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Getting ready for an international assignment
Jong Won Yang
Part 1.1 Introduction of the company.
Before we get started, CJ GROUP was the forerunner of Samsung Group. The company was founded
in 1953, starting by producing sugars for the first time in Korea history. At that time, Sugar was
classified as a frippery in Korea, for example, descent restaurants served water with sugar melted in
it. They contributed lowering the price of sugar in those days. The founder of the initial company
is ‘Lee Byung Chul’, who was a South Korean businessman, founder of Samsung Group. He is from
a local aristocrat and said that he did not show his talent and interest in writing, he showed his
ability in theology and business. After graduating from Middle East High School, South Korea, he
went to Tokyo to study political economy at Waseda University, but he lost interest in theology
along with health problems, and he knew how people was thinking, so he dropped out of school
and returned home. Most of the people think that he went straight to business after dropping out
of school with the support of his father, but actually he recovered health in his hometown and went
to Seoul to meet his old friends and settle down, but failed to get a job, wandered around with his
father’s remittance for nearly two years until he came back to hometown. He had hard times dealing
with what he should do for living, failing every business he invested on and was addicted in
gambling, most of the time walking out of the place with bare hands. And then a critical opportunity
was created for him to enter the business. One day, walking back from the gambling house to home
again with no profits earned, as soon as he opened the door and saw the children sleeping in the
moonlight, he felt as if he had been awakened from a nightmare. Lee was 26 years old at the time.
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He collected capitals through many businesses, some are transportation, real estate, and export.
With such funds, he started to carry out group-sized businesses in 1953 with Cheil Jedang and Cheil
Industries in 1954. It was the start of Samsung empire. In 1950’s, when Korea’s first president Lee
Seung Man was elected, while other companies in Korea was trying hard to robust their firms, CJ
was already a well-established firm thanks to his close ties with president Lee while his father was
working for the Independence Association, he was able to create an mutual association with the
Lee administration. The relationship with the politics was began to shine after Lee’s administration
promised dollar support for their fertilizer factory. But soon enough, Lee was accused for his
attempts for long term dictatorship by changing constitutional law in his taste and the April 19
revolution brought down Lee’s regime along with the establishment of a fertilizer factory went
nowhere. Then the 5.16 coup takes place, to add insult to injury, when he was arrested by the
prosecution on charges of fraud and tax evasion with a fine of 5 billion won. Eleven businessmen
were arrested as fraudulent stockholders, while Lee, the No. 1 businessman in the business
community, was dubbed the "negative stockholder No. 1." The military government accused Lee
Byung-chul and others of corruption, but compromised with them for economic management and
growth, and Lee made cooperative relations with the military government. It was also able to resume
the establishment of a fertilizer plant with the help of the government. After a decade of twists and
turns, the world's largest. fertilizer plant was about to be completed as a site capable of producing
360,000 tons a year, but this time the ‘saccharine smuggling scandal’ blocked their way. The scandal
was big enough that it received a nationwide criticism. To take responsible for this scandal, Lee had
to hand over the completion scheduled fertilizer factory to the country. Lee left CJ in disgrace, but
soon came back to business through Samsung Group. He prospered Samsung Group by establishing
media, hospitals, taking over banks, insurance.
Part 1.2 Developments in other fields
Former CJ broaden their products more into it, covering most of the ingredients in Korea, such as
seasonings, instant coffees, and frozen foods. At the end of 1980’s, they were able to expand the
company’s size by stepping into Indonesian market. It was not the end for CJ just by covering the
food industry in Korea. They were challenging themselves into other fields of markets. They also
stepped into restaurant businesses and media too. After CJ CheilJedang announced themselves as a selfsupportive group, which was controlling most of the seasonings thus ingredients in the company, CJ found a
chance to start a new business for themselves too, and that’s why they were starting to dive in to media
markets in Korea. They were investing into ‘Dreamworks SKG’ which is one of the big animation
company founded by Steven Spielberg. In 1996 December, they founded ‘CGV’, a third leading filmdistribution company. For Korea, in cultural aspect, people prefer more indoor leisure life rather
than sporting outdoors. The average work time in Korea supposing one is working in regular work
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days, it sums up to 49hours and 55minutes a week. Which is up to 8hours per day. It is only a
statistic and in reality, they work up to 10pm plus extra jobs are given to them and could not leave
the office until you finish it. For those reasons, they would take a rest indoors to relive the stress
they got during the work days. Following, about movie market, According to HIS Markit, South
Korea is placed in fourth in worldwide for the size of the market, defeating most of the European
market despite the population of it. In other words, as Korea theater market is forming an oligopoly,
and the gap between the first and the second place is not that big, CJ was successful in that market.
It wasn’t only cinema’s taking all the credit when CJ was establishing a solid foothold throughout
the market in early 1990’s. CJ also had 1 trillion won in sales for the first time in the domestic food
industry. For my thoughts, I think this was the time when they were turning their firm’s route towards
becoming a cultural enterprise. In 1997, they opened a buffet style restaurant named ‘VIPS’, which
was a big hit in Korea making competitors and starting a new trend in restaurant business. After
settling their business in foods market, they started investing more to the culture business. Firstly,
one of the many affiliates that showed up is CJ Entertainment. It is a film investment, production
and distribution division under CJ ENT, and is one of the top four in the Korean film industry along
with NEW, Showbox and Lotte Entertainment. The company can afford to invest, make, distribute,
and screen movies in theaters. In Korea, there are only two companies that can hold such power:
Lotte Culture works and CJ ENT. In other words, they were also forming an oligopoly in the film
industry in Korea. CJ ENT is famous in Korea and clearly there's a very powerful distribution through
CGV and a push for his own movie through its ridiculous amount of screen occupation.
However, this was just the beginning of CJ GROUP’s entrance to cultural enterprise. In other parts
of their business, CJ took over MNET, which started as a music channel, but soon failed due to
flawless changes in broadcasting market and the expansion of the cable market. After CJ merged
the company, it has started to become an entertainment channel premiering a variety of programs
including concerts and variety shows by domestic and foreign singers. In 2000’s, it was a golden
era in Korean entertainments, such as K-POP or Korean TV shows. Plus, at that time Korean dramas
were exported to other countries, breaking a record in Korean domestic drama ratings.
Next, they opened health& beauty store named Olive Young, a drugstore targeting mainly on men
women cosmetics. It is currently the drugstore with the largest number of stores in the country.
Through 1,200 stores nationwide, online malls and global K-beauty reverse-import platforms, it is
not that much to say that it has pioneered the domestic drugstore market. Also, Japanese and
Chinese tourists often visit for cosmetics and beauty products. Through these efforts they were able
to stabilize the company into the domestic market, and was also ready to head out to other
countries.
In a nutshell, CJ held their success in business through close relationships with the politics. As I’ve
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spoken before, in 1950’s Korea was decolonized from Japan and neither in politics nor institutional
part lacked backbones. In other words, once you were seizing power, it could naturally lead to
dictatorship or long-term management on the place, providing the company to hold the dominant
position. That’s why CJ was able to accumulate their power and have those monopolistic status in
Korea. And on the other hand, at that time Korea did not have much cultural activity for the people
to enjoy in their spare times. Thanks to CJ, people were able to enjoy Korean movies, food, dramas,
and music to their heart's content in everyday life.
Part II Global status of CJ Group
CJ’s entrance in the global market couldn’t be explained by only showing single country’s cases.
They were analyzing each country’s characteristics to step in to their domestic market. The main
countries are: China, America, East Asia, Australia, Europe, Japan and Indonesia.
In December 1988, CJ Cheiljedang established the company’s first overseas subsidiary in pasuruan,
Java Island in eastern Indonesia, and began selling its amino acid "Lysin" for feed. This is not only
CJ Cheiljedang but also CJ Group as a whole, the first overseas company to do so. It has been quite
successful as the annual production volume has increased from 10,000 tons in the early days of its
establishment to about 250,000 tons now, and last year, the accumulated production of lysine
surpassed 3 million tons. Indonesia's bio business is expected to generate about $600 million in
annual sales this year. In particular, it exports most of its production (about 90 percent) to other
countries, including Europe and Asia, and has achieved the achievement that suits its status as the
world's largest amino acid production base for feeders.
Following with successful launch in Indonesia, CJ Group started out as a food business in Vietnam
and expanded its scope to include bio, logistics, movies and theaters. Currently, the company
focuses on four major business groups: food and food services, biotechnology, new distribution and
entertainment & media. CJ Group's sales in Vietnam exceeded 1 trillion won last year, with a target
of 5 trillion won by 2020. Their size grew bigger after taking over Vietnamese frozen company Cau
Tre and fisheries processing & food co. MINH DAT, expecting $700 million annual sales in upcoming
2020. Not only foods were the strength in the local market. The screen business was successful. CJ
CGV entered Vietnam in July 2011 by acquiring Megastar, the country’s No. 1 multiplex, and changed
its brand to CGV in 2014. In its first year in Vietnam, only 4.4 million people attended the event
annually, but the number of its accumulated audience exceeded 62 million last year, a year. One out
of every 1.5 Vietnamese watched the movie at CGV, given that the Vietnamese population has
reached 90 million.
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So far, China has been one of the biggest blue oceans all over the world that everyone wants to
dive into. Subsequently, CJ was also one of them. From food to culture, there are 11 subsidiaries
already performing in China. CGV was having its successful steps toward the Chinese screen market
as they had opened its 100th cinemas in Shanghai. With the opening of the theater, CJ CGV have a
total of 100 theaters and 793 screens in 48 cities including Shanghai, Beijing, Guangzhou and
Shenzhen.
For the food industry, CJ Cheiljedang has been producing Bibigo dumplings at its Yoseong and
Guangzhou plants. dumpling was already on sale before the company introduced its simple food
products such as meatballs and Korean style burgers to China, which consumes a lot of dumplings,
is an important market for CJ Cheiljedang, which is the main food source of Bibigo dumpling. 7.8
percent of all Bibigo dumpling sales come from China. The annual sales were up to 50 billion won,
just in China. According to statistics, bibigo dumpling’s percentage of global sales (53.7 percent)
exceeded that of domestic sales for the first time with 295 billion won and 342 billion won. It has
been proved China was a competitive market to invest on as the sales in China was as big as the
sales in America.
As matter of fact, in the U.S, Bibigo dumplings annual sales was ranked first with sales of 240 billion
won in overseas markets. Korean style is famous as a well-being food in America because there are
not much salt involved and they could intake various of needed vitamins even with only one dish.
So, their strategy was to make Americans have Korean dishes at least once a week. Plus, the
ingredients in the dumpling has also been changed to make it taste more like Asian-styled.
Part III Drawbacks in entrance
There weren’t only good sides for CJ group in entering foreign markets. They went through many
fails and also coming out with new strategy to maintain their position in those markets or had to
leave there.
First, they did not understand the consumer’s needs. CJ’s first product in the Chinese market was
beef seasonings. It brought success in the Korean market and they thought Chinese will be the
same. So, taking the risk of a lack of pre-marketing, they were busy placing the products in the
market. As a result, they had to pulled out with a big deficit. The reason they failed in the Chinese
market was that most of the Chinese people prefer chicken powder than beef. Plus, the absence of
advance marketing also played a part. For their solution, recently, they started embarking on
development of making Chicken powder seasonings. They invested up to 80 billion KRW in their
seasoning factory located in Qingdao.
One of the biggest events happened during there were stabilizing the businesses in China was
THAAD retaliation. Due to the controversy over the deployment of the U.S. Forces Korea (USFK)
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THAAD since 2016, the Chinese government has ordered Chinese people in their country to ban
the transmission of content produced in South Korea or advertisements featuring Korean celebrities.
At the same time, unofficial executive orders encourage boycotts of Korean goods or penalize
Korean companies operating in China. Many companies pulled out of business in the aftermath of
retaliation and CJ was one of them. Starting with CJ Foodville’s dining brand VIPS, other brands
were also withdrawn sequentially. The problem was profitability. CJ Foodville’s Chinese business
posted a cumulative deficit of 84 billion won from 2008 to 2017. Although it made 432 billion won
in sales during the same period, there was practically no actual sales. All five local corporations have
not made a single profit since their launch. So, what they come up with was to invest in other
subsidiaries, CJ Cheiljedang and CJ Freshway.
In Indonesia, despite the many advantages the domestic market was having, such as a population
of about 200 million, a G20 member country and an abundant amount of natural resources, they
also faced with problems. The following are the things they overlooked: was a Muslim country, there
are many islands geographically and in terms of per capita GDP, the scale is not large. In my point
of view to solve this problem given upon them, strategy has to be changed following with specific
analysis in their cultural and given environment.
Conclusion
It is also hard for individuals to understand how other people from other culture think so. To
understand the cultural difference and to set a effective strategy to bring success in the market, it
is their role to analyze and to adapt into experience the given environments. Through understanding
the culture, there will be less threat of big failure and may bring success in that market. Plus, by
spreading the field of business such as investing in many kinds of business could be also very
helpful in many ways. As we can see from CJ Group chronicle, they were maybe a very successful
in their home ground Korea, they also had to go through problems that they have to defeat for
their success in foreign markets. By modifying strategies flexibly, and finding the way to quickly
adapt into their nature, they were able to safely set their business in other countries.
References
https://www.cj.net/cj_introduction/global/global.asp
https://busy.org/@brianyang0912/feat-cj
http://www.skyedaily.com/news/news_spot.html?ID=82708
https://m.sedaily.com/NewsVIew/1OMI70EDR6