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Chicken war

Posted December. 11, 2010 13:30,   


Lotte Mart is flooded with orders since it started to sell fried chicken for just 5,000 won (4.39 U.S. dollars) per pack Thursday. People even have to reserve chickens and pick them up at a designated time. After the discounter E-Mart started selling pizzas at half the market price in August to trigger a “pizza war,” the retail sector is now seeing a “chicken war.” As Lotte’s fried chicken is gaining popularity, small neighborhood chicken stores near the discount chain’s outlets are feeling the heat. They are staging rallies claiming that Lotte’s discount chicken is forcing them out of business. E-Mart pizzas, however, are known to have caused a sales drop of under 10 percent at neighborhood pizzerias, so the impact of the Lotte chicken might not be significant.

In the wake of the chicken war, a debate over measures designed to curb super supermarkets could resurface. The “co-growth committee” to be launched Monday will set guidelines on “sectors of business deemed appropriate for small and medium-sized enterprises” by commissioning a study to the Korea Institute of Industrial Economy and Trade. Bankruptcy of the self-employed is undesirable, but a regulation should not deprive consumers of the right to choose cheap and quality products. The government lifted rules on protecting small businesses as recently as several years ago to boost the competitiveness of smaller companies. The system of allocating business sectors exclusively for small and medium businesses, which bans conglomerates from entering or expanding in those sectors, was abolished in phases through 2006.

The National Tax Service said the number of self-employed in Korea was 4.8 million people last year, or 20 percent of the economically active population. Among them, 1.2 million or 26 percent are in 30 business areas, including restaurants, clothing stores and bars, so they inevitably face cutthroat competition. Nevertheless, 35 percent of the 930,000 people who launched businesses last year did so in the 30 areas. People who wish to open a business can find out how competitive the intended business area is by referring to the tax authority’s Web site. Opening a venture in highly competitive sectors could worsen the serious problems of the self-employed.

Jeon In-woo, chief of planning and coordination at the Korea Small Business Institute, said, “The self-employed with competitive businesses should continue to grow and acquire others who hope to open a business, and thus cut the number of the self-employed in half.” People should be encouraged to organize their businesses in the form of subscription-based operations, including franchises or super market cooperatives, and to cooperate with each other. Nadeul Store (Kosa Mart), a common brand that the Small and Medium Business Administration is implementing to protect rural businesses, can raise their cost competitiveness only through joint logistics and going beyond the use of a common brand. The ultimate solution to helping the self-employed is to increase the number of quality jobs.

Editorial Writer Hong Kwon-hee (konihong@donga.com)