Differentiation and Localization Strategy of Korean Firms for the Purpose of Expanding Market Share in China
Authors:   Asia-Europe Perspective Association, Kwon Yung-Chul , Kim Ki-Hyun 
Published: June 2018

China is on the progress of changing from world factory to world market. In this regard, the purpose of this study is to assess the strategies that make the increases of Korean firms' market share in China possible. Specifically, both differentiation and localization strategies are suggested based on the concept of market orientation. Competitive and cultural barriers would be key entry barriers in the China market. Differentiation strategy can be a alternative to overcome the competitive barriers whereas localization strategy be a alternative to overcome the cultural barriers. To prove this logic, we analyzed the case of three companies, such as E-mart, Korean Tier Inc., and Orion, operating in China. The results indicate that these three companies have implemented both differentiation and localization strategies across the value chain functions such as product, marketing, and management in the China market.
We also tested the relationship between the level of differentiation/localization and performance based on the sample of one hundred fifty two companies. The result showed that there is a significant difference in performance among three groups - (1) high level of differentiation and localization; (2) middle level of differentiation and localization; and (3) low level of differentiation and localization. This result implies that both differentiation and localization strategies play important roles in expanding Korean firms' market shares in China. Therefore, the results of this study will provide meaningful guidelines for penetrating into the China market to Korean firms.
The problem is how we implement the differentiation and localization strategies in the China market. First of all, we should pay attention to the concept of competitor orientation to realize the differentiation strategy. In this respect, we have to evaluate the strength and weakness of our main local competitors regularly, response to their strategic changes, and explore market opportunities in a timely manner. Based on these analyses, we can become to get the idea of differentiation strategy.
Secondly, we should also pay attention the concept of consumer orientation to realize the localization strategy effectively. In other words, we have to understand the local consumers' wants and needs, have interests in providing the most values to the local consumers, monitor their satisfaction to our products or services regularly. Based on this process, we can come up with the idea of realizing the localization strategies in the China market.
Finally, it is impossible to realize the differentiation and localization strategies in the China market without the keen cooperation between parent company and local subsidiaries. They should share information about local competitors and consumers and cooperate to develop products and services in the China market. Parent company should also grant full autonomy to local subsidiaries for their operation in the China market which is strategically very important market. Thus, local subsidiaries can realize the differentiation and localization strategies in order to develope market opportunities in a timely manner in the China market.
Finally, in these days emerging markets such as India, Brazil, Russia become to strategically important to our Korean firms. Therefore, we can apply both the differentiation strategy to copy with the barriers to competition and the localization strategy to copy with the barriers to culture in these strategically important countries.