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WHARTON

ASIA JOURNAL VOLUME 9 | FALL 2013

FAST FOOD IN ASIA

CHINA TAKES OVER U.S. PORK fusion food

KIM’S FOOD TRUCK

PLUS MBA INTERVIEW GLIMPSE AT ASIA HEADLINES & MORE!

KPOP TV TALENT SHOWS IN CHINA

THAILAND’S ENTERTAINMENT AND MEDIA INDUSTRY


TABLE OF CONTENTS 3

Fusion Food By Salina Lee

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Fast Food in Asia By Jessica Xu

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Food Inflation in China By Hyojin Lee

LETTER FROM THE EDITOR Who’s down for a bite to eat? Or wants to watch an Asian movie? Or maybe even both? In this issue, we focus on the business side of Asian entertainment and food industries. By taking looks at fast food companies in Asia to TV entertainment expansion in Thailand, we are able to step back and see how much Asia has progressed in these fields as well as get an idea of where it is headed. We also feature MBA interviews of people who’ve worked in the food industry in Asia as well a new section of the Journal, the Asia Headline News section, where we highlight the most important business news that has occurred within the half year in Asia.

Lao Tzu once said that “nature does not hurry, yet everything is accomplished,” and with this issue of the Wharton Asia Journal, I am pleased to say that the time that we’ve spent putting together the Journal reflects the final quality of the product. I would like to thank the rest of my committee, the board, and additional contributors for allowing the Journal to flourish. Go WAX! Sincerely, Ethan Song

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China Takes Over U.S. Pork

By Justine Lee

JOURNAL STAFF Editor-in-Chief Ethan Song

Managing Editor Salina Lee

Director of Layouts Jessica Xu

Layout Designers Connie Kang Justine Lee Jinny Lee Jo Wang

Writers Connie Kang Justine Lee Salina Lee Ethan Song Johnny Su Steven Sun Jo Wang Jessica Xu Ann Zheng


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TV Talent Shows in China

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By Connie Kang

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Television Industry in Malaysia By Ann Zheng

Thailand’s Entertainment and Media Industry By Ethan Song

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K-POP: Marketing Mechanism Behind Idols By Steven Sun

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Kim’s Interview

ASIA

By Ethan Song

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MBA Interview By Jo Wang

Glimpse at Asian Headlines By Ethan Song

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POR

KB BUN ELLY

A KS A L

FUSION CO A T HI

IMC

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Many of you might have gone to Morimoto or Chifa to experience that hype around Asian Fusion food. Not exactly a recent restaurant fade, Asian fusion became a culinary trend in the late 1990s when restaurateurs like Wolfgang Puck discovered the success of combining strikingly different Asian flavors with Western tastes. The resulting culinary creations hit the restaurant industry in a revival of trends to combine various cultures, ingredients, and cooking styles in the form of fusion dishes. Fitting in with the American idea of a melting pot, fusion restaurants integrated different cultural styles to bring the famous “kimchi taco” and “pork belly buns.” Most fusion foods can be traced back to the colonial days when chefs would draw inspiration from the cultural mixes associated with colonies and trade routes. The classic Vietnamese banh mi sandwiches are an example of the direct influence of French colonialism. Typical French baguette, pate, and mayo heightened with the Viet flavors of chili and cilantro created a fusion of two cultures and brought in a legacy of food business dedicated to combining unusual ingredients together. Although prominent in America, fusion food is also becoming a growing trend in Asia as well.

This summer, after “surviving” a Typhoon 8 in Hong Kong, I ventured out to Lan Kwai Fong for some afternoon victuals and stumbled upon a French-Japanese fusion restaurant tucked into the upper floors of the LKF Tower. Despite my skepticism of such a combination, there were few options available at the time, so I decided to try it out. My resulting meal was sautéed Kobe beef with brown rice wrapped in a crepe-thin egg omelet topped with a unique wasabi cream sauce. Needless to say, it was phenomenal. Presentation-wise, everything was French classy and Western style. However, the distinctive Asian flavors popped and melted together

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FOOD

By Salina Lee

in very unexpected ways. Fusion food business is not just a combination of tastes, but also one of cultures, and Asia is increasingly embracing the concepts of cultural diversity, especially through the trends of food hybridity.

The fusion restaurant business is gaining attention as chefs first experiment with combinations of the wide range of Asian foods. Fusion Shanghainese and Cantonese cuisine in Shanghai has been creating food ruptures across the taste buds by revising the traditional hongshaoru with salted pig meat in Canto style soy sauce. The Malaysian-Chinese cuisine combines thick, yellow noodles with ever-present mixed meat and seafood paste to create the well-known Singaporean dish found in every hawker center. Hybrid Asian cuisines have even yielded to bolder cuisine combinations such as southern comfort food with Chinese accents at the MC Kitchen in Hong Kong. A foie gras lettuce wrap represents a risky combination of French style foie gras eaten like traditional Thai vegetable wraps. If that’s not convincing enough, the mash potato with Chinese salty fish demonstrates an ultimate combination that fuses unrelated cultures into a dish of satisfying taste.

Food is undeniably a common link across cultures, and the idea of fusion restaurants only serves to affirm the fact that cultures can be combined and accepted to create an even more expressive form together. The fusion cuisine is proof of a culinary business that picked up a trend in Western restaurants, moved to Asia, where the already present tradition of hybrid Asian foods, only became more prominent in the recent years. As the international scene becomes ever more international, grab your wok and find a spatula to prepare yourself for the fusion food business as it transcends taste buds and maybe even lead to a similarly hybrid acceptance of the world’s cultures.


China has one of the largest food and grocery markets in the world. Not only does China’s food market influence the world food prices, but it also has a strong influence on China’s own economy. Although the Chinese government keeps close track of changes in food demand and supply, fluctuations in food prices are often difficult to control and can trigger macroeconomic consequences. In September, food prices again became agents of increased consumer inflation.

Food inflation inCHINA By Hyojin Lee

Overview of Recent Jump in Food Prices

Consumer Price Inflation due to Pork Prices

China’s food prices in September 2013 jumped 6.1% compared to last year. That is also an increase of 1.5% from August 2013. This percentage change is the greatest advancement in food prices since May 2012. The rise in food prices is attributed mainly to supply-side factors. Due to floods, droughts, and typhoons in certain areas, the price of fresh vegetable prices soared almost 19%, and fresh fruit prices increased 12.45%. In addition, the widely celebrated Mid-Autumn Festival in September might also have been a contributing factor to the increase in demand for food.

The pork industry in China is one of the most influential factors of consumer price inflation in China, behind that of fresh vegetables. China is a major consumer and producer of pork: half of the world’s hogs are raised in China, and its population consumes more than half of the world’s pork. China began importing pork in 2007.

The increase in food prices drove up China’s annual consumer price index (CPI) by 3.1% in September, compared to 2012. In fact, the consumer inflation rate has surpassed the market consensus of 2.9%, and is now at its seven-month high. Food prices account for most of the inflation pressure, as it consists about 33% of the CPI calculation. The percentage of food in the CPI calculation is almost twice as high as that in the United States, which is about 14%. Compared to the percentage increase in food prices, the prices of non-food products have, on average, increased 1.6% in September.

Macroeconomic Implications for Current Food Price Increases

Whether the rise in inflation would pose risks to China’s economy is unclear. Most economists believe that inflation is not yet a great concern because the country’s economy is still struggling. China’s GDP growth has slowed down to 7.7% last year, which is the lowest on record since 1999. With dwindling exports and falling producer prices, economic growth has not improved significantly despite the government’s attempts at financial reform. In September, exports decreased 0.3% year on year, against the market expectation of a 6% increase. Producer prices also dropped 1.3%. With these in mind, the inflation caused by food prices may be under control. The rise in annual consumer inflation is still below the government’s target of 3.5% for 2013 and is expected to stay below it.

In this situation, maintaining the price of pork is crucial to the extent that the Chinese government runs a strategic pork reserve. The operating mechanism of the pork reserve, which has both live and frozen pork, is similar to that of oil and crop reserves in other countries. Usually the reserve will buy pork when the price ratio of pork to corn falls below 6 to 1, and sell pork when the ratio is over 7 to 1 or 8 to 1. The actions of the reserve also depend on seasonal factors such as Chinese New Year, when consumption of pork reaches all-time highs. The fluctuation in pork prices is highly correlated to CPI inflation cycles. CPI inflation may face a risk of being higher than the upper limit of 3.5% in the beginning of 2014, as it has been observed that pork prices have distinctly increased compared to corn prices in the first half of 2013. Around Chinese New Year in 2014, the 6 to 1 ratio is likely to break. This may reduce the possibility of monetary policy easing in 2014, since the benchmark deposit rate is already set relatively low at 3%. Inflation driven by food prices is not something new. Historically, inflation rate increased following a significant shortage in food supplies. For instance, when severe storms aggravated food shortage and economic activities in February 2008, China’s inflation rate rose to a decade high of 8.7%. Because the causes of food price increases are mostly supplyside factors beyond the control of the Chinese government, unexpected inflation driven by food prices remains a concern for both policymakers and foreign investors.

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FAST FOOD IN ASIA: LOCALIZE OR DIE by Jessica Xu

If you’ve ever stepped into an American fast food chain abroad, it was likely familiar...and just a tad different. A dish with localized ingredients here, a poster sporting the country’s most famous celebrity there - but the design of the restaurant and its basic core offerings were everything you’ve always known and loved. Restaurants that expand abroad work extremely hard (and fail terribly) at achieving this balance of replication versus localization, and there’s no formula on how to get it exactly right. This is a problem for any new location, but especially Asia, where tastes differ so greatly, but the potential for growth is one that

companies cannot afford to miss. So how can Western fast food companies succeed in the East?

One way or another, they have to adapt. The classic cheeseburgers, pizzas, sandwiches, and tacos that form the basic fast-food diet in the United States have limited appeal abroad, and won’t survive for long by themselves unless they are accompanied by dishes that have roots in the local cuisine. This is illustrated by the growth of KFC and McDonald’s in China. Though they entered China only three years apart, McDonald’s lags far behind with

Examples of Local Adaptations

Black Sesame Green Tea Starbucks - Asia

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Citrus Thai Shake Fries McDonald’s Singapore


only 1,700 current stores in relation to KFC’s 4,400. One large contributing factor is menu adaptation. Whereas KFC localized its menu from the beginning with specialized items like egg tarts and breakfast porridge, McDonald’s kept its menu largely the same before realizing the benefits of adaptation. As a result, more than 20 years later, KFC is still the undisputed industry leader and one of the biggest success stories of a foreign company in China. However, at the same time, restaurants must also be wary of over-adapting. Whatever changes that are made should not affect the restaurant’s core offerings, otherwise it risks losing its identity and the elements that made it successful in the first place. For instance, McDonald’s introduced a rice burger that catered very well to customers in Taiwan, Singapore, Hong Kong, and the Philippines, but the lack of a connection between rice and

Moon Cake with Ice Cream Haagen-Dazs Greater China region

the McDonald’s brand ultimately rendered the product to be a flop. In addition, part of a foreign brand’s value proposition is precisely the fact that it is foreign, and too much localization will negate the added value. As Martin Roll, a brand strategist specializing in Asian brands, stated, “If people see you as too local, why would they buy your brand versus the local brand?” In the process of adapting, restaurants cannot lose sight of their core competencies or brand foundations for fear of undermining their existing strengths and diluting the brand.

Global expansion is not as easy as taking an existing business plan and implementing it in a different country, and restaurants often struggle to find the right way to leverage their strengths while also adapting to local culture and practices. Ultimately, the only way to find the right mix is through trial-and-error. Restaurants may not always succeed, but when they do, the payoff is enormous.

“Wing Zeed” (Shrimp donut) KFC - Thailand

“Dragon Twister” (Peking duck wrap) KFC - China

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China Takes Over U.S. Pork by Justine Lee

In September 2013, two of the largest pork producers in the world finalized a remarkable acquisition. Shuanghui International Holdings Ltd., China’s largest meat processor, acquired Smithfield Foods Inc., a U.S. company that is also the world’s largest pork processor and hog farmer. The $4.7 billion agreement between these two parties is the biggest takeover to date of an American company by a Chinese firm. This deal manifests China’s aims to secure assets overseas, with Shuanghui buying Smithfield at $34 a share and valuing the company at $7.1 billion, including debt.

Shuanghui (also referred to as Shineway) is based in the Henan province. A majority stakeholder of Henan Shuanghui, the largest meat processor in China, Shuanghui is not a statecontrolled company. Wan Long, Shuanghui’s chairman, has been called “China’s Number 1 Butcher” after the company’s claim that it slaughters over 15 million pigs each year. Many of Shuanghui’s products come from private farms, but Mr. Wan stated that he wants to bring in more pigs from companyowned farms.

Smithfield Foods operates in 26 states, with headquarters in Smithfield, Virginia. The company owns both the world’s largest slaughterhouse and the world’s largest meatprocessing plant, which are situated in Tar Heel, North Carolina. Smithfield also has a global presence, running facilities in ten European countries and Mexico. The number of total employees around the world is over 46,000. Those affiliated with the transaction stated that Smithfield agreed to the deal in order to gain access to China’s growing

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China has been Using foreign acquisitions to Secure resources and fuel it's economy. market. As the world’s biggest consumer of pork, China will need imports from the U.S. company to satiate its increasing demand. Currently, 25% of Smithfield’s exports are sent to China. Related individuals stressed that there were no intentions associated with the deal to import Chinese meat. This statement was likely made to quell concerns surrounding China’s past run-in with food hygiene issues. The deal characterizes the latest effort by Chinese businesses to secure resources through foreign acquisitions in order to fuel China’s economy. Past endeavors have focused mostly on mining and oil related industries, with several attempts being blocked. One example is oil company Cnooc Ltd., which attempted to buy Unocal in 2005 for $18.5 billion. Cnooc was denied purchase over fears that the company posed a threat to U.S. national security, amongst other worries, with China emerging as a rival economic force at the time. Shuanghui’s offer ultimately won over political and food safety concerns, beating out two other possible offers as well. Joseph Luter, Smithfield’s Chairman, stated at the beginning of the deal’s announcement that “Lots of people love us.” From this, it appears that Chinese companies’ ability to maneuver through U.S. politics and regulations has improved.

In 2012, Chinese buyers engaged in 49 deals with a combined worth of $11.57 billion. These agreements had a higher


dollar volume than those in 2009 and 2011 combined and show the extent to which Chinese companies are acquiring or investing in U.S. companies. Spending in 2013 has already overtaken that of 2012, especially with the recent Smithfield acquisition. Many companies in China had been targeting private companies and joint ventures, with most investments under $500 million. Now it appears that businesses are looking to public companies, like Smithfield, as well. According to Robert Profusek, a Jones Day specialist in acquisitions and mergers, this deal is likely to change the perception in China that the U.S. is an impenetrable stronghold. In light of companies like Cnooc, which failed to win an acquisition, Shuanghui’s successful acquisition of Smithfield is an auspicious sign.

Smithfield is one of five companies that control 73% of the pork-processing industry in the United States. One of the issues raised by this deal was China’s food hygiene, as recent scandals have beset China’s food and agricultural sector. Perhaps one of the biggest shocks occurred in March 2013, when dead pigs numbering in the thousands turned up in Shanghai’s rivers (officials blamed negligent farmers for the problem). In 2011, health inspectors in China found clenbuterol, a food additive banned in both China and the United States, in Henan Shuanghui Investment & Development Co.’s pork products. This additive speeds up muscle development in pigs, but if consumed by humans, clenbuterol can cause nausea, headaches, and an irregular heartbeat. The company responded to this news with an apology on its website, stating that it had discontinued partnerships with producers that used the chemical. Both Smithfield and Shuanghui assured audiences that they would “retain world-leading food safety and quality control standards” after the deal was made public. The United Food and Commercial Workers International Union supported the deal, as it would keep Smithfield management and collective bargaining agreements in place.

Despite these recent scandals, which would have otherwise prevented the deal, the Chinese company was able to beat out two competitors in its acquisition of Smithfield Foods. Furthermore, Shuanghui sets itself apart from other Chinese companies that attempted to buy out U.S. firms. With the successful takeover by Shuanghui of such a prominent and global U.S. company, Shuanghui is able to increase its market share of the pork industry and China is able to more firmly establish its economic presence overseas.

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TV TALENT SHOWS IN CHINA Ever since 2004, when the first TV talent show “Super Girl,” adapted from American Idol, was introduced to the Chinese audience, various satellite channels have produced too many American Idol-style shows that China’s statebroadcasting regulator issued a new policy banning the production of such American Idol-style shows.

Reality television is arguably one of America’s biggest “cultural exports” and the Chinese entertainment industry has been a rather lagging but frenetic follower of the trend. This past summer in China, 9 similar talent show series went on air and every Sunday there were 11 programs broadcasting, including reruns of previous episodes. Most of them are based on US or UK formats:

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by Connie Kang

“Chinese Idol” is based on “American Idol”, “Voice of China” bought the authorization of “The Voice” and “Chinese Duets” originates from “The Duets”. The introduction of foreign reality shows has been striking to the media and entertainment industry, as China has never produced a TV program that well engages the audience and the public. The real-time airing and SMS voting brought a brand new entertaining experience to the audience, and the open audition all over the country made the ordinary people believe in the equal opportunity for everyone to become an overnight sensation. While reality TV shows, especially singing competitions, started to gain traction in the Chinese media market, the government stepped in with concerns about the quality and educational value of the programming. A new rule drastically tightened an existing policy that capped the broadcasts of foreign television shows to 50 episodes. On top of that, the policy restricted


producer decide the winner, whereas it is claimed to be decided by audience voting. Also, the repetitive hyping up has gradually bored the audience. It might be just the right time to control the overproduction of talent shows.

Nonetheless, most of the commentators hold resentment against any action of SARFT, thus leading to a very critical response that the administration bureau has extended its

the talent shows from airing during the prime time hours of 7:30 to 10 p.m.

Although many Chinese web commentators are cynical about the motivation of the State Administration of Radio, Film and Television (SARFT), the infamous broadcasting regulator does have some solid reasons this time. The inflation of the talent shows mirrors the lack of creativity in Chinese entertainment industry nowadays. In the past seven years, the talent shows that are suspended because of copyright infringement have amounted up to 200. The aimless and meaningless duplication of such TV programs would have submerged other innovative proposals and would have ruined the higher-quality programming among the numerous talent shows. Moreover, the unfair manipulation behind the talent show has raised many controversies that affect the quality of the TV program production. As reported, even in the most popular TV shows, there is a high likelihood that the director and the

hands too far and over controlling of the entertainment productions hurts the growth of the industry. Many have also compared the regulation on talent shows to government’s control on the airing of popular Korean and Japanese dramas in 2012. It is suspected that SARFT intends to promote domestic content and limits the foreign influence on the entertainment industry and audience’s cultural life. However, would the invisible hand of the market be a better regulator? Would the audience stop watching the unvaried and overproduction of talent shows when the supply far exceeds the demand? Probably. Has the market of talent shows reached that point? Probably not.

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TELEVISION INDUSTRY IN MALAYSIA

by Ann Zheng In 1963, Malaysia experienced its first exposure to television broadcasting. Fifty years later, we are able to observe that watching television has become a favorite pastime, and even necessity for many Malaysians. Eight free-to-air (FTR) channels are currently offered in the nation. With FTR channels, all a person needs is the receiving equipment to watch television. Conversely, there are also two national pay subscription channels offered in Malaysia. Other alternatives have been well-received. Furthermore, a traditional method of accessing Malaysian TV has been analogue terrestrial television. Analogue television transmits programming in a continuous signal, which varies in amplitude and can easily deteriorate over long distances. Thus, the enhanced digital providers have more or less usurped the role of the analogue terrestrial channels. There are eleven channels offered as of today, with three of them owned by the government. To truly visualize the extent of the television industry in Malaysia, the pay-TV provider Astro, must be analyzed.

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The Malaysian industry is currently highly concentrated, with only one satellite television operator dominating the others: MEASAT Broadcast Network Systems. MEASAT made the decision to launch a service, Astro, as part of its commercialization of space on June 1, 1996. Globally, the number of satellite television providers has risen dramatically over the years, creating opportunities for various companies to flourish in the competitive market. Because of this worldwide phenomenon, it would be logical to expect a similar level of industry diversity to exist in Malaysia as well. That is far from the case, however. As the top pay-TV operator in the entirety of Malaysia and in almost all of Southeast Asia, Astro has successfully attracted three million residential pay-tv users. If a Malaysian developed a desire to watch CNN or browse the National Geographic channel, the only method he or she has for accessing such shows would be through making payments to Astro. Astro prides itself on its great performance and widespread influence, but is often blamed for monopolizing the industry and eliminating almost all alternatives for consuming television. Astro’s currently broadcasted TV channels include Disney Channel, MTV, Cartoon Network, Nickelodeon, and Outdoor Channel. All of these channels are quite popular in western countries. People are charged at a steeper price for access to the identical channels in South Asian countries and Malaysia is no exception.


In recent years, Astro has faced some degree of competition, coming from the form of an illegal satellite TV provider: Videocon. Videocon is actually a provider from India that successfully gives its customers access to over hundreds of channels. These customers only have to pay a mere fraction of the costs charged by Astro. Unfortunately, there is a high level of risk and consequences for purchasing and using Videocon because it is considered an illegal service. Malaysians who are caught engaging in Videocon face serious fines, up to RM100,000 and possible jail time. In order for a Malaysian to subscribe to the Videocon service, they must take the time to contact and meet with a Videocon distributor. This distributor is then responsible for setting up the dish and decoder, along with registering the subscription. Although the television signal then becomes wired to Malaysia, the true subscription is registered under the name of an Indian citizen. Altogether, customers can gain access to a television signal within 2-3 hours post-installation.

Another competitor to Astro with regards to major payTV service is HyppTV. HyppTV is owned and operated by incumbent Telekon Malaysia (TM). Additionally, Malaysia had gained a new pay -TV operator that began in June 2013, but always stayed as the sole cable TV operatory known across the country. Many other pay-TV operators try but fail to achieve high levels of success due to the high costs and lack of funding. Regardless of the alternatives to Astro, the Malaysian government should try to make cohesive attempts to collaborate with Astro. Only collaborative efforts can help create lower-cost alternatives to access satellite television in Malaysia.

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THAILAND’S ENTERTAINMENT AND MEDIA INDUSTRY SPENDING SPREE by Ethan Song

Does Thailand have the potential to join the economical ranks of the Asian Tigers? As Thailand follows the path to technological advancement and greater industrialization, the expansion of Thailand’s media and entertainment industry is only a microcosm of the overall promise of this South Asian economy.

With over 26 million internet users out of a population of 67 million and an audience that receives 80% of the news through the television, growth is inevitable. Thailand’s advance in the digital media industry can be associated with the relatively free internet regulations. Though there have been growing restrictions and censorship in the media from the government since the early 2000s, the boom of the internet has nevertheless created many opportunities for the media market.

PricewaterhouseCoopers predicted a surge in media spending, where annual spending is expected to increase from 280 billion baht (US $9.7 billion) this year to around half a trillion baht (US $14.8 billion) by the end of 2017. This year’s main spending consisted of 71 billion baht (US $2.3 billion) from TV advertising, 65 billion baht (US $2.1 billion) from the internet and 37 billion baht (US $1.2 billion) from book and newspaper publishing. The fast-expanding Thai entertainment and media industry is reported to grow at compound annual growth rate of 11.3% over the next five years, compared to the lesser growth of already developed economies like Western Europe (3%) and the US (4.8%).

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Much of this growth can be attributed to Thailand’s largest media conglomerate entertainment company, GMM Grammy, which was founded in 1983 by Paiboon Damrongchaitham. During its thirty years of existence, GMM has expanded its territory to concert production, artist management, and television production and publishing. It now claims a 70% market share of Thailand’s entertainment industry. The future of GMM lies in Paiboon’s many sons, one of which is Fahmai Damrongchaitham, current COO of platforms for GMM Z, the parent company’s satellite-television branch. Fahmai wants to expand his father’s empire to deliver television, music, and radio to all audiences. Just this year, GMM Z was able to distribute 1.8 million set-top boxes, a product similar to the Apple TV and Roku streamers. Fahmai predicts that he will be able to sell double the amount within the next two years by focusing on expanding media platforms to mobile applications. The young businessman hopes that this will also continue to give GMM the leading role in the entertainment industry. Though this goal sounds


provides an injection of significant funds into the Thai economy, but helps export our unique culture to the rest of the world.”

rather ambitious, it is possible, given Thailand’s explosive growth of smart phones accompanied by the increasing availability of the internet.

Along with television media, the cinema industry has also been expanding to new territories. Thailand has long been a site for scenic landscape filming, so it is not surprising that in 2008 alone, the entertainment industry generated more than 42.7 billion baht (US $1.4 billion) income from service exports, continuing the annual export growth of 10% since 2003. Over 550 foreign films were shot in Thailand, bringing in an estimated additional 1.8 billion baht (US $61 million) in revenue. Thailand’s Minister of Culture, Sukumol Kunplome, remarked that the growing business “not only

The Department of International Trade Promotion (DITP) under the Ministry of Commerce in Thailand has begun supporting the international expansion of its entertainment industries by facilitating Thai service providers to take part in international entertainment festivals, such as the Hong Kong Film Festival, Cannes Festival and MP TV. Leading film production house GMM Tai Hub (GTH) plans to form a joint venture with Hong Kong actor-director Steven Chow to coproduce a thriller catering to Chinese movie-goers. This is a key milestone for its overseas expansion, which is estimated to cost around 77 to 205 million baht (US $2.4 million - $6.4 million). Yongyooth Thongkongtoon, international sales executive at GTH, pointed out that the upcoming integration of the economies of the ten ASEAN countries within the next few years presents numerous business opportunities. Although the television and movie entertainment industry currently only accounts for only around 2% of Thailand’s total GDP, it shows a boom like none other. Perhaps the explosion within in the entertainment industry in Thailand will be the spark to awaken the sleeping Asian tiger and bring Thailand to join the ranks of its neighbors.

“[The entertainment industry] not only provides an injection of significant funds into the Thai economy, but helps export our unique culture to the rest of the world.”

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s l o d I d n i h e mB

s i n a h c e M g

n i t e k r a M : p

K-po

Two words that meant nothing a year and a half ago, are now recognized by almost two billion people, the majority of whom have no idea what the song is even saying. The most successful video to date (doubling the view count of its nearest competitor, Justin Bieber’s Baby), now represents the peak of the Korean culture exporting movement, known as the “Hallyu,” or the Korean Wave. Psy’s Gangnam Style was the biggest splash in the world’s ever growing internet music/advertising market, grossing Psy as an individual over $8 million and the indisputable

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success that it brought. The genre known as K-pop was thus born into a rigorous advertising market and competitive YouTube market. This sudden growth and success demands an analysis of how the song of the century managed to come from an otherwise unknown, stocky and middle-aged Korean man. K-pop, or Korean pop, is the music genre of the internet, and the genre from which Psy originated. Made increasingly famous as a result of Gangnam Style, K-pop had already, in fact, been a multimillion dollar industry, with the big 3 labels in the Korean music industry

n

Su even t S y b


- SM, YG, and JYP Entertainment grossing over $200 million collectively in 2012. With the advent of Gangnam Style and the advertising, fans, and awareness it added, these labels’ revenues have only increased, and intentions to market

abroad have never been higher. It is important, however, to note that K-pop’s fanbase has spanned across the globe notoriously selling out not just in Asian metropolis’ like Beijing, Singapore, and Tokyo, but also in New York, Paris, and London. Its fanbase, thus, has not been limited to Asian fans - a result of what can only be deemed the successful marketing techniques of the overhead industries that produce hit artists.

The marketing strategy that K-pop teams have created and employed has taken full advantage of the fact that K-pop’s primary consumption is done almost entirely on the Internet. Seo MinSoo, author of the article “Lessons from K-pop’s Global Success,” breaks it down into four major steps. The first and second, involve the creation of content, through the rigorous selection and training process. Every potential artist must go through specific preparation, such as vocal practices and intense choreography, in order to create an each individual piece. Then, through the power of both social media and the rest of the supporting Korean entertainment economy, delivery is brought to “techsavvy” fans, who can look online for an effectively endless deluge of content. Eye-catchingly dressed artists then perform three times a week, release teasers, act in dramas, and engage in the sub-reality that both Korean variety and reality shows perpetuate. As consumption of the K-pop genre grows, these chances to view and follow artists

become increasingly available in other forms of media, including television, v-logging, and dedicated fan sites, all of which provide not only translating services to better understand artists, but also a forum upon which those both new and old to the genre can meet and discover others sharing their interest. In addition, with the support of advertising groups both domestic and abroad, K-pop artists - or idols, as they are known in Korea - sponsor everything from shoes to foods to refrigerators, further supporting their stream of content even outside of music consumption.

Finally, with the support and recognition of K-pop’s “soft power” by the Korean government, idols are frequently promoted as cultural ambassadors and diplomats, and acknowledged as powerful tools to be used in effort to increase Korea’s global presence. The Korean government, then, has taken advantage of K-pop as a marketing tool in and of itself, to boost nearly all related markets. A study of Korean tourism showed that the

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Korean Wave, describing the Korean culture phenomenon overall, brought in over $3 billion worth of tourist related revenue domestically. This revenue did not, however, include the recent successes of businesses located in Korea that have been doing equally as well abroad, by using K-pop branding as a selling point. These businesses range from famous labels, such as Samsung or LG, to smaller franchises, such as chain Korean restaurants and Korea’s signature liquor, soju. Indeed, with the noted support of government underwriters such as the ”South Korean Government, Ministry of Culture, Sports and Tourism, Korean Foundation for International Culture Exchange, Korean

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Creative Content Agency,” all working in conjunction with large K-pop entertainment labels, K-pop concerts and events abroad, and especially in the West, are continuing to see growth in both size and frequency, with notable events such as the annual KCON in California, and SM Town in Paris, even gaining national media coverage. As a result, the cycle of interest in K-pop, starting with simple internet following, to large-scale events and concerts, continues to draw government backing. The intense marketing machine behind K-pop, supported by groups ranging from huge entertainment labels to the Korean government itself, was

undoubtedly a large part of Psy’s remarkable success. Notorious for gaining its starting momentum from YouTube’s legions of K-pop followers, Gangnam Style would likely have never made it to where it now stands. Nevertheless, the continued success of K-pop is absolutely unguaranteed. Indeed, Psy’s follow-up single, Gentleman, did not reach nearly the same level of success that Gangnam Style acquired. That being said, as advertisers and K-pop giants in general look at the largely untapped and potential consumer base still present in the US, the future of K-pop is unpredictable at best.


As students at Penn, we’re offered many options for places to dine, whether it may be a Chipotle run after the gym, or a trip to Center City for a gourmet meal. Yet, one of Penn’s most popular options for quick and yummy food is the numerous food trucks scattered around campus. Even though most trucks are packed during lunch times, we were able to get a grab a meal and interview with the owners of Kim’s Oriental, Penn’s most popular Asian/Chinese food truck! Note: The interview was conducted in Chinese and translated to English for this entry.

What made you decide to go into the food truck business?

What type of obstacles is there in the food truck business?

What is the typical schedule for you like during the week?

I decided to go into the food truck business because it’s pretty much a restaurant. This type of business is fun and I love my job.

Surprisingly, I haven’t encountered too many problems. However, when it gets busy it’s hard to keep everybody’s queue in ordering and they might not be too clear in telling us what they want to order.

We’re open from 11 AM – 8 PM every weekday and on Sundays. I’m usually up at 8 in the morning preparing the food, chopping up meat and washing vegetables. We have team of 4 people during the school year, but we’ll switch to three during the summer when it’s slow.

What are your day to day responsibilities as the food truck owner and manager?

I would probably say that the Ginger Chicken, Oriental Beef, and Spare Ribs on Black Bean Sauce are the most frequented. They’re the easiest and quickest to prepare for us, which makes it convenient for customers, so that’s a reason why people buy it so often.

What are the most popular items on the menu?

What is your favorite type of food?

I usually eat vegetables, but I am a big fan of seafood.

How has the college scene affected your business?

Since Kim’s is such a popular food truck on campus, do you plan on expanding your services into a fulltime restaurant?

Most of our customers are college students and staff at Penn.

It hasn’t really crossed my mind yet, but if I decide I’ll let you know!

Do you usually prepare your food ahead of time then?

Yes, we usually start preparing the specials around 8 in the morning.

I pretty much manage everything and do front end and back end work. You’ll see me mostly up front taking orders but in the down times during the afternoon, I’ll help cook and prepare foods. I end up also managing revenues of the truck, but at the end of the day everyone will split the income fairly.

Did you know that many Chinese restaurants in America are operated by Fujianese people? Fujian is a province in southeast China famous for its seafood and sweet and sour cuisine. In many cases, the restaurant dynasty starts when families immigrate to America and open small food-stops and restaurants. Later, when the restaurant business is running smoothly, they will bring over friends and relatives to help work. To Fujianese people, family means everything. Most workers in America will allot a large portion of their paycheck to send back to their family in China.

KIM’S INTERVIEW by Ethan Song

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by Jo Wang

MBA INTERVIEW

AMY (KAI) LEE

Interviewed by Jo Wang

Amy Lee is a second year MBA student from Hong Kong. Before working in BCG Hong Kong for two and a half years, she worked in corporate finance with Swire Beverages in Hong Kong. Swire Beverages is the manufacturer, distributor and marketer of Coca-Cola in Hong Kong. J: Can you tell me a bit about yourself? A: I graduated from Hong Kong University of Science and Technology, majoring in Global Business. I learned a lot about consulting and finance as part of my program in college. For summer internships, I did one with the Hong Kong Securities and Futures Commission and another with UBS in their legal department. Through both of these, I learned a lot about the security and exchange market and also the investment market in Hong Kong, but I decided that I wanted something

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different. I actually got an offer from BCG upon graduation but it was deferred for a year due to the economic recession at 2009. So, I went to work in the corporate finance department for Swire Beverages. J: What were your responsibilities at Swire Beverages? A: Swire Beverages is the manufacturer, bottler, distributor and marketer of Coca-Cola in Hong Kong. It is a very capitalintensive industry, with a lot of capital investment in terms of increasing production capacity. The beverages industry in Hong Kong is very competitive, including strong international companies such as Vitasoy (producer of the soy milk beverages), so within the industry there was a lot of brand and manufacturer acquisition. I was mainly responsible for validating the assumptions of financial models that go into the strategic planning for those acquisitions. Another part of my job description is treasuring. Swire Beverages has 9 bottling


plants in China and all have different liquidity requirements. We have put together an instrument that enables the 9 bottling plants to share cash on a daily basis so that each plant could leverage on each other instead of keeping a lot of cash on the plant. So I was responsible for balancing and coordinating the cash flow.

J: I know that Swire is a fairly local company in Hong Kong. How international is the working environment? Do you mostly work in Mandarin, English or Cantonese? A: The language requirement always depends on the industry. In today’s Hong Kong, Cantonese may not be a must, but Mandarin definitely is, especially reading and writing. Swire is actually fairly local. So if you work at the Swire headquarter, it would be helpful if you can speak Cantonese, that way you want to interact with your colleagues. But if you are only talking about working for the company, Swire has an international management training that also teaches people Mandarin. Upon hiring, Swire requires people learn Mandarin before starting their job as well. J: How would you describe the food and beverages industry Hong Kong? Where does the competition mostly come from? A: When you talk about the product, it is definitely international. But if you talk about the distribution of product, it is local. For example, Coke is an international product, but

all the companies that distribute Coke in Hong Kong are local companies. A lot of competition comes from mainland China as well. But compared to the fast-growing Chinese food and beverages market, the Hong Kong food and beverages market is fairly stable, since it is a matured economy. The new growth opportunities are typically driven by introduction of new products, such as organic food. In comparison, the food and beverages market from mainland China is a lot more dynamic and competitive. There is a lot more diversity. The Hong Kong market has been exposed to the West for a long time, so people have developed a more western taste. But the Chinese market is different. It has a diversity of tastes, which lead to a lot of different manufacturers and suppliers. Also, the local Chinese taste is just simply different from western ones. For example, people in Hong Kong have been drinking Coca-Cola for a long time. People in mainland China, on the other hand, especially in less developed regions, are still developing a taste for drinks that bubble in your mouth. The mainland Chinese market is more competitive for companies with a western product. That is why although Coca-Cola and Pepsi are the two biggest beverages in China, they still spend a tremendous amount of money on marketing in China. They are still struggling to expand their brand recognition and familiarity, because they are not the preferred, default brand name in China, as they are here in America. J: How do you think things have changed since you worked for Swire in 2009? Is there anything that you wish you had known? A: Nowadays, a lot of foreign companies are directly setting up their headquarters in China instead of Hong Kong, especially for consumer products. Furthermore, within the mainland Chinese market, companies like Coca-Cola are buying a lot of local companies that actually did not manufacture soft drinks. They do this as a way to expand their business into a different realm. For people who want to work in Hong Kong in general, they should know that Hong Kong is a window to China. A lot of industries - be it food and beverages, or financial services, or consulting - are now focusing on the market from China.

“For people who want to work in the consumer products industry, they should know what Hong Kong is not a window to China now.�

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GLIMPSE AT ASIAN HEADLINES (AUG - NOV 2013) by Ethan Song

japan (SEPT 2013) Synthetic-fiber manufacturer Toray Industries made two separate acquisitions of fiber manufacturer, Woongjin Chemical, in South Korea and US carbon fiber manufacturer, Zoltec, at a total value of $1 billion USD. Japan’s Otsuka Pharmaceutical Company buys US cancer drug maker Astex for $886 million USD to strengthen product line.

china (NOV 2013) Leaders vowed to loosen the one-child policy, expand farmer’s rights, and encourage private investment in businesses. The nation will also try to accelerate the convertibility of the yuan as well as to use 30% of state capital in public finances to improve common welfare.

VIETNAM (OCT 2013) Vietnam Airlines signs a contract with General Electric to buy and lease a total of 40 new jet engines that is valued at $1.7 billion USD. This is part of an ongoing effort to increase its profile as an Asian carrier.

south korea (AUG - OCT 2013) A series of strikes in Hyundai raise tensions within the company. Though the strikes have mellowed out, they’ve already taken their toll on the automotive giant. As part of an effort to improve brand identity, Hyundai R&D chief and other executives stepped down after quality issues prompted car recalls.

asean (NOV 2013)

india (SEPT 2013) Ford Motor Co. and Mazda have considered reentering India’s motor market. However, a variety of factors including depreciation of the rupee, inflation of production costs, and rising borrowing costs have increased vehicle prices. Sales expansion of automobiles scaled down by 3-5%.

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The ASEAN (Singapore, Malaysia, Indonesia, Brunei) countries are committed to having the bandwidth freed by 2020. Greater bandwidth would allow 4G users to roam in ASEAN countries and also in US and Europe. The biggest issue is a potential rise in cybercrime due to the expansion.

indonesia (SEPT-OCT 2013) A weakening rupiah poses concerns for large corporations. This is attributed to the decision of the U.S. Federal Reserve to keep the pace of its bond buying steady. As Churchill Mining, a British resources company, gets its coal drilling license revoked, tension continues between the local government and foreign entrance into markets.


SOURCES fusion food

Sara Dickerman, “Fusion Reacion,” (April 12, 2012) <http://www. slate.com/articles/life/food/2012/04/asian_fusion_comeback_ american_s_love_hate_relationship_with_asian_inspired_cooking_. html> Danyelle Freeman, “Trend Watch: The New Asian Fusion,” (April 24, 2011) <http://www.restaurantgirl.com/trend_watch_the_new_ asian_fusi.html>

fast food in asia

http://usatoday30.usatoday.com/money/world/2010-09-07asiatastes07_ST_N.htm http://www.thedailymeal.com/10-unique-kfc-meals-aroundworld-slideshow http://yum.com/brands/china.asp

food inflation in china

Financial Times: Vegetable prices fuel Chinese inflation (October 14, 2013) http://www.ft.com/intl/cms/s/0/4b6f9cd8-3475-11e3-8f1d00144feab7de.html?siteedition=intl#axzz2l0hpo0ra Bloomberg News: China Export Drop Limits Recovery; Food Stokes Inflation http://www.bloomberg.com/news/2013-10-14/china-exportsunexpectedly-drop-as-food-prices-stoke-inflation.html CNBC.com: Hog Stock: Inside China’s Strategic Pork Reserve http://www.cnbc.com/id/100795405 “China’s inflation at decade high”. CNN. 2008-03-10. Archived from the original on 2008-03-15. Retrieved 2008-03-11.

china takes over u.s. pork

Cameron McWhirter, et al. “China Makes Biggest U.S. Play,” (May 30, 2013) http://online.wsj.com/news/articles/SB10001424127887324412 604578512722044165756

k-pop: marketing mechanism behind idols

http://www.korea-marketing.com/lessons-from-k-pops-globalsuccess/ http://en.wikipedia.org/wiki/S.M._Entertainment http://www.iaspm.net/k-pop-politics-digital-mediation-andglobal-fandom%E2%80%8F/ http://kto.visitkorea.or.kr/eng/tourismStatics/keyFacts.kto http://www.bbc.co.uk/news/world-asia-pacific-13760064 http://polygrafi.wordpress.com/2013/04/29/what-is-southkorean-tourism-without-k-pop/ http://musicglobalization.com/2012/11/27/the-real-reasonbehind-k-pops-success/ http://travel.cnn.com/seoul/life/tell-me-about-it/k-pop-takingover-world-dont-make-me-laugh--476482 http://www.nytimes.com/2013/08/10/arts/music/Cramming-forStardom-at-K-Pop-School.html http://www.nytimes.com/2012/03/05/business/global/ using-social-media-to-bring-korean-pop-music-to-the-west. html?pagewanted=all

tv talent shows in china

“China Is Cracking Down On Airing Reality Shows.” Business Insider. Associated Press, 22 Oct. 2013. Web. 12 Nov. 2013. <http:// www.businessinsider.com/china-cracking-down-on-realityshows-2013-10>.

FlorCruz, Michelle. “China To Cut Foreign Talent Show Entertainment Television Programming: Shows Like ‘The Voice’ To Go.” International Business Times. IBT Media, 22 Oct. 2013. Web. 12 Nov. 2013. <http://www.ibtimes.com/china-cut-foreigntalent-show-entertainment-television-programming-shows-voicego-1434932>. Li, Le. “China Silences American-style TV Talent Shows.” NBC News. NBCNews.com, 26 July 2013. Web. 12 Nov. 2013. <http:// behindthewall.nbcnews.com/_news/2013/07/26/19699246china-silences-american-style-tv-talent-shows>.

television industry in malaysia

http://www.quepublishing.com/articles/article.aspx?p=1245329 http://nurinaamir.wordpress.com/2013/06/07/astro-themonopolist-in-malaysia/ http://www.screendigest.com/news/2013_06_new_country_ malaysian_data_and_forecasts_added_to_tv_intelligence/view.html http://my.news.yahoo.com/suggested-title---you-may-be-fined-upto-rm100-00-if-you-re-tuned-into-the-wrong-channel-123118159. html

thailand’s entertainment and media industry spending spree

“Investvine » Thai Media and Entertainment Industry in Spending Spree.” Investvine RSS. N.p., n.d. Web. 25 Oct. 2013. “PwC Predict Media Spending Surge.” Media and Entertainment Industry in Line for Spending Surge | Bangkok Post: Breakingnews. Bangkok Post, 11 July 2013. Web. 25 Oct. 2013. Thongtep, Watchiranont. “GTH Forming JV to Produce Film for Chinese Audiences.” The Nation. The Nation, 7 Aug. 2013. Web. 25 Oct. 2013. Thongtep, Watchiranont. “Son of GMM Grammy Founder Keen on Taking Empire into the Future.” The Nation. The Nation, 26 Aug. 2013. Web. 25 Oct. 2013.

glimpse at asian headlines

http://online.wsj.com/news/articles/SB10001424127887323595 004579066622966141700 http://online.wsj.com/news/articles/SB10001424127887324577 304579056882493304394 http://online.wsj.com/news/articles/SB10001424052702304799 404579155030975404484 http://online.wsj.com/news/articles/SB10001424127887324094 704579065100580701082 http://online.wsj.com/news/articles/SB10001424127887323665 504579028362196364296 http://www.straitstimes.com/breaking-news/singapore/story/ asean-intensifies-plan-free-bandwidth-phones-2020-20131116 http://online.wsj.com/news/articles/SB10001424127887324577 304579056370574912270 http://online.wsj.com/news/articles/SB10001424052702304526 204579100391348622078 http://www.bloomberg.com/news/2013-11-15/china-pledges-toease-one-child-policy-as-party-details-reforms.html http://online.wsj.com/news/articles/SB10001424052702304200 804579163631487732504 http://online.wsj.com/news/articles/SB10001424052702303442 004579120711962482266 http://online.wsj.com/news/articles/SB10001424052702304795 804579101001956259102

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Wharton Asia Journal Volume 9  

Wharton Asia Journal, published by the Wharton Asia Exchange (WAX) at the University of Pennsylvania in Fall 2013.

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