Thoughts on Korean Business by Don Southerton

Korea’s top-tier high-tech companies, Samsung Electronics and LG Electronics, are locked in a war of negative publicity strategies. The competition between the two archrivals has been stiff in the past but already this year spokesmen of the two companies have clashed several times in wide-ranging battlegrounds. In Korea, the standoff flared up again last week when Samsung invited reporters to its telecommunications research and development (R&D) center in Suwon and revealed the world’s first push-to-all (PTA) phone. The invitation was attractive as the research center, which has played a key role in developing Samsung’s glittering array of fancy phones, had never before opened to the public. Moreover, Samsung’s unveiling day of Feb. 24 coincided with the opening day of LG’s integrated cell phone R&D center, which was attended by LG group chairman Koo Bon-moo. The ‘’coincidence’’ raised the ire of LG, which claims that Samsung intentionally sabotaged their long-awaited research...

Hyundai Motor Group has named Chung Eui-sun president of Kia Motors Corp in Korea as of March 1. Chung Eui-sun, the only son of the group's chairman, Chung Mong-koo, has been Kia's senior executive vice president of operations for the past two years. Prior, Chung Eui-sun was Kia's executive vice president of domestic marketing and customer services. The U.S.-educated Eui-sun joined the group's management in 1999 after earning an MBA from San Francisco University. It is quite apparent that this move signals the automotive group's move to speed up a father-son succession. I see this succession plan as no surprise, in fact, it follows Korean tradition--past and present.

Korean automobile parts makers have enjoyed robust growth in recent years driven by growing sales of Korean cars in the global market. Export-driven industries now may cut their profits coming from overseas sales, but the prospect for their further advance is very bright as long as the car industry keeps its form. Carmakers and parts makers are in the same situation. If carmakers go global to develop untapped markets, parts makers follow in their footsteps to harness their business network. If auto sales are slow, parts makers are in trouble. Car parts manufacturers provide crucial items, such as modules, engines, braking systems and scores of convenience devices for automakers. Korean parts makers need to make technological improvements in some areas but for the most part they are on par with top global firms. The industry, led by Hyundai Mobis, Mando, and Halla Climate Control, is now enjoying its heyday as Korean cars make fast progress in overseas markets, including the United Stat...

Daeborum , originally uploaded by dsoutherton . Koreans celebrate the full moon holiday, Daeborum, with a number of traditions including cracking hard-shelled nut, which is thought to ensure health and good luck.

Hyundai-Kia Motor has started a pilot program for its fuel-cell vehicles and completed a hydrogen recharge station near Los Angeles, California in the U.S., Korea’s largest automaker announced Sunday. The first facility built by the U.S. Department of Energy, the station will be run jointly by Hyundai-Kia Motor and U.S oil giant Chevron Texaco. The two will also cooperate in technology development and standardization. The Korean car company plans to build another five hydrogen recharge stations in the U.S.. Fuel-cell vehicles are next-generation pollution-free cars that run on electricity produced in a chemical reaction between oxygen and hydrogen.

Competition between the traditional big rivals of the retail and distribution industry - Lotte and Shinsegae - is reaching a decisive phase. The battlefield is the Myeongdong area, especially Sogong-dong and Chungmuro in Seoul, where both have their main branches. Lotte appears to be ahead with the opening of luxury goods hall “Avenuel” next to its main branch on March 18. It is planning an entire “Lotte Town” covering 25,000 pyeong or 82,645 sq. m and including the old and new buildings of Lotte Department Store, Young Plaza, and Avenuel. Shinsegae is trying to revive its reputation for reliability by opening a new branch and completing renovation of the main branch in August. Shinsegae chairwoman Lee Myung-hee wrote a her first New Year’s message to all staff in the company’s newsletter, encouraging them to give their all in completing the refurbishment of the main branch. A company official said that even though Shinsegae was the first Korean department store in 1930, it lost its le...

LG Electronics Inc., in Korea, has announced that it will erect a plant to manufacture household appliances in Russia. The electronics maker said it will begin construction between May and June in 2005 for completion in the first half of next year. LG Electronics will manufacture television, refrigerators, washing machines and audio systems at the facility. Interestingly, Korean manufacturers, especially appliance makers, have been enjoying considerable popularity in Russia. In fact, in 2003, LG air conditioners, audio systems and vacuum cleaners were named Russian "national brands" of the year. "It's difficult to come up with the exact demand for LG goods in Russia, but the Russian government and people recognize LG as a top brand," said Yang Seung-hyuk, a spokesman for LG Electronics. LG said the Russian factory will play an essential role in the company's plans to establish a strong East European headquarters in the land of vodka and caviar. LG Electronic...

The North Korean announcement last week that it officially had nuclear weapons stymied a two-year effort by South Korea, the U.S., China, Japan and Russia to persuade North Korea to dismantle its program in return for economic aid and security guarantees. The regime also said it was indefinitely suspending its participation in the 6-way talks. North Korea's diplomat to the United Nations in New York was quoted as saying his government is demanding direct talks with the United States to ease tension over its announcement. Essentially, the North wants a non-aggressive pact directly with the U.S. along with the lifting of economic sanctions. In the past, North Korea has also pressed for withdraw of U.S. troops on the East Asian peninsula. In many ways these demands are not new, for the North has always pressed for direct talks with the U.S., who its sees as the dominate force in the region. In contrast U.S. policy has stressed that the United States and its allies must convince the No...

GS Group, now ranked 14th-largest in the local Korean corporate sector, was born last year in July after LG Group decided to split its operations between the two founding families - Koo and Hur . This ended a 57-year partnership. "We hope to build a top global company that is profitable, clean and contributes to society in the fullest," said Hur Chang-su, chairman of the group. To launch the new business group, a new logo has been created . The new logo was a joint effort between GS and Landor, a U.S.-based company specialized in creating corporate logos. The lgo features the colors orange, green and blue that are meant to symbolize ideas such as progressiveness, a strong service mind and transparent corporate governance. With nine affiliates under its wing, GS Group will focus on energy and retail. LG Group strengthened its electronics and chemical divisions. On Mar. 31, GS will completely dispense with the LG moniker. Sister firms such as LG-Caltex Oil Corp. and LG Retail ...

The Samsung Group and four other conglomerates will be allowed to make investments in other domestic companies, including its units, freely until April 2006 as the nation's anti-trust regulator on Monday decided to offer five groups a one-year grace period from its shareholding limit restriction. The other four groups to enjoy the grace period are Lotte, POSCO, the Korea Electric Power Corp. and the Korea Highway Corporation. The present rule bans conglomerates with more than 5 trillion won in assets from investing more than 25 percent of their net assets in other firms, including their affiliates. The decision was made between the Fair Trade Commission (FTC) and the ruling Uri Party before the enforcement of the revised Monopoly Regulation and Fair Trade Act (MRFTA) from April 1. Under the eased rule, three business groups _ Shinsegye, Daewoo Engineering & Construction and LG Cable _ are expected to be excluded from the shareholding limit restriction. Considering the one-year ...

Hyundai Motor Group in Korea is working closely with law firms in China to toughen its stance against copyright violations by Chinese automakers. This raised speculation that the largest carmaker in Korea may soon follow in the footsteps of General Motors and Toyota to raise a legal battle against Chinese auto firms for copyright infringements. The two auto giants and some other foreign auto players operating in China have filed lawsuits against Chinese firms, alleging they stole and abused designs of their popular and successful cars that are sold worldwide

North Korea's declaration that it has nuclear weapons and is boycotting six-party talks on its nuclear program comes as bad news for South Korean companies that are currently doing business or planning to do business in the North’s Kaesong Industrial Complex. Among 15 South Korean companies licensed to operate in the industrial park, two firms including Living Art have started production of goods, and another eight including Bucheon Industrial are building plants. Chung In-gyo, an official at Bucheon Industrial, an electric home appliance maker, said that icy intra-Korean relations could delay completion of its plant. Pyongyang has sometimes refused to allow South Koreans to visit the North, and there were concerns such refusals could become more frequent. An official with footwear maker Samdeok, Chun Seong-pyo, said the North’s announcement could derail the company’s plans to export its products to the U.S. Export to the U.S. is difficult because Washington has designated the Nort...

South Korea's 10 largest firms by market value apparently have more than doubled their net profits in 2004 on an annual basis, the country's main bourse said Wednesday. Samsung Electronics Co, Korea Electric Power Corp, POSCO Co, and seven other domestic companies are estimated to have racked up a combined 26.6 trillion won (US$25.67) in net income, up 160% from a year earlier, according to the Korea Exchange. Market leader Samsung Electronics, the world's second-largest manufacturer of computer chips, recorded 10.8 trillion won of net profits last year, up from 5.96 trillion won a year earlier. Korea Electric Power Corp, the No 2 domestic firm by market capitalization, racked up an estimated 2.7 trillion won of net income. It has yet to release its fourth-quarter earnings data. POSCO, South Korea's biggest steelmakers and third-largest firm by market value, locked in 3.8 trillion won, while Kookmin Bank, the country's biggest lender, racked up 555 ...

Lunar New Year , originally uploaded by dsoutherton . Each year millions of Koreans celebrate the Lunar New Year Holiday. The holiday brings families together for a day of tradition including bowing to elders (left photo), ancestor rites, food, and games (right photo).

Hyundai Motor Co. posted an increase in sales but a decrease in operating profit in 2004. South Korea’s largest automaker announced that it recorded revenues of $27 billion in 2004, up 10 percent from a year earlier. Operating profit though down 11.4 percent. In the fourth quarter 2004 , HMC achieved the highest quarterly sales of the year with more than W7.5 trillion, but its operating profit dropped some 26 percent to W344 billion due to a stronger won and higher steel prices. Hyundai said its revenues saw an increase last year despite sluggish domestic sales as exports grew. But it added its operating profit fell because of higher marketing costs to counter a slump in domestic consumer spending, while export profits decreased due to the strong Korean won. Ordinary income rose 6 percent to W2.489 trillion, while net income saw a 2 percent increase with W1.785 trillion. Hyundai Securities analyst Song Sang-hun said that after the last fourth quarter, the company could see i...

Lotte Group, Korea's seventh-ranking conglomerate by assets, announced that it implemented the biggest personnel shake-up in its 38-year history. The move involved 10 chief executives and 86 executives. Industry observers say the major shuffle was carried out in line with Lotte Group Vice Chairman Shin Dong-bin's "reform-oriented" management. Vice Chairman Shin took on significant managerial duties last October when he was appointed head of Lotte Hotel's policy division. This division also acts as the group's restructuring headquarters and is the control center of the business empire. Former chief executive officer of Shinsegae Co.'s Westin Chosun Hotel, Jang Kyung-jak, was plucked to become CEO of Lotte Hotel Co. Of the 10 replaced CEOs, Lotte Group says three, including Jang, were scouted from other business groups. Observers believe the placing of 62-year-old Jang from rival group Shinsegae is aimed at changing Lotte's "conserva...

Daewoo International Corp. has announced that its 2004 sales and operating profit rose 21.5 percent and 23.1 percent respectively over the previous year on stable growth in overseas sales and thriving energy business. Daewoo International is a former unit of now-defunct Daewoo Group, which collapsed under a mountaln of debt after the 1997-1998 financial crisis. The company graduated from a debt workout program in 2003 and has been making steady improvement. Daewoo said it enjoyed brisk business in all of its business sectors, including steel, metal, chemical, car parts and energy. But the company said increase in exports and three-way trade in particular contributed to sales growth. Daewoo is currently leading an oil exploration project off Myanmar jointly with Korea Gas Corp. and two Indian companies. In January, the company, which holds 60 percent share in the project, said it found a 93-meter gas layer. The company is also part of a Korea National Oil Corp.-led gas field de...

Hankook Tire Co., Korea's biggest tire maker, is weighing Eastern European countries such as Slovakia and Poland for a plant to supply regional carmakers including the Slovak unit of Kia Motors Corp. Seoul-based Hankook declined to elaborate on the amount of the planned investment. The company will decide on the location and size of the investment in March, spokesman Moon Jeong-soo said in a phone interview. "We are considering various countries right now, including Slovakia and Poland," the spokesman said. Hankook, whose net income rose 64 percent last year to $163 million on higher demand for tires, seeks to expand into Eastern Europe to benefit from low labor costs and proximity to customers. Kia, one of its main clients, is building a factory in Slovakia with a capacity of producing at least 200,000 cars a year from late 2006. Slovakia is enticing foreign investors with a flat 19 percent income tax and flexible labor laws, which make hiring and firing easi...

Korea's Internet penetration rate passed 70 percent at the end of 2004. More than 31 million of the country's 48 million people used online access. A survey by the Ministry of Information and Communication conducted in January 2004 indicated that 31.6 million people of the country's 44 million people over the age of six accessed the Internet at least once in the past month via desktop computer or wireless terminal. This accounts for a penetration rate of 70.2 percent. More than 72.2 percent of the surveyed households used digital subscriber lines (xDSL) for Internet access, while 11.3 percent used cable and 3.6 percent had fixed-line modems.