Team2 week2 sk_networks_stg_final

Entry Strategy of SK Networks

in China Market

Team 2

TM : JU Park

Team Member : SY Kim

IH Joe

HP Choi

RA : Pay Kim

2010.03.12.Fri

22

Agenda

1. Last session overview

2. Analysis of refueling market and SK Networks’ R&C in China

3. Strategy and Item selection for success in China Market

4. Explain of item

5. Marketing Strategies

6. Expected effects

33

Agenda




4. Explain of item


6. Expected effects

44*SK Networks 2009년 6월 반기보고서**Annual Report Of China Car Industry, 2009, SERI

Last session overview

Because of limits of Biz portfolio of SK Networks in Korea and large

opportunity in china market, we decide to enter China refueling market

Limits in Korea Market*

Yearly sales of car in China

Opportunity in China Market**

We decide to enter China refueling market

++

0

500

1000

1500

05' 06' 07' 08' 09'

0

10

20

30

40

09' 10' 11' 12'

Over 13 million cars are

sold in 2009

World’s largest car

market

21 car per 1,000 people

in China

On average, 4.6 people

per 1,000 will get the car

for next three years.

A number of car per 1,000

people in China

0

10

20

30

40

50

60

05' 06' 07' 08' 09'

SK

GS

S-Oil

HDO

200

400

600

800

05' 06' 07' 08' 09'

M/S fluctuation of last 5 years

Market size change of last 5 years

M/S of 4 major

refueling market

player is almost fixed.

It’s really hard to

increase M/S of SK

Networks.

The entire market size

of refueling industry is

not changed for last 5

years.

55

Agenda



2.1. KSF of refueling market in china

2.2. Fitness analysis between KSF and R&C


4. Explain of item


6. Expected effects

66

KSF of refueling market in china

Common KSF of refueling industry and government regulation are the KSF in

China market

KSF of refueling market in china

Specific factor in China

++

How to find KSF in China

Environment Way to find KSF

General KSF of refueling market

Regulation of China government

1. To start gas station business, foreign

company should gain the China

government’s approval.(quarter

regualtion)

2. When foreign companies establish the

company in china, shares of foreign

companies must be under 49%.

Shares of

company

Shares of

Governmet

enterprise

Exxon mobile 48 52

Shell 43 57

Total 49 51

BP 48 52

47%

32%

21%

Others Sinopec CNPC

General KSF

Accessibility

Price

Promotion

Etc(service, quality, …)

KSF (In China)

Accessibility

Price

Promotion

Etc(service, quality, …)

Government Regulation

77

Fitness analysis between KSF and

R&C

Because R&Cs in China market are not satisfied the KSF of refueling industry,

we need to have differentiations compared to other companies

Satisfaction IndexRequired R&C Competitive advantage

R&C Analysis

Capacity of

establishing channel

KSF and R&C in China market

KSF

(In China)

Accessibility

Price

Promotion

Etc(service,

quality, …)

Government

Regulation

Exxon Mobile

Shell

Total

BP

Capacity of networking

with oil country

Operating Capacity

Operating Capacity

Capacity of make good

relationship with China

government

Exxon Mobile

Shell

Total

BP

Exxon Mobile

Shell

Total

BP

Exxon Mobile

Shell

Total

BP

Exxon Mobile

Shell

Total

BP

Standard :

a number of gas

station in China

Standard :

Oil Spot / Location

of oil refinery factory

Standard :

a shares of company

comparing to China

national enterprise

Standard :

Brand awareness.

Standard :

Additional Service

that company can

provide..

Even though SK Networks is not satisfied KSF, so we need to have differentiations to success in

the future

88

Agenda




3.1. Methodology of strategy

3.2. Short term strategy

3.3. Long term strategy

4. Explain of item


6. Expected effects

99

Methodology of strategy

Because of characteristics of refueling industry, we need to achieve KSF first

and will find the way to differentiate from competitors

Short term STG

1

12 Point text: Level 0

Level 1

Level 2

Level 3

Long term STG

2

12C

Mission

Reason

Method

ology

Improve R&Cs to satisfy KSF in China Market

Accessibility and price are 80% of key buying

factors of customers in refueling market

So, accessibility and price are essential and

basic factors to enter refueling market

해Present concrete methods that can lead to

get R&Cs

해Find R&Cs that is necessary to satisfy KSF

해Check KSF that SK Networks cannot satisfy

Mission

Reason

Method

ology

Raise revenue and profit through making a biz

item that can satisfy customers’ needs and fit

with SK Networks’ R&C

General refueling concept can’t have a

competitive power

SK Networks need to make a differentiations

from competitors to beat competitors in china

market by using their R&C

해Set marketing strategies that make our long

term strategy operate well

해Select biz item that we can develop and

operate very well

해Consider SK Networks’ R&C

해Set criteria that can make differentiations

from competitors

1010

Short term strategy – Raise R&C to achieve KSF

There were many efforts to satisfy the KSF and these efforts supported to

improve the R&Cs of SK Networks

Efforts that show to improve R&C

SK Networks is improving R&Cs to satisfy KSF in China market

Not satisfied KSF

Accessibility

Price

Promotion

Necessary R&C

Improve accessibility

Minimize distribution cost

Raise brand value

Expand

channels to

meet

customers

1

Petrochemi

cal plant

Acquisition

2

Brand

marketing

3

Increase the number of gas

station slowly

Speedmate cooperated with

SINOPEC that is the

biggest refueling company

SK Networks made an

acquisition of Chinese

petrochemical plant

It will take cover the

capacity of China market

Contract cooperative

marketing with SINOPEC

that will raise brand value of

Speedmate and SK

Networks

1111* Annual customer report 2008 in China Market

Long term strategy – Make differentiations

We set 3 criteria – Synergy with other biz, Find customers’ hidden need, Not

activate in China - to differentiate from competitors for long term STG

Criteria to make differentiations from competitors

To be able to

make synergies

with refueling

1

To be able to be

sufficient hidden

needs of

customers *

2

Model that isn’t

active in China

market

3

Can it share target customers?

Can it share sales channels?

Can it share brand image?

Can it share operating know-how?

Doesn’t it interrupt to support refueling business?

Propensity of the overall Chinese

- Many Chinese people want one-stop service

- Almost Chinese people are lazy

Hidden needs of car owners in China market

- There are not enough repair stores compare with market growth

Find some biz model of SK Networks’ portfolio that doesn’t activate in China

market

Biz model that SK Networks can establish and operate well

1212

Agenda




4. Explain of item

4.1. Item Introduction

4.2. Example of renter car customer

4.3. Example of gas station customer


6. Expected effects

1313* Annual customer report 2008 in China Market

Item Introduction

Combining implications from 3 criteria, we were able to select total car service

solution that includes renter car and repair shop

Implications from criteria for long term strategy

To be able to

make synergies

with refueling

1

To be able to be

sufficient hidden

needs of

customers *

2

Model that isn’t

active in China

market

3

Item that we selected

++

해Related with car service

해One stop service

해Service model that can’t be searched

• We are going to manage gas station and car

service center.

• After let all the people know our brand, in long-

term strategy we are going to add car-rental

shop.

Many Chinese people want one-stop

service and almost Chinese people are

lazy

There are not enough repair stores

compare with market growth

There is no convergence solution of car

services

It will be useful to use the space of gas

station channels

It will be good to deliver same image to

targeted customers

Gas station

Car service center Rental car shop

Total car service solution!!

1414

Example of car rental customer

•He is Chinese.

•His name is Ji-Hoon who often use car

rental shop because of business trip.

• He Arrive at Simyang.

• In Simyang airport, he

asked which rental shop is

best . Guide said to him

“SpeedMate is very good

rental shop in Simyang

which connect with their own

gas station and car service

center.

Ji- hoon come by Speed Mate. And

he makes a contract on 4-passenger

car during a week.

They give him a point card which can

use at SK gas station and car service

center. for a week.

Whenever Ji-hoon refuels for a week , he goes to

SK Gas Station because of point card.

1515

Example of gas station customer

a

She is career woman.

Every day she go to work by her car.

Almost every week she goes to refuel at SK Gas station. There is Speed

Mate, car service center, on the side of gas station. And she always saw

speed mate every time she stops by gas station. One day, her car broke

down . But she has a SK Point card so she doesn’t worry about it. Because

she accumulate her point by refueling, she is able to

fix her car for free.

1616

Agenda




4. Explain of item


6. Expected effects

1717

Marketing Strategies

Divide customers’ behavior pattern into 4 parts and present marketing

strategies for each part

N/A

Perception

1

Refueling

- Reducing a prime cost

- Reducing a distribution

cost

Renter Car

- Reducing a channel

establishing cost

Purchase

2

N/A

Usage

3

Set price benefits for

loyal customers

Discount the price by

using customers’

mileage

Evaluation

Re-purchase

4

Price

Place

Make a Channel

expansion strategy that

considers locations of

plants and gas stations

Make a layout of gas

station that considers

movement way and

arrangement of

promotion materials

N/A Offer full services in

every channels(ex.

Every gas station can

offer to make a contract

renter car service)

Promotion

N/A Make a exposing

method that can promote

related services

Package service

promotion

Make a connection

between related services

Set point/mileage

linkages that can be

used through all services

N/A

Achieve price rationality

1818

Marketing Strategies :: Perception stage

In perception stage, we expend gas station channel from Symyang because of

accessibility and database of customers

N/A Refueling



cost

Renter Car


establishing cost

Purchase

2

N/A

Usage

3


loyal customers


using customers’

mileage

Evaluation

Re-purchase

4

Price

Place

Make a Channel






movement way and

arrangement of

promotion materials


every channels(ex.



renter car service)

Promotion

N/A Make a exposing


related services

Package service

promotion

Make a connection


Set point/mileage



N/A


Channel Expansion strategy

Crowded Location of SK Networks’ gas stations

To consider characteristics of people and crowded location of SK

Networks’ gas stations, we will start expansion from Simyang

SK Networks has a database of Simyang’s people and knows the

characteristics very well because SK Networks operate gas stations

and collect data for 4 years

Perception

1

1919

Marketing Strategies :: Purchase stage

In purchase stage, we can achieve price rationality for gas station and renter

car service and make a connected service program for promotion campaign

N/A

Perception

1

Refueling



cost

Renter Car


establishing cost

N/A

Usage

3


loyal customers


using customers’

mileage

Evaluation

Re-purchase

4

Price

Place

Make a Channel






movement way and

arrangement of

promotion materials


every channels(ex.



renter car service)

Promotion

N/A Make a exposing


related services

Package service

promotion

Make a connection


Set point/mileage



N/A


Is it possible to achieve price rationality?Purchase

2

Connected service program

Refueling

Renter Car

A prime cost has competitive power by network

power with oil-producing countries

Acquisition of petrochemical plant can reduce the

distribution cost

Channels’ establishing cost and rent cost of land

is not the problem because SK Networks already

constructed gas station channels

Can achieve price rationality

Gas

station

Repair

shop

Renter car

Provide package service to use all services

together for customers

Promote other services when customers take a

service

2020

Marketing Strategies :: Usage stage

In usage stage, we will make a connection between related services and set

point/mileage linkage

N/A

Perception

1

Refueling



cost

Renter Car


establishing cost

Purchase

2

N/A Set price benefits for

loyal customers


using customers’

mileage

Evaluation

Re-purchase

4

Price

Place

Make a Channel






movement way and

arrangement of

promotion materials


every channels(ex.



renter car service)

Promotion

N/A Make a exposing


related services

Package service

promotion

Make a connection


Set point/mileage



N/A


Total Point / Mileage Service

Gas

station

Repair

shop

Renter

car

All services of SK Networks will share the point or

mileage (Customers can use their points or

mileages anywhere that are operated by SK

Networks)

Lock-in our loyal customers through raising

transition cost

Ex. A customer who accumulated mileage by

using refueling services can use his/her mileage

for repairing his/her car

Usage

3

Money

Point / Mileage

Using point / mileage

해IT Solution that manages total point service

2121

Marketing Strategies :: Evaluation / Re-purchase stage

In evaluation / re-purchase stage, customers can receive the benefits of price

by using their point

N/A

Perception

1

Refueling



cost

Renter Car


establishing cost

Purchase

2

N/A

Usage

3


loyal customers


using customers’

mileage

Evaluation

Re-purchase

4

Price

Place

Make a Channel






movement way and

arrangement of

promotion materials


every channels(ex.



renter car service)

Promotion

N/A Make a exposing


related services

Package service

promotion

Make a connection


Set point/mileage



N/A


Price discount

Offer full service everywhere

Gas

station

Repair

shop

Renter

car

Same service everywhere

Loyal customers will receive benefits that discount

prices of SK Networks’ all services that is

operating right now and will operate in the future

Steady buying

Price benefits

Lock-in through customers’ all car life

When customers drop by any SK Networks

channels, they will receive the services that

include renter car, repair and etc..

2222

Agenda




4. Explain of item


6. Expected effects

2323

Expected Effects

If long term strategy works very well, we can expect synergy with other biz

group, improvement of profitability and have a base to east Asia marketSynergy with

other biz group

Synergy

with other

biz group

Profitability

improvement

Having a base to

east Asia market

Profitability Improvement

Having a base to east Asia market

Refueling biz is not profitable

but total car solution will give

SK Networks more profitable

biz portfolio

Synergy with SK shipping

- The amount of oil trading

which is transported to China

can realize the scale of

economics

Synergy with SK Energy

- SK Energy’s oil refinery

factory which built in China

can be a bridgehead to east

Asia market

To make channels that is near by other

countries, SK Networks can spread biz area

to east Asia

Entry countries will confirm by considering

the locations of petrochemical plants and

gas stations

End of Document

2525Industry Report of China Oil Refueling Industry, 2009, Kotra

Appendix

KSF and R&C in China market(Accessibility)*

KSF

(In China)

Accessibility

Price

Promotion

Etc(service,

quality, …)

Government

Regulation

A number of gas

station in China

(2009)

A number of gas station

each company plan to

build in near future

Exxon mobile 59 750

Shell 44 500

Total 18 300

BP 41 500

SK Networks 21 40

In terms of accessibility, all the competitors except Total get more accessibility than SKN.

To assess the accessibility, as market is not saturated yet, rather a number

of gas station than location is more effective index.

2626

Appendix


KSF

(In China)

Accessibility

Price

Promotion

Etc(service,

quality, …)

Government

Regulation

a number of oil spot

that each company

invests

refinery factory which

located in China

Exxon mobile 131 O

Shell 97 O

Total 76 O

BP 144 O

SK Networks 43 O

A number of oil spot that each company invests is smallest of all. However, SKN also has one

refinery factory in China

To assess the competitive advantage of price, we analysis cost structure of

each company. Among cost structure, relationship with oil country and a

number of refinery factory which located in China is the most important

factors.

2727

Appendix


KSF

(In China)

Accessibility

Price

Promotion

Etc(service,

quality, …)

Government

Regulation

The year that each of company enter

China market

Exxon mobile 1990’

Shell 1993’

Total 1993’

BP 1995’

SK Networks 2007’

Enterance year of SKN is latest of all.

In Promotion, as China’s refueling market is not mature yet, we give the

most emphasis to brand awareness.

2828“China’s gas station competition landscape”, www.opinet.com, newspapet script

Appendix


KSF

(In China)

Accessibility

Price

Promotion

Etc(service,

quality, …)

Government

Regulation

Welcoming

service

Additional

Gift

Car

Clearning

Service

Quality

Exxon mobile O O O O

Shell O O O O

Total O O O O

BP O O O O

SK Networks O O O O

All the player provide basic service.

Service consists of welcoming sevice, additional gift, and car cleaning

service. In fact, there are no quality difference in quality.

2929

Appendix


KSF

(In China)

Accessibility

Price

Promotion

Etc(service,

quality, …)

Government

Regulation

Shares of company Shares of Governmet

enterprise

Exxon mobile 48 52

Shell 43 57

Total 49 51

BP 48 52

SK Networks 100 0

First foreign refueling company who get the 100% shares in China

As shares of company affect the strategy that company trying to excute, to

get the independence of business, shares of company is really important.

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