LOTTE Confectionery: Strategy Evaluation

1. Background

LOTTE Confectionery is No1.confectionery Crew that holds multiple No1 retailing emanations of aggregate, candy, chocolate and biscuit segments in Korea private chaffer. LOTTE Confectionery stands in unrivaled situation by Xylitol and occupies solid situation in chocolate by Ghana chocolate and Dream Cacao.

Orion Confectionery interknowing sale exceeded private sale in 2009.

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Orion Confectionery ranks 1st in interknowing sale floating Korean confectionery companies and possesses vast augmentation reprimand at interknowing chaffer, accordingly Orion Confectionery releases gentrified private emanations to interknowing chaffer.

Private confectionery chaffer is Red Ocean, of-late income has been decreased. Private confectionery chaffer is saturated in occurrence (EDaily. 2011.01.11). Even Controleign confectionery companies are confederacy and intensifying two-of-a-trade in Korea.

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The flake and profitability of interknowing chaffer are larger and surpassing than private chaffer. Thus, Korean Major Maintenance companies unwavering to penetrate aggravatesea chaffers. Floating them, Orion Confectionery ranks at 1st in interknowing confectionery office.

2. Current policy of LOTTE Confectionery

1) Me Besides policy

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‘Me Besides’ policy is a office policy that subjoined crew emulates a chaffer superfluous crew’s policy. It is denominated as ‘Chaffer retainer policy’ or ‘Imitation policy’. With this policy, a retainer can reach divers advantages. The chaffer head frequently bears the colossal expenses of developing fantastic emanations and chaffers, unfolding disposal, and direction the chaffer. By opposition, as with challengers, the chaffer retainer can attain from the head’s trial.

LOTTE Confectionery is a illustrative crew to uses ‘me besides strategies’ control emanations. There are divers cases that LOTTE Conf. emulates competitor’s controltunate emanations.

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Ttalented 1. Me besides emanations cases in LOTTE Confectionery

Competitor Emanation

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(Company)

LOTTE Conf.

Product

Remarks

Competitor Emanation

(Company)

LOTTE Conf.

Product

Remarks

Chocopie

(ORION)

Chocopie

Pie

 

(HAITAI)

 

Snack

Homerunball

(HAITAI)

Myball

Snack

DR.YOU

(ORION)

Mother’s finger

Premium

Emanation Mark

Source: Interview with ORION employee

LOTTE Confectionery applies ‘Me besides Policy’ control aggravateseas office. The Ocean countries where LOTTE Conf. unnatural emanation occurrenceories by itself are China, Vietnam, Russia and India. Except India, the entrance timings of LOTTE control 3 counties are ordinary as ‘me besides policy’.

In China chaffer, ORION penetrateed in 1993 and LOTTE penetrateed 1 year succeeding. Vietnam where LOTTE penetrateed in 2007 as merit of BBICA, 2nd biggest confectionery crew in Vietnam, was disclosed to ORION 2 years controlthcoming. ORION recognized a national ancillary crew, OFV (ORION Maintenance Vietnam Crew), in 2005 and unnatural national occurrenceory in 2006.

In Russia chaffer, ORION recognized OFR (ORION Maintenance Russia Crew) in 2003. ORION unnatural a chocolate occurrenceory nigh Moscow in 2004 and cooperate occurrenceory control aggravatetotal confectionery consequenceion in 2006. But LOTTE recognized LOTTE KF RUS LLC in 2007.

Ttalented 2. ORION – LOTTE Confectionery Aggravateseas entrance duration

Country

ORION

LOTTE

China

In 1993, Establishing Beijing Office

In 1994, Establishing national ancillary

Vietnam

In 2005, Establishing ORION Maintenance Vietnam Crew

In 2007, Acquiring 30% supplys of BBICA

Russia

In 2003, Establishing ORION Maintenance Russia Crew

In 2007, Establishing LOTTE KF RUS LLC

Source: Financial Fantastics, “LOTTE, Subjoined ORION?” February 25.2008, LOTTE Confectionery on-line homepage, “History” (http://www.LOTTEconf.co.kr/images/company/pic_hi05.jpg)

2) M&A Policy

LOTTE confectionery has objectueed 500 billion KRW to aggravateseas chaffer by 2010. LOTTE focused VRICs (Vietnam, Russia, India, China) with merit national companies and occurrenceory fabrication. Sales signalination was lower than confluence. LOTTE aggravatesea sales consistantly increased and latest year chronicled 500 bil KRW.

They feel a 650 bil KRW sales target this year.

LOTTE sped up their global office as penetrateing China, India, Vietnam, Belgium, Russia and Pakistan (6th largest population).

1 China

LOTTE confectionery recognized “LOTTE China maintenances poor jurisdiction crew” in Beijing, China in 1994 and in 2005 it uncongenial “Qingdao maintenances poor jurisdiction crew” which renamed succeeding “LOTTE Qingdao maintenances poor jurisdiction crew”. In 2006 it besides uncongenial “Shanghai maintenances poor jurisdiction crew” and renamed it as “LOTTE Shanghai maintenances poor jurisdiction crew”.

The income in China in 2005 was encircling 90 billion Korean Won and unwillingly increased to 100 billion KRW in 2006, as the chocolate emanation which is ocean emanation of LOTTE Shanghai maintenances LLC reach its strides in 2006, the income jumped up to 140 billion KRW in 2008.

– LOTTE China maintenances poor jurisdiction crew- Choco Pie, Aggregate Emanationion

LOTTE Confectionery’s disquisition into the Chinese Chaffer was chiefly unusual. Even through the fierce two-of-a-trade of Global Maintenance Industries, LOTTE was talented to hold the Chinese Flavor.

LOTTE indicates that it was affectly accordingly “Steady emigration and Improvement of the Corporeprimand representation from the controlthcoming 80’s and the minister of dignified emanations imputable to the art of National plants in the Mid 90’s.” Before any knowing kinsfolk among Korea and China, LOTTE Confectionery tight on ministering dignified mark emanations through Hong Kong.

Thus LOTTE has succeeded in establishing hanker signal credulity. Let’s admit a appear on a couple of cases. Supporting Horse Racing hosted by national merchants, emanationion and encouragement of Café Coffee Aggregate to succor Chinese abandon smoking, war to succor victims of abundance impairment and other activities to hold the courgeneration of the Chinese.

Through these efforts, in August of 1994, LOTTE Confectionery recognized the ‘LOTTE China maintenances poor jurisdiction crew’ in the Administration Technology Fruit Zundivided in Beijing. Thus it has made affectly to minister suittalented national emanations.

The regulative recognized national occurrenceory was entirely co-operational. LOTTE Confectionery, Japan LOTTE, and Mitsui objectueed in the occurrenceory and are now exposed in 3 divisions. The 1st occurrenceory dundivided Choco-pie, Cream Cake, Koalamazzi, The 2nd occurrenceory dundivided compound aggregate, and trash aggregate. The 3rd occurrenceory dundivided Xylitol aggregate, Coating aggregate.

Floating these emanations, it can be said that GUM represents LOTTE Confectionery. Chewing aggregate inaugurated entity dundivided and sold in September of 2001, Xylitol aggregate, compound aggregate in 2002 and Coating aggregate in 2003.Products from these occurrenceories were sold in Beijing, Shanghai, Tianjin, and other areas of China. Besides the chaffer portion-out in China exceeded 30%.

– LOTTE Qingdao Maintenances Poor Jurisdiction Crew- snacks, biscuit emanationion

In 1996 the ‘Qingdao Maintenances Poor Jurisdiction Crew’was recognized at the test and technology boundary of Qingdao. Infamousd on reaching the belief of Chinese, LOTTE Confectionery singly objectueed and uncongenial Qingdao Maintenances Poor Jurisdiction Crew in 2005.

Ocean emanations of that crew were snacks and biscuits such as Myball, Peanut-cuttlefish circle, Choco-pie, Custard, Strawberry pie and other pies. Chiefly the prevailingity of the Custard and Choco-pie is sharply increasing and is expected to regenereprimand the CRAZE in Korean Chaffer.

– LOTTE Shanghai Maintenances Poor Jurisdiction Crew- Emanationion of galled fluent of chocolate.

In 2006 ‘LOTTE Shanghai Maintenances Poor Jurisdiction Crew’ was singly uncongenial by LOTTE Confectionery, recognized in 1993. This occurrenceory was oceanly submissive the galled fluent of chocolate. In January of 2007, LOTTE Confectionery and Hershey’s authorized a strategic union to consequenceion and retail the ocean emanations from this occurrenceory. And from October 2007, LOTTE Confectionery inaugurated to consequenceion and minister its prevailing emanations, Ghana and Dream CaCao into total aggravate the Chinese chaffer.

(Source: Journal ‘The Buyer’ 2008)

2 India

LOTTE uncongenial Parry’s in May 2004. It was a uncompounded objectue, not attributable attributable attributable junction stake. LOTTE regulatively uncongenial 60.39% supply and reached the intermission succeeding. Supply merit consume was encircling 23.2 Bil KRW. Parrys Confectionery Ltd, recognized in 1914, was undivided of the symbolical confectionery companies in India. Annual sales are aggravate 22 Bil KRW. By acquiring Parry’s, LOTTE could preoccupy India confectionery chaffer as courteous as secured the figure competitiveness making India as emanationion infamous control exporting to Africa and Middle East area.

(Source: 2004/5/21 maintenance fantastic instrument)

3 Vietnam

In 2007, LOTTE uncongenial 30% supplys of BBiCa which was the 2nd largest confectionery crew with annual sales 20Bil KRW in Vietnam. Using BBiCa’s sales network aggravate the province, LOTTE expected to unfold chaffer influence in Vietnam, the population was encircling 84 Mil in 2007.

(Source: 2007/10/05 Medical today instrument)

4 Pakistan

LOTTE Confectionery uncongenial Pakistan Kolson crew’s (K. S. Sulemanji Esmailji & Sons (Private) Poor) supply 69.45% (20 Bil KRW) and became the biggest supplyholder. Through this merit, LOTTE could initiate a nationwide office in Pakistan.

Pakistan confectionery chaffer extent was the 1/3 of Korean’s. However it was expected to expand 10% each year, since the population lower the generation of 14 was 37%. (Source: LOTTE Confectionary Internal Data)

Kolson was founded in 1942, undivided of the superfluous crew with asset 53.2 bil KRW and annual sales were encircling 33 bil KRW. Kolson had the 2nd largest chaffer portion-out (29%) in snack, 4th(6%) in biscuit, the 1st(44%) in pasta chaffer in 2010.

3) Synergy with LOTTE assembly’s affiliates

LOTTE has a anticipation to produce a global mark equitable affect Samsung and Wal-Mart. Undivided of the solution strategies control achieving this object is fabric “LOTTE Town” LOTTE has already discloseded “Moscow LOTTE Town” on latest October, 2010, which is consisting of softness hotels and portion stores. That was the regulative aggravatesea “LOTTE Town” Besides in Hanoi, Vietnam and in Shenyang, China are lower fabrication “LOTTE Town” which is planning to finished the object of 2013 in Hanoi, and to finished the object of 2015 in Shenyang.

1 Fabric LOTTE Town in China and Vietnam

By 2018, LOTTE achieve plant further than 10 LOTTE Town in Nanjing, Shanghai, Chengdu – in China-, Ho Chi Minh in Vietnam, and Jakarta in Indonesia, etc, to attend them as a augmentation infamous control the LOTTE’s global office. Additional aggravatesea LOTTE Town achieve be unnatural oceanly focusing on VRICs (Vietnam, Russia, Indonesia, China)In China, Nanjing Jenye District, Shanghai Zhabei District, Sichuan Province, Chengdu Jin Jiang District, Wuxi, Jiangsu Province, Zhongshan , Shandong Weihai , Chongqing, and Wuhan, LOTTE is discussing with those cities and governments control consulting the fix, fabric extent, office counsel in LOTTE Town. Those involved projects are targeting to finished in 2014 to 2015. In Vietnam, subjoined Hanoi, Ho Chi min and Danang are planning to fabricate LOTTE Town. Jakarta in Indonesia and St. Petersburg .in Russia -subjoined Moscow-, are meddling afront control LOTTE Town.

2 LOTTE Town and LOTTE Confectionery global office

LOTTE assembly is planning LOTTE Town fabrication, oceanly targeting on promotion countries such as China. Those countries are equitable encircling to imagine consumer chaffers infamousd on high-growing economic fruit and high-growing spending merrymaking. If LOTTE Confectionery is starting global office infamousd on LOTTE Town, it can develop the synergy to aid sales and maximize avail.

3 Aggravateseas crew administration with Japan LOTTE

LOTTE Confectionery has a controltune of national ancillary companies. And most of them are operated in collaboration with Japan LOTTE. It seems to produce further sttalented office occurrence. Japan LOTTE has further aggravateseas trial (Recognized LOTTE USA in 1978, and so on) and financing accommodation (Low Yen Carry divide, and so on). Therefore LOTTE could portion-out Japan LOTTE strengths and hedge opposing aggravateseas office risks.

Ttalented 3. Aggravateseas collaboration subsidiaries

National ancillary

Country

Overseas collaboration companies

LOTTE China Maintenances Co., Ltd

China

Japan LOTTE, Mitsui & Co, LOTTE Confectionery etc.

LOTTE Philippines Maintenances Co., Inc

Philippines

Japan LOTTE, Japan Taiwan Trade, Philippines Nugget Maintenance

LOTTE Vietnam Maintenances Co., Ltd

Vietnam

Japan LOTTE, Marubeni Co.

LOTTE Packaging(Beijing) Maintenances Co., Ltd

China

Japan LOTTE

LOTTE Taiwan Co., Ltd

Taiwan

Japan LOTTE

Shandong FengCheng Cold bevergeneration Poor jurisdiction crew

China

LOTTE Objectue Poor jurisdiction crew, Shandong FengCheng Maintenance Poor jurisdiction crew

LOTTE Trade And Disposal. PT

Indonesia

Japan LOTTE

Source: Korea Counsel Service. INC, “LOTTE Confectionery – Contingent jurisdiction and Contract clause” (http://www.kisline.com/)

3. Conclusion

1) LOTTE Confectionery SWOT partition

Control policy tender, we stir SWOT of LOTTE confectionery as underneath.

Ttalented 4. SWOT Partition

Strengths

Weaknesses

A colossal private and global disposal network and its affiliates

A multiformity of No. 1 nativity mark held

Excellent emanationion facilities

Abundant principal control objectuement

Limitation of Me-Besides policy on prize emanation

Poor exploit in aggravateseas objectuement

Weak newfangledness policy

Centralized resolution making

Opportunities

Threats

Synergy with LOTTE Assembly’s interknowing policy

Target province’s (VRICs) population augmentation

Keen two-of-a-trade with national and global companies

Diversity of national consumers’ tastes

2) LOTTE Confectionery’s solution strategies

Given occurrences and over partition, we can invent 4 solution strategies control LOTTE Confectionery in signals of Interknowing Office Administration.

First, Strengthening M&A (Brownfield system) infamousd on abundant principal power

  • Saving duration control chaffer penetration
  • Risk hedging

Ttalented 5. Entrance statute of Controltunete and Orion

Entrance statute

LOTTE

Orion

Remark

Ownership

M&A

O

X

 

Greenfield

 

O

 

Trading

Exporting

O

O

 

Importing

X

X

 

Collaboration

strategies

Low commitment (Licensing)

X

X

 

High commitment

(JVs)

O

X

 

Second, Synergy chattels through Assembly’s alignment

  • Administration of flake & administration of scope
  • Cooperating with LOTTE Town

Third. Decentralization control resolution making

  • Localization policy control local occurrences of each province
  • Timely responsiveness

Lastly, Chaffer superfluous through newfangledness policy

  • Allocating objectuement in R&D
  • Recruiting and educating global experts

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