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American Fast Food in Korea

An overview of the fast food market in South Korea and a brief market analysis for the nation of Myanmar (Burma)
by

Elaina Hirsch

on 26 October 2015

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Transcript of American Fast Food in Korea

American Fast Food in Korea
1. Compared to other East Asian countries, is Korea an ideal market?
2. Evaluate the Korean fast-food industry, applying Porter's Five Forces Model
Threat of New Entrants
Bargaining Power of Buyers
Threat of Substitutes
Bargaining power of suppliers
Determinants of rivalry among exiting competitors
Threat of New Entrants
Bargaining Power of Buyers
Threat of Substitutes
Bargaining Power of Suppliers
Intensity of Rivalry
Among Competitors
3. What are the Korean-specific factors? And how do they affect your analysis?
4. If you were Matthew Wolfe, would you recommend his company pursue the Korean market at the present time?
South Korea
Myanmar
My inputs (materials, labor, supplies, services, etc.) are standard rather than unique? Yes +
My suppliers would find it difficult to enter my business or customers would find it difficult to perform my function in-house? Yes +
My business is important to my suppliers. Yes+
I have many potential suppliers. Yes+
Comparison between
South Korea and Myanmar
Social/Cultural
Technology Infrastructure
Economic Analysis
Political/Legal
Social/Cultural
Technology Infrastructure
Economic Analysis
Political/Legal
The Republic of Korea
Democracy
President- Park Geun-hye is the first woman to be elected as President in South Korea, and is the 11th democratically elected president
Prime Minister- Hwang Kyo-ahn, Was appointed Jul 18th 2015
Effective Law system that is ranked 11th by the World Justice Project.
Series of Military Dictatorships in the 60's and 80's, but maintains a liberal democracy today.

Rapid development of the middle class during the mid 20th century
All Koreans speak the Korean Language, which has similarities with Japanese and Chinese languages
Freedom of religion is constitutionally guaranteed, so there is no national religion
Ranked 117th out of 145 on happiness scale
Diet is based mainly around rice, vegetables and meat
Kimchi (seasoned vegetables) is served with almost every meal
Population:
50.2 Million
Economic Freedom:
29 in economic freedom and 7th Asian country.
GDP
:$1.7 Trillion with 2.8% Growth
Gini Index:
31.1 (Medium)
Unemployment:
3.2%
Labor Force:
28.86 million
Media:
television, radio, cinema, newspapers, magazines, and Internet
Main Export:
Electronics
-
$573.1 billion in 2014

The four most popular languages in Myanmar are Sino-Tibetan, Tai–Kadai, Austro-Asiatic, and Indo-European
Over 80% of the population practices Buddhism
Christian and Muslim populations continue to face religious prosecution
Ranked 20th out of 145 countries on the happiness scale
Seafood, rice and salads are some of the most popular foods in Myanmar
Mohinga (rice noodle and fish soup) is a traditional breakfast meal and is known as their national dish
New competitors increase competition which pushes down prices. (ex: McDonalds)
Diminish market share.
Higher threat when barriers to entry are low (low cost of entrance), open distribution channels, no intellectual property, and low licensing/regulations.

We concluded that the threat of new entrants would be a moderate one.
Saturated with competition
low market room

If you have the capital, it would not be difficult to gain distribution channels in an urban country such as south Korea.
No Intellectual Property
Food Regulations
“Positive list” system
Strict restrictions on the importation of American beef.
Import ban on lamb and American potatoes
Moderate
Favorable
By Elaina Hirsch, Alex Pappas, Arielle Labianca,
Shawn Benesh, and Henry klosowski

Family Restaurant Chains
Food Delivery
Age
Five Day Work Week
Anti-American Sentiment
Favorable
Moderate
Moderate
Convenient
24/7
Dish Collection

Quick
Delivery "Dead"lines

Popular
Almost every fast food chain delivers
Delivery sales in 2014 have hit a notable high. CU had a 38% sales growth.
Annual Market Growth Expectation: 8 %
Ranks 161 in economic freedom and 36th in the Asia-pacific region. GDP of 60 billion
Real GDP of 5.5%
Labor force of 33 million
Unemployment rate of nearly 37%
Over the past 5 years Burma has made the greatest improvement in economic freedom in the world -Still remains a depressed economy due to years of government intervention, horrific public institutions and infrastructure and rampant corruption
Small business growth is nearly non-existent as it is difficult to get financing and there are numerous bureaucratic hurdles to get through to open a business.
Banks are nearly all government owned
GINI data is not available but it is well known that income disparity is extremely high in Myanmar.
The food service industry is expected to continue growing. Total sales in South Korea food service were nearly 62.3 billion dollars (+)
Fast food industry grew 8 percent from 2008 to 2012 and is forcasted to continue to grow at an average of 4.6 percent until 2017 (+)
People love that fast food is cheap and quick and an easy replacement meal to cooking at home
Customers have almost no costs in switching to another provider. They can just as easily go to a McDonalds or a Wendy's. This increases rivalry greatly as everybody is competing for a customer with very little loyalty.
The product is not complex. Customers can understand any way to buy fast food and thus can choose between companies
The Republic of the Union of Myanmar
President: Thein Sein
Established as a Democratic nation in 1948
Was a Military Dictatorship from 1962-2011 as a result of a coup d’etat.
Most Party Leaders are former military officials.Involved in one of the worlds longest ongoing civil war
Governed as a presidential republic with a bicameral legislature.
House of Representatives & House of Nationalities
Ranks 157th out of 177 countries on the Corruption Perceptions Index.
Was given a rating of 2.1 out of 10 (10 being least corrupt and 0 being highly corrupt) as of 2012
Eased restrictions
Korean tradition is to eat meals at dining tables

Fast food restaurants had to adapt to create more seating at their locations.

Because of the high costs of entry into the Korean Market the restaurants had to raise prices of their product thus forcing them to target a predominately middle class customer base.
Korea is know for having the highest average work week
Law in place to make sure that no more 40 hours a week
Maximum is 12 hours a day
Extremely active telecommunications and IT industries.
Tech markets are backed strongly from the government.
Enormous public investment in tech infrastructure including high speed Wifi
$1.5 billion investment to upgrade mobile tech throughout the country.
At the forefront of tech innovation
According to a 2011 World Service poll by BBC 74 % of Koreans have a positive view of the US

The Anti-American sentiment had started after the Korean war with the large presence of American soldiers in South Korea, and the few crimes that were committed by them.
Very poor technology infrastructure
Mobile penetration is only to approximately 1% of the population
Reformers are attempting to change strict censorship laws and renew telecommunications licenses with companies abroad
Eric Schmidt, CEO of Google recently visited the country. A good sign for its future in technology
Foreign companies look to build infrastructure to exploit vast natural resources
USAID to set up tech academies to teach about building technology infrastructure
We believe that South Korea offers a unique and intriguing opportunity for another fast food entry
Entry wouldn't be difficult because other fast food chains have modeled the way for success
Large urban population allows for high density of consumers
Competition will be fierce as this company is late to enter, but a growing population and burgeoning middle class with disposable income will ever increase the customer base.
Fast food firms are saturated at home and must look to other markets to survive.
Fast food grew at 8% the past 5 years and is expected to grow at 5% the next 5 years.
Population
Economic Overview
China
South Korea
Japan
YES.
GDP
Is there a large number of buyers relative to the number of firms in the business? (+)
Does customer face any significant switching costs? (-)
Does the buyer need a lot of important information? (-)
Your customers are not highly sensitive to price? (moderate)
With the fast food industry the customers have the most control.
YES.
After a racist comment made by a US TV host, and an incident in the Winter Olympics of 2002 anger towards the US had risen.

Many fast food customers would refuse to eat McDonalds and shopped at Lotteria instead.

Main substitutes are traditional sit-down Korean restaurants
They are well established in urban areas, but fast food is quicker and easier
This appeals to the younger population, which is driving the industry
Baby boomers consumed the most Korean Fast food between 1980s and 1990s
By 2002 the new generation had taken over the fast food industry in Korea
Feel hostile toward the fast food industry
Demographic trends causes decreases to fast food
40% of the populations is now married without children and single person

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