S. Korean Companies See Olympics as a Springboard

Rows and rows of women huddle over workbenches on a cavernous factory floor, stitching shoes as the stench of glue fills the hot, stagnant air.

They are part of a 12,500-member work force toiling at what is billed as the world’s largest athletic shoe factory; for years they have anonymously crafted well-known brands such as Nike, Converse and Puma.

Now their employer, Kukje Corp., plans to capitalize on the Seoul Olympics to jump out of the blocks with a prestige brand of its own: Pro-Specs.

Pro-Specs? It may not be a household word yet, but Kukje strategists think that a $5.5-million investment in the right to become the official shoe of the 1988 Summer Olympics will bring the company brand enough recognition to compete with the famous-name sneakers that it still makes for foreign clients.

Olympics fever has similarly struck scores of other South Korean companies, which see the games as a golden opportunity to prime their export drives with high visibility for previously obscure brands. Likewise, the media hoopla attendant on the Sept. 17-Oct. 2 sports extravaganza may prove to be a turning point for South Korean industry as a whole, a chance to put the country on the map and show the world how far it has advanced.

Kukje, a leading manufacturer in this southern port city, is donating about 65,000 pairs of Pro-Specs to be worn by athletes, officials, organizers and torch-runners.

“They’ll be all over TV,” said Kim Soo Ki, manager of Kukje’s Olympics planning headquarters. “We’re counting on the fact that viewers will notice their feet.”

Kukje, whose name means “international,” hopes to repeat what the Japanese sports shoe company Asics did in the 1964 Olympics, using Olympic sponsorship to springboard an unknown brand into an international product. Adidas later did it in Munich, and Converse took advantage of the Los Angeles games, Kim noted.

The same philosophy goes for South Korea’s leading manufacturers in a range of product lines, from sportswear to electronics and instant noodles.

But the high expectations are accompanied by a potential for disappointment, analysts warn. Some Olympic sponsors and suppliers have not worked out marketing strategies that would allow them to cash in fully on their two weeks in the international spotlight.

Kukje, for example, does not yet have distribution channels for Pro-Specs in the United States, the world’s most lucrative athletic shoe market. The company is focusing its export campaign on Europe, preferring to take a timid approach to America because it fears consumers will remember the unpopular “Specs” brand sold by the U.S. company--a former client named Specs International--that Kukje bought out 12 years ago.

Brewery Cautious

The official beer of the Seoul Olympics, the OB brand of South Korea’s Oriental Brewery Co., also will be hard to find in the United States for the foreseeable future.

OB sells about $500,000 worth of beer each year in the United States, catering mostly to Korean restaurants and Korean residents in Los Angeles and New York. It has ambitions to enter the mainstream market, but after spending $4 million on its Olympic sponsorship rights, the cautious brewery did not allocate any money for U.S. advertising.

“But we’re advertising our product in Seoul, which is the cheapest and most efficient way, since the world is coming here,” said Ahn Jung Hyon, manager of OB’s marketing department.

Kim Bum Il, director of the Seoul Olympic Organizing Committee’s marketing division, said he advised Korean sponsors to cool down expectations about Olympics magic. Some were prepared to bid so much money for sponsorship rights that they would have had little left over for a marketing campaign to support their status, he said.

“Korean companies hope to grow and get benefits out of the Olympics, but the benefits won’t come automatically,” Kim said. “It will depend on quality control, marketing techniques and management. What the Olympics really brings to the companies is a new vision.”

The organizing committee appealed to patriotic duty as well as business sense in peddling sponsorship rights, selling the idea that companies should “support the Olympics because they are a once-in-a-lifetime event in Korea,” Kim said.

It worked. The committee has commitments from sponsors, suppliers and licensees approaching $200 million, nearly triple its original goal.

“We don’t expect any immediate, direct benefits from our sponsorship of the Olympic Games, but it’s a chance to help show the real Korea to the world,” said Chung Jang Ho, executive vice president of Goldstar Co., the electronics giant.

Effects of Politics

To ensure that it shares in the indirect benefits of the games, Goldstar spent $10 million to acquire rights as maker of the official personal computer and is supplying household appliances to the Olympic village.

Chung said the publicity could help Goldstar products compete in the high-end of overseas markets. For example, the company plans to reintroduce the 45-inch television that failed to sell in the United States earlier this year because American consumers were suspicious about Korean quality.

Whether the Olympic spirit can change such perceptions, though, depends largely on the political atmosphere surrounding the event, observed Park Won Am, a research fellow at the Korea Development Institute, a government think tank.

“I would say there will be some benefits from name recognition from the Olympics, but it may be offset by domestic political uncertainties,” Park said. “A political struggle after the Olympics could be a de-advertising phenomenon for our economy.”

Some political analysts have warned that a period of turbulence could follow the Olympics, as opposition forces prepare for a confrontation with the authoritarian-leaning government to test recent democratic reforms.

Not all the major South Korean companies, meanwhile, have jumped on the Olympics bandwagon, or at least not up front.

‘Good-Will Gesture’

Daewoo Group, which like Goldstar is one of the country’s top industrial conglomerates, declined to even bid on an Olympic sponsorship. Hyundai Motor, Daewoo Motor’s nemesis, ultimately paid $1.5 million for the official car designation.

But Daewoo recently pulled off a publicity coup by announcing that it would donate 36 television sets, seven mini-buses, four large buses, four passenger cars and a copy machine to the Soviet Olympic team.

“It was just a good-will gesture,” said a spokesman for Daewoo, which has been exploiting a thaw in economic relations between Seoul and East Bloc nations by aggressively cultivating trade contacts with the Soviet Union.

While international marketing objectives remain abstract and vague, much of the hubbub over Olympic sponsorship is geared toward practical gains in South Korea’s growing domestic market. The right to display the Olympic logo and a cute drawing of Hodori, the cartoon tiger mascot of the games, proved to be a decisive weapon in the war for market share in the instant-noodle industry, for example.

Nhongshim Co. reportedly spent $1.2 million to become the official supplier of ramen , or instant noodles, and that status helped to propel the company into the top market position, giving it more than half of all instant-noodle sales in South Korea.

But an exporting strategy does not appear to be part of Nhongshim’s plan, said an analyst of the instant-noodle industry in Seoul. Ramen is not practical as an export item, being bulky and offering slim profit margins for trading companies, he said. Moreover, Americans do not eat much of it.

Even without benefits from the Olympics, South Korea’s industrial powerhouse is likely to continue making inroads in overseas markets. Last year, South Korea’s economy grew by 12.2% and its global trade surplus ballooned to almost $7.7 billion.

Dramatic effects of the Olympic experience could still be seen in the domestic tourist industry, which has yet to attain international appeal.

“Korea has never been a destination point. It’s always been an extension, added on to trips to Hong Kong or Japan,” said Suh Man Soon, director of sales and marketing for Seoul’s Hotel Lotte.

He sees the Olympics as a “turning point” in South Korean tourism, but at the same time fears that stringent security checks, prompted by the threat of terrorism, could spoil the fun for many visitors. Nor is it clear whether worry about personal safety has scared away potential Olympic tourists.

“It’s really a big problem,” Suh said. “Our image could really be hurt if attendance at the Olympics turns out to be poor.”