SsangYong Rexton II in Hong Kong
Introduction
The advances in technology and the fast modernization of the world in general opened up new and very promising avenues of business abroad. A lot of business-minded individuals from different countries with different nationalities and cultural orientation have and continuously defied the geographic boundaries that exist between continents. This is evident in the growing number of internationally-operating businesses and profit-oriented firms all over the world run by entrepreneurs of varying races and cultures. Such is the globalization trend that has plagued the industries as the information retrieved by man is rebelled successfully against intercontinental borders ( 1994). However, the complexities of the internationalization craze resulted to the downsizing and concentration among small and medium-scale businesses.
The by-products of globalization in almost all aspects of living paved way to more offering of innovative consumer products and services in the global marketplace. Almost all local, multinational and transnational companies (MNCs and TNCs) are studying the potentials of introducing a new product or service to a country in which it does not exist (2001). Among the most crucial aspect in the decision-making of such profit-making institutions is the marketing strategy to be implemented and used in order to effectively penetrate target market and assure economic and product/service success.
Meanwhile, consumer demands during these modern times are more pressuring and challenging. The varying and ever-changing needs of the regular consumer are constantly dependent on the demands of daily survival. Accordingly, the practical consumers increasingly require social responsibility from companies and each other ( 2001). The majority of contemporary consumer judge companies on the way they treat the environment. Aside from these, products and services, like on children’s needs, require safety testing and also make compulsory corporate responsibility.
The main purpose of this report is to identify a new product to be launched in a country (territory). In this case, the Rexton II car model manufactured by South Korean company – SsangYong Motor Company is the innovative product chosen while the country in which it will be launched is Hong Kong. Historically, SsangYong distributes its car models in China. But the said distribution is concentrated in the key areas and cities in the country, such as Beijing, Shanghai, and others. Mainland China is the only place for their car marketing and distribution. Hence, the company is not expansively operating in Hong Kong. With the outstanding features of the region for economic growth and the perceived deficiency in operations, Hong Kong is a potential target market. The preceding discussions substantiate the reasons on the selection of the country as a place for product positioning. Given the relevant analysis, the essential information that will be gathered through this marketing study will serve as the foundational basis for probable market availability of Rexton II in Hong Kong.
NEW PRODUCT: SsangYong’s Rexton II
SsangYong’s Rexton II car model is the newest offerings of the company in 2006. This is the modified version of the mighty Rexton released in South Korea in 2001. The model received the changes of the style in order to address the needs of emphasizing more satisfactory driving experience on asphalts, with more comfort and convenience as well.
Originally, the Rexton model is a 4×4 Sports Utility Vehicle (4WD SUV) released in the late 2001. It is characterized by high standards of appointment, quiet on-road performance, car-like handling, and rugged off-road capability (2007). Accordingly, the car is marketed worldwide with the needs of the motor industry to provide the seeking customers with the most innovative, multi-use, trendy, and affordable vehicles. The car is available in several specifications, such as 2.7, 2.9 and 3.2 liter engines in gasoline or diesel forms ( 2007). It is devised to accommodate a total of seven seating capacity – all facing forwards, or a five people with some sizeable luggage. The Rexton model is similar to the Mercedes M-class, Hyundai Tucson, and the company’s own Musso. Rexton is among the most competitive and sought-after product of the company ( 2007). The latest offers of SsangYong – the Rexton II, is new improved models based from the original designs and are now available in Korea and the UK (2006).
Meanwhile, SsangYong Motor Company is the fourth largest automobile manufacturer in South Korea. It is also a member of the chaebol-supported trading companies along with Samsung, Daewoo, Hyosung, Lucky-Goldstar, Sunkyong, Kumho, Hyundai and Koryo (1999 ). The company’s product line includes the following car models: passenger car and SUVs ( ) and commercial vehicles (SY truck and Transstar). With such information and the given market scope, SsangYong Motor Company is now ready to venture its product not only in major areas in China but also in Hong Kong – the target market.
TARGET COUNTRY: HONG KONG
Hong Kong is a free economy that allows international economic enterprise. This market promises a lucrative and rich land for international business operators. Hong Kong claims to be the world’s freest and most service-oriented economy, the Asia’s best city for business, second least corrupted government, the world’s 11th largest trading economy, and 10th largest exporter of services. According to facts presented by the Hong Kong Trade Development Council in the tdctrade.com webpage (2007), Hong Kong affirms its position as the world’s second highest per capita holding of foreign exchange and Asia’s 2nd source of foreign direct investment. The table below presents the major economic indicators of the region:
Hong Kong Major Economic Indicators
Source: HK Trade Development Council in tdctrade.com (2007)
-
2003
2004
2005
Latest
Population, Mid-year (million)
6.80
6.88
6.94
6.99a
Gross Domestic Products (US$ billion)
158.2
165.6
177.2
188.7b
Real GDP Growth (%)
+3.2
+8.6
+7.3
+6.8c
GDP Per Capita (US$)
23,300
24,100
25,500
27,000b
Inflation (% Change in Composite CPI)
-2.6
-0.4
+1.0
+2.0d
Unemployment Rate (%)
7.9
6.8
5.6
4.8d
*** a Mid 2006; b Government forecast for 2006; c First three quarters of 2006; d 2006.
Meanwhile, the coming out of Korea in the 1990s as one of the largest capital exporters in the global market, particularly in the Asian region (i.e., Indonesia, Vietnam, and China) is a new and noteworthy phenomenon (1999). South Korea action to business expansion in Hong Kong will be a significant leap for both territories. Hong Kong as a reputable and economic viable region is a potent target market. The following are the reasons on why Hong Kong is chosen to be the prospective target market.
Market characteristic
In the first quarter of the year 2005, the economy of Hong Kong proved its firm and stable hold as its real GDP rose to 6% following the progress of the recorded 8.1% from the previous year. With the given instance, the market of Hong Kong is dynamic and it caters to a large range of economic activities and consumers that it can generate such economic ability. The second phase of Mainland–Hong Kong Closer Economic Partnership Arrangement (CEPA II) in August 2004 extended the liberalization enjoyed by the city in the trades of goods and services as consumer prices rose since July of 2004 from its five years of decline. The unemployment rate fell to 4.8% in 2006, from the peak of almost 9% in 2003. The first five months of the year 2006 recorded an increase of 11.6% while exports grew by 9.4%. Arrivals of tourists for visits and vacation as well as business deals continued to increase with a total of 23.4 million or 3.4 times the size of the local population in 2005. The increase was noted as 7.1% from a year earlier. Thus, the tourism sector recorded tourist’s growth of 8.7% first and third quarter of 2006 (2007).
Hong Kong market is composed of various elements ranging to cultures, races, and types of industries, people, and the like. Since it is a melting pot and considered to be world’s freest economy, doing any relevant business is very promising. The introduction of the Rexton II is never a dull marketing decision. Relative with careful planning and strategies, the new product will gain advantageous position in the industry it belongs.
Hong Kong’s Competitive Environment, Cost and Tax, and Demand for the Product
The foremost competitive edge for Hong Kong’s financial sector lies in its reputation of being a hub for financial services and having achieved global prominence in these financial businesses. Its competitive position in the market is influenced by several factors. The regional shift of the growth patterns to and the strong and growing domestic spending in the mainland China puts Hong Kong at the heart of the fastest-growing markets in the Asia-Pacific. Many believe that Hong Kong is the key to gain entrance to China’s vast market and Asia’s economic recovery that a number of overseas companies will be interested in participating strengthened by the CEPA as a result of the successful integration of Hong Kong to China’s economy (2007).
Further, the earning power of the Hong Kong economy is rooted from the higher returns of investment due to the low, simple and predictable tax system that operates in the locality wherein corporate tax rate is 17.5%, maximum salaries tax is 15.5% and the lack of tax on any kind of foreign-sourced income. There are no capital gains taxes and sales tax or VAT. Hong Kong also does not tax personal tax dividends or bank interests (2007). Accordingly, active multinational business organizations are represented in the Hong Kong market where business partners and competitors meet bringing together thought-leaders from all over the world. There are currently 3, 119 regional headquarters and offices of foreign business firms based in Hong Kong. International conferences are also popularly held in the city which amounts to 200 meetings and seminars including the Fortune Global Forum. The economy is characterized with vibrancy with the visibility and dynamics of overseas companies that fuels the entrepreneurial and transnational skills and knowledge of business individuals ( 2007).
With the political, social and legal stability is maintained within the bounds of the territory, Hong Kong has the reputation of one of the world’s best and most productive business centre. It has a corrupt-free economy; it protects the individual freedom of the people stationed; it has transparent, predictable and enforceable legal set up and offers security and protection to investments. The laws that govern the local citizens do not recognize the difference of foreign dwellers in the city as they are not subjected to any special regulatory policies (tdctrade.com 2007). Also, the international management quality and international management experience ranks Hong Kong high in terms of professionalism as according to the reports of the World Economic Forum. This is evident in the low cases of incidence regarding disputes between the management and the labor force of the companies operating in the city ( 2007).
In relation to the product, Hong Kong is a competitive location. Aside from the existing products similar to its nature, SsangYong’s Rexton II will be special in terms of its nature, being a modified version of the equally satisfactory Rexton original edition. The materials and process of production is specialized. The reputation of the product in major areas of China will elicit favorable response from the Chinese and non-Chinese market. Such competitive feature will bring success to the venture. Also, Hong Kong being a commercialized city, the demand for transportation with a touch of contemporary lifestyle is high. Thus, the introduction of the Rexton II in the market is very potent.
Financial and Economic Status of Hong Kong and Strategic Entry of the Product
In the same reference (2007), Hong Kong was rated as the freest economy by the Heritage Foundation in its eight consecutive year and among the top competitive economies of the world according to World Economic Forum. In the year 2001, Hong Kong was considered to be the largest source and recipient of foreign direct investment (FDI) in Asia as well as the largest provider of funds to the mainland. Investors from different parts of the world can make use of their stocks and money in the Hong Kong economy undaunted by the problem of the difference in currency. The financial engineering skills in the corporate environment are demonstrated by the high level of available professional expertise in the city. Hong Kong economy is swarmed by representatives and presence of different multinational corporations which opens ways to new financial services. The English language as the official communication medium in the city proved to be highly relevant in its continuous activeness in the international market
The recent performance of Hong Kong’s external trade has been satisfactory after a 5.4% growth in 2002 increasing steadily from the 11, 7% percent in 2003 and 15.9% in 2004. However, the early months of 2005 slowed the city’s export growth to 11.4% due to the moderating global demands, interest rate hikes, volatiles oil prices, and protectionist measures against Chinese textile. Hong Kong’s major export markets include the Chinese mainland (44%), the United States (17%), the European Union (14%) and Japan (5%) fuelled by the outward processing activities in Guangdong where most Hong Kong companies extended their manufacturing bases. Retained imports which account for around one-third of the total Hong Kong imports likewise slowed down in the early 2005 ( 2007).
With the given significant aspects of the financial and economic environment of Hong Kong, the economic growth of the product is promising. The appropriate and succeeding techniques in terms of marketing of the product are the key to eventually break and penetrate the possible consumers. As predicted, the innovativeness and freshness of the product and even the company itself will serve as its prime attraction.
Strategically, the prospective product – Rexton II to be launched in Hong Kong is a challenge. Given the numerous competitors for the product, the company is faced with the reality of rapid and stiff marketing and market dominance. Rexton is among the products offered by SangYong. The other vehicles are also potential entrants to the said market. But since Rexton is the chosen product, particular attention is set. After identifying the elements of the product, there is a need to identify the market environment conditions. Competition is an important factor to consider before entering a business. Companies should have successful competitive strategies to be able attract, retain and grow customers. However, before the company can plan and execute these strategies, it should be able to pinpoint its sources of competitive advantage which can be differentiated through products, services, channels, people and image (2001). The competitors of SsangYong’s Rexton II is the same products offered by world’s leading automobile manufactures like General Motors, Ford, and others. However, there are also several determinants of its potentialities as a new promising product in the Hong Kong market such as the newness of the SsangYong Motor Company and other significant corporate factors.
Legislative Regulatory and Socio-political Setup of Hong Kong
The non-interventionist policies that govern the citizens and foreign individuals who resides and make business transactions in Hong Kong opened the city to the complex and socio-political environment of international trading. As the world’s freest economy, Hong Kong exhibits a limitless transparency of regulation modeled on the administrative law systems of the United Kingdom, United State and other world leaders in regulatory practice especially in the areas of securities, banking and financial services regulations. Maximum disclosure is provided to all Hong Kong listed companies. This enable the free movement of capital through Hong Kong as there is neither restriction on the international movement of funds nor restriction on currency trading. There is no customs tariff on virtually all goods imported into Hong Kong and access to state-of-the-art hardware and software innovations is easy. The media practice is very vigorous and is not subjected to any form of government censorship ( 2007).
Starting the business in Hong Kong as the target market for SsangYong’s Rexton II or all car models in general as the new product is not complicated. Prior to the operations of the company to Hong Kong, SsangYong is already operating and breaking the automobile market in Mainland China, especially in key areas and cities like Beijing, Shanghai, and other. Given the standard policies prescribed by the national government; the regulation of the initial business venture is dependent on the specified state legislations. The car manufacturers or the company itself must ensure the complying with Hong Kong product standards. In doing so, there will no other be problems to be encountered regardless of the present considerations from both parties – the business and its management and the Hong Kong government.
Conclusion
In every given business that aims market entry, there are a lot of factors to be considered. Aside from the product to be offered and the prescribed target market, there is a need to identify the most potent system that will reinforce the efforts of market access. The marketing communications is the most appropriate strategy that marketing authorities must take into consideration. This is the combination of all the possible communication vehicles that will facilitate the flow of the new product in the chosen location. Advertising particularly internet advertising, sponsorship, direct marketing, sales promotion, and public relation are evaluated and proven o be functional. The product – Rexton II from South Korea and the target market – Hong Kong are undeniably feasible. Meanwhile, the barriers of market entry for the Rexton II such as competition (2004), culture ( 1998), customer diversity and buying behavior ( 2002; 1997), and disadvantages of the selected mediums in marketing communications are seen to be minimized through the utilization of market research, constant evaluation and troubleshooting. Introductory businesses face the most number of challenges, problems and pressures especially if they operate in a politically, economically, socially, and physically diverse locality. But then again, with the appropriate implementation of the chosen strategies coupled with strategic management, the venture will be successful.
Credit:ivythesis.typepad.com
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