Global Players from Emerging Markets: Strengthening ... - Unctad

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98 Outward Foreign Direct Investment by Enterprises from the Republic of Korea 100% 80% 60% 40% 20% 0% 100% 80% 60% 40% 20% 0% Figure 5. Korean OFDI motivations, by region and firm size, 2002 North America Figure 5-1. Motivation by region (percentage) Europe China Asia Central & Latin Region America Figure 5-2. Motivation by firm size (percentage) Large TNCs Firm size Sources: Figure 5-1 from MOCIE (2002) and Figure 5-2 from KCCI (2002). for production of stainless steel. It has been importing this raw material from South Africa, India, Finland and other countries. It also acquired a 14.9 per cent stake in CAML Resources Group (Australia) for $13.3 million. 75 POSCO has also signed a $12 billion investment deal in June 2005 for mining activities and to establish steel plants and mills in India. • Samsung Corporation acquisition of Otel Inox (Romania) in 1997 for $37 million to assure long-term resource supplies of iron and steel. 76 • Korea National Oil Corporation (KNOC) and SK invested $62 million and $51 million respectively in Peru for crude oil and natural gas development. 77 75 Korea Metal Journal, 15 September 2004. 76 Samsung Corporation acquired 51 per cent of the equity in 1997 and 75 per cent at present. 77 SK Corporation (www.skcorp.com). Small TNCs Others Investment policy Trade barrier bypassing Technology Export promotion Procurement of parts Cost reduction Market expansion Others Strategic alliance Trade barrier bypassing Regulation bypassing Natural resources Create new business Labor Cost reduction Market expansion 1-3. Technology learning A number of Korean firms had invested abroad to learn or access foreign technologies. Even though some of these investments did not yield satisfactory profits abroad, the main goal was to gain access to more advanced technologies and to establish a global brand name. They include: • LG Electronics purchased a 5 per cent share of Zenith (United States) in 1991. The main purpose of the investment was to learn the flat screen TV technology and to acquire brand name. LG Electronics subsequently increased its stake in the company to 57.7 per cent in 1995 and eventually took over the company in 1999. • Hyundai Electronics acquired a 37 per cent interest of Maxtor (United States) in 1993 to access to Maxtor’s technology of hard disc drive production for computers.
Conventional Unconventional 1-1. Cost reduction 1-2. Natural resource • Samsung Electronics in 1995 bought a 40 per cent interest in AST Research Inc. (United States). 2. Demand conditions 2-1. Local presence requirement FDI may be preferred to exporting when transaction costs are high in the external market. This includes requirements set by the host Government for foreign firms to access to the domestic market. An example of this is: • Samsung Electronics invested in Viet Nam to produce television sets, monitors and other home appliances to service the local market because Viet Nam requires foreign companies to establish production facilities in Viet Nam in order to sell their products to the Vietnamese market (KITA 2003). 2-2. Product creation Firms may need to modify their products or improve qualities to access new markets. Examples include: Figure 6. Typology of OFDI motivations 4-2. Catch-up 4-3. Strategic location Factor Conditions Strategy Structure Rivalry 1-3. Technology learning Related & Supporting Sectors 2-3. Market learning 3-1. Follow-the-customer 3-2. Infrastructure 3-3. Regulation bypassing Demand Conditions Source: Adapted from Moon, Rugman and Verbeke (1998) and Moon and Roehl (2001). CHAPTER VIII 99 • LG Electronics introduced new products such as three-directional air-conditioners and stainlesssteel refrigerators in Taiwan Province of China. • Hyundai Motor introduced a new car, Santro, to the Indian market. It is a compact car (999cc) but equipped with high-tech and differentiated features. Hyundai Motor understood the unique characteristics of the Indian consumers and met their needs. 2-3. Market learning 2-1. Local presence requirement 2-2. Product creating Operating near to overseas customers can be important to respond quickly to consumer tastes and to access to design facilities. Such examples include: • Samsung Electronics established a design centre in Italy to learn the advanced Italian design mechanism. Samsung has already built design centres in Los Angeles, San Francisco, Tokyo, London and Shanghai. • Amorepacific, the largest Korean cosmetics company, expanded its operations into France to sell its products and more importantly, to learn the sophisticated French cosmetics market.
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United Nations Conference on Trade
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Preface The landscape of internatio
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