American Fast Food in Korea
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Base on market information for Asia Pacific, we can made conclusion that business future in Asian region has to have bright future. With 33% of the worlds GDP and 50% of its population, Asia has emerged as a rapidly growing force in the global economy. Due to the cultural diversity, regulatory controls, growing base of consumer power and its own set of business “rules,” the multinational corporations (MNCs) find it challenging to enter the Asian market successfully. Most MNCs are reassessing their existing strategies or formulating new strategies to sustain their growth (4).
With regional exports exceeding $1.3 trillion, the East Asia and Pacific regionÐ²Ð‚™s share of trade in GDP is the highest in the world. (Global Development. Finance Report. 2006).
The economy of South Korea has grown in the last 35 years. Per capita GNP only $100 in 1963, exceeded $20,000 USD in 2005. South Korea is now one of the worlds largest economies (as of 2006, it is 14th in the world according to GDP). (2).
If we will compare Korean market to East Asian countries (Exhibit 1 p.12).From report I have strong understanding that mane fast-food market in any Asian countries is in big cities. LetÐ²Ð‚™s check urban population level in all Asian countries. Based on Exhibit 1 we can clearly see that Korea has one of the best Urban Population level-total population level 47.6 million and urban population is 82%.
Check GDP and GNI level. We can see that Korean level one of the highest in the Asia. Nominal GDP (2005 est.): $811.1 billion. GDP growth rate: 2003, 3.1%; 2004, 4.6%; 2005, 4.0%. Per capita GNI (2004): $14, 162. (5).
In 1997 Korea had some serious economic crises and faced sever difficulties. After some structural reforms in Korean government, economy starts to recovery. Already In 2001 Korea was 13th largest economy in the world with GNP of $398 billion.
So based on all information from above I can make conclusion that Korea has good future and it is one of the most promising market in Asian region.
Porters Five Forces have become a yardstick for assessing industry profitability. They are
Rivalry among competitors
Threat of new entrants
Threat of substitute products
I will try to analyze each one, for Korean fast food market.
Buyers Ð²Ð‚?power. The power of buyers is the impact that customers have on fast food industry. Buyers could be powerful in different circumstances. I believe that in our case we can say that buyers are concentrated. As I could explain earlier, main per cent of population in Korea are in the big cities. Its give us good idea that for fast food industry in this region will be easier to delivery product to the customers. Buyers purchase the significant proportion of output.
Suppliers power. A fast food industry require raw material for there business-labor, components. It leads to buyer-supplier relationship between the fast food industry and the firms that provide it the raw materials used to create products. Suppliers are powerful if they are concentrated- it will be really expensive to switch the supplier. From another side suppliers are week if it will be many suppliers with standard product on the market Korean agriculture sector includes forestry and fisheries. National products are rice, vegetables, fruit, root crops, barley; cattle, pigs, chickens, milk, eggs, fish. About 20% of the land used for agricultural busyness (5).From here we can understand that for fast food companies will be easy to find or switch the suppliers without problems for there businesses.
Threat of new entrants. The possibility that new firms may enter the industry also affects competition. In theory any firm should be able to enter and exit market. And if free entrance and exit exists, than profit always should be nominal. There are some barriers of entry. Easy to entry if: little brand franchise; access to distribution channels; common technology. On Korean market steal not allot firms with brand franchise. And it is big requirement in new choices for customers. It let us know that it will be easy to enter to the market.
Threat of substitute products. Product price elasticity is affected by substitute products-as more substitute become available, the demand becomes more elastic since customers have more alternatives. A close substitute product constrains the ability of firms in an industry to raise prices. In our case we can see example of some firms, Lotteria and McDonalds, who easy change there recipes for Korean customers which needs more healthy national ingredients for there food.
Rivalry among competitors. In pursuing an advantage over its rivals, a firm can choose from several competitive moves: changing prices; improving product; creatively using channels of distribution; exploiting relationship with supplier. For firm who will try to enter Korean market, I would say more realistic and more helpful move will be to improve products. Improving quality of materials, quality of services, and probably quality of food preparation technology (healthier environment), will be most important key to success on the Korean fest food market.
Urban Koreans eat out frequently. Fast paced lifestyles are driving Koreans to choose western-style fast-food, but healthy eating is a concern. These factors are driving a fast growing market for sandwich store franchising (3).
Another important factor