In 1997 Chairman Hyun Ju Park and fellow co-workers from Dongwon Securities set up their own investment company called Mirae Capital. From this success the company grew to become Mirae Asset Securities co. in 1999.
Mirae Asset concentrated on fund managing and asset management, while other firms focused on IB and brokerage.
By applying a more aggressive and analytical management strategy, they far outperformed their competitors and eventually grew to have 14 trillion krw of assets under management for their equity type funds by 2009.
Until the end of 2007, Mirae Asset along with help from a raging bull market jumped up to the NO 1 position in the securities industry. But after the financial crisis, they failed to manage their risk properly and have been met with continuous fund redemptions, bringing down their ranking.
Mirae Asset became a pioneer in the Korean security industry in an unprecedented manner by launching first overseas fund and real estate fund by a domestic company, redefining the role of an institutional investor.
Mirae Asset wants to make a great success globally by adjusting their experience in Korea, and expand their oversea business aggressively.
South Korea's entry into overseas markets as a breakthrough in the financial industry is expected to perform many new accomplishments and we can learn many valuable things by watching Mirae Asset's leading move. (table 1 & 2)
2. MIRAE ASSET
1) International Business Strategy
(1) Globalization vs. Localization
Globalization is the process of designing and developing business models that function for multiple cultures. Localization is the process of customizing a MNE's business model for a given country or culture.
Considering we live in a globally connected financial market with strong IT infrastructure, pressure for global efficiency of Mirae Asset is comparatively low but pressure for local responsiveness and flexibility is high.
Regarding the low pressure aspect for global efficiency, it has already been proven that Mirae Asset achieved big success on their past installment fund campaign "Make 300,000,000 won" and achieved a great rate of return. It can apply this successful and strong existing domestic business model onto the global market; they have a high chance of success if the global markets needs are the same as their domestic S. Korean market.
But there are problems with this marketing strategy as many countries have different economic development levels. Not realizing this may lead to loss of market share and decline of growth. Therefore, there is greater pressure to pursue and succeed with a localization strategy.
Mirae Asset acquires proven successful local companies making products that fit their unique nationality; and achieve localized business strategy. Mirae Asset focused on this strategy by establishing independent international subsidiaries and responding to local markets and unique situations flexibly.
(2) Global Configuration and Coordination
International business strategy of Mirae Asset is a country-oriented strategy where the coordination of activity is low and configuration of activity is independent. Business activities of Mirae Asset are dispersed to each countries and intensiveness of the value chain between these subsidiaries is not tight and rigid. This strategy is usually applied to firms that need high adaptiveness to local market.
(3) Distinctive competence
There are hundreds of thousands of competitors in the world financial market. Some of them are mere domestic companies operating only in the local; others are multinational companies which have large scope of operation.
Because the financial industry deals with various types of financial products ranging from simple, monthly installment, index funds to complicated CDO's, Mirae Asset had to strengthen its brand identity to survive in these fierce circumstances by concentrating on a few type of financial product lines.
Consequently, they determined to put great emphasis on its core brands - FUND MANAGEMENT. Since much of Mirae Asset's success in S. Korea was their ability to manage funds with top ranking rates of return, proven with the success of their "Discovery Fund" in S. Korea, they needed to start with fund products first, in their global markets.
As Mirae Asset can use their successful fund managements skills learned from S. Korea, an emerging market on the verge of becoming a developed market, it is easily compatible to other BRIC countries that are also developing, but will become the future developed market powerhouses. Mirae can understand emerging market economies and stock markets better than their competitors as S. Korea was an emerging economy not too long ago. As a result of this compatibility, Mirae has found success in fund management in the BRIC's economies.
For example, In India, they have the top fund returning 95% in recent 1 year yield rate.
As Mirae can adopt and customize to this unique type of emerging market investor better than others, they can leverage this competitive advantage in the fund management market in BRIC's economies, while increasing brand awareness and value simultaneously.
(4) Scope of Operation
When Mirea Asset was founded in Dec. 1999, the company was different from the conservative securities industry, as it did not rely on brokerage commissions. Nowadays only 37 percent of Mirea asset profit comes from brokerage but the other securities company still makes half of profit from brokerage commissions. The rest of Mirae Asset profit is made from its asset management, investment banking and proprietary trading sectors.
Mirae Asset was the first company starting globalization among local securities companies. For example, Mirae Asset first launched oversea fund in Korea and exported local fund product line to other countries. It was hard to image that small local securities company exported local fund product line to finance advanced countries such as US and HK. But Mirae Asset made it.
Mirae Asset also focused on opening oversea branch when local security company compete each other to take small market portion in Korea market. So far, Mirae Asset has opened oversea offices around 7 countries (China, Brazil, India, United Kingdom, Vietnam, United States, Hong Kong). Especially the first Korea securities company opened Brazil office getting ahead of big local securities company such as Samsung and Hyundai.
Mirae Asset consider not only globalization but also localization when expand international business area. For localization, Mirae Asset hired local people for oversea branch. As a result, almost 90% of oversea branch staffs are hired in local. It is hard to make it without Mirae Asset's belief that local staffs have strong advantage to understand local regulations, finance environment and culture comparing to Korea staffs. If Mirae Asset made a decision to dispatch Korea staff to oversea office, would cause waste of time and money to get Korea staffs educated like local staffs level.
To find out another way to expand international business, Mirae Asset made a decision to set up joint venture Company with Click ＆ Phone Stock Company (Vietnam Securities Company). It is the first time to get permission from Vietnam government for opening joint venture with foreign securities company. Mirae Asset won the competition against global major player such as JP Morgan and Nomura.
Based on global network, Mirea Asset is going to introduce various product lines such as IPO, Bonds, funds and stock brokerage over the world. Especially fund product lines have shown good performance (100%) compared to market average (63%) in 2009. Brazil and India fund association really appreciated astonishing achievement made by Mirae Asset.
(5) Resource Deployment
The resource deployment is one of the critical factors to do international business. Especially it is not easy for local company to allocate resource deployment into oversea as expanding international business. Mirae approached resource deployment with two view points like finance product line and geographic line.
In case of finance product line, Mirae Asset persued to assign more resources into retail business for selling fund because Mirae Asset had an experience to successfully launch various fund products in Korea.
For example, Mirae Asset independent fund has yielded 602.64% profit for nine years. Stock Market index performance has shown 166.15% for nine years. Comparing to the benchmark 436.49% better performance.
In case of geographic line, Mirae Asset focus on China, Brazil and India so-called BRICKs country to expand their international business. These countries have common advantages such as a lot of super rich people, expanding infrastructure and no major player in local securities market.
Especially China hold international exhibition and Brazil is going to hold the upcoming world cup and Olympic game so Mirae Asset is going to introduce various products line related to asset management, investment banking and proprietary trading sectors that has shown good performance in Korea. Mirae Asset has been doing well to get maximum benefit though efficiently deploy own resource over the world.
(6) Synergy
We can find out many synergy effects from Mirae Asset's various product line and global network. Mirae Asset is able to provide finance solution to client who would like to invest oversea market within a given time. This service is available because Mirae Asset has expanded operation process to global range.
Mirae Asset also has been increased operation efficiency and accumulated finance, regulation and client finance taste data via branches over the world. Therefore, Mirea asset can easily utilize priceless information from oversea branches to consult client request. If Mirae Asset did not expand service area from domestic to international, costs Mirae Asset countless trial and error.
Researchers in Mirae Asset over the world deliver up-to-date information to fund manager daily basis so fund managers are able to build new product line for each market and make right decision to maximize client profit. It resulted into high performance 45 percent over the past two year (data Quote from Mirae Asset web site) comparing to the benchmark. Based on high performance, Mirae Asset exports best selling product line to other countries.
Once the product line successfully launched in one country, Mirae Asset is able to use this experience to apply the same product line to other countries. It will reduce the IT investment and lower entry cost.
Mirae Asset lessens geographic risk through inventing money into several markets. Even US and Japan market is under the depression, Brazil market can show better performance because of the 2014 World Cup and 2016 Olympic Games, both being hosted by Brazil. This geographic opportunity can give a chance to avoid the risk and maximize the profit.
Success product lines story make Mirae easy to approach international market. Mirae's success story attracted the attention of case-study writers at Harvard Business School. The school will use Mirae's case in a class titled `International Entrepreneurship' beginning this April. (Quoted from Mirae web site) Harvard business cases are sold to many other business schools. This means that by the time the Mirae Asset case is being read by MBA students around the world, Mirae will have a totally different status in the global investment market.
2) International Marketing Management
(1) Market Analysis
In 2009, the global fund industry was worth around USD22900bn [table 3]. Korea is the No. 14th ranked as having net revenue around USD264.6bn. While for searching 44 countries fund markets, there're 31 countries fund markets are increased (include China). The industry is getting increased internationally including not only advanced country also emerging countries. The market participant is able to seek to an opportunity at the developing country securities market that recognizes the fast-growing and world's leading securities market. [table 4]
For the bond industry was worth around USD1000bn. Market increased 17.5% ('08 yr 960 trillion Won) [table 5]
For the global fund market. the market size of north America and Europe increased 2.4% and 1.1%. The Asia Pacific and Africa market increased 5.1% and 6.9% separately. The top market growth ranked over the world, Romania 30.6%, China 24.3%, Chili 19.8% in order. China took the number one growth rate country among top class 15 countries.
Based on product line, stock market size is 8900bn increased USD 411bn (+4.8%), bond market size is 4500bn increased USD 173bn (+4.0%) and Stock and Bond mixed mode is 2300bn decrease USD 243bn (-4.40%) compared to last quarter.
Detail market portion is like below Stock (39.1%,), bonds (19.8%), stock/bond (10.2%) mixed and MMF (23.0%)
(2) 4P's Analysis
-Product
The Mirae Asset produces 508 different kinds of fund products selling them via online and offline in several countries (China, Brazil, India, United Kingdom, Vietnam, United States, Hong Kong).
Mirae Asset set the target market to Korea and then expands market scope to global. The company main product line is asset management, investment banking and proprietary trading sectors. Especially Mirae has the strong point for stock, bonds, MMF fund product line.
-Price
Mirae Asset's income from there stock, CMA, bond and fund fees and so on. Price is depend bank interest rate, finance flows and other issues.
-Place
Previously, Securities company stick with selling product line through its own branch to maximized the profit but it is hard to keep the strategy due to tough competition. That is the reason that securities company sells fund product line leaning on sharing local distribution channel such as bank and other securities company rather than their own branch. Mirae Asset has alliance ship with other securities and banks.
In general, the route of the distribution channel is start from Investors Bank or Securities companyFund managers Market operation -> Report the result to investors. Mirae Asset diversified it's selling channel through online and office to make the profit maximized instead of stick with it's own branch.
-Promotion
Mirae Asset is using combination of both marketing strategies push and pull. For example in Korea, they have been using more pull promotions. They talk about the product and brand in television ads, pamphlets, billboards, exhibition etc. In Shanghai, there's Mirae Asset's main tower in finance CBD, and still they are doing aggressive promotion activities purpose to improve their image and the awareness of brand. [1] Otherwise, in importing countries, the distribution system is more tightly controlled, so that the company is to emphasize on push strategy.
(3) Branding
Mirae Asset chose a different strategy for advertising when compared to other brokerage firms. Other firms focused on a product or the general company image advertisement, but Mirae Asset sent a clear message, stressing they are experts. "Expert = Mirae Asset."
By highlighted the utmost importance of expert fund management ability, Mirae Asset naturally differentiated itself from the rest of the industry.
Consumer began to think: If I want to invest in a fund, I need to go to Mirae Asset fund experts. "Fund = Mirae Asset" became ingrained in consumers minds after successful execution of this branding strategy.
3. Suggestion
(1) After the financial crisis, people did not trust securities companies. There was skepticism on the financial firm's growth strategy based on investment banking. But Korea's capital market found out the opportunity that money move from savings and deposits to investment.
Unless bank interest rates go back to as high a level as before, the flow of money into the indirect investment market will be accelerated.
Mirae Asset has to fully utilize this chance to make fundamental strong and find out another business model for steady income.
Recently we can easily hear the news that "South Korea will become the most aged society among advanced economies in 2050, with nearly four out of every 10 Koreans being aged 65 or over due to low birthrates and the rapidly aging population." Refer to Picture 1 (Quote by Joins.com)
As the population ages, people have more interested in the retirement and pension. That means the retirement and pension fund market will rapidly get bigger in near future. The retirement and pension fund pursues long term investment not like hot money so Mirae Asset is able to create steady income via long term investment plan.
Therefore, Mirae Asset has to concentrate on the retirement and pension fund market as the main target of its future growth strategy. Mirae Asset already have a reliable IT system and international scope operation. So Mirea Asset can save time and entry cost to start the retirement and pension fund business.
We suggest that It is time to transplant accumulated experience in the asset management to the pension fund business. After successfully launch the retirement and pension fund line in Korea, Mirae Asset is able to export it to oversea market as Mirae Asset did in the fund product line.
4. Exhibits
[Table 1]
[Table 2]
As of Dec. Trillion Won
Assets
Net Profit
Billion Won
Mirae Asset at a glance
(in 2009)
Asset
43 trillion won
Net Profit
126.1 billion won
ROE
7.80%
Net Capital Ratio
501.40%
[Table 3]
(Unit: USD Trillion, ë¶„ê¸°ë§ ê¸°ì¤€)
[Table 4]
<주요êµì˜ 주가지수>
(Unit: P)
Division
U.S.A
(DOW)
U.K
(FTSE100)
Japan
(Nikkei225)
China
(ìƒí•´ì¢…í•©)
Korea
(KOSPI)
2007 yr
Q4
13,264.8
6,476.9
15,307.8
5,261.6
1,897.1
2008 yr
Q1
12,262.9
5,702.1
12,525.5
3,472.7
1,704.0
Q2
11,350.0
5,625.9
13,481.4
2,736.1
1,674.9
Q3
10,850.7
4,902.5
11,259.9
2,293.8
1,448.1
Q4
8,668.4
4,382.7
8,859.6
1,820.8
1,124.5
2009 yr
Q1
7,608.9
3,926.1
8,109.5
2,373.2
1,206.3
Q2
8,477.0
4,249.2
9,958.4
2,959.4
1,390.1
Q3
9,712.3
5,133.9
10,133.2
2,779.4
1,673.1
Q4
10,428.0
5,412.8
10,546.4
3,277.1
1,682.7
ì „ë¶„ê¸°ëŒ€ë¹„ì¦ê°
715.7
278.9
413.2
497.7
9.6
Rate (%)
7.40%
5.40%
4.10%
17.90%
0.60%
[Table 5]
<Fund Net Asset Top 10 >
(Unit: USD billion)
Rank
09'yr Q3
09'yrQ4
Rank
Country
Net Asset
Country
Net Asset
1
U.S.A
10832.4
U.S.A
11120.7
1
2
Luxemburg
2238.9
Luxemburg
2293.9
2
3
France
1851.0
France
1805.6
3
4
Australia
1150.6
Australia
1198.8
4
5
Ireland
834.2
Ireland
860.5
5
6
Brazil
741.9
Brazil
783.9
6
7
U.K
702.9
U.K
729.1
7
8
Japan
662.0
Japan
660.7
8
9
Canada
544.8
Canada
565.2
9
10
Germany
312.8
China
381.2
10
11
China
306.7
Germany
317.5
11
…
…
…
…
…
…
14
Korea
268.9
Korea
264.6
14
