Internet Market Entry Into South Korea

Introduction

The basis of this report was to identify a suitable target market that would be best suited to launch Jet.net. On considering many potential candidates, South Korea has been identified as the country to export this service to. The main body will include an analysis of how suitable Jet.net is for the selected market by exploring its existing broadband market and information required for market entry.

Market Analysis

The broadband market in South Korea has significantly grown in the last six years, to the extent that South Korea has become the worlds leading nation for broadband internet use. As table 1 shows in 2004 the worth of the broadband industry totalled $7.8 billion with a continued steady growth throughout the period 2000-2004. This represented a compound annual growth rate (CAGR) of 46.8% for the five year period (Data Monitor 2005).

Source: Data Monitor, June 2005 (TABLE 1)

The narrowband sector was the market�s most abundant source of volume in

2004, with 19.5 million of the market’s overall user’s coming from this segment, which is equivalent to 61.5% of the total (Datamonitor 2005). But growth in this sector will be tiny as South Korea’s popular broadband sector gradually takes over the market.

Source: Korea Internet Whitepaper, 2006 (FIGURE 1)

AS the chart above shows in the last quarter of 2005 the internet usage rate has reached over 70% of the 48 million population with the number of internet users growing by 13.6% in 2000-20004, and expected growth still forecasted. This saw the market grow at a rate of 46.8%.

Target Market

In order to get a better understanding of the broadband market in South Korea, there needs to be an understanding of the potential consumers. South Korea’s hunger for technology has incorporated customers with a wide range of demographics in taking up broadband subscriptions. The usage rates of males tends to be higher than that of females, 78.5% of all males use the Internet which is 11.3% higher than females (67.2%). In the total population the numbers of Internet users are 17.78 million among males and 15.23 million among females (Ministry of Information and Communication 2006). This would suggest that the target market should not be distinguished by sex, as a large proportion of both genders use the internet, and should be targeted.

When the demographics are broken down into age, it can be seen that the majority of broadband users are in the 21-39 age bracket making up 24.84 million of the population (MIC 2006). Within this age bracket those in their mid twenties heavily use broadband in Pc Bhangs (Pc rooms that small business run, similar to internet cafes) to socialise, and be part of a group in a culture where group interaction is overwhelmingly important. 25,000 PC Bhangs currently exist (Taylor 2006), and with the numbers increasing these businesses are very attractive in targeting. interesting

To get a better picture of where the target market are located, usage rates can be split into the different cities, with Ulsan having the highest usage rate at 81.8% (MIC 2006). By interpreting these figures it would suggest that Ulsan would be the best place to introduce the service as it is the city with the highest usage rate in South Korea, meaning the consumers would not need too much educating, but would perhaps face stiff competition as the majority of the population are already subscribed to a ISP. Alternatively Jet.net could take advantage of the city with the lowest usage rate and launch the product in Jeju, as there is still more room for growth.

Although the broadband service is being made available to small business as well as homes users, Jet.net should try and take advantage of the small percentage of users who currently access the internet at work, as at current only 23.7% of users use the service at work compared to 97.7% of users in the home (MIC 2006).

With the offer of a modem and free router with web space Jet.Net should look at Wireless LANs, which are becoming big business in Korea. There are many coffee shops that already offer wireless LANs as well as airports, universities etc.

As Jet.net also cater to domestic and small business customers, the government through the National Computerization Agency and the MIC help assist small and mid-sized firms who cannot afford to have an IT team or to purchase the necessary IT material, as many of these exist and can be taken advantage of. This is referred to as the government’s Small Enterprises Networking Project and is aimed at helping small companies to catch up in IT (ITU 2005).

When identifying the target market, Jet.net will need to take into consideration segmentation, social lifestyle factors, as the use of the broadband service will not be down to price as South Korea with Japan have the lowest broadband prices as a percent per capita GDP in the world (DTI 2005), due to intense competition.

Broadband is currently being made available and accessible to all persons in South Korean society irrespective of their demographics. With the introduction of the “Ten Million People Internet Education” 4.1 million people were provided with basic internet skills (Yun et al. 2002). The program also targeted unemployed housewives, recognising that women have a strong influence on household purchases and their children’s education. This provided internet education courses programs for those who felt they were left behind at affordable prices, thus adding the possibility of those in the lower social class as a target market. As education is of great value in Korean Society, and with the inception of internet education programs, parents are most likely to use the service, thus should also be targeted.

Cultural Factors

To improve market entry, there a number of cultural factors that can affect the business transaction in South Korea. Although South Korea is becoming more and more modern since 1997, modern does not equal western. Business is conducted in a different way, as South Koreans approach business with an emphasis on “group spirit and harmony” (Communicaid