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HETBAHN Case

HETBAHN Case. Technology Management and Strategy. HETBAHN Case. Presented by Kihoon Kim, Toikye Cho, Younghwan Jeon. HETBAHN Case. HETBAHN Case. PART Ⅰ PART Ⅱ PART Ⅲ. HETBAHN Case PART I. PART Ⅰ PART Ⅱ PART Ⅲ. Introduction. Company Overview Industry Overview

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HETBAHN Case

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  1. HETBAHN Case Technology Management and Strategy

  2. HETBAHN Case Presented by Kihoon Kim, Toikye Cho, Younghwan Jeon

  3. HETBAHN Case

  4. HETBAHN Case PART Ⅰ PART Ⅱ PART Ⅲ

  5. HETBAHN Case PART I PART Ⅰ PART Ⅱ PART Ⅲ

  6. Introduction • Company Overview • Industry Overview • Product Overview

  7. Introduction 1. Company Overview *Vision & Mission Vision To become a Global Enterprise that Creates a Healthy, Happy and Convenient Lifestyle Mission To Create Premium Value for Customers, Shareholders and Employees by Supplying the Best Products and Services through the "Only One" Spirit “CJ creates a Healthy, Happy and Convenient Lifestyle”

  8. Introduction 1. Company Overview *Business Area Food Logistics Entertainment IT Infrastructure Bio Technology CJ’s business areas include food, bio, processed food, animal feed, pharmaceuticals and entertainment

  9. Introduction 1. Company Overview *Business Performance (April, 2010) CJ’s is one of the biggest companies in food industry in Korea

  10. Introduction 1. Company Overview *Business Performance (April, 2010) CJ’s is one of the biggest companies in food industry in Korea

  11. Introduction 1. Company Overview *History before HETBAHN (1953~) 1953~1970 Foundation and Take off 1973~1980 Growing into Composite Food Company 1980~1990 Advanced Technology Development and Overseas Market Entry 1991~1995 Diversifying Independent Business Fields Launching Life and Culture Group 1996~

  12. Introduction 1. Company Overview *History before HETBAHN (1953~1997) 1953. 8.Founded Cheil Jedang Co., Ltd. (the first manufacturing business of Samsung Group) 11.Commenced sugar manufacturing (first sugar- producing facility of Korea) 1973. 11. Commenced animal feed manufacturing 1975. 11. Commenced production of ‘Dashida’ 1987. 2. Founded Cheil Frozen Food 1991. 11.Commenced life science business 1994. 2. Entered food service business 1996. 2.Established CGV, the multiplex theater 1997.4.Completed official and legal separation from Samsung Group 1997.12.

  13. Introduction 1. Company Overview *History before HETBAHN (1953~1997) 1953. 8.Founded Cheil Jedang Co., Ltd. (the first manufacturing business of Samsung Group) 11.Commenced sugar manufacturing (first sugar- producing facility of Korea) 1973. 11. Commenced animal feed manufacturing 1975. 11. Commenced production of ‘Dashida’ 1987. 2. Founded Cheil Frozen Food 1991. 11.Commenced life science business 1994. 2. Entered food service business 1996. 2.Established CGV, the multiplex theater 1997.4.Completed official and legal separation from Samsung Group 1997.12. HETBAHN selected as hit product in the field of ready-to-eat processed foods at the Korea Consumer Festival 1997CJ General Research Center won a prize of 1st Technology Research Center Award from the Ministry of Science and Technology for outstanding research performance

  14. Introduction 2. Industry Overview *Ready-to-eat Processed Rice • Frozen Rice (1993~) • Food businesses adopted frozen fried-rice, frozen rice-ball manufacturing facilities from Japan • Market penetration was unsuccessful due to bad taste • Retort Rice (1995~) • Market penetration was unsuccessful due to bad taste Food businesses gave constant effort to develop ready-to-eat processed rice product to meet the market taste The market was attracting businesses with great potential demand

  15. Introduction 2. Industry Overview *Ready-to-eat Processed Rice • Frozen Rice (1993~) • Food businesses adopted frozen fried-rice, frozen rice-ball manufacturing facilities from Japan • Market penetration was unsuccessful due to bad taste • Retort Rice (1995~) • Market penetration was unsuccessful due to bad taste • Aseptic Rice (1997~) • Aseptic packaged rice introduced to the market by CJ Food businesses gave constant effort to develop ready-to-eat processed rice product to meet the market taste The market was attracting businesses with great potential demand

  16. Introduction 3. Product Overview *Brief History of HETBAHN 1996. 12. CJ developed Aseptic Packaging System and launched brand new aseptic packaged ready-to-eat processed rice, HETBAHN. 1997. 7. CJ supplied HETBAHN to KOREANAIR. HETBAHN began to be served as airline food. 1997. 12. HETBAHN recognized as thebest-hit- product from 12 newspapers. HETBAHN had bean launched in 1996 and became a bestselling ready-to-eat processed food in 1997

  17. Motivation of Innovation • Demographic Changes • New Knowledge

  18. Motivation of Innovation 1. Demographic Changes • Structure of food market had been changed as • the number of nuclear family increased • the number of double-income family increased • Life style / Eating habits had been changed • The new structure of food market had created • massive opportunities for ready-to-eat processed food providers 2. New Knowledge New Knowledge of Aseptic Packaging System brought Changes in Perception of ready-to-eat food product CJ developed new technology “Aseptic Packaging System” (Details follow) (Details follow) *”The Discipline of Innovation”, HBR, Peter F. Drucker (Unexpected Occurrence, Incongruities, Process Needs, Industry & Market Change, Demographic Change, Changes in Perception, New Knowledge)

  19. Motivation of Innovation 1. Demographic Changes • Structure of food market had been changed as • the number of nuclear family increased • the number of double-income family increased • Life style / Eating habits had been changed • The new structure of food market had created • massive opportunities for ready-to-eat processed food providers 2. New Knowledge New Knowledge of Aseptic Packaging System brought Changes in Perception of ready-to-eat food product CJ developed new technology “Aseptic Packaging System” (Details follow) (Details follow) *”The Discipline of Innovation”, HBR, Peter F. Drucker (Unexpected Occurrence, Incongruities, Process Needs, Industry & Market Change, Demographic Change, Changes in Perception, New Knowledge)

  20. Motivation of Innovation 1. Demographic Changes • Structure of food market had been changed as • the number of nuclear family increased • the number of double-income family increased • Life style / Eating habits had been changed • The new structure of food market had created • massive opportunities for ready-to-eat processed food providers 2. New Knowledge New Knowledge of Aseptic Packaging System brought Changes in Perception of ready-to-eat food product CJ developed new technology “Aseptic Packaging System” (Details follow) (Details follow) *”The Discipline of Innovation”, HBR, Peter F. Drucker (Unexpected Occurrence, Incongruities, Process Needs, Industry & Market Change, Demographic Change, Changes in Perception, New Knowledge)

  21. Motivation of Innovation 1. Demographic Changes(cont.) Increasing female employment 5-day-work-week Microwave 5-day-work-week changed the life style of the customers. Customers started to enjoy sports and leisure activities on weekends. 68% of households owned at least one microwave in 1996. Microwave became a one of the most popular equipment. The number of female employment kept increasing. Females’ role changed from housewife to career women. (Number of female employment) (Proportion of microwave ownership) (x10,000) 32% 68% Statistics Korea Statistics Korea 1980 1985 1990 1997 The changes implies that the customers’ potential demand for convenient food increased significantly.

  22. Motivation of Innovation 1. Demographic Changes(cont.) Increasing female employment 5-day-work-week Microwave 5-day-work-week changed the life style of the customers. Customers started to enjoy sports and leisure activities on weekends. 68% of households owned at least one microwave in 1996. Microwave became a one of the most popular equipment. The number of female employment kept increasing. Females’ role changed from housewife to career women. (Number of female employment) (Proportion of microwave ownership) (x10,000) 32% 68% Statistics Korea Statistics Korea 1980 1985 1990 1997 The changes implies that the customers’ potential demand for convenient food increased significantly.

  23. Motivation of Innovation 1. Demographic Changes(cont.) Increasing female employment 5-day-work-week Microwave 5-day-work-week changed the life style of the customers. Customers started to enjoy sports and leisure activities on weekends. 68% of households owned at least one microwave in 1996. Microwave became a one of the most popular equipment. The number of female employment kept increasing. Females’ role changed from housewife to career women. (Number of female employment) (Proportion of microwave ownership) (x10,000) 32% 68% Statistics Korea Statistics Korea 1980 1985 1990 1997 The changes implies that the customers’ potential demand for convenient food increased significantly.

  24. Motivation of Innovation 1. Demographic Changes(cont.) Increasing female employment 5-day-work-week Microwave 5-day-work-week changed the life style of the customers. Customers started to enjoy sports and leisure activities on weekends. 68% of households owned at least one microwave in 1996. Microwave became a one of the most popular equipment. The number of female employment kept increasing. Females’ role changed from housewife to career women. (Number of female employment) (Proportion of microwave ownership) (x10,000) 32% 68% Statistics Korea Statistics Korea 1980 1985 1990 1997 The changes implies that the customers’ potential demand for convenient food increased significantly.

  25. Technology Management • Key Success Factors • Aseptic Packaging System • (Core Technology of HETBAHN)

  26. Technology Management 1. Key Success Factors *KSFs for ready-to-eat rice product Customer-Driven Knowledge-Driven Capacity-Driven • Brands or Customer Relations are relatively important • R&D is relatively important • Physical capital is relatively important Both Brand Image and R&D are KSFs for CJ’s ready-to-eat rice product

  27. Technology Management 1. Key Success Factors *KSFs for ready-to-eat rice product Customer-Driven Knowledge-Driven Capacity-Driven • Brands or Customer Relations are relatively important • R&D is relatively important • Physical capital is relatively important  Food products industry is Customer-Driven Industry in general  The taste of ready-to-eat rice must be upgraded through New Knowledge to meet the mass market Both Brand Image and R&D are KSFs for CJ’s ready-to-eat rice product

  28. Technology Management 2. Aseptic Packaging System (Core Technology of HETBAHN) Frozen Rice and Retort Rice could meet only small portion of the enormous demand because of BAD TASTE Aseptic Packaged Ready-to-Eat Rice which tastes just like home-made rice CJ could meet the massive market with the new product which provides outstanding taste Potential customer demand for Ready-to-Eat Rice

  29. Technology Management 2. Aseptic Packaging System (Core Technology of HETBAHN) Frozen Rice and Retort Rice could meet only small portion of the enormous demand because of BAD TASTE Aseptic Packaged Ready-to-Eat Rice which tastes just like home-made rice CJ could meet the massive market with the new product which provides outstanding taste Potential customer demand for Ready-to-Eat Rice

  30. Technology Management 2. Aseptic Packaging System (Core Technology of HETBAHN) *Innovative Packaging Process: Aseptic Packaging

  31. Technology Management 2. Aseptic Packaging System (Core Technology of HETBAHN) *Innovative Packaging Process: Aseptic Packaging 1. Clean Room *HETBAHN factory is managed as clean as semiconductor factories *Number of particles of dust: 100/ft^2 (Normally there exist 20,000 particles of dust/ft^2 in the air) 2. Inspection *3-hour-cleaning must be conducted everyday *If any problem occurs: All the processes must be stop immediately until the problem gets identified and removed 3. UV Sterilization *All the packages must be sterilized with UV

  32. Technology Management 2. Aseptic Packaging System (Core Technology of HETBAHN) *Innovative Packaging Process: Aseptic Packaging 1. Clean Room *HETBAHN factory is managed as clean as semiconductor factories *Number of particles of dust: 100/ft^2 (Normally there exist 20,000 particles of dust/ft^2 in the air) 2. Inspection *3-hour-cleaning must be conducted everyday *If any problem occurs: All the processes must be stop immediately until the problem gets identified and removed 3. UV Sterilization *All the packages must be sterilized with UV

  33. Technology Management 2. Aseptic Packaging System (Core Technology of HETBAHN) *Innovative Packaging Process: Aseptic Packaging 1. Clean Room *HETBAHN factory is managed as clean as semiconductor factories *Number of particles of dust: 100/ft^2 (Normally there exist 20,000 particles of dust/ft^2 in the air) 4. Vacuum-packing *Packaged rice gets cooled in cold water for 15minutes *No preservative is needed because the rice is vacuum-packed 2. Inspection *3-hour-cleaning must be conducted everyday *If any problem occurs: All the processes must be stop immediately until the problem gets identified and removed 3. UV Sterilization *All the packages must be sterilized with UV

  34. Technology Management 2. Aseptic Packaging System (Core Technology of HETBAHN) *Innovative Packaging Process: Aseptic Packaging No Preservative No Extreme Heating No Freezing No Dehydration HETBAHN can be stored in room temperature for 6 month, doesn’t have to be kept in freezer, and delivers the Great Taste just like home-made rice!

  35. Technology Management 2. Aseptic Packaging System (Core Technology of HETBAHN) Aseptic Rice Retort Rice Frozen Rice Aseptic Packaging System provides outstanding taste

  36. Technology Management 2. Aseptic Packaging System (Core Technology of HETBAHN) Aseptic Rice Retort Rice Frozen Rice *Freeze cooked rice from 40℃ to below 0 ℃ *Can be stored for an year in a freezer *Seal the cooked like in room temperature Can be stored in room temperature for 6 months *Heat cooked rice to over 100 ℃ for sterilization *Can be stored in room temperature for an year Aseptic Packaging System provides outstanding taste

  37. Technology Management 2. Aseptic Packaging System (Core Technology of HETBAHN) Aseptic Rice Retort Rice Frozen Rice *Freeze cooked rice from 40℃ to below 0 ℃ *Can be stored for an year in a freezer *Seal the cooked like in room temperature Can be stored in room temperature for 6 months *Heat cooked rice to over 100 ℃ for sterilization *Can be stored in room temperature for an year Aseptic Packaging System provides outstanding taste

  38. Technology Management 2. Aseptic Packaging System (Core Technology of HETBAHN) Aseptic Rice Retort Rice Frozen Rice *Freeze cooked rice from 40℃ to below 0 ℃ *Can be stored for an year in a freezer *Seal the cooked rice in room temperature Can be stored in room temperature for 6 months *Heat cooked rice to over 100 ℃ for sterilization *Can be stored in room temperature for an year Aseptic Packaging System provides outstanding taste

  39. Timing of Entry • First-Mover Disadvantages • Overcoming Disadvantages • First-Mover Advantages

  40. Timing of Entry 1. First-Mover Disadvantages Uncertainty of Customer Requirements High Development Expenses CJ was the first mover of the Aseptic Packaged Ready-to-Eat Rice market and had to face first-mover disadvantages

  41. Timing of Entry 1. First-Mover Disadvantages Uncertainty of Customer Requirements High Development Expenses • Previous Ready-to-Eat Rice products failed to penetrate the market due to the bad taste. • The failure of the frozen rice and retort rice established negative customer perception of Ready-to-Eat rice product. • Aseptic Packaging System required huge amount of initial cost for establishing the facility. • The new process required high cost of maintenance for keeping the cleanness. • R&D for Aseptic Packaging system took 2 years CJ was the first mover of the Aseptic Packaged Ready-to-Eat Rice market and had to face first-mover disadvantages

  42. Timing of Entry 1. First-Mover Disadvantages Uncertainty of Customer Requirements High Development Expenses • Previous Ready-to-Eat Rice products failed to penetrate the market due to the bad taste. • The failure of the frozen rice and retort rice established negative customer perception of Ready-to-Eat rice product. • Aseptic Packaging System required huge amount of initial cost for establishing the facility. • The new process required high cost of maintenance for keeping the cleanness. • R&D for Aseptic Packaging system took 2 years CJ was the first mover of the Aseptic Packaged Ready-to-Eat Rice market and had to face first-mover disadvantages

  43. Timing of Entry 2. Overcoming Disadvantages *Marketing 4P Product Price Outstanding taste Convenient storage Competitive price (1050won) compare to a bowl of rice served in restaurants (around 1000won) Promote Place Concentrated displays in convenience stores in urban area TV advertisements Offering free samples CJ overcame first-mover disadvantages through Marketing 4P

  44. Timing of Entry 3. First-Mover Advantages Brand Loyalty Reaping Increasing Returns CJ was the first mover of the Aseptic Packaged Ready-to-Eat Rice market and enjoyed the first-mover advantages

  45. Timing of Entry 3. First-Mover Advantages Brand Loyalty Reaping Increasing Returns • Achieved 91% brand awareness in only 1 year from the launching • “HETBAHN” became a BYWORD for ready-to-eat rice • Attained 15,000,000,000won annual revenuein 3 years from the launching (Brand awareness: Ready-to-eat rice) 9% (Market sales of HETBAHN) 91% HETBAHN report, 2000 SERI, 2005 CJ was the first mover of the Aseptic Packaged Ready-to-Eat Rice market and enjoyed the first-mover advantages

  46. Timing of Entry 3. First-Mover Advantages Brand Loyalty Reaping Increasing Returns • Achieved 91% brand awareness in only 1 year from the launching • “HETBAHN” became a BYWORD for ready-to-eat rice • Attained 15,000,000,000won annual revenuein 3 years from the launching (Brand awareness: Ready-to-eat rice) 9% (Market sales of HETBAHN) 91% HETBAHN report, 2000 SERI, 2005 CJ was the first mover of the Aseptic Packaged Ready-to-Eat Rice market and enjoyed the first-mover advantages

  47. Types of Innovation • Types of Innovation

  48. Types of Innovation *Product & Process Innovation Convenience Taste PRODUCT CJ produced new product which could bring outstanding taste to the customers PROCESS CJ implemented new process which could produce ready-to-eat rice in room temperature HETBAHN: Product Innovation & Process Innovation

  49. Types of Innovation *Product & Process Innovation Convenience Taste PRODUCT CJ produced new product which could bring outstanding taste to the customers PROCESS CJ implemented new process which could produce ready-to-eat rice in room temperature HETBAHN: Product Innovation & Process Innovation

  50. Types of Innovation *Radical & Competence Destroying Innovation RADICAL HETBAHN was the first product which was manufactured through aseptic packaging system COMPETENCE DESTROYING Aseptic packaging system made previous CJ’s ready-to-eat rice packaging system obsolete. It was entirely new technology. HETBAHN: Radical Innovation & Competence Destroying Innovation

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