Market Entry Analysis for South Korea

According to Sood et al, (2007) 85% of South Korea’s 46 million population live in the major urban areas; over 10 million in the capital city of Seoul. South Korea’s economy was badly affected by the “Asian flu” financial crisis in 1997 but recovered to sustain a 10.5% per annum increase in GDP in 1999 with even stronger growth predicted by 2010. Porter, (1996) asserted that South Korea’s market industry traditionally tended toward heavy commercial engineering dealing with shipbuilding, petrochemical and automotive/transportation markets although it was facing stiff competition from Japan in shipping industry and Taiwan in automotive industry.

Market Objectives and Potential

Brassington and Pettit, (2004) claimed that one of the market industries that South Korea that has become successful is manufacturing industry. The best buy stores choose to venture in manufacturing industry as the manufacturing industry accounts for 25% of South Korea’s of gross national product which has recently broadened its scope to become very successful in high-tech precision manufacturing in the consumer electronics, multimedia computers/notebooks, aerospace and defense markets.

According to Carrissa and Smith, (2007) the best buy store is the world’s leading specialty consumer electronics retailer, generating nearly $31 billion in revenue in 2006. In addition to Best Buy branded retail stores, the company operates other retail chains in the United States, Canada and China. It has several other subsidiary-type stores like Magnolia Hi Fi and Future Shop, plus others. The store now wants to role out its business in South Korea.

One of its market objectives is s to bring technology and consumers together in a retail environment that focuses on educating consumers on the features and benefits of technology and entertainment products, while maximizing overall profitability. According to Boyle, (2007) the best buy stores believe that they offer consumers meaningful advantages in-store environment, product value, product selection and customer service, all of which advance our objectives of enhancing our business model, gaining market share and improving profitability.

The market potential in the country is very high with the country population of about 46 million people it, therefore, follows that the best buy store can have a greater market for its products. Indeed the best buy has high market potentiality in South Korea, it recently entered china yet Best Buy the Chinese consumer electronics market is potentially valued at $100 billion compared to $120 billion in the US yet it existed in the US for a long period.

Major competitors

A broad set of companies compete in the consumer electronics retail market, but Best Buy’s most direct competition comes from the circuit city stores, the second-largest specialty consumer electronics retailer behind Best Buy. Best Buy leads Circuit City in nearly every significant measure, except most recently in same-store sales growth. The company generates more sales than Circuit City and does so more efficiently. There are some 90,000 best buy stores throughout the United States and others in Canada plus the currently new market entry in China. The best buy store has become as fragmented as any market can become, particularly with the size revenue market it is. Therefore competition for the market is stiff. (Boyle, 2007)

Strategy for market entry

The best buy store has rolled out its strategy in entering the new market. Best Buy store has been having a pilot program for the last few years, but now the company is aggressively rolling out a full-scale initiative. Currently, about 115 of Best Buy’s stores offer the small business services program, and Best Buy plans to double that number this year. Eventually, the company hopes to run the program in every store. Meanwhile, the company continues on an expansion tear that has it approaching the 1,000-store mark, this is the strategy the company has been employing in entering the new markets and the same approach will be employed by the company to enter the Korean market. (Carrissa and Smith, 2007)

Market Penetration and Coverage: The best buy store has over 90,000 business premises in the United States of America and more others in Canada. It recently entered china. (Boyle, 2007)

Expected Sales: Consumer electronics sales volumes are expected to reach $100 billion in South Korea with available market population of 46 million people. (Boyle, 2007)

Time Table for Entry

The best buy store sets to role up its business in South Korea using the already existing market in china through expansion of retail outlets. The company outlined a one-year plan for the company to settle for serious business in the country. The program gives a one-year plan for proper entry of the store into South Korean territory. (Boyle, 2007)

Business Structure

Boyle, (2006) asserted that the Best Buy stores operate within a multi-business unit

Structure designed to:

Maximize efficiencies across multiple business units and service areas;
Support new business initiatives;
Advance future digital strategies; and,
Enhance business unit performance.

It has the Board of Directors, chief executive officer, president and chief operating officer, executive vice presidents, senior vice presidents, directors and managers

According to Carissa and Smith, (2007) the marketing and advertisement of products and retaining of customers is based on the reward zone program. Reward Zone is a program to reward customers and encourage them to shop at Best Buy even more often. Customers can join for free and then earn Reward points for almost every purchase. Each time members accumulate 205 points, they receive a $5 certificate.

References

Boyle M (2006): The best buys giant gamble, Fortune Magazine.

Boyle M (2007): Q & A with best buy CEO brad Anderson, Fortune Magazine.

Brassington, F and Pettit, S (2004): Principles of marketing. Financial times prentice hall.

Carissa W and Smith T, (2007): The best buy CEO, Minneapolis / St. Paul Business Journal, Vol.1.

Porter, M.E (1990): The competitive advantage of nations. London press.

Sood A, Gareth, J. Gerard J.T (2007): Functional Regression: A New Model for Predicting Market Penetration of New Products. Marketing Science journal. Vol.4.