Professional Documents
Culture Documents
29 Number
3 December
2013 Structures
pp. 361-376
A Comparative Study of Korean and Japanese
Logistics
Industries
Market
Abstract
The logistics industries of Korea and Japan have very similar growth
patterns. In this study, we aimed to determine how market structures are
changing in Korea and Japan for the past 10 years. We divided logistics market
structures into logistics subsidiaries (2PL) and 3PL companies, and we
analyzed whether performances such as turnover, profit, or their growth rate
between the 2PL and 3PL markets are significantly different. Koreas market
concentration ratio for the logistics industry indicates the rapid turn to a
competitive, low-concentration market structure, whereas the comparable
market structure in Japan has already entered a perfectly competitive market.
The results show that rapid expansion in a subsidiary logistics market depends
on a captive market that does not affect 3PL market size and profitability. In
fact, that rapid expansion directly reduces the growth in the Korean or
Japanese 3PL markets.
Key Words : Subsidiary, Third-Party Logistics, Logistics Industry, Market
Structure, Two-way ANOVA
Copyright 2013, The Korean Association of Shipping and Logistics, Inc. Production and hosting by Elsevier B.V.
Open access under CC BY-NC-ND license. Peer review under responsibility of the Korean Association of Shipping and Logistics, Inc.
361
I. Introduction
The logistics industry in Korea has rapidly grown over the past ten years.
Multinational, major manufacturing and wholesale companies have
concentrated on the internal and external efficiency and effectiveness of
supply chains in an effort to reduce logistics costs. To that end, some
companies have established their own logistics companies: second-party
logistics(2PL) companies(also known as subsidiaries) owned through
mergers and acquisitions in the logistics industry. However, some experts
and researchers have suggested that this trend might weaken the
competitiveness of existing third-party logistics(3PL) companies,
eventually leading to monopolistic and oligopolistic structures in the
logistics markets. This is especially relevant for 3PL companies in Korea.
Some researchers have suggested that big business groups have two
reasons to prefer setting up their own 2PL companies when entering the
logistics market rather than using 3PL companies. These reasons are the
1)
conflict of interest hypothesis and efficient transactions hypothesis .
Ghemawat and Khanna (1998) proposed similar views, asserting that the
subsidiaries of business groups replace poorly performing or nonexistent
third-party companies in markets that developed countries take for granted.
Others offer tangible empirical results in their research, which are
2)
consistent with these arguments . Results from these studies suggest that
business groups could offer efficient forms of governance in some
circumstances, showing that subsidiary tended to exhibit higher
3)
profitability than independent firms do in developed countries.
Logistics industries in Korea and Japan have very similar market growth
patterns. And they both have only 2PL and 3PL markets all around the
world. In this study, we aimed to determine how market structures are
changing in Korea and Japan. We divided market structures into 2PL and
3PL companies and analyzed whether performances such as turnover,
profit, or their growth rate are significantly different between 2PL and 3PL
markets.
362
363
2001
Glovis(Hyundai-Kia
Motors)
Subsidiary
2009
2010
CAGR
15,408
31,928
58,340
41.0%
Pantos(LG
Electronics)
1,867
10,009
11,346
14,576
16.7%
Samsung-Logitech
(Samsung Electronics)
1,621
8,256
11,012
14,667
26.3%
9,597
11,717
18,317
20,977
8.6%
6,061
7,427
9,032
10,847
8.0%
Korea Express
3PL
2005
Hanjin
8) Caves and Uekusa(1976); Chang and Choi(1988); Khanna and Palepu(2000); Perotti and Gelfer(2001)
364
<Table 2> Pearson correlation analysis for subsidiaries and parent companies by
turnover in Korea
Parent company
Logistics subsidiary
Pearson correlations
Samsung Electronics
Samsung-Logitech
0.957**
Hyundai Motors
0.974**
GLOVIS
Kia Motors
0.942**
LG
Hi Business Logistics
0.889**
CJ
CJ GLS
0.873**
Lotte
LotteLogistics
0.919**
Dongkuk Steel
Intergis
0.712*
Hyosung
Hyosung Trans World
0.973**
SeA Steel
SeALogis
0.747*
* Correlation is significant at the *p<0.05, **p<0.01 level.
Internal transaction
ratio by turnover
100%
100%
100%
92.15%
31.42%
90-95%
46.55%
100%
100%
365
Logistics subsidiary
Pearson correlations
Hitachi Group
Hitachi Logistics
Sanyo Electronic
Logistics
Alps Logistics
JFE Logistics
Kewpie Distribution
Service
Toyota Transportation
0.963**
0.608
60%
0.099
0.848*
59%
44%
0.889*
80%
0.670**
35%
Sanyo Electronic
Alps Electronic
JFE Steal
Kewpie
Toyota Motors
12) U.S. Department of Justice and the Federal Trade Commission(2010), p.18.; Quick
MBA(http://www.quickmba.com/econ/micro/indcon.html)
366
CR3
HHI
CR3
HHI
CR3
HHI
CR1
HHI
CR3
HHI
2001
50.10%
945.5
74.8%
2,268
55.2%
1,360
71.8%
5,936
28.5%
452
2005
35.50%
557.74
54.5%
1,217
44.1%
935
71.0%
5,872
36.2%
669
2009
29.60%
443.98
48.4%
1,056
42.0%
914
69.2%
5,614
36.5%
636
2010
31.80%
494.69
59.5%
1,333
40.7%
847
67.2%
5,396
43.3%
975
367
CR3
HHI
CR3
HHI
CR3
HHI
CR1
HHI
CR3
HHI
CR3
HHI
CR3
HHI
2001
20.7%
232
33.4%
551
24.4%
452
31.1%
586
38.0%
689
46.5%
1155
23.8%
487
2006
21.7%
233
26.9%
449
28.9%
563
37.9%
732
37.3%
662
83.0%
5282
21.0%
390
2007
22.5%
235
33.9%
462
26.8%
520
35.7%
657
39.2%
729
85.4%
5464
21.2%
374
2008
22.5%
237
35.0%
486
26.4%
483
31.9%
547
40.3%
766
84.5%
5443
19.8%
354
2009
21.9%
231
34.0%
461
26.3%
467
32.8%
597
39.9%
745
79.7%
4866
20.8%
389
VI. Conclusion
The logistics industry market size in Korea has rapidly grown for the
past 10 years and our analysis of the market concentration index indicated
that the market structure has rapidly turned into a competitive,
low-concentration market. However, the warehousing aspect of large 2PL
companies tended toward a continuously higher concentration when
compared with the other sub-industries. Thus, despite an increase in
market size, warehousing, and its high market concentration, is likely to be
monopolistic, with the consequent problems of large subsidiary
companies.
Conversely, the market structure of the logistics industry in Japan has
already entered a perfectly competitive marketplace as of the 2000s
without major changes. Like all other sub-sectors in the Japanese market,
371
the logistics industry has turned into a low-concentration market, with the
exception of its specific cargo sub-industry. Nevertheless, the results of
this study show that a recent change in the Japanese logistics subsidiary
market will stimulate the growth of other 3PL companies. Thus, a
gradually higher market concentration is likely in the future.
In this study, we mainly aimed to test differences in performance
(turnover, profit, or growth rate) between 2PL and 3PL markets since 2001,
focusing on the top 50 logistics companies by sub-industry. Our results
indicate that turnover/profit (size of market) in the 2PL market may not
have directly affected turnover/profit in the Korean 3PL market.
Conversely, a turnover/profit growth rate in the 2PL market may have
directly or indirectly affected the growth rate of turnover/profit in the
Korean 3PL market in the warehousing, land transportation sub-industry.
Hence, an expansion in the 2PL market greatly depends on the captive
market, and it has not caused a reduction in the 3PL market size, even
while it caused a reduction in the 3PL market growth. Although our results
for Japan were similar to those for Korea, a recent change in the
2PLmarket in Japan is likely to stimulate growth in the Japanese 3PL
market size.
We analyzed the Korean and Japanese logistics industries market
structures since 2001, and our study, using a two-way ANOVA to test
inter-market competition, differs from previous studies dealing with the
performance between these two markets. Contrary to our expectations, the
results indicated that the rapid expansion in the 2PL market, which is
highly dependent on the captive market, has not affected the 3PL market
size and profitability, even while it has affected a reduction in the 3PL
markets growth rate some parts of business in the two countries.
Acknowledgment
This work was supported by a grant from Incheon National University in 2013.
372
References
CAVES, R. and UEKUSA, M. (1976), Industrial Organization in Japan,
Washington, DC: Brookings Institution.
CHANG, S. and CHOI, U. (1988), Strategy, structure and performance of Korean
business groups: A transactions cost approach, Journal of Industrial Economics,
Vol.37, No.2, pp.141-158.
CHANG, S. and HONG, J. (2000), Economic performance of group-affiliated
companies in Korea: Intragroup resource sharing and internal business transactions,
Academy of Management Journal, Vol.43, No.3, pp.429-448.
CHOO, Y. and AHN, K.(2009), A study on the container terminal concentration for
Busan Port, Journal of Korea Port Economic Association, Vol.25, No.3, pp.207-228.
GHEMAWAT, P. and KHANNA, T. (1998), The nature of diversified business
groups: A research design and two case studies, Journal of Industrial Economics,
Vol.46, No.1, pp.35-61.
HA, Y. and SEO, J. (2013), An analysis of market concentration in the Korean liner
shipping industry, Asian Journal of Shipping and Logistics, Vol.29. No.2,
pp.249-266.
HAN, C. (2003), A study on the effectiveness of hub port development strategy,
Journal of Korean Navigation and Port Research, Vol.27, No.2, pp.171-178.
Japan Institute of Logistics System (2010), Report of Logistics Cost Survey, 2010
March (Japanese)
KEISTER, L. (1998), Engineering growth: Business group structure and firm
performance in Chinas transition economy, American Journal of Sociology, Vol.104,
No.2, pp.404-440.
KHANNA, T. and PALEPU, K. (2000), Is group affiliation profitable in emerging
markets? An analysis of diversified Indian business groups, Journal of Finance,
Vol.55, No.2, pp.867-891.
KIM, H., AHN, K. and SHIN, Y. (2004), A study on concentration and
centralization of tonnage in Korean shipping (A comparative study with Egypt),
Journal of Korean Navigation and Port Research, Vol.28, No.2, pp.121-127.
373
374
Appendix
<Table 6> Test of interaction between market and year by turnover in Korea
Turnover
DF
MS
p-value
9
9
9
9
6660233
9283317
2056771
23893437
.037
.051
.322
1.709
1.000
1.000
.968
.084
Null
Hypothesis
support
support
support
Support
<Table 7> Test of interaction between market and year by growth rate of turnover in Korea
Growth Rate of Turnover
DF
MS
p-value
8
8
8
8
1.127
.308
7.630
1.067
.867
.467
2.675
.423
.544
.879
.007
.907
Null
Hypothesis
Support
support
reject
support
<Table 8> Test of interaction between market and year by profit in Korea
Profit
DF
MS
p-value
9
9
9
9
641,431
244,079
2849.305
22224.701
.600
.227
.211
.864
.797
.991
.993
.557
Null
Hypothesis
support
support
support
support
<Table 9> Test of interaction between market and year by growth rate of profit in Korea
Growth Rate of Profit
DF
MS
p-value
8
8
8
8
137.411
35.488
4.005
139.794
1.090
.439
.881
2.285
.369
.897
.532
.021
Null
Hypothesis
Support
support
Support
reject
<Table 10> Test of interaction between market and year by turnover in Japan
Turnover
DF
MS
p-value
6
6
6
6
6
5412512149.830
2289464290.085
50554070.306
2915811231.852
12259271.416
.421
.125
.068
1.229
.010
.866
.993
.999
.293
1.000
Null
Hypothesis
Support
Support
Support
Support
Support
375
34989816682.818
.644
.695
Support
30724529.228
.206
.975
Support
<Table 11> Test of interaction between market and year by growth rate of turnover in Japan
Growth Rate of Turnover
DF
MS
p-value
5
5
5
5
5
5
5
.273
.264
.109
.052
.003
.021
.170
1.811
1.028
4.132
.937
.194
.781
3.509
.108
.400
.001
.459
.965
.567
.005
Null
Hypothesis
Support
Support
reject
Support
Support
Support
reject
<Table 12> Test of interaction between market and year by profit in Japan
Growth Rate of Turnover
DF
MS
p-value
2108565.184
.178
.983
Null
Hypothesis
Support
<Table 13> Test of interaction between market and year by growth rate of profit in Japan
376
DF
MS
p-value
6.271
.891
.487
Null
Hypothesis
Support