Chapter 4. Networks and Interactions of Korean firms in Taiwan
4.1 Taiwanese Business Environment in the Context of Korean Firms
According to the Company List Directory 2011 published by Korean Trade Association, KOTRA, there are total of 98 companies enlisted to be operating in Taiwan, all in Taipei, and the expansion forms that companies take are mostly Sales. Total of 53 companies operate in Taiwan as Sales Office, and the second most are in the forms of Branch and Contact Points, having 14 each. Lastly, eight companies locate themselves in Taiwan as Manufacturing site and 9 companies takes Taiwan as a place to provide Services. It is clear that Korean firms use the territory called Taiwanese market not for the assistance for manufacturing, where unique resources that are offered only within the certain geography can be explained. However, the very function of Taiwanese market to many is its selling point.
Fig. 4-‐1 Expansion Types of Korean Firms in Taiwan
Source: KOTRA, Directory 2011
0 10 20 30 40 50 60
Branch Ofqices Contact Points Manufacturing Sales Service
There are eight different types of business industries in which Korean firms operate in Taiwan. The type that account for the most is Manufacturing and Distribution, 41 and 35, respectively. The third and forth most are Service and Logistics which accounts for eight and seven, respectively. Then, Miscellaneous accounts for three, Construction for two, and one each for Automobiles and Finance.
Tab. 4-‐1 Industry Types of Korean Firms Operating in Taiwan Source: KOTRA, Directory 2011
Industry Types Percentage in Operation (%)
Manufacturing 42
Distribution 36
Service 8
Logistics 7
Miscellaneous 3
Construction 2
Finance 1
Automobiles 1
Providing Taiwanese market or making good use of Taiwanese market indeed is Electronic and Electric components, and related Equipment.
Miscellaneous includes those companies that make up 3 at most, which is Clothing and Materials. Other industries are placed under the category
“Miscellaneous”, and these include Online Games, Plants, Dental X-‐ray, Digital Marketing Researching, Outdoor Outfits, Finance and Insurance. The number of companies that account for 1 to 2, out of overall 98, are included as Miscellaneous; however, I have taken out Construction, Cosmetics, Home Devices, and Manufacturing of Automobile Parts from Miscellaneous category because they are the ones that I have interviewed, and there was a need to indicate them on the graph.
Fig. 4-‐2 Provision Types of Products/Services Korean Firms in Taiwan
There are total of 14 companies that have interviewed, and the range of these firms covers most of the industries that are operating in Taiwan. The ones that are missing for provision types of products and services that Korean MNCs operate in Taiwan are Petrochemicals, Clothings and Materials.
Fig. 4-‐3 Types of Industries that the Interviewed Firms Operate
Taiwanese business environment is challenging for Korean firms, especially in the face of competition against Japanese firms. Taiwanese market is highly open to foreign markets, goods and services, and they have developed high level of fondness towards that of Japanese over the years. In the same context, but with a negative turn, the market is not so fond of Korean firms.
Granovetter (1985) argues that economic action is embedded in structures of social relations in modern industrial society, and fondness of Taiwanese towards Japanese products can be explained with the concept of embeddedness of economic behavior. Culture is an ongoing process in which gets constructed and reconstructed during interaction, and despite that ‘Korean Wave’ has present since early 21st century, Korean companies still struggle to transform the minds of the local Taiwanese which hinder their economic behavior.
Coe et al. (2004) argues that regional development is ultimately depended on the ability of processes of value creation, enhancement and capture, and this affects the economic decision making process of local Taiwanese. Korea and Taiwan share many similarities, but there have been many social and economic incidences where Korea has become an obstacle for Taiwan’s development over
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the years. The value of ‘Korea’ or ‘Korean-‐ness’ have been formulated in prior to the dispersing of Korean Wave, which only has become more prevalent from the 21st century. Before much before Koreans have made an impact in Taiwan as part of Asia with the introduction of Korean Wave and also with the advancement of industries in technology, for instance, Taiwan has been highly exposed to Japanese influence, from animations and dramas to home appliances and cars. Such strong Japanese influence in Taiwan traces back to its colonization. Though Korea, similarly to Taiwan, shares the same history of Japanese colonization, there exists much anti-‐Korean sentiment in Taiwan.
Taiwanese business environment is deeply connected to Japanese sentiment, and Korean firms always face competition against those of Japanese in the market.
In fact, Taiwan’s most-‐liked country is Japan, and its percentage outdistanced other countries that Taiwanese like (Tab. 4-‐2). On the other hand, Japan is ranked as number 1 for the most-‐disliked country, and Japan is not on the top 5-‐list for most-‐liked country for Koreans. The age group that does not like Japan is in wide range. Total of 1,500 people answered, and those in 19-‐29 aged group accounts for 39.5%, 30’s accounts for 47% and 40% for those in the 40’s, and 45.8% accounts for those in their 50’s, and the highest percentage that dislikes Japan is undoubtedly the older generation, aged 60 and above, makes up 49.7%. Every other person in the age group 60 or above has hostility against Japan.
Tab. 4-‐2 Most-‐liked and –disliked countries for Korea and Taiwan
Korea Taiwan
Most-‐liked country (%) Most-‐disliked country (%) Most-‐liked country (%) 1. United States (21.5) 1. Japan (44.1) 1. Japan (41)
2. Australia (19.0) 2. China (19.1) 2. China (8) 3. Switzerland (8.0) 3. North Korea (11.7) 3. United States (8) 4. Canada (7.4) 4. United States (4.8) 4. Europe (6)
5. Britain (5.1) 5. Iraq (0.7) 5. Australia (5)
Source: Jung Hyung Jeong, Gallup Korea 2012
Foreign trade is one of the great drive engines for Taiwan’s economy, representing 140 of GDP in 2012 (Taiwan, 2013). In 2012, Taiwan’s top trading partners include China and Hong Kong combined which represents 28% of the
total trade value, and followed by the ASEAN bloc (15%), Japan (12%), the US(10%), the EU(9%) (Taiwan, 2013).
Taiwanese’ fondness of Japanese brands and products explains such high percentage of its penetration in Taiwanese market, which often is the challenge that Korean firms try to overcome. Offering Japanese’ products much favor, to Korean firms, is the bar that cannot hurdle easily. Different response to Japanese colonialism can enable to grasp of the development of such favor.
Korean companies operating in the world are generally in very large size, and I have given the opportunity to interview 5 of the top 10 companies listed globally in major industrial sectors, according to the sales data compiled by CEO Score during the period of July to September of 2013. LG Electronics ranked 10 among IT companies, Hyundai Merchant Marine Co. ranked eighth in the shipping business globally. Hyundai Motor Co. and Kia Motors Corp. was listed as sixth place. In terms of cosmetics field under the category of pharmaceutical company, LG Household and Health Care Ltd. and Amore Pacific Corp. have ranked in 15th and 16th place5.