Daewoo Case

DAEWOO MOTOR COMPANY UK (A)

Introduction

Pat Farrell had joined Daewoo from Rover, having previously served as Marketing Director for both UK and European operations. Shortly after joining the company, he was asked by Daewoo's Chairman to determine what it would take to achieve. I % market share as quickly as possible.

He and,Les Woodcock, the Managing Director, agreed as to the enormityof the challenge. Pat's e~rience at Rover suggested that Daewoo could sell around 7,000 cars in the first ye~given a reasonable promotion budget and dealer network. But to do so they would have to overcome concerns about the cars' performance and reliability--the Nexia and Espero--which were viewed as re-bodied, old versions of Vauxhall Astras and Cavaliers sold much cheaper than the originals.Accordingly, they met with other members of the original management team, Peter Ellis, Ray Battersby and David Gerrans as well as Gary Duckworth, from their newly appointed advertising agency, to determine how to launch successfully in the UK market by tile end of February 1995. Emotions were mixed that Friday evening the previous August as they drove to a Berkshire retreat for a weekend ofheavy brainstorming. Les was upbeat::

This is probably one of the biggest Ichallenges of my career. Never before has a new car company entered this market and gained a 1% share in three years. But this is what they want and we have a free hand to do whatever it takes to achieve that target. --


Daewoo Group: From Korea to the World

Daewoo Group, a South Korean industrial giant, or"chaebol" was ranked the 33rd largest company in the world by Fortune in 1993, with sales of over $33 billion. In 1994, the group comprised 31 companies in Korea and more than 450 subsidiaries and branches worldwide. It was engaged in diverse activities such as trading, construction (both domestic and overseas), shipbuilding, automobiles (encompassing passenger cars, commercial vehicles and autocomponents), heavy equipment, machine tools, telecommunications equipment, consumer electronics, home appliances, textiles and financial services. '

Daewoo's globalization strategy was based on a broad portfolio and a vision driven by Chairman Kim Woo Chung. In 1990, Daewoo launched its global management plan: "Vision 2000," which facilitated an aggressive program of international expansion aroundelectronics and passenger cars, established core areas. The objectives of the strategy were to secure additional world markets through global buying power and localized production. Other Korean giants such as Hyundai, LG and Samsung had grown enormously through similar strategies.

"Vision 2000" called for the production of more than two million cars a year, half of these outside Korea. It hadembarked on joint venture vehicle production projects in five countries, including Uzbekhistan, Iran and the Philippines. The company was aiming to become the tenth largest car producer in the world by the end of the century. In 1993, Daewoo had sold over 300,000 cars worldwide. These ambitions meant it had to be successful in the high volume European market. Daewoo was planning a simultaneous launchfor the Nexia and Espero in seven western European countries with plans to rollout in a further seven a few months later. Its target was 100,00Q sales in the first year, with 1 % of the new-car market in each country it entered by 1998. Daewoo's European assault would be decentralized, with each market having its own promotional campaign and distribution program. The company had also embarked on aextensive product development program to come up with its own designs. In 1993;Daewoo had acquired British-based lAD, one of Europe's biggest automobile design agencies, whose staff of 400 were already hard at work developing cars for launch in 1997.

The UK Car Market

UK car production had grown by 15% over the previous three years, with most of the increase accounted for by Japanese...