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One Up On The Nippon Brigade

Korea never makes a splash. But it's sailing smoother than Japan in the uncharted Indian waters.

One Up On The Nippon Brigade
outlookindia.com
-0001-11-30T00:00:00+0553
FEW have noticed them, even fewer possibly grasped the significance. But while all our attention has been focussed on the high brand awareness, high ad-spend American and Japanese transnationals, a quiet—almost self-effacing—group of gigantic corporations have been moving in, determined to grab huge market shares in areas ranging from real estate to consumer electronics, automobiles to power transmission. They are the Korean chaebols —highly diversified industrial groups—several of them among the 50 largest corporations on the planet.

The South Koreans simply appear to be more serious than the Japanese or the Americans about the Indian market. They are willing to invest more. And they may have also got their strategies more tuned to the Indian realities than their rivals.

Consider the investments, growing rapidly from Rs 61.5 crore in 1991 to Rs 106.8 crore in 1994. And in the first four months of 1995 alone, investments totalled Rs 72.6 crore. Since the reforms began, about 100 Indo-Korean collaborations have been or are in the process of being implemented. Take a look at the projected investments: Daewoo, one of the leading global conglomerates,proposes to invest over $5 billion (Rs 17,500 crore) in India by the year 2000 in automobiles, power, real estate and white goods. The figure for another giant, Hyundai, is $1.4 billion (Rs 4,900 crore). And Samsung has announced plans of investing $629 million (Rs 2,200 crore) in India by the turn of the century.

Strategies. "Much more than the Japanese, we fear the Koreans in India," says a senior executive from an Indian white goods major. "Just look at the prices they are selling their products at." Unlike Sony and Panasonic, which have priced their Indian launches high in a bid to leverage their brand names to maximum effect, the Koreans have firmly adopted the value-for-money mass-market route. A Sony colour television may cost well over Rs 30,000. A Samsung 53 cm FST colour television with a built-in twin-head video cassette recorder comes for Rs 28,750. Samsung's video camera (camcorder) is priced as low as Rs 29,000 while its Sony equivalent comes for close to Rs 40,000. According to DCM-Daewoo Motors Managing Director Shiv Gopal Awasthi, the low price line of Korean products is maintained primarily through slim overheads, relatively low wages and optimised designs. Sony and Akai have been reduced, in recent months, to giving discounts and free gifts to sugarcoat the stiff price tags.

Even two years ago, Korean corporations were practically unheard of in India. Then DCM Toyota became DCM-Daewoo. This served as some sort of signal to the rest of the chaebols . Soon came LG (formerly Lucky Goldstar), in collaboration with Bestavision, the makers of Texla televisions, and the Weston group, and launched its Goldstar brand. (The collaboration with Bestavision has since collapsed and LG is signing a new alliance with the C.K. Birla group.) Hyundai is setting up a 100-per cent subsidiary. And now Samsung has arrived, and a host of other lesser-knowns.

Why India? After all, isn't China a preferred market to India for most global players? A South-east Asian diplomat, who has served in India for years, explains the logic: "About China and India, there are a lot of illusions. In China, it seems that everything is very stable, but in reality it is not. In India, while the situation seems and looks extremely unstable, it is actually a much more stable and calm environment. " Says South Korean Ambassador Byung Yong Soh: "Until June 1991, India was a sort of introvert economic player towards investment from outside, which acted as a disincentive for most foreign companies, including Koreans. But today, Korea not only wants to invest in India, but also wants to be a part of the Indian industrial revolution." Not only because of India's relatively cheap skilled labour and manufacturing facilities, but also, the confidence that Korea has on the ability of India to make products of international standard, he says.

The other possible reason for the newfound Korean interest: a majority of Korean business has been concentrated in the last two decades in the erstwhile USSR and Europe. The Indian reforms came just as the scope for market expansion in these regions became limited, pushing the Koreans into looking towards Asia for direct investment. And India appeared the dream destination: fast-growing markets for middle-priced durable goods, the long-lasting demand for infrastructure constructions, the complementariness of labour quality and technologies between the two countries, a well established legal system, security markets and the communication skills of Indian workforces. The chaebols also know that if the South Asian Free Trade Agreement (SAFTA) comes through, India, being a leader in this region, could provide enhanced market access to other member countries. Says Byung Mon Park, chief of Samsung in India: "There is no 'ism' in any country anymore. Now it is a contest between economic powers."

And South Korea clearly wants to be a global economic power. On his recent visit to India, South Korean President Kim Young Sam was accompanied by a 40-member business delegation, which included CEOS of the largest Korean corporations, including Samsung, Daewoo, Hyundai, Samyang, Miju, Kia, Korea Electric, Yukong, Junil, Dongil, Sung Moon Electronics, Kohap, Domh Kuk Steels and Sunkyong. Rarely has such a high-level business delegation come to India.

Obviously, India plays a very central role in Korea's global plans. Unlike, from all available evidence, Japan. For, they may look the same to the uninitiated Indian, but the Japanese and the Koreans, who have a long history of mutual antagonism, are as different from each other as chalk and Rocquefort. Indian companies working in collaboration with the Koreans claim that it's a welcome relief from the Japanese, characterised not only by their revolutionary products, but also by their painfully slow decision-making and rigid ideas. Says Sunil Vachani of Dixon Utilities, a Weston group company, which has a tie-up with LG Electronics: "The Koreans are much more flexible when it comes to decision-making, primarily because they are always ready to compete with anyone, at any cost."

Vachani had a tie-up with Japanese electronics giant, Hitachi. The basic difference, he says, is that the Koreans are mentally prepared to share their technical secrets with India and are willing to support and be a part of Indian industry. And the factor which clicks well with India is that the Koreans are ready to negotiate according to Indian terms and conditions rather than maintain a price and conditional rigidity like the Japanese.

"The Japanese are over demanding when it comes to others and less compromising when it comes to themselves," says Awasthi, who has also worked with both Japanese and Korean partners.

The chaebols realise they have to make up for lost time. Their brands are not so well-known; Korea has never had any strong trade ties with India. But both these situations could change faster than expected. And the Koreans could leave their arch-rival, the Nippon brigade, gasping for breath.

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