The Secret Is Outsourcing

The Samsung Economic Research Institute (SERI) introduced the successful cases of Reigncom, Humax and Missha, which grew into global companies through equal outsourcing or explored a niche market in its report titled “Expansion of outsourcing and strategic response” on April 28.

--Determined outsourcing of core parts

Rising as a leading MP3 player company, Reigncom committed design, the core part of its product differentiation, to “Inno Design”, a Korean design company of Silicon Valley. Reigncom also placed its product manufacturing in the hands of a manufacture-specialized outsourcing company in Hong Kong from the beginning of their business, and they have focused on R&D and marketing. 130 employees out of 327 in Reigncom work in those two fields.

--Not hesitating to turn to equal outsourcing

Making its mark in the low-cost cosmetics industry, cosmetic manufacturer Missha created a niche market with prices in the 3,300-9,800 won per product range to break the conventional idea of “expensive items sell well.”

As sales have increased suddenly with this strategy, Missha entrusted production to 16 cosmetic companies starting in August of last year. They now produce 80% of products outside of their company.

Because Missha has cost and manufacturing data from their own factory, it is possible for them to demand proper prices from specialized producing companies.

A researcher of SERI, Jeong Chang-yong said, “Missha showed the possibility of sudden growth through equal outsourcing when there is excessive demand in the market,” adding, “Lots of interest will be given to them if they can keep up their success by managing outsourcing firms effectively.”

--Simultaneous growth of ordering and outsourcing companies

Starting from a R&D venture group in a graduate school and growing up as a world-class digital set top box company, Humax drew a long-term simultaneous cooperation relationship between a R&D company and an outsourcing company.

Humax concentrated on R&D from the beginning and entrusted production to three to four outside companies because it is important to develop various product groups quickly, with the diverse technological standards of set top boxes.

As sales of Humax have increased, the outside companies integrated into a single company of 500 employees. Humax maintains an exclusive outsourcing agreement with the company, seeking simultaneous growth.

Won-Jae Lee wjlee@donga.com