BAT Korea Looks to Gain Leadership via Localization

When a company makes advances into an oversea market, the rule of thumb is that it has to be woven into the cultural fabric of tobaccothe target country through relentless localization efforts.

If this rule holds true, BAT Korea is doing really well because the subsidiary of British American Tobacco here has won the hearts and minds of customers based on tactics tailored to local tastes.

Ever since BAT Korea ranked first at the National Customer Satisfaction Index (NCSI) among cigarette producers in 2004 for the first time, the Seoul-based outfit topped the podium in five of the past six years.

In particular, the company famous for such brands as “Dunhill” and “Vogue” won the annual accolades in 2008 and again this year, nudging past all of its five competitors, thus demonstrating that it stands out both in brand power and quality.

This boosts the market share of BAT Korea and according to research firm AC Nielsen, BAT Korea carved out 18 percent of the market during the third quarter of 2009, chasing only industry leader KT&G.

The quarterly research found that KT&G is still the run-away leader with a market share of 60.5 percent, but the former state monopoly would not be happy with the result as it accounted for almost all pieces of the market in the past.

“When we first tapped into the domestic market back in 1988, people were not that friendly to foreign entities. That was especially the case when it came to cigarettes,” BAT Korea Corporate Affairs Manager Celine Shin said.

“But we have focused our efforts to meet the needs of customers by attempting to offer made-in-Korea products via seamless localization efforts. Our unique corporate culture also helped achieve fast growth in Korea,” she said.

Localization ― Sacheon Factory

As Shin points out, BAT has pulled out all the stops in its localization initiative here since it first advanced into the country in 1988 as demonstrated by the establishment of its factories in Korea.

The company set up factories in Sacheon, South Gyeongsang Province midway through 2002, a first among foreign-based tobacco manufacturers in Korea. It currently employs around 270 workers.

The state-of-the-art facilities, which boast the annual capacity to produce 25 billion cigarettes, are touted as one of the best BAT factories in terms of productivity and management among 49 across the world.

Starting in 2005, BAT Korea began exporting cigarettes produced in Sacheon to a host of Asian countries such as Japan, Australia and the Philippines as well as to South America.

The outbound shipments have increased rapidly over the past several years ― last December, the Korea International Trade Association awarded it for its achievement of $10 million in exports.

Last month, the factory’s accumulated production surpassed the 100 billion-cigarette milestone, the exploits showing the efficiency of the Sacheon facilities, according to BAT Korea’s Executive Demand Chain Director Rafael Marquez.

“The record of producing 100 billion cigarettes is quite a significant achievement in a sense that it was reached in a relatively short period of time of less than seven years, which also highlights high productivity,” he said.

Corporate Social Responsibility

Another major pillar of its localization schemes are the brisk activities associated with corporate social responsibility (CSR) programs.

One of its most notable CSR efforts is to financially support projects for prospective social enterprises by offering as much as 25 million won to each ― along with the Work Together Foundation, the No. 1 foreign tobacco firm in Korea picked up three prospective social enterprises this year.

Shin notes that the program serves society in an unprecedented way.

“By establishing funds that support prospective social enterprises in a systemic way, we hope to contribute to society and believe this is a practical and differentiated way of adding value to the community,” she said.

Lee Kwang-taek, executive director at the Work Together Foundation, praises the long-term effect of the initiatives.

“While most supportive programs are targeted mainly toward registered social enterprises, supporting prospective social enterprises is quite valuable to help them pursue their businesses and eventually to help increasing employment opportunities over a long-term perspective,” Lee said.

In addition, BAT Korea has forged ahead with a variety of CSR programs with the mindset of putting consistent activities on the front burner.

“Instead of offering one-off help, we are attempting to forge a long-term support relationship with the needy. Hence, we have an employees’ voluntary club dubbed Big Love,” Shin said.

“Composed of 24 small units, Big Love carries out periodic activities throughout the year. Interest in the organization runs high because our employees participate in voluntary efforts twice a year,” she said.

The efforts of Big Love have been recognized several times by regional governments or assemblies in areas such as Jeju and South Jeolla provinces.

Unique HR Policy

Another factor that buttresses the early success of BAT Korea is its unique human resources (HR) management, which focuses on openness and global exchange.

For example, BAT Korea braces for a mixture of different cultures because people from various ethnicities work together, from Switzerland, the Netherlands, Australia, Venezuela, Russia, the United Kingdom and Turkey although most of around 1,100 employees are Koreans.

BAT Korea General Manager Stephan Liechti himself is from Switzerland, having taken the helm of the tobacco manufacturer in October last year.

The firm encourages a multi-cultural environment through the “Global Talent Exchange,”’ under which global affiliates of BAT exchange staff members for a certain period of time.

Also of note is its unique talent management system aimed at fostering the cream of the crop.

Under the scheme, new recruits of BAT Korea go through a set of rigorous on-the-job training for two years, which includes cross-functional projects and overseas assignments for about three months.

After finishing the two-year management trainee processes, they will be promoted to an entry-level management position.

“A global leader should not only be functionally strong but also be capable of demonstrating continuous efforts to strive for excellence and lead oneself and his/her team with clear direction,” BAT Korea’s HR Executive Director Anna Dolgikh said.

“It is also important to respect diversity as well as to find opportunities even at difficult times and face challenges in a constantly changing business environment,” she added.

By Kim Tae-gyu, Koreatimes

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