Kakao

International Business class tasked us with choosing a company, deciding what country it should expand into, and recommending a mode of entry.

My group chose Kakao, the dominant messaging app in South Korea. It’s used by 93% of smart phone users there, and we thought that such a well-loved app would easily transfer to other markets. We were wrong. After researching the topic, we learned that messaging apps are so heavily reliant on network effects that it’s virtually impossible to take market share from an entrenched competitor.

Providing a free messaging is not very profitable, so Kakao had been finding ways to leverage their ubiquitous mobile presence into more profitable ventures. They had expanded into games, publishing, music streaming, taxi hailing, social media, and many other areas. Our team concluded that their fintech division offered the greatest potential. They offered KakaoPay (a mobile e-wallet) and KakaoBank (a mobile banking service.)

My job was to pick which country Kakao should expand into. I decided based on 5 criteria:

  1. Total Population
  2. Mobile Penetration
  3. Mobile Payment Penetration
  4. Unbanked Population
  5. Financial Services Penetration

The total size of the population was key, so I narrowed my focus to the 5 countries with the largest populations.

Kakao


It was important that customers had access to the app, so I ranked the countries by rate of mobile cellular penetration.

Kakao (1)


I didn’t want to enter into a crowded market, so I ranked the countries by how undeveloped their mobile payment markets were.

Kakao (2)


I wanted to focus on a market where traditional banks had left significant gaps that mobile banking could fill.

Kakao (3)


And I also wanted to find a country where financial services, such as stock trading and loans, were underdeveloped.

Kakao (4)

Kakao (5)


I put these rankings together, assigning each country points (5=best, 1=worst) based on how favorably they fit each criteria.

Kakao (6)

Indonesia was the clear winner, as it had the most favorable conditions for each criteria, except total population.

The professor agreed with my assessment, and was impressed with how I relied on researched data to come to my conclusion.

You can read my summary of our report here.

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