Thoughts on Korean Business by Don Southerton

Korean companies need to globalize their decision-making structure to keep up with the competition. This was the recommendation by Carl W. Stern, Boston Consulting Group's co-chairman, during a recent interview with the JoongAng Ilbo. Mr. Stern, who has worked at Boston Consulting Group for more than 30 years, was the company's chief executive officer from 1997 to 2003. During a visit to Seoul , Stern told the JoongAng Ilbo that Korean companies still practice a Korean-centered governance structure, in which Korean companies believe that Koreans should head foreign companies' branches in Korea, as well as Korean companies' overseas operations. Supposing North America, Europe and Asia each make up one-third of a company's sales, he said, the ideal corporate governance structure would have the same proportion of nationalities in executive positions. As for marketing strategies, they need to be tailored to each country if a company wants to keep growing, he said. He cr...

It must be August, for South Korea's unions are beginning to make their annual demands. This year the union of Hyundai Motor Co. is demanding a voice in decisions on the ever-increasing expansion and construction of new overseas plants. For the union at Kia Motors, workers are pushing for seats at board meetings, and a personnel committee composed of the same number of members from the two sides. Kia's union has also objected the firm's family management especially with the appointment of Chung Eui-sun as CEO earlier this year. Chung Eui-sun is the only son of Hyundai-Kia Automotive Group chairman Chung Mong-koo. What might be a surprise is that this year wage increases are not the top priority. Why? Unions are aware that an ever-increasing share of Hyundai and Kia revenue is from overseas sales. Moreover, the unions are sensitive to Korea'?s flat domestic car market, a strong Won, and higher costs. Chosun IL Bo reports that labor unions wouldn't call for exorbitant...

South Korea has long been cited for its workers having the world's longest workday. I see this dedication as a contributor to success of many Korean firms. But it may come at a price. In a recent article in Chosun Ilbo, they note that an overwhelming majority of Korean office workers complain work is making them chronically sick, and three out of 10 have quit their jobs due to ill health. Online polls have found that of 560 office workers, 75.7 percent or 424 said they contracted a chronic illness at work. Of these, 40 percent complained work made them literally sick to the stomach, citing gastric ulcers, stomachache, constipation and diarrhea, followed by stress-related trouble with 26.4 percent, and bone and muscle problems with 17 percent. Those who suffered headaches and depression accounted for 5.6 percent each, and some 1.9 percent had respiratory trouble. Another 1.9 percent complained of lifestyle-related illnesses such as diabetes and hypertension. About 27 percent said t...

In a recent Bloomberg news article titled: Hyundai's Toyota Obsession Fuels Drive to Pass DaimlerChrysler, Don Southerton of Bridging Culture was cited. See link on left side of blog (BC in Bloomberg News). The online article's content will also appear in Bloomberg's monthly magazine later this month.

Amid growing failout following disclosures of Samsung Group's bribes in 1997, Chosun Ilbo ( and most of Korea's papers ) show increasing impcat of the government investigation. For example Kia Motors Labor Union has hinted it will sue the Samsung Group after a leaked bugging tape confirmed that Samsung lobbied to take over the then-ailing carmaker in 1997. The union, which is itself embroiled in a corruption scandal, says the biggest victim of a campaign contributions scandal revealed by the recording was Kia Motors and the public. The leaked tape from the clandestine bugging operation by the now-defunct Agency for National Security Planning appears to bear out rumors that Samsung lobbied politicians and public officials to assist in its takeover bid for Kia Motors in 1997. The controversial tape reveals Samsung planned to lobby then finance minister Kang Kyung-sik and presidential candidate Kim Dae-jung.

Fleet of Hyundai Trucks haul tons of rice to North Korea , originally uploaded by dsoutherton . With North Korea in dire need of food, relief efforts include 500,000 tons of rice being sent to North Korea.

Since the beginning of the year, Hyundai Automotive Group chairman Chung Mong Koo has gained about $290 million in stock value with a surge in the share price of Hyundai AG stocks. The market value of Chung’s Hyundai AG stocks reached $1.57 billion last Thursday. Outside the gains from HMC, Chung gained $68.4 million from Hyundai Mobis, a parts-making unit of Hyundai, $57 million from Hyundai Hysco and $26.1 million from his investment in INI Steel. Chung has plans for steel makers Hysco and INI to be a global leaders by 2010. Only four of the twenty eight Hyundai AG firms are publicly traded, although plans are underway for a Glovis IPO in late 2005 or early 2006.

Kia Motors America said it would build a design studio at its new $70-million headquarters complex in Orange County California. With the distinct branding of both Hyundai and Kia, the new design facility is part of an effort for Kia to distinguish itself from Hyundai Motor and develop unique Kia car designs. Likewise, Hyundai will develop cars that fit its new branding image. The South Korean automakers now share a state-of-the-art studio in Irvine, which will continue to be used by Hyundai designers after Kia's $17-million, 65,000-square-foot design facility is completed early in 2007. Kia broke ground Friday July 22 on its new headquarters site.

Samsung Electronics has been named the world’s 20th most valuable brand, beating Japan’s Sony. Hyundai Motor and LG Electronics were also among the world’s 100 best brands. Multinational branding consultants Interbrand have unveiled its list of the world’s 100 best brands by value. Samsung Electronics’ brand value was estimated at $14.95 billion, up 19 percent from the previous year, taking 20th place. As a result, the Korean company beat its Japanese rival Sony whose brand value dropped 16 percent for the first time, the consulting firm said, coming in at 28. Hyundai Motor was ranked 84th with a brand value of $3.48 billion, overtaking Japan’s Nissan. LG Electronics took 97th place with $2.64 billion in brand value. Coca Cola was named the world’s top brand at $67.5 billion,

Hyundai Autonet Co., Korea's largest car-electronics equipment maker has agreed to export navigation systems to Japan. The affiliate of Korea's Hyundai Automotive Group aims to enter Japan by end of this year, and sell 200,000 units in the next three years. Autonet also plans to export its products to the United States, Europe and Australia soon. Autonet said it already began developing the 3.5-inch touch-screen kits designed to target the Japanese market. The products will not only store and display road maps, but also play video games, music and films in MP3 files, according to Autonet. . Why Japan? Japan's annual demand for car navigation systems is the world's biggest of 3.5 million units. Most come in with DVD and hard disk drives with road maps. I'm told that Autonet plans to enter the Japanese market by offering a competitive product at less than half the price of those currently available in Japan. Autonet VP Kim Sung-soo notes "We will sell through not...

After much rhetoric and posturing, the fourth round of talks is scheduled to begin at Beijing's Diaoyutai state guesthouse on July 26. South Korean officials note that In the past, the talks used to last three or four days then the diplomats had to wait several months before resuming the next round of talks, This process made it difficult to maintain momentum and took a great deal of diplomatic effort to simply reopen the talks. South Korean diplomat Ban noted that all participating countries, except North Korea, have tentatively reached a consensus that they need to remedy this "unproductive" and "inefficient" situation. Ban expressed the hope that the six countries could agree in extending the conference period and each participating country could have various sessions of talks in different formats, including bilateral talks and chief delegatesÂ’ talks, to produce a meaningful and substantive result. "We do not know North Korea's stance (on the longer...

On Monday July 18, South Korean shares rose to a new 10-year high. This was driven by gains in Samsung, Hyundai and other major exporters. The Korea Composite Stock Price Index, or Kospi, gained 13.05 points, or 1.2 percent, to 1,075.48, the highest since late 1994. The index's all-time high for a close is 1,138.75 on Nov. 8, 1994. The index high came from market-heavyweight shares such as Samsung Electronics and Hyundai Motor that led market gains. Samsung Electronics Co., the world's biggest maker of memory chips, rose 2.2 percent to $540. Hyundai Motor Co. jumped 3.4 percent S65.

New Book on Hyundai Auto Chairman , originally uploaded by dsoutherton . The Challenge of Chung Mong-koo, a book recently published in Korea, traces how the carmaker has successfully overcome past challenges and argues that behind all the achievements and technological growth...was the Hyundai Motor Group chairman. For those interested in obtaining a copy I'm in the process of getting a Korean link to purchase copies. I'll get you one if you wish. In particular, the book pays attention to Hyundai/Kia’s growing investment in research and development (R&D). Hyundai officials say Hyundai’s R&D budget will increase to $3 billion next year, nearly $1.9 billion for Hyundai Motor and $1.1 billion for Kia Motors, while global car production will reach 3.72 million units.

Information has surfaced that investors from Britain and Scandinavian countries are aggressively buying shares of Hyundai Merchant Marine (HMM). This means Hyundai Merchant may face a hostile takeover from management off foreign private equity funds seeking management right of the Korean shipping firm. Geveran Trading, an investment fund based in the Republic of Cyprus, an international tax-haven, holds a 13.57 percent stake in the Korean company, according to the Financial Supervisory Service (FSS). Geveran Trading is the second largest shareholder of Hyundai Merchant Marine, following the majority shareholder, Hyundai Elevator, that holds a 17.76 percent stake in the affiliate and is seen as the family controlled defacto holding company that controls HMM. Ironically, over the last couple years Hyundai Elevator has fought off take-over by members within the Chung family. HMM was once part of the Hyundai Group. With the death of Hyundai founder Chung Ju Yung in 2001, the group split in...

Chosun Ilbo notes: The head of South Korea's Hyundai Asan is visiting North Korea, and is expected to meet North Korean leader Kim Jong-il. The South Korean government and Hyundai Asan officials say the conglomerate's chairwoman, Hyun Jeong-eun, will meet with Kim Jong-il. Chairwoman Hyun is visiting North Korea to discuss details of inter-Korean projects. The projects include tourism development in the eastern resort of Mount Geumgang and tours to Baekdu Mountain located on the North Korean border with China. The development of tourism projects is expected to pick up following an easing of nuclear tension with North Korea's intention to resume stalled six-country talks. My comments.... Hyun Jeong-eun is the daughter-in-law of Hyundai founder Chung Ju yung who forged inroads with North Korea in the late 1990s. Subsequently, Hyundai Asan was created to offer trips to Mount Geumgang region. This is the first mention that Asan seeks to offer tours to Mt. Baekdu Mt. Baekdu i...

In a recent Chosun Ilbo article it was reported that South Korea's Ambassador to the U.S. Hong Seok-hyun will strive to correct five misconceptions he feels Americans might have about Korea. In an address at the Rotary Club in Washington, D.C., Hong said despite evidence that the alliance between the two countries has been a success, some people cast doubt on the soundness of the two allies' relationship. What emerged from them was a “surprising” depth of misunderstanding by intellectuals and the media, Hong said, and correcting them was one of his most important duties as ambassador. The five are: 1. Anti-American sentiment is rife in Korea 2. Koreans no longer want U.S. troops in their country 3. South Koreans place greater importance on their ethnic unity with North Korea than their alliance with the U.S. 4. President Roh Moo-hyun is overly progressive 5. Korea is leaning toward China and away from the U.S. Hong attributed such conceptions to a poor understanding of change...

Hyundai automotive Group Chairman Chung Mong-Koo has been named the top CEO of an Asian auto company by the business magazine _Automotive News._ Chairman Chung and 17 other automobile industry executives from across the world were declared _All Stars._ The July 11th issue of the magazine notes, _Hyundai sales are rising around the world, quality is among the best, and a U.S. plant is cranking out Sonata sedans. The industry is paying attention to the Korean giant._ This recognition come just after aftre Chairman Chung was voted “One of the Best Business Managers” of 2004 by the American business magazine, _“Businessweek._ Chairman Chung joins industry leaders Dieter Zetche, CEO, Chrysler Group, top North American CEO and Hans-Olov Olsson, CEO, Volvo Car Corp., top European CEO, in the "Automotive New" article.

Samsung Electronics has joined the ranks of the worldÂ’s 50 largest companies. According to the 2005 Fortune Global 500 list released by the business magazine Fortune, Samsung Electronics ranked39thh. Rank in the Fortune Global 500 is determined by total revenue in the prior year. Samsung Electronics netted $9.4 billion in net profits on $71.9 billion in sales last year, according to Fortune, moving up 15 notches from the 2004 tally. The electronics maker was Asia'’s second most profitable company. Toyota Motor is ranked number in Asian profitability. Interestingly, Japan's Sony Corp. stood at 47th with $1.5 billion won in net profits on $66.6 billion in sales, lagging behind Samsung. Hyundai Motor was the only other Korean company that made the top 100 list, ranking 92nd, up from 98th a year earlier. KoreaÂ’s biggest automaker chalked up $1.47 billion in net profits on $71.9 billion in sales. Other Korean firms that made the Global 500 list include SK Corp., LG Electronics, S...

The Korean food service sector has begun to shift its marketing. Food businesses are giving up on low-income earners amid a drawn-out slump that has taken a heavy toll on consumer purchasing power. In fact, family restaurant chains such the American-based ribs franchise Tony Roma have announced that they their cut-price marketing policy, once popular among chain restaurants, is over. Since 2003, restaurant chains have competed for greater market share by cutting prices and introduce less expensive meals. Many, including Tony Roma, feel this strategy has failed. Specifically at Tony Roma'’s, sales of meal specials priced below $20 have dwindled considerably, In contrast, sales of meals costing over $20 have doubled. Interestingly, what continues to stand out when I look at the Korean consumer market is that appealing to the low end of the market seldom works. Koreans appreciate quality and the status it often brings.

After weeks of negotiations in New York and China, North Korea has agreed to return to six-party talks on its nuclear program, This recent round of diplomacy ends 13 months of intense international efforts to bring the reclusive country back to the negotiating table. The six way talks will likely resume in Beijing on July 27. U.S. Assistant Secretary of State Christopher Hill and North Korean Vice Foreign Minister Kim Kye-gwan met in Beijing on Saturday and agreed to reconvene the talks in the week of July 25. The two countries formally announced the agreement on Sunday. In contrast to what I see as an upbeat prospect of progress by the North Koreans and South Korean press, Secretary of State Condoleezza Rice cautioned Sunday that North Korea's decision to resume nuclear disarmament talks does not mean the United States is any closer to its long-standing goal of a nuclear-free Korean Peninsula. "It's only a start," Rice said at a news conference. "It is the goal ...

South Korea’s Finance-Economy Minister Han Duck-soo announced that the Korean government will work to become a member of the Group of 10 (G10) by 2010. During a meeting hosted by the European Union Chamber of Commerce in Korea (EUCCK), Han said that the government will speed up economic reform to improve Korea’s chances of joining the G10 by 2010. In an article in Korea Times, Han notes "The government aims to transform Korea into an advanced trading nation by strengthening national competitiveness and joining the G10 as small but strong nations in Europe have done." Currently, the Group of Eight (G8) is an exclusive group of countries with powerful economies, but the G8 is on its way to becoming the G10 with India and China, and perhaps Korea, to reflect the changing global economy. Han notes the following reforms: He said that the government originally planned to complete its foreign exchange liberalization plan by 2011, but decided to advance the schedule because of the ra...

POSCO, the world’s fifth-largest steelmaker posted $11 billion in revenue and about $2.5 billion in net income during the first half of the year due to increased product prices. This is a record high for half-year performance. The brisk performance is unlikely to continue. A close look at POSCO’s performance in the first half shows that it hit its peak in the first quarter and fell off in the second. Some feel that the company profits for the next two quarters may suffer. Chinese steel plants went into full operation this year, five years after they started construction, causing a glut that has hurt steelmakers around the world. POSCO as a result reduced its sales target for this year slightly.

South Korean broadband already is considerable faster than that in America--up to ten-times faster. Internet speeds in South Korea will soon be even faster...with BcN. Koreans will be able to download a two-hour high-definition movie in a minute thanks to the super-fast Broadband convergence Network (BcN). A BcN consortium, headed by the country'’s third-largest fixed-line telecom operator Dacom, has started a pilot run of the next-generation network in 350 households in Seoul, Ulsan and Puchon. The BcN integrates traditionally separated telecom, Internet and broadcasting pipelines into a converged network while seamlessly switching over to a wired or wireless connection. It promises a speed of 100 megabits per second (Mbps), about 50 times faster than current broadband norm of 2 Mbps provided to 11 million of the countryÂ’s total 15.5 million homes.

SK Telecom president Kim Shin-bae told a press conference held in Seoul that KoreaÂ’s foremost wireless operator, plans to keep its self-imposed 52.3-percent market share restriction for the next two years. SK Telecom will not expand its current market share beyond 52.3 percent until 2007. Why? Kim vowed that SK TelecomÂ’s market share will not exceed 52.3 percent to avoid imminent government regulations. This promise was made just before the Ministry of Information and Communication held a meeting in 2004 to check the monopolistic status of SK Telecom after the merger with Shinsegi. Nevertheless, by early 2005, SK Telecom has already carved out 51.2 percent of the countryÂ’s mobile telephony market with 19.1 million customers. Two other firms have market share: KTF has 12.1 million customers and LG Telecom has 6.2 million customers. With regard to cell phone service, Korea's cell phone market is quite saturated with more than 37 million people out of the countryÂ’s total popula...

In an study published by Chosun ilbo, Samsung Economic Research Institute expert Dr. Moon Seung-yeol recognizes 12 characteristics of Korea's rich. 1. The wealthy never trust experts 100 percent. The rich live their lives in constant contact with bankers and stockbrokers, but they do not trust them to make decisions for them, even if their information is valuable and accurate. The reason is simple: they trust their own judgment more because they are richer than their advisers. 2. Most wealthy are morning people. Successful businesspeople and the rich wake up early. They set their goals more clearly than others to live their day according to plan. 3. The wealthy live longer. They say the more money you have and the higher your position, the less stress you suffer and the longer you live. But research has shown that rather than absolute size of their fortune, peopleÂ’s lifespan is determined by whether they have the confidence that they are better than the rest. 4. The wealthy resp...

South Korea's Hyundai Automotive Group and Germany’s largest electronics firm Siemens have eneterd in a joint venture to make navigators and other in-car electronic products. Hyundai announced the joint venture will produce multimedia devices and later expand to electrical and electronic auto parts like door locks, air conditioners and power windows. Hyundai aims to ensure improved quality of its electronic parts.

South Korea's Supreme Public Prosecutors’ Office has officially indicted former Daewoo Group chairman Kim Woo-choong for fraud, false accounting and embezzlement. Prosecutors said Daewoo executives falsified records following the Korean fiscal crisis in 1997. Prosecutors estimate the fraud at $40 billion for the fiscal years 1997 and 1998. They say Kim also defrauding banks of $7 billion in loans, hid $20 billion in the group’s foreign bank accounts, and embezzled $2 billion. Defense lawyers for the former Daewoo chairman have argued that the $40 billion total is an exaggeration. Kim’s lawyers cite that the actual amount was no more than $21 billion, and the Daewoo had no choice but to falsify its accounts because soaring interest rates in the Asian financial crisis resulted in a loss of $14 billion.

On Wednesday June 30, 2005 Garden Grove, California held its annual Friendship Luncheon--a gathering of business and community leaders, local government, and those interested in furthering their understanding of Korea. I was happy to serve a this year's keynote speaker before the audience of Koreans and Americans. My intent was to provide insights into Korean culture though an understanding of Korea's long and rich history. The focus of my talk was on the importance of human relationships in interacting with Koreans. A high point in the luncheon was a presentation by a member of the Garden Grove government and a local Rotary who discussed her experiences on a recent visit to the city's sister city Anyang, South Korea. Garden Grove is located in Southern California, south of Los Angeles--near Disneyland. Garden Grove is home the the world famous Crystal Cathedral. Anyang, South Korea is located near Seoul.

GS Group announced that it will aim for $2 billion in net profit by 2010. This goal would position CG as one of Korea's top-five industrial groups--a highly coveted ranking. In July 2004, the GS Group separated from LG Group to establish GS Corp, its holding company, and focused on its core divisions of energy and retail. This amiable split divided assets of the LG group between the Koo and Huh families. The Huh family now controlling the CS group. GS is currently ranked as the country's seventh-largest industrial group. Samsung ranks first. CG hopes to emerge as the one of the top five by 2010, officials said yesterday, based on its strong growth potential and commitment to change. The group also aims to turn main affiliates such as energy concern GS Caltex Corp. and GS Retail Co. into leading companies in the respective markets.. CG's retail arm runs 86 large supermarkets and 14 mid-size discount outlets along with convenience stores and department stores nationwide.