information about the recent trend of house prices in Seoul. According to the article, prices of small homes, homes in areas other than Gangnam (southeastern Seoul), and zones for urban redevelopment, which were unpopular until as recently as two to three years ago, are steeply rising as investors scramble to jump into the foray. In the meantime, homes in “bubble seven areas” which led home price gains, large sized home, and homes for reconstruction are quickly losing popularity in the face of a string of regulations, depressing their prices. The market trend has completely been reversed.

Before we talk about the home price differences among areas in Seoul – simply, Gangnam and not-Gangnam -, we should focus at Gangnam and study about it, first. Through many years, Gangnam and areas near Gangnam have been the No.1 district in Seoul. More concretely, Gangnam station district, Jamsil station district, MyungDong, ShinChon and such areas have been extremely popular and the home prices and business building prices in these areas were extremely high. As many people do know, the reason is quite simple. It is because of millions of people’s desire to settle in these areas. And the reason why many people want to settle in these areas is because these areas have lots of businesses and conveniences. In fact, millions of people come to these places everyday for various reasons. They come to work, study, sightseeing, hanging around and go home. All these popularities haven’t been settled in short period of time. It took many years to develop these areas and lots of years have past since these areas have become the heart of the Metropolis, which means that these areas will go on developing and popularizing unless there are some major events that can block them developing. However, the popularity of these areas has brought a serious gap between ‘Gangnam’s and ‘not-Gangnam’s.

The Korean government has done lots of thing to reduce the gap between ‘Gangnam’s and ‘not-Gangnam’s in Seoul. Several regulations were carried out to discourage the overdevelopment in ‘Gangnam’ areas. Since the home prices and business building prices in ‘Gangnam’s have decreased due to several regulations so far, it seems that the government’s actions are working. However, thing aren’t actually following the government’s will. Even though the prices have decreased a bit, it is not a critical decrease. In fact, more and more people are still actually coming to Gangnam areas for various reasons. Statistics cannot show the reality truly. Gangnam is Gangnam. It cannot be fallen in a short period time. And also, as a matter of fact, the government is making a mistake. Why would they want to discourage the development and well-going of Gangnam? It is certainly unreasonable. It they want to reduce the gap, they can certainly design some good places dealing with lots of businesses and entertainments in areas other than Gangnam. Is the way to reduce the gap is to discourage Gangnam? Absolutely no.



Reference : http://news.naver.com/main/read.nhn?mode=LSOD&mid=sec&sid1=108&oid=014&aid=0001961192


20700273 – Entry 8

Samsung Will Invest W28 Tril. This Year

          In addition to current three free economix zones, the government of Korea has chosen three more sites to be additional free economic zones today. Of course, the major objective for taking such a decision is to attract and bring more foreign investments.

          The three new economic free zones are illustrated in the picture, they are; Pyeongtaek, Gyonggi Province and Dangjin, South Chungcheong Province, and West Sea Area. The government selected these sites as strategic hubs hoping to revitalize the economy.

          Each site has its purpose to be selected as free economic zones. First of all, as Daegu is not on the coastal side whereas all the other sites, the governmemt will specialize the site in IT, textile industry, and machinery parts production, according to the article. The Gunsan area will be under cultivation in order to attract future business and tourism. Furthermore, the West Sea Area will be targeted as "center for global cooperation to compete with eastern Chinese economics districts" (Koreatimes)

          Other three already existing economic free zones are Incheon, Jinhae in Busan. and Gwangyang whici is in South Jeolla Province. Since these free economic zones are under a lot of ciriticism and having some problems among Korean investors, such as lobbying or illegal transactions, many experts are raising doubts for having additional free economic zones.

          We have talked about this free economic zones (AKA FEZs) in Korea for several times in Korea, and noticed that there are some questions to be solved in order for Korea to fully benefit from these areas by "...drawing foreign interests, capitalizing on their eligibility for building foreign facilities such as schools and hospitals, prior to nationwide deregulation" (KoreaTimes). Also, I personally think Korean investors should stand back from these zones for the national interests. What have been the problems in existing FEZs is that instead of attracting foreign investments, Koreans are the ones who are buying out all the real-estates and blocking foreign investors to put money in those free economic zones. We always have to see a big picture, and if we do so, I blieve we would have more chances in the future with successes in the FEZs for having abundant foreign investments.

Reference;
http://koreatimes.co.kr/www/news/biz/2008/04/123_23131.html

20601008 - 7th Entry