Page 617 - Business Principles and Management

Unit 6

Focus On...

Global Sales–Chaebol–A South Korean
E-commerce Club

Combine a unique cultural buying motive, the technology of the
Internet, and effective pricing and you have a rapidly growing sales
tool in South Korea. In 1998, the South Korean company Samsung
tried to find a way to help its 185,000 employees through a difficult
economic time by developing a group-purchasing program over the
Internet. Employees purchasing products offered by the company on
their Internet “cybermall,” known as Chaebol, were given a 15 per-
cent discount on the price of the products.
A unique aspect of the South Korean culture is a strong commit-
ment to group purchasing. Employee groups, groups of professionals,
and even alumni of schools encourage each other to purchase from
Internet sites set up specifically for their group. In addition to provid-
ing products for sale, the cyber communities offer chat rooms, bul-
letin boards, group information and news, and personal home pages.
These cyber groups reduce the amount of promotion required and
also allow companies to sell products at a lower cost because of the
greater volume resulting from group purchasing.
Even Samsung was surprised by the success of Chaebol. The Internet
site increased its membership to 1.2 million customers within two years
and expects to add at least another million in the third year. Sales are
expected to top $1 billion by 2005, with net profits of $45 million.
For years, many social networks in South Korea have formed around
employee groups. So it has been much easier to extend buying club ser-
vices to those existing groups. Samsung now establishes similar Internet
services for many businesses. It has formed a partnership with Freechal.
com to open a site called Samsung Mall that is available to anyone.
However, it still uses purchasing clubs as the primary method of signing
up customers, continuing to build on the cultural need to belong to a
group. The next step for Samsung is to develop an agreement with one
of South Korea’s largest parcel delivery services to be able to guarantee
24-hour delivery of products ordered on the Internet.

Think Critically

1. Why do you believe Internet shopping grew so rapidly among
Samsung employees in the first two years of the new cybermall
business?
2. What causes Internet sales to increase when Samsung devel-
ops specialized cyber communities and includes chat rooms,
information services, and home pages developed specifically
for a particular group of consumers?
3. Do you think U.S. culture would support the same approach
to developing Internet shopping groups as was done in South
Korea? Why or why not? Are there examples of successful
shopping groups in the United States that have developed
without the use of the Internet? For those you can identify,
what has made them successful?

Source: BusinessWeek Online, March 20, 2000 (http://www.businessweek.com/
2000)
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