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  • Archive for March, 2013

    North Korea’s “war” declaration: made for domestic consumption but potential for “black swan”

    March 30th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    North Korea has just declared “war” on South Korea.
     
    This is the latest in a streaming series of increasingly bellicose statements from the DPRK and its 20-something leader, Kim Jong-Un.
     
    While many commentators are taking a bet (position/view) that North Korea will not do anything that will provoke war on the Korean peninsula, we believe that a certain amount of attention must be focused on a possible “black swan” event in which a small foreseen or unforeseen event can trigger retaliation by the other side per the responding country’s rules of engagement. Unlike recent skirmishes and attacks along the inter-Korean border region, this time both Koreas are on extremely high levels of military alert akin to two sprung traps in which even a small event can trigger a larger-scale conflict.
     
    We also believe that most of North Korea’s rhetoric is for the public consumption of North Korea’s military brass and general public, in that order. Such acts are in part an effort, perhaps even a desperate one, to secure domestic support, implying that Kim Jong-Un may be losing support at home. Because of Kim Jong-Un’s age (under 30), and inter alia, that he is the nation’s 3rd-generation ruler from the Kim dynastic clan (a “3-3” risk factor), North Korea’s leader has to take a constant “hyper-hawkish” stance to dispel any notion that he may be weak and dovish towards the nation’s historic enemies. Within a Korean cultural context, even one day difference between two people can vastly change relational dynamics.
     
    Below is a quote from a recent CNN story and video clip related to North Korea’s increasing threats, featuring Jasper Kim of the Asia-Pacific Global Research Group:
    “First and foremost, it’s for his domestic audience,” said Jasper Kim, founder of the Asia-Pacific Global Research Group in Seoul, South Korea. “Because without the support of the military, he won’t be around for much longer. And so he has to bolster his support with the brass.”

     

     

    Korean War 2?: Heightened tensions on the Korean Peninsula push to the edge

    March 22nd, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    Is the Korean peninsula on the verge of a Korean War part 2?
     
    According to Asia-Pacific Global Research Group founder (and professor at Ewha Womans University in Seoul, Korea), the risks of this are certainly notable. Jasper Kim notes that both North and South Korea are engaging in a “dangerous game of tit-for-tat” at all levels–military, paramilitary, and cyber, which “has the potential to end very badly given that the two Koreas are like two sprung traps, which can be triggered at any time.”
     
    We believe that the two Koreas are engaged in a worrisome form of bilateral, bellicose brinksmanship. The recent cyberattacks against some of South Korea’s major broadcasters and banks are likely just the beginning of a continued series of purposely provocative attacks meant to shore up domestic support in North Korea, especially from its military for Kim Jong-Un, while simultaneously trying to ensure a type of “zone defense” in North Korea in the form of nuclear and non-nuclear missile technology.
     
    Below are recent CNN TV appearances on this issue featuring Jasper Kim:
     
     

     

    Hyundai Motor’s U.S. vehicle exports – 8 million mark (5 Things to Know)

    March 12th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    Hyundai Motor’s U.S. vehicle exports – 8 million mark (5 Things to Know)
     
    1. Hyundai Motor’s recent sales environment in the U.S. and related challenges
     
    The post-2008 crisis period had an impact and placed additional competitive pressure on Hyundai Motor Company (HMC), as it did for many other corporates, both Korean and non-Korean. Sometimes, crisis periods can help domestic firms. For example, the 1997-98 Korean financial crisis led to a weakening of the Korean won, making Korean exported goods relatively less expensive, thus, boosting sales. The same export-related economic phenomenon occurred with HMC during and directly after the 2008 subprime crisis. However, the post-crisis so-called series of U.S. debt buybacks known as quantitative easing (QE) has acted to weaken the U.S. dollar relative to other currencies, including the Korean won, making Korean products appear less competitive compared to pre-QE. The average U.S. car purchase price is slightly less than $30,000. Approximately 2.4 million imported cars are sold in the U.S. annually.
     
    2. HMC’s weaknesses and strengths in the market
     
    HMC’s strengths include its ability to provide good value for money from the purview of U.S. consumers (American car buyers). The economic crisis motivated potential buyers to think more economically about their car purchases. So, instead of a well-known domestic (U.S.) or foreign (Japanese/European) car at a relative premium price point, a certain market segment of car purchasers opted to buy relatively lesser-known Hyundai vehicles (such as the Elantra, Sante Fe, and Tucson, to name a few).
     
    HMC’s weaknesses include its reliance on export markets, not only the U.S., but also in the EU, and more recently, in mainland China (where domestic competition is increasing on a daily basis) as well as its relative late entrance into the hybrid vehicle market sector.
     
    3. Hyundai’s post-2008 crisis strategy
     
    One notable strategy by HMC was the creation and implementation of the Hyundai “Assurance Program” (where buyers were able to return their Hyundai car within 1 year if facing unemployment), which linked to an extended warranty that covered vehicles for 10 years or 100,000 miles (above and beyond the market standard at that point). Together, this created a tipping point in terms of the perception of Hyundai and Hyundai cars, specifically, that it was more than just a company seeking to maximize profit, but rather, was a company that treated its customers as real people with real-life concerns.
     
    Much like with Japanese automobile manufacturers before it, Hyundai also began producing higher-end luxury sedans, such as the Equus (which was first introduced in 1999 and redesigned again in 2009). This was strategic since such upper-end luxury vehicles carry with it a significantly higher profit margin relative to other model types.
     
    4. Risks on the company’s future earnings
     
    The more notable risks for HMC going forward are several. First, a weakening yen/dollar rate, which could make Hyundai vehicles appear relatively more expensive when compared to similarly situated Japanese vehicle models. Second, Hyundai must continue to focus on quality assurance so that a Toyota brake pedal-type event does not occur. In the event of such occurrence, the reputational capital that HMC amassed could quickly dissipate car sales and market value. Third, increasing capabilities of domestic car manufacturers exist in large developing markets such as China and India, that could one day compete head-to-head with HMC on their home turf at some point in time. In 2012, China exceeded the U.S. as the largest automobile market at over 240 million cars.
     
    5. On HMC’s efforts building more manufacturing plants in the U.S. export market, and global trends of the automobile industry that the company. HMC, should consider
     
    Hyundai has already established manufacturing plants domestically in the U.S. This is a strategic move done to avoid tariffs (import taxes) since tariffs are generally (but not always) placed on non-domestic (foreign) goods and services. In fact, given the relatively weak dollar, some onshore U.S. car manufacturers are seeking to export its vehicles outside the U.S. to offshore markets. Moving forward, HMC should continue establishing not only manufacturing but also research centers in key emerging markets such as China, India and other strategic locations.
     
    Future trends that should be relevant to HMC include the push towards more green and fuel-efficient cars, including electric vehicles (EVs) and smaller model cars. Notably, Hyundai recently introduced a hybrid version of its popular mid-sized car, the Avante, here in Korea. While this is a leap forward, it is also over a decade after Toyota introduced its hybrid car (the Prius). Hyundai could also focus on integrating technology into its vehicle such as with seamless wifi and higher fuel efficiency.
     
     

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    Hyundai Motor Company (HMC) listed stock details (in Korean won):
     
    Open: 210,500 Day’s Range: 208,500 – 212,000 Volume: 343,841
    Previous Close: 208,500 52wk Range: 195,000 – 272,500 1-Yr Rtn: -1.49%
    Stock Chart for 005380
    005380:KS 210,500
    1D1M 1Y
    3/119pm10pm11pm3/121am ET206,000208,000210,000212,000
    208,500
    10:40:00 pm
    210,500
    Interactive 005380 Chart

    Previous Close
    Key Statistics for 005380
    Current P/E Ratio (ttm) 6.6952
    Estimated P/E(12/2013) 6.0974
    Relative P/E vs. KOSPI 0.3465
    Earnings Per Share (KRW) (ttm) 31,515.0000
    Est. EPS (KRW) (12/2013) 34,604.9130
    Est. PEG Ratio 0.8240
    Market Cap (M KRW) 46,478,336.00
    Shares Outstanding (M) 220.28
    30 Day Average Volume 667,378
    Price/Book (mrq) 1.0079
    Price/Sale (ttm) 0.5215
    Dividend Indicated Gross Yield 0.90%
    Cash Dividend (KRW) 1,900.0000
    Last Dividend 12/27/2012
    5 Year Dividend Growth 13.70%
    Next Earnings Announcement 04/26/2013

     

     

     

    REPIVOT strategic negotiation framework: the easy way to sway

    March 7th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    REPIVOT strategic negotiation framework:
     
    For those interested in maximizing bargaining outcomes, the REPIVOT strategic negotiation framework (created by Jasper Kim) is recommended as a starting point in negotiation scenarios. The REPIVOT strategy can be leveraged to create value as well as mitigate negotiator’s remorse and tit-for-tat (TFT), lose-lose scenarios at the institutional, state, or individual level.
     
    Specifically, REPIVOT is a function of:
    Relationships: assessing how to create short and/or long-term value-added relationships
    Emotions: understanding how emotions act as “invisible influencers” when negotiating
    Positions: positions (price, quantity, time) are a small but highly “visible influencer”
    Interests: interests (often invisible) are the rationale for the party’s position (which are subdivided into shared, conflicting, and complementary interests)
    Values: values are both subjective and objective possibly different from your own
    Options: collaborating and brainstorming with the other side(s) for mutual gain
    Trust: creating sway, influence, and persuasion to get others to “want what you want”
     
    Each of the REPIVOT input factors are based on a database consisting of scientific research and findings from the world’s leading experts, journals, and studies in a cross-border, cross-disciplinary perspective, including psychology, law, economics, biology, sociology, and business, among others.
     
    The value (economic and non-economic) created by the REPIVOT framework should be weighed against one’s BATNA (best alternative to a negotiated agreement).
     
    REPIVOT CALCULUS:
    – If REPIVOT value (opportunity 2) > BATNA value (opportunity 1), say “yes” to the 2nd opportunity
    – If REPIVOT value (opportunity 2) < BATNA value (opportunity 1), say "no" to the 2nd opportunity   The REPIVOT strategic negotiation framework is copyrighted by Jasper Kim and the Asia-Pacific Global Research Group.   For related consultation workshops and/or negotiation services, please contact the Asia-Pacific Global Research Group.        

    Kim Jong Un and Dennis Rodman: the odd ambassadorial couple (5 Points)

    March 5th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    (The questions below were based in part on an interview with a local South Korean broadcaster)
     
    1) What is the significance of Dennis Rodman’s visit to North Korea?
     
    From a political standpoint, Rodman’s visit to North Korea – accompanied by the Harlem Globetrotters basketball team and executives from VICE media group (a news and media group set to debut a related show on HBO in April 2013) – was significant in terms of Kim Jong-Un’s efforts to turn the one-off basketball event into a global diplomatic event that could appeal to the masses, and as a result, serve as a highly calibrated opportunity to continue its push for legitimacy (from the international community) and sympathy (at the grassroots level from average citizens in and beyond Asia).
     
    2) Why did Kim Jung Un allow Rodman and the Harlem Globetrotters into Pyongyang?
     
    Our view is that the DPRK leader took a creative low risk potentially high reward strategy of using the meeting between the highly visible American basketball envoy and North Korean officials (including Kim Jong Un himself) into a shuttle basketball diplomacy forum–by openly declaring that (1) the North Korean leader not want “to do war” with the United States; and (2) Kim Jong Un’s public declaration for President Obama: to “call him [Kim Jong Un].”
     
    What was notable and fairly striking was that such comments were made so public to such a sports cult of personality like Dennis Rodman – who is both famous and infamous within and beyond the basketball court – instead of through more discrete private diplomatic channels. The bottom line is that the highly covered and highly unlikely meeting of basketball enthusiasts from the U.S. and DPRK was a global public platform for Kim Jong Un to reach out to people around the world at the grass roots level – through the medium of basketball – to place pressure on the international community to perhaps rethink the way that people view the closed Stalinist state (as perhaps not so closed after all).
     
    Such event viewed in context with the DPRK’s past recent acts of increased communication with the international community such as by (1) allowing global media outlets to report on the failed missile launch in early 2012; (2) increased and more rapid reporting of both positive and negative local news events (e.g., failed and successful missile launch attempts in 2012); (3) greater openness in the frequency and range of prominent foreign dignitaries (eg, from Bill Clinton to Eric Schmidt); and (4) increased use of mobile phones by both DPRK citizens (through Orascom/Koryolink, a 3G joint venture service) as well as foreigners being allowed to use social media and the internet (including Google) while visiting and reporting on North Korea, which led to the first tweet from the so-called Hermit Kingdom, represents a less than subtle message from Kim Jong Un to the outside world that he views the opening of the DPRK as inevitable and perhaps even favorable.
     
    Not one event is a game changer, but the culmination of such emerging pattern of openness is certainly deserving of serious attention and analysis.
     
    3) Rodman and Kim Jong Un watched a basketball game together and sometimes talked without a translator. The former NBA star was also invited to Kim Jong Un’s palace for a lavish dinner party. Why did the young leader meet and spend significant time with Rodman, but not Google’s Eric Schmidt?
     
    Kim Jong Un’s decision to meet former NBA superstar Dennis Rodman and not Google’s Eric Schmidt (earlier in January) was probably based on comfort level and cost-benefit analysis by the DPRK leadership. In short, meeting with Dennis Rodman provides relatively more potential upside relative to its possible downsides. Rodman is not known for his diplomacy, which in part, led to Rodman’s positive comments towards Kim Jong Un during his visit as a “friend for life” and “good guy.” Of course, the young Kim Jong Un’s affinity for the Chicago Bulls team (that won six national championships in the 1990s), and in particular, NBA superstar Michael Jordan is well known. So along with the political upsides of the meeting, Kim Jong Un also had the opportunity to directly communicate with one of his coveted sports heroes. On the other hand, Eric Schmidt would represent more possible downside than upside since Schmidt and Google are vocal proponents of free, open, and transparent access to information and the internet–things that are not plainly existent in North Korea today.
     
    4) Rodman’s visit has attracted a lot of attention worldwide. What did Rodman gain from the trip?
     
    Rodman gains from added publicity. As the mantra goes, “There’s no such thing as bad publicity.” And certainly, a high profile visit to North Korea – perhaps the most closed state on earth – catapulted Rodman into the top headlines of news affiliates around the world. Vice, the company that organized and sponsored the trip, also benefits for the same reason–attention and publicity, which can easily be monetized and highly beneficial for their new eight-part TV upcoming series debuting next month in April. As one part of the quid pro quo for the trip, VICE agreed to donate basketball backboards and scoreboards to North Korea, which is actually an effective demonstration of “soft power” and “cultural diplomacy,” ironically made by an upstart magazine rather than at the state level.
     
    5) The visit came only about two weeks after North Korea’s third nuclear test. Does the trip signify a thawing of US-DPRK relations?
     
    In short, we believe that the event is an olive branch from the DPRK generally, and Kim Jong Un, specifically, to the U.S., generally, and President Obama (a huge basketball fan and former basketball player), specifically. Kim believes that the shared interest in U.S.-style basketball can serve as the foundation from which to develop stronger (or at the very least, less antagonistic) relations between the U.S. and North Korea. Also note that the teams were not set up in a “U.S. v. DPRK” team competition, but rather, blended teams in which each team had players from both countries, which culminated into a 110-110 tied score (whether the tied score was pre-orchestrated is another issue). Little downside and even some possible upside could be created by perhaps mirroring the basketball diplomacy efforts with a similar basketball game in the U.S. (possibly in Washington D.C.).
     
    In a time of heightened tensions in and around the Korean peninsula, perhaps it is one of America’s most iconic sports, basketball, that can help bring the U.S. and DPRK closer together to forge a diplomatic solution to the ongoing impasse.
     
    Of course, as many commentators have already noted, North Korea has one of the most dire human rights conditions on the planet. So, obviously, the “sports sunshine policy” analysis here should not be construed to condone or find acceptable the conditions that exist and have existed in the DPRK and its citizens. Also, Dennis Rodman’s role and visit to the DPRK is in no way one as a state-appointed diplomat or ambassador. Rather, this research note’s takeaway is that the sports sunshine policy option between the U.S. and DPRK should be one that could be explored as a way to break the half-century impasse.
     
    Below is an ABC news clip related to Dennis Rodman’s recent trip to North Korea.
     

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