In saturated Europe, niche companies are targeting Asia

Faced with the difficulty of expanding further in limited regional markets, the hidden champions of Europe are looking to Asia.

Analysts say expansion of small but strong European businesses could deal a big blow to small businesses in Korea, which struggle to survive in an environment that favors conglomerates.

“Our next target market is Asia,” said Wolfgang Langhoff, R&D vice president at Leoni. “For the past 100 years, we have been playing in the German and European markets only, and our goal in the next few years is to have a balanced market-share position across the world.”

The company’s sales target is 50 billion euros ($67.7 billion) by 2016, but the executive said he was not sure if it can achieve the goal without Asia.

Bucher-Schoerling has already set up its Asia headquarters in Busan as part of a core strategy to advance into Asia. It has a plant in Incheon, too.

“The reason why we chose Korea for our base in Asia is that we can ensure high quality and work with many good suppliers like Bosch and customers like Hyundai Motor,” said Rolf Huber, vice president.

“It can be a major concern for small Korean companies if these European companies aggressively enter the Asian market,” said Kim Min-seok, a research fellow at LG Economic Research Institute. “European companies have long maintained a strategy of producing high value-added products even at high price tags compared to their Asian rivals, but they are now making attempts to lower prices through cost optimization, a big change.

“If they can keep their quality level, while cutting prices, they could easily take over the Asian market.”

The researcher added that the European companies know how to effectively diversify their key products.

“Once they have a core technology and a flagship product, they try to utilize it to develop similar but different lines of products,” said Kim.

Korean businessmen, while frustrated by adverse conditions in the domestic economy, also are worried about the European champions’ arrival on their home turf.

“The European companies are doing business in niche markets where conglomerates can’t go,” said Kim Ki-hong of SKA. “Korean entrepreneurs would have to work harder to discover fresh business items and seek as much information as possible to find their own niche markets.”

Some point out the European companies’ stretch to Asia could be a boon for some Korean companies.

“Many German companies want to work with Korean partners,” said Kim Tack-whan, a professor at Kyonggi University. “If they come to Korea and set up joint ventures with local companies, there would be no better opportunity for Korean businesses than to learn and catch up with them.”

BY SONG SU-HYUN [ssh@joongang.co.kr]