Thoughts on Korean Business by Don Southerton

For the past few weeks I have reflecting on relevant business events that occurred in 2004. I’d like to share those thoughts along with my forecast on trends that will impact 2005. First, 2004 saw the continued expansion of Korean-based businesses globally, especially in America. Samsung, Hyundai, Kia, and LG are among a select few of Korea’s top conglomerates that have allocated billions of dollars to further their quests to become major global players. For example, Hyundai Motor America and Kia Motors America have made continued inroads (no pun intended) into the American car market. In fact, I now drive a 2004 Santa Fe. Moreover, Hyundia Motor Manufacturing Alabama is preparing to launch its billion dollar car manufacturing operation in early 2005, supported by a number of major Korean-based suppliers who have followed Hyundai to Alabama. I also see the recent move by LG Electronic to boost its position in America as significant. LGEUS has embarked on a major brand marketing...

In his 2005, New Year's Address, President Roh Moo-hyun said, "The widening gap between big businesses and small and medium-sized businesses, high-tech industries and traditional industries, regular workers and irregular workers, capital region and the provinces, and upper and lower classes is an urgent task we can no longer ignore." Roh argued that large corporations must lend a helping hand to small and medium-sized ones, regular workers to irregular ones, the capital region to the provinces, and the higher social classes to the the grassroots. Roh said competitive big businesses and high-tech industries should lead economic growth and provide wide support to technologically and competitively less-capable small and medium-sized firms and the general public so that they may develop together.

Hyundai Motor in Korea announced that Chairman Chung Mong Koo has been named one of the world's leading CEOs of 2004 by U.S business magazine BusinessWeek. Business Week lauded Chung by saying that he has boosted the quality of Hyundai's goods and services and transformed the company into a world-class automobile manufacturer. Chung assumed the leadership of the family-run firm in 1999. BusinessWeek chose best-performing CEOs from around the world in 17 sectors, including the automobile industry, for its New Year's edition. Interestingly, Chairman Chung is the only Asian CEO on the list of top-class managers. See BusinessWeek article at:http://www.businessweek.com/magazine/content/05_02/b3915630.htm

How is New Year's celebrated in South Korea. In Seoul, equivalent to the New Year’s Party in Times Square in New York, a replica of the Posingak Bell will be rung 33 times at midnight. The Korea Times notes the bell will be stuck 33 times. The number 33 stands for good fortune in Korea and is meaningful in Buddhism. The time-honored ceremony will be broadcast live on television for those who prefer to enjoy the party at home, and will also be shown through huge outdoor screens on several buildings near the area. The Korea Times article explains that the original Posingak Bell is now at the new national museum in Yongsan, Seoul, which was moved on Dec. 20 from its old location in Kwanghwamun. The bell was first used to mark the end of the old year and the beginning of the new in 1953. However, the original ritual dates further back to its construction in 1397 by the order of King Taejo, the founder of the Choson Kingdom (1392-1910). In the early Choson Kingdom, peopl...

Like most Asian countries, South Korea has two different New Year's—one that follows the solar calendar and one that uses the lunar calendar. Traditionally the lunar New Year's, called So-nal, has greater cultural and familial significance (In 2005 it will be celebrated on February 9). As for the solar New Year’s celebration, in 1896, as part of reforms instituted to Westernize and modernize Korea, the Gregorian calendar was adopted, along with some of the West’s holidays such as the January 1st New Year’s celebration. Today I find Korea’s celebration of New Years similar to celebration in America. In fact, Koreans also make New Year’s resolutions where they promise to exercise regularly or eat fewer sweet things—such as chocolates and candy. A new resolution for many is to drink less coffee. A popular resolution this year is to study harder to improve English language skills—a skill seen as crucial in the workplace. It’s appropriate to wish your Korean colleages ...

Ownership , originally uploaded by dsoutherton . The Korean Fair Trade Commission has noted that the heads of leading family-run conglomerates continue to control their empires with less than 2 percent ownership stakes. The government commission calls the situation a "severely distorted ownership structure." The Fair Trade Commission said in a recent announcement that each chairperson of the country's 36 chaebol with assets in excess of $1.91 billion owned only an average 1.95 percent of the total shares. In addition family members held 2.66 percent. This was supplanted by 41.71 percent control exercised by the owner's family through a complicated arrangement of cross-shareholdings of affiliates. An additional 2.76 percent of stocks were held by company executives, nonprofit organizations and treasury shares that are "friendly" to the chairpersons and their kin. I find it amazing that the report said chaebol owners and their families did not own a s...

In an article in the Korea Herald, it was noted that South Korea's exports to the United States surged 26.94 percent during the first 10 months of 2004. This was driven by shipments of automobiles and wireless communication gear. Citing U.S. figures, the Korea Trade-Investment Promotion Agency said that Korean exports to the world's largest economy reached $38 billion during the January-October period and account for more than 3 percent of U.S. import total. Cars were the top export item. Shipments surged 30.57 percent year-on-year at $8 billion, or 21.16 percent of exports to the United States. Hyundai and it sister company Kia are Korea's top car manufacturers. Wireless communication gear followed at $7 billion, increasing at a near 50 percent clip compared to the same period last year to account for 18.3 percent of exports. Since the post Korean War period, the U.S. had been South Korea's largest export destination.

Christmas Eve Seoul , originally uploaded by dsoutherton . Christmas Eve in Seoul, Korea Herald photo

You may wish to greet your Korean colleagues with: Sae hae bok mah nee bah deu say oh! (I’ve modified the Romanization for easier pronunciation). Hint: Break the greeting into: sae hae—bok—mah ne—bah deu say oh In South Korea, the government recognizes Christmas, December 25, as a public holiday. Christians, who make up about 30% of the population, celebrate the occasion as a religious holiday. Like in the West, both Christians and non-Christians may engage in some holiday customs such as gift-giving, sending Christmas cards, and setting up decorated trees in their homes. Children have embraced Santa Claus, whom they call Santa Grandfather. Each year I see more signs of commercialism with stores and buildings displaying Christmas decorations and offering holiday sales. Sae hae bok man i bat eu say oh! works well and is a common seasonal greeting. For those wanting to wish someone Merry Christmas use Sung tan jul chuk ha. On behalf of Bridging Culture have a h...

How are Koreans celebrating Christmas? Outside the religious holiday celebrated by Korean Christians, more Koreans are shifting their seasonal activities. For example, the spirit of Christmas is supposed to be about charity, love and gift-giving, but at year-end parties the notion of ``spirit’’ is often taken literally, with people required to attend endless parties to drink soju, whisky and ``poktanju (boilermakers)’’ until the dawn of next year. According to Korea Times there are signs that many Koreans are now turning away from these alcohol-drenched events in search of more meaningful and positive ways to end one year and start another. Instead of attending conventional year-end parties with bottles of alcohol, they choose to see a concert and musical or enjoy other cultural events with their families, friends and colleagues. Some people even participate in volunteer work to help people in need. Workers from conglomerates such as Samsung Electronics and LG have visited or...

Hynix Semiconductor Inc., the world's third-largest memory chip manufacturer, will benefit from a World Trade Organization ruling that punitive tariffs imposed by the United States on the Korean company violate global trade rules. Nevertheless, if the chip industry faces an oversupply, which some think is likely in 2006, the removal of tariffs will help Hynix by allowing it to gain full use of its domestic plants. According to the Korean Herald a WTO panel ruled the U.S. failed to present convincing evidence that the Korean government had subsidized the struggling company by ordering banks to provide loans. The U.S. has decided to appeal the decision and a final ruling is not expected for months to a year. In July 2003, the U.S. International Trade Commission decided to levy tariffs of 44.29 percent on memory chips made by Hynix on a request from U.S. semiconductor maker Micron Technology Inc. Hynix said it was upbeat about the ruling and expressed optimism that this wi...

SK Corp. Chairman Chey Taewon has tightened his grip on the company, Korea’s biggest refiner and flagship of the nation’s No. 5 industrial group. SK C&C Co., an information technology unit of SK Group, said it bought a 0.86 percent stake in Seoul-based SK Corp., making it the refiner’s second-biggest shareholder. Chey, who is fighting attempts by Monaco-based fund Sovereign Asset Management Ltd. to oust him, owns 44.5 percent of SK C&C. Sovereign wants to eject Chey after he was convicted last year of fraud at an affiliate that SK Corp. then bailed out. Sovereign says SK Corp., founded by Chey’s uncle four decades ago, is undervalued because of poor corporate governance, including putting affiliates before those of shareholders. The purchase will raise privately-held SK C&C’s stake in SK Corp. to 9.4 percent from 8.55 percent, Ko said. Chey’s direct holding in SK Corp. is 0.6 percent, according to stock exchange data

One of two cell phones sold in the U.S. market next year will be manufactured in South Korea. Korean firms Samsung, LG and Pantech are expected to take about 50 percent of the U.S. cell phone market, which is estimated at 140 million units next year. According to market research firm IDC, Samsung and LG accounted for 18.8 percent and 17.7 percent, respectively, of cell phones sales in the U.S. market in the third quarter, making them the third and fourth largest global firms in the market.

According to Korea Times (Han guk Ilbo), fortunetellers on the major streets of Seoul are seeing an increase in business. With the sluggish Korean economy, customers are seeking insights into the coming year. Palm readers in large indoor shopping centers or subway stations in downtown Seoul are seeing a year-end boom in their business. Services offered range from the traditional saju (horoscope) and sonkum (palm reading) to Western style fortune telling such as tarot cards and astrology. Prices range from 3,000 won ($2.80) to 5,000 won ($4.70) for basic services. Fortunetellers in the article said people in their 20s or 30s account for over 70 percent of their customers, whereas at some places, up to 95 percent of clients are young customers.

South Korea's Ministry of Gender Equality will be reorganized as the Ministry of Gender Equality and Family as it moves into a wider role covering national issues such as the low birth rate and increasing number of divorces in Korea. According to Chosun Ilbo, the ministry's restructuring will mean the task of investigating and managing cases of gender discrimination will go to the National Human Rights Commission. The government said that the ministry's redefined workload would give it a better grasp of family-related concerns like the low birth rate and an aging society. Family-protection policies dealing with divorce, marriage and the prevention of domestic conflict would also be carried out on a broader scale. I see this move to address family issues interesting, but no surprise since Korean divorce rates have soared in recent years.

When skimming the Korea Herald newspaper, I found a suggestion list for Christmas shopping in South Korea. I feel it gives some insight into the commercialization of Christmas in South Korea. Here are some of the ideas… Smell majestic: Let him feel your caress even if you are not near him with Millesime Imperial, a luxurious perfume from House of Creed. Available in four sizes from 30ml for 132,000 won at Galleria Department Store. Silky Christmas: Hermes silk twill scarf is every woman's must-have item and just in time for the Christmas, the fashion house introduces Noel au 24 Faubourg, a Christmas-themed edition. As the French house declares, it is "a beautiful flying carpet" that will make her heart flutter. Drink in style: Dehydration is a problem that affects many city slickers - don't let it get your loved ones this holiday season! The light and handy water bottles offered by Swiss company Sigg are perfect for adults and children alike. They come in a...

A South Korean company has produced the first batch of goods from its plant at the Kaesong Industrial Complex in North Korea. Kaesong is located on the 38th Parallel, north of the DMZ. Kaesong had for centuries been the commercial center of Korea. Kitchen-utensil maker Livingart has opened its newly constructed plant and began producing a range of pots and kitchen goods. About 400 South Korean representatives, including Unification Minister Chung Dong-young, Hyundai ASAN Chairwoman Hyun Jeong-eun, lawmakers and business people, and around 50 North Korean officials, such as Ju Dong-chan, who heads the Pyongyang agency managing the special zone, participated in the dedication ceremony marking the initial success of the pilot scheme. Hyundai ASAN Chairwoman Hyun said that she was thrilled to see a South Korean company produce the first goods 15 years after her late father-in-law Hyundai's founding chairman Chung Ju-yung launched a cooperative project with the North. T...

For Immediate Release December 14, 2004 Bridging Culture President Profiled in Korea’s Chief Executive Magazine Don Southerton, BC president, is profiled in the December edition of Chief Executive magazine. The business magazine targets top management of Korea’s leading companies and is often cited for its findings on the South Korean economy and business. Don Southerton was interviewed on the work his firm does with Korean based companies including Hyundai Motor America. Southerton serves as an advisor, consultant, and trainer for many of the top Korean-based corporations with operations in America. Chief Executive reporter Daeyong Jung notes in the article the value of BC cross cultural programs to Korean and American firms with global operations. The article points out two aspects of BC programs and consulting. One aspect is working with Americans of Korean-based companies, and a second dimension--working with U.S. firms with interests in South Korea. Two points ...

Kia Motors Corp. in South Korea has reached an agreement with its labor union to transfer some sales staff to other positions such as production or administration, the company. Officials from Korea's No. 2 carmaker said the agreement is designed to tackle the nation's faltering domestic auto sales. Due to the weak Korean economy, Kia's domestic sales slid 20.4 percent year-on-year to 232,074 units from January to November. Kia officials declined to elaborate on how many workers they want to move from the sales operation. The company has about 3,000 sales staff nationwide. The Kia union initially opposed the transfers, saying the company could use the plan to begin mass layoffs. Employees only endorsed the plan after the company promised job security for the shifted employees. Other Korean carmakers such as Hyundai Motor Co. and GM Daewoo Auto & Technology Co. said they have no plans for similar job transfers. The Big 3 carmakers in Korea - Hyundai, Kia ...

The tax burden for the average Korean conglomerate’s inheritor is approaching tens of billions of won as the amount of gifts from owners and parents has surged. Chung Sang-yung, honorary chairman of Kumgang Korea Chemical (KCC), gave company stocks amounting to 98.1 billion won (7.35 percent stakes) to three of his sons, including Chung Mong-jin. Chung Sang-yung is a younger brother of the late Hyundai Group founder Chung Ju Yung. Mong-jin, has become the majority shareholder of KCC on the back of the stock transfer, with the amount of gift taxes charged on Chung’s three sons totaling 40 billion won. Chung Ju Yung’s son and Hyundai Department Store chairman Chung Mong-keon has given 2.15 million shares (a 9.58 percent stake) to his son Ji-sun, vice chairman of the company. Taxes for the donation reached 30 billion won. In addition, Korean Dongwon Group chairman Kim Jae-chol handed over 4.33 million shares worth 28.5 billion won to his son Nam-goo, president of Dongwon Se...

Seoul English Village opens. At the opening, Seoul Mayor Lee Myung-bak says it introduces a new English education model into the country. Seoul English Village is one of many English immersion towns sprouting up across the nation. The program’s basic concept allows only English to be spoken in day-to-day activities. In Seoul, the concept was to construct a small town where a person immediately is enveloped into feeling he or she has entered another English-speaking country. The Seoul mayor stressed the importance of mastering English since it was a global language, and sees the village giving students an opportunity to open their eyes and ears to the world without having to travel abroad. The mayor believes that the English Village will help to improving fluency of English among the general public amidst more importance being put on the capability of speaking the international language. "I hope the village gets the love from parents and students who have been suf...

The economic gap between North and South Korea continues to widen. For example, South Korea’s gross national income (GNI) jumped 10.7 percent to $606.1 billion, while North Korea’s rose 8.2 percent to $18.4 billion. Moreover, the gap in per-capita GNI between the two Koreas also continued to widen to 15.5 times last year, up from 15.1 in 2002 and 14.4 in 2001. South Korea’s gross domestic product (GDP) expanded 3.1 percent in 2003, down from the 7 percent growth in 2002, while North Korea saw its GDP grow 1.8 percent, up from the 1.2 percent expansion a year ago. As in most developed capitalist nations, the service sector accounted for 57.2 percent of South Korean economy last year, followed by manufacturing with 26.9 percent. In contrast, 32.8 percent of the North Korean economy was supported by the service industry with the agricultural and fisheries sectors accounting for 27.2 percent. With South Korea becoming a major global producer of cars, the difference in automobi...

South Korea overtook Mexico to become the world's 10th largest economy in 2003 . The World Bank ranked Korea 10th with a gross national income (GNI) of $606 billion in 2003, narrowing the gap with China, which slid to seventh from sixth a year ago. According to the World Development Indicators 2004 published by the World Bank, Brazil, ranked 13th in 2003, slid to 15th place while India maintained the 12th spot on the basis of GNI. The report showed that Korea overtook Mexico, whose GNI stood at $602 billion last year. Canada (eighth), Spain (ninth), the Netherlands (13th) and Australia (14th) posted similar figures with Korea, with GNI¡¯s of $833 billion, $828 billion, $494 billion and $465 billion, respectively. According to the World Bank, the United States ranked first with the largest GNI of $10.9 trillion, followed by Japan with $4.3 trillion, Germany with $2.3 trillion and the United Kingdom with $1.8 trillion.

LG Group chairman Koo Bon-moo has adopted his nephew, Kwang-mo as a son. Interesting, why the LG chairman adopted the only son of his younger brother Koo Bon-neung, chairman of Heesung Group is in line with traditional, centuries old Confucian norms. The group chairman, who also takes responsibility of Koo family affairs, has no son and two daughters. In Korea, adopting a nephew is not unusual, especially to insure a male heir to fulfill family Confucian rites. LG officials dismissed a possible link that the adoption is related to the group's succession matter. ``LG Group family members has respect for the traditional eldest son-led system under Confucianism,'' the group said. As to an eventual LG chairman successor, candidates include LG. Philips LCD vice chairman Koo Bon-joon, one of three younger brother of Koo Bon-moo.

Hyundai Motor Group is expected to overtake LG Group to become the nation's No.2 conglomerate in terms of total assets. Regaining its top ranking among the conglomerates has been goal of Hyundai, since the breakup of the Hyundai Group into several smaller groups in 2001-2002. Excluding state-run firms and privatized enterprises, Hyundai Motor, will trail only the No. 1 group Samsung. Hyundai Motor's rise was made possible as its affiliate Hyundai Capital attracted $371 million from General Electric Capital and took over the bankrupt Hanbo Steel. In addition, LG Group will see its assets fall as GS Group is to be spun off from the conglomerate. LG Group will stress chemicals, telecommunications, and electronics. GS will focus on retail and service sectors. LG will remain as the No.2 group this year but from next year its ranking will fall to third. LG will also become the No. 2 conglomerate in revenue on the back of strong sales in its electronics and chemica...

Professor Kim Phil-soo at Daelim College claims that 80 percent of elementary schoolchildren in South Korea are inarticulate when it comes to putting two chopsticks together. On reason for the new phenomenon is the rising influence of Western culinary culture. With the growing popularity of Western culinary culture's use of the knife and fork, manifested in the rise of U.S. food outlets like Bennigans and Outback Steak six in ten Korean adults are now unable to use chopsticks correctly, according to a recent study. Professor Kim Phil-soo at Daelim College conducted a survey on the use of chopsticks on 252 adults aged 21-40 in November. Results showed that only 38 percent of the adults, split almost evenly between male and female, were able to use chopsticks in the correct manner.