South Korea
Republic of Korea
Fig. 1 National flag of Republic of Korea
South Korea officially the Republic of Korea 대한민국; RR: Daehan Minguk) is a country in East Asia, constituting the southern part of the Korean Peninsula and sharing a land border with North Korea. The name Korea is derived from Goguryeo which was one of the great powers in East Asia during its time, ruling most of the Korean Peninsula, Manchuria, parts of the Russian Far East and Inner Mongolia under Gwanggaeto the Great. Its capital, Seoul, is a major global city and half of South Korea's over 51 million people live in the Seoul Capital Area, the fourth largest metropolitan economy in the world. South Korea is a highly developed country and the world's 11th largest economy by nominal GDP.
Fig. 2 Map of Republic of Korea
In April 2016, South Korea's population was estimated to be around 50.8 million by National Statistical Office, with continuing decline of working age population and total fertility rate. The country is noted for its population density, which was an estimated 505 per square kilometer in 2015, more than 10 times the global average. Aside from micro-states and city-states, South Korea is the world's third most densely-populated country. In practice the population density in much of South Korea is higher than the national one, as most of the country's land is uninhabitable due to being used for other purposes such as farming.
South Korea's mixed economy ranks 11th nominal and 13th purchasing power parity GDP in the world, identifying it as one of the G-20 major economies. It is a developed country with a high-income economy and is the most industrialized member country of the OECD. South Korean brands such as LG Electronics and Samsung are internationally famous and garnered South Korea's reputation for its quality electronics and other manufactured goods. South Korea was one of the few developed countries that were able to avoid a recession during the global financial crisis. Its economic growth rate reached 6.2 percent in 2010 (the fastest growth for eight years after significant growth by 7.2 percent in 2002), a sharp recovery from economic growth rates of 2.3% in 2008 and 0.2% in 2009, when the global financial crisis hit. The unemployment rate in South Korea also remained low in 2009, at 3.6% The South Korean economy is heavily dependent on international trade, and in 2014, South Korea was the fifth-largest exporter and seventh-largest importer in the world.
1. Introduction to South Korea
In April 2016, South Korea's population was estimated to be around 50.8 million by National Statistical Office, its population density was an estimated 505 per square kilometer in 2015, more than 10 times the global average. South Korea's mixed economy ranks 11th nominal and 13th purchasing power parity GDP ($ 29,730 per capital)in the world, identifying it as one of the G-20 major economies. It is a developed country with a high-income economy and is the most industrialized member country of the OECD. South Korean brands such as LG Electronics and Samsung are internationally famous, the country ranks first among the most innovative countries in the Bloomberg Innovation Index. Additionally, South Korea today is a growing trend of inventions of new types of media or apps, utilizing the 4G and 5G internet infrastructures in South Korea. Moreover the country is the origin of some of the major firms in the home appliances sector and has a large volume of appliances dominated by these companies. Consumer appliances had a positive growth in 2015, despite the maturity of major categories as well as negative external factors. Table 1 shows the household appliances market value in South Korea in the past decade. The South Korean home appliances market has been estimated at USD 1.13 billion in 2018 and is projected to reach a value of US 5.31 billion by 2021 growing at a CAGR of 6.18% during the forecast period from 2016 to 2021. Its smart home market is likely to fivefold by the year 2024 from its current level in 2016. So by now this is the best opportunity to develop the product of WDIRC in South Korea market.
Table 1 South Korea household appliances market value (2007-2016)
2. WDIRC selling
The forecast of WDIRC selling can be shown in Table 2 during the first ten years since product launched. Here the assumptions of households, occupancy ratio, initial sale, selling price, and manufacture cost are 15,887,128, 0.0800%, 12,710, 350 and 200, respectively. The first year is set as the baseline for comparison with the following years, the sale volume, year penetration, revenue, cost and profit are 12,710 (sets), 800 (ppm), 4,448,396(USD), 2,541,940 (USD) and 1,906,455 (USD), respectively. As we think, the growth rate with years will be 1, 4.82, 6.93, 7.00, 7.44, 10.23, 10.78, 13.09, 14.86 and 18 times over the first year. The year penetration of WDIRC will be from 800 ppm to 14,400 ppm at the end of tenth year, the totally ownership (penetration) is close to 75,320 ppm (7.53%), it still is a low penetration ratio in South Korea even WDIRC listed in market for ten years. However the revenue, manufacture cost and profit these three also present an ascending trend, the profit earned from South Korea is about $ 34.31 million at the tenth year in an exclusive market, it owns a huge market and profit in this market. Totally according to our prediction and assumption, the selling in South Korea will be up to 1,196,615 sets, even this; the penetration ratio is still lower than other consumption electric products such as TV, Refrigerator, Air conditioner, and Wash machine.
Table 2 To estimate the selling of WDIRC in South Korea
How about the annual growth rate for selling WDIRC in South Korea market? Fig. 3 shows the result. Here the calculation of revenue can use this equation as “WDIRC’s Revenue = Annual growth rate * Year + Baseline”, the formula can be written in a mathematic equation in Figure. According to this regression by data simulation, the annual growth rate it take about 7M per year (r2 =0.9594), in other words, by averaged the annual revenue is 7M in South Korea market for selling WDIRC products during the first decade.
Fig. 3 To estimation the revenue of WDIRC selling in South Korea market
3. Rice selling
A ten-years forecast to WFR sale, after WDIRC launched in South Korea market, is presented in Table 3. The first year since the marketing of WDIRC, online/offline deals for WFR sale are 136,360 kg, here the assumptions of population, rice consumption, sharing of WFR, online buying rate and market sharing are 50,503,933, 90.00, 0.10%, 10.00%, and 30%, respectively. How to calculate the WFR volume by online/offline sale, Eq. 1 is the equation for calculating the WFR sale volume.
Eq. 1 SaleVolume=Population x RiceConsumption x WFRratio x On/OffBuyingRatio x MSharingRatio
(eg. 136,360= 50,503,933 x 90.0 x 0.001 x 0.1 x 0.3)
The use rate of WFR is set as 0.0027 kg/person-year. Based on this, we can get the annual revenue is $ 136,360 (WFR priced as $1), and the profitability is set to 10%, so the profit that will earn $ 13,636. Changing with the time, the ratio of WDIRC in kitchens will increase and cause the use of WFR increasing. We assumed the series of growth rate (G.R.) by years is 1, 2.45, 4.11, 23.67, 26.06, 36.62, 40.19, 66.98, 69.63 and 83.08. G.R. it is based on the prediction of WDIRC’s growth. By this series of G.R., both revenue and profit, they will also be presented like this serial when the dealing cost of WFR through online/offline transaction is keeping constant. Whatever the cost of online/offline transactions depends on the volume of WFR’s selling, so if the volume with time is scaling up, the dealing cost will be significantly lowered, in other words, the profitability with time will increase more than our prediction. If all hypotheses are true, the profit in tenth year will approach to $ 1,132,850. Eq. 30 calculates the penetration of WFR which to be used in this country by people. From this indicator (URate of WFR), we can see the level of penetration of WFR, even at the tenth year, the level of WFR use rate in South Korea is still underestimation, that’s meaningful for us to optimistically think, the use rate of WFR can be easy completed and it will be grew up more than our prediction.
Eq. 2 URate of WFR = SaleVolume of WFR / Population
(eg. 0.0027 = 136,360 / 50,503,933)
Table 3 To estimate the selling of WFR in South Korea
Regarding the revenue of WFR selling in South Korea, Fig. 4 shows the result. This is a prediction by data simulation according to our assumption, the regression could be calculated as “WFR’s revenue = Annual growth rate * Year + Baseline”. The result shows the annual growth rate is 1M per year (r2=0.9569), in other words, the increasing of revenue of WFR selling in South Korea is 1M dollar per year. This growth can help the company to maintain its team in the local market for servicing customers.
Fig. 4 To estimation the revenue of WFR selling in South Korea market
4. To summarize the revenue and profit
Here according to the estimations above, we summarize the incomes from sales of WDIRC and WFR in South Korea. Both revenues and profits are presented in Table 4. In the first year, the products of WDIRC and WFR are unfamiliar with Korean people; namely the recognition and acceptance aren’t well to local consumers, so on the beginning (1st year) sales would be not good and the totally revenues and profits will be $ 4,584,756 and $ 1,920,091, respectively. Both of them will increase with years when selling with good experiences and promotions. Through our forecast, at the end of tenth year, the profits of WDIRC and WFR will be up to $ 34,316,100 and $ 1,132,850, and the totally profit will be $ 35,448,950, this is a huge profit which be created in South Korea market by our novel products and services.
Table 4 To estimate both revenues included WDIRC and WFR selling in South Korea
Totally the revenue of WDIRC and WFR (2W) selling in South Korea market can be shown in Figure 5. The 2W revenue in first year is 4.584 M dollars, after that the growth rate of revenue is 9M per year, this is a simple regression by mathematic model to predict the revenue on product selling. In practice, there are other factors that need to be considered much more, it could be higher than this or lower. Whatever by this calculation let us to trust that the market it always be there.
Fig. 5 To estimation the revenue of WDIRC and WFR selling in South Korea market