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Half the Truth on Internet Prediction

Posted June. 17, 2002 23:32,   


"We will drive all department stores from Korean territory."

In June 1999 when took off a boom on Internet and .COM, HANSOL CS CLUB, one of Internet shopping malls placed provocative advertisement in newspapers saying like above. Internet boom affected all industries without exception as expected. In the most of industries related to motorcar, electron, steel and chemistry, B2B and B2C companies appeared like so many mushrooms after rain.

Such as Samsung, LG and SK, major conglomerate elaborated the e-business strategy and invested to venture companies being veiled in the Internet boom.

However, in 3 years, there is currently no industry which has been changed from ranking because of Internet. Instead, as department stores have advanced into the business of Internet shopping mall, companies specialized only in the Internet business are in the middle of hovering between success and failure.

Samsung has re-elaborated the Internet strategy by disorganizing the e-Samsung in charge of Internet business of all affiliates.

What is true or false for the prediction on changes which Internet brings about to companies.

▽Half the truth 〓Prediction on revolution caused by Internet has been actualized considerably. PhD Son Sangyeong, researcher of Korea Information Society Development Institute (KISDI) said "We can realize if we predict an inconvenience for people and companies in the situation of no Internet".

Considering the changes of Korea evaluated as IT power, it has been founded as follows; 60% PC supply, 8,100,000 high speed Internet subscribers, 24,300,000 Internet population and 70% Online stock dealings.

If no Internet, companies cannot do their business. All departments including a purchase, production, marketing, sales and logistics have been using the Internet. If the Internet cannot be used, the stock market will be all interrupted.

The above-mentioned forecasts from experts are true.

Predicted as the big Internet boom, the distribution industry has been dominated by the existing leading companies such as Lotte, Hyundai and Shinsegae. Any of Internet shipping malls made profits among approx. 220 shopping malls. It is forecasted that the Samsung Mall, Interpark and Hansol CS Club will firstly get out of the deficits, but they cannot threaten the department stores.

Financial industry is the same as the distribution industry. Spreading of Online stock dealing didn`t change a map of securities business. `Kiwoom.com Securities` which is the online securities company started early in 2000 succeeded to make profits after the laps of 1 year from establishment. However, it cannot be the competitor of Samsung Securities, Hyundai Securities and LG Securities whose operating profits exceed KRW 100 billion. Some of small online securities companies are hovering between life and death being unable to do large IT investment expenses.

In a banking portal business predicted as a new industry creation, approx. 200 companies appeared, but less than 10 companies are operated properly. These operating companies have reviewed to change the corporate strategy.

▽Internet changed from Gold to Air 〓In connection with baffled Internet forecasts, Han Manhyeon, a director of Monitor Company said "Internet is not a special commodity, but a social infrastructure like electricity and road. Companies cannot show an influence only with technology itself, but can show the power when combining the technology and strategy."

When long-established companies use the Internet because of these characteristics of the Internet, its influence can be larger. Online shopping malls established by Lotte, Hyundai and Shinsegae were started late, but they have been growing rapidly because many consumers think that the department store is superior to the online shopping mall in a trust and delivery of products.

Major industries such as the motorcar and electric home appliances are the same as the above. As the Internet motorcar distributors such as Car123 and Libero appeared, it was forecasted that the purchase behavior of consumers would be changed. However, these companies are currently in trouble after the lapse of 2 years.

Ju, Woojin, a professor of Business Administration, Seoul National University who founded `Car123` said "Consumers don`t want to purchase the car through Internet because of trust problems such as After Service, and motorcar companies don`t permit the Internet distributors to protect the existing distribution network. Accordingly, the Online distributors have difficulties to continue the business".

B2B companies are the same as the online motorcar distributors. Many B2B companies appeared in each industry, but only companies in which manufactures participate as shareholders made profits because manufactures exclude a middleman and manage the B2B company directly as they start to understand the Internet. Out of the chemical products B2B companies, `Chemround` managed by a general trading company closed the business in March of this year, but `Chemcross` managed manufactures such as LG-Caltex and Hyundai Oil Bank has grown rapidly.

▽ Internet power is shown from now on 〓Changes brought to long-established companies by Internt are focused on the operation efficiency including a reduction of purchasing expense, Simple business control without documents and information sharing.

However, experts emphasize that the real changes brought by Internet will be shown from now on.

Jinseok Cha, a executive director of SKT analized "Due to the technology which can exchange through internet compressing sounds, a recording industry has been in depression. Also, the Internet has brought about a harmony or disorganization of each industry owing to the new business of game industries and banking combination".

Yunjong Jang, a head of the office of Digital Economy, Korea Institute for Industrial Economics & Trade said "A experiment of the past 3 years gave a lesson saying that the Internet itself cannot be the gold, to companies. But, companies which don`t use the internet effectively cannot succeed because the Internet is the social infrastructure such as the electricity and road.

Byong-Ki Lee Seung-Ryun Kim eye@donga.com srkim@donga.com