Thoughts on Korean Business by Don Southerton

What continues to impress me is Korea's leadership in the development of new techology, especially in the cell phone sector. South Korean-based LG Electronics announced it has developed the world'’s first satellite digital multimedia broadcasting (DMB) phones using wideband code division multiple access (WCDMA) technology. LG notes the new DMB phones support Europe'’s global system for mobile communications (GSM) and general packet radio service (GPRS) as well as WCDMA. The slide-type phones have 2.2-inch liquid crystal display (LCD) screens and are designed to save power, enabling users to watch DMB for maximum three hours. An added feature is that the DMB aerial is embedded in the earphones. Some 100 researchers spent a year developing the phone,

A recent Korea Herald article posted the results of survey. In the survey Korean college students rated Coca-Cola as their favorite brand. Samsung Group and its chairman Lee Kun-hee as the most favored firm and businessman. The survey of 603 undergraduates conducted by online employment service provider Powerjob showed that 45 percent of the respondents chose Samsung as the company they most preferred to work at. Global steel giant POSCO ranked second with 15.6 percent, followed by SK Group with 10.3 percent. Hyundai and CJ ranked fourth and fifth with around 7 percent of the respondents. Samsung Group Chairman Lee Kun-hee was voted the most respected CEO with 37 percent of the voters' support, while his nephew, CJ Group Chairman Lee Jae-hyun, ranked second with 15.4 percent. Coca-Cola ranked as the favorite brand with 36.2 percent, while Microsoft Corp. ranked second with 23.4 percent and Samsung third with 20.6 percent.

Chosun Ilbo newspaper recently had an article on: Why are American film stars into Korean women? To many, Korean women have great appeal. The article notes that the appeal of Korean women to American men includes, "“Korean women are submissive and kind. They are known to make breakfast, lunch and dinner for their husbands, help their husbands well, and raise children well." Moreover, there are also those who feel that in the eyes of Western men, East Asian women possess a sort of mysteriousness about them. For example, an American living in Korea, said, "Even Korean women who are not though of as pretty by Korean men can give a sense of mystery to Western men." Another Anglo noted, “Korean women are gentle, feminine and quiet. I think Korean women are the prettiest of all East Asian women."” The newspaper article pointed out that western men also seem to find the purity and conservativeness of Korean women attractive. A U.S. soldier in Korea said, "“Amer...

Following last week's move by Hyundai Motors to strike, unionized workers of Kia Motors also plan to go on a strike demanding a wage hike and better working conditions. According to Kia Motors, the planned five-day strike will cause about an estimated $100 million in losses. The decision to strike comes as Kia union leaders have been under fire for taking kickbacks from jobseekers in return for employment. Korea's second largest carmaker said that the scheduled walkout is likely to bring about a massive production and delivery disruption. A large disruption is expected during the scheduled 48 hours of strike for five days as the company is unable to meet orders of 54,000 automobiles from abroad, including about 10,000 for North America and 21,000 for Europe.

Hyundai Asan Corporation, the longtime major promoter of tourism ventures to North Korea completed its first trial tour to Kaeseong in North Korea. Kaeseong is located 10 kilometers north of the Demilitarized Zone. It was a city once part of the South prior to the cease-fire truce signed in 1953 after the Korean War, but now is the North Korean city situated closest to the border between the South and North. A few people connected to the Kaeseong Industrial Complex project have visited Kaeseong. But it is the first time that South Koreans have been on a sightseeing tour to the city, the one-time capital of Koryeo Dynasty that lasted from 918 to 1392. The one-day excursion involved 500 tourists, nearly half of whom were born in Kaeseong. Hyundai Group chairwoman Hyun Jeong-eun, Hyundai Asan Corporation chairman Yoon Man Jun, Korea National Tourism Organization president Kim Jong-min and 70 journalists also participated in yesterday's tour. Tourists gathered at Kyoungbok Palace in do...

Like expected, the labor union at South Korea's second-biggest carmaker, Kia Motors announced its members would stop work for up to six hours a day next week to protest for higher pay and better work conditions. The move came after nearly 75 percent of its 27,100 members voted in favor of a strike. This comes as no surprise since the union at its affiliate Hyundai Motor has been on strike for several days. Kia's union is demanding an 8.4 percent increase in basic monthly pay and a performance-based bonus equivalent to at least three months of pay for 2005, The union also has made demands over management issues.

Korea has emerged as the prime test bed for new wireless communication technologies. Chosun Ilbo notes that if U.S. consumers are now able to surf the Internet with their Sony Playstation Portable games console, it is because the Japanese electronics maker Sony developed the new functions based on tests in Korea. For example, Sony Computer Entertainment Korea first offered a movie and music online service on the Playstation through wireless LAN in cooperation with Korea's KT in May. It was the first practically service model and was used by some 100,000 Korean customers. Encouraged by those results, Sony developed the online service for the global market. This service allows users to download files, surf the Internet, or send e-mails with their games console. Why Korea? What attracts developers is the country'’s significance as a global IT power. As of this May, the number of hot spots -- places with a wireless Internet connection -- numbered about 16,000 sites in Korea; this a...

South Korean media reports that Hyundai Motor Company unions will stage strikes in the wake of stalled talks... Since its establishment in 1987, the Hyundai union in Korea has staged strikes lasting a total of 286 days, and unionized Hyundai workers have gone on strike every year since 1995. Hyundai Motor estimates its losses due to the strikes at $8 billion. The labor union of Kia Motors said it will vote Friday on whether to strike. Highlights of Korean media note: Unionized workers of Hyundai Motor Co., Korea's largest automaker, plan to go on strike today after failed talks with management over pay and working conditions. The union of Hyundai Motor said on Wednesday it will stage a four-hour walkout Thursday, two hours in the morning and two hours in the evening. The union added that it will walk out for six hours tomorrow to join the rally by the Korean Metal Workers Federation, in which the union takes the majority, and leave work again next Tuesday for the national laborers’...

To many westerners visiting South Korea for the first time, they might be surprised at the popularity of American-based food and beverage. One of the recent successes is Outback Steakhouse. The chain's Chief Operation Officer Paul Avery recently visited Korea as it opened its 67th store--only eight and a half years after starting up business. Why is Outback so successful in South Korea? Entrepreneurialism... Avery notes that the firm's business model to divide responsibility and profit has worked well in Korea. Outback Korea is the most profitable among the family restaurant company's overseas branches, accounting for 50 percent of the profits earned by overseas branches in 21 countries, with 67 out of 145 stores worldwide. Avery points out that Outback system of sharing profits is key. At Outback Korea and in the U.S., managers need to initially invest in the business to be eligible to share in the restaurant's profit. Thanks to the system, Outback Korea has succeeded...

I'm often asked about the role of women in Korean business. My answer is that in some business sectors women have made great strides. Overall, however, Korean women have not made much progress gaining leadership positions. One exception is daughters of the family-run conglomorates. This article in Korea Times cites this change... The place for women in tradition-bound chaebol families used to be at home, supporting chief executive fathers or brothers from the sidelines or waiting to be married to sons of other chaebol families. Not any more, at least from the standpoint of a growing number of women in chaebol, who are not satisfied with this stereotype and putting themselves at the front line of management. "Their image has shifted to one of capable business women," a business source commented. "They are second and third generation daughters of chaebol families who are well educated and ready to put what they learned into practice." One of them is Chang Seon-yo...

Over the years a number of my friends and acquaintances have taught English language classes in Korea. A few have told me that recently they have seen an influx of less qualified teachers... This article in Chosun Ilbo then is no surprise... The Foreign Affairs Division of the Busan Metropolitan Police Agency arrested two Americans and booked 37 foreign language instructors for fabricating their educational backgrounds or working in Korea as foreign language teachers without proper visas. In addition, 50 owners of foreign language institutes, including a 37 year-old identified by his family name of Lee, and 27 brokers were also booked. According to police, the arrested Americans obtained forged diplomas and transcripts through brokers and Internet sites, came to Korea and worked as native English instructors in three to four institutes. Both are high school graduates. One had a bogus bachelor and master's degree from a well-known state university in the United States, and worked a...

Chosun Ilbo notes a change in Korean business--going Dutch on the bill. One aspect of Korean business is that the host always picks up the food bill or bar tab. In fact, some Koreans feel American businessmen are rude or impolite by going 'Dutch' or buying drinks separately at the bar. In an interesting news article on changing Korean business norms it cites that firms such as Hyundai-Kia Motor Group have distributed detailed ethics guidelines to staff. The memo include such maxims as, "Live only on your salary," "Don't" cultivate a taste for luxurious restaurants or bars," and "Go Dutch even on meals with close colleagues." How that will impact the workplace, one has to wait and see. My guess is it will take some time. My advice is to continue to pick up the bill if you offer to take a Korean guest or colleague out to eat or for a drink.

When the Hyundai Group split into a number of separate divisions in 2000-2001 many of its subsidiaries were suffering from the ills of the 1997 Korean fiscal meltdown era--high debt and huge losses. Some divisions like the Hyundai Automotive Group recovered quickly, and wisely a number of the Hyundai Group firms were spun-off. Hyundai Electronics was one of the firms bleeding cash and after its spin-off and merger with LG Semiconductor was renamed Hynix. For a number of years Hynix Semiconductor became the byword for a failed company, posting a deficit of over $5 billion in 2001 alone. But now, the chipmaker has rejoined the ranks of healthy companies by earning over $1 billion last year... and even more impressive revenues in the first half of this year. In contrast, Micron Technology, which once attempted a Hynix takeover, posted a deficit of $130 million in last quarter and was recently robbed of its No. 2 spot in the global DRAM market by the Korean company. How did Hynix return f...

August tends to be the month Korean unions make new contract demands. A federation of labor unions representing hundreds of thousands of metal workers, including those at the nation's top auto makers Hyundai and Kia, has called for a one-day nationwide strike against the government's policies on irregular workers. Korea Times notes that about 110,000 union members - 100,000 with permanent employment status and the rest irregular workers - will respond to the call, staying away from their job for six hours from 10 a.m. on Aug. 26, leaders of the Korea Metal Workers' Federation insisted. The federation has over 80 workplaces and 140,000 workers under its wing. The planned stoppage will affect nation's manufacturing industries, especially the auto manufacturers. I think it is interesting that KMWF officials cite their action as the first "political" strike. Political strikes, in which workers protest the government, not their employers, over policies related to ...

I'm always curious of Hyundai-Kia Automotive Group subsidiaries, most of which directly support car production, parts, finance, and distribution. Hyundai-Kia differs from most Korean conglomerates, like Samsung and SK, since they tend to concentrate on a few core businesses. But there are a few exceptions, in fact their ownership extends well past the 28 subsidiaries commonly cited as Hyundai-Kia Group firms. One report has the Hyundai-Kia involved in over 100 companies. This would also greatly add to the worth of the Chung Mong Koo and his family. Some examples of unrelated Hyundai-Kia businesses. One example, is Corentec, a medical venture company that produces a wide range of scientific instruments, such as artificial joints and spinal systems. Family ties are the reason why this bio venture ended as part of the group. Sun Doo-hoon, a son-in-law of Hyundai-Kia chairman Chung Mong-koo, bought shares as part of an investment and turned it into a Hyundai subsidiary. Hyundai also...

South Korea's jobless rate was 3.7 percent in July. This is up slightly from 3.6 percent in June and 3.5 percent in May, According to the South Korean National Statistical Office's July Employment Trends, the number of employed in July totaled 23.2 million. This is 690,000 jobs over December 2004 . One interesting dimension of the Korean job market appears to be generational. For example, the 60s age group took up 50.4 percent, or 348,000 of the new job total. The 50s group took up 242,000, or 35.1 percent. That means of the total of new job vacancies, 85.5 percent, or 590,000, were filled by those aged 50 and above. Reflecting Korea's rapidly growing aging population, the government report highlighted that the number of working people in their 30s dropped by 31,000. The 40s age group totaled 77,000, or 11.2 percent. An NSO official said the declining employment figure for those in their 30s could be explained by many of them seeking extra training or furthering their studi...

Amid a week of speculation, the announcement that Kia Motors is actively engaged in site selection for an automotive plant in U.S. South drew commentary in Korea by its auto industry watchers. Here are some of the key points raised in Korean media... Korea Herald has reported that although there is enough room for another factory next to Hyundai's plant in Montgomery, Alabama, Korean industry watchers say the possibility of building Kia's factory there is very low. This is simply because having two or more factories in a single state could expose the carmaker to various risks in terms of taxation as U.S. states have different legal systems. For example, Japanese Toyota Motor Corp. runs separate production facilities in Kentucky, Indiana and West Virginia. "In order to make use of HMMA's auto parts supply channel and logistics network, it would be better for Kia to operate a factory in a nearby state," said Mirae Asset Securities Co. analyst Park Young-ho. Mississi...

I thought this was an interesting article in Korea Times... An increasing number of [Korean]conglomerates are bringing public relations officials to the fore of management amid the growing importance of communications activities. Doosan Group promoted Kim Jin, vice president of the groupÂ’s PR team, to president of Doosan Bears, the conglomerate's professional baseball team, only two years after he became a vice president. He will concurrently serve as the president of the PR team. Kim entered the group in 1978 and has worked in the communication division since 1984. Given a vice president or those of lower positions has traditionally headed the PR team, his appointment as president is quite surprising, Doosan officials said. Daewoo Electronics also promoted Lee Seung-chang, a director of its PR team, to president. From 1993 to 1995, Lee worked at the planning and coordination bureau of the now-defunct Daewoo Group, then second largest South Korean conglomerate, and worked for then...

Kang Chul-kyu, the head of South Korea's Fair Trade Commission warns that Korean conglomerates may fall prey to hostile takeovers due to their obsession for managerial control. Speaking on a South Korean radio show, Kang pointed out that by taking up more stakes in affiliates to defend their ownership, conglomerates are exposing themselves to a growing risk of merger and acquisitions by foreign parties. Korea Herald notes Kang's statement "Their {the heads of the conglomerates] efforts to protect managerial control work against them because the larger the stakes in their affiliates, the larger the risk of a collective failure." In turn, this risk might render the conglomerates vulnerable to hostile takeovers. Interestingly, most South Korean conglomerates choose to take this risk, as shown in the owner families that gain managerial control via their stakes in affiliates that in turn hold shares in the most powerful subsidiaries.

Korea Times reports that Sunsage, a joint investment firm between JP Morgan Partners and Affinity Capital, is likely to select preferred bidders this month for negotiation for the sale of Mando Corp., Mando officials said Wednesday. Sunsage owns a 73.11 percent stake in the second largest automobile parts maker in South Korea. Mando president Oh Sang-soo said the U.S.Â’ TRW Automotive and GermanyÂ’s Continental Teves and Siemens have shown interest in the takeover. KoreaÂ’s largest automaker, Hyundai Motor, has been rumored to be joining the race, but it remains unclear whether or not it has contacted Sunsage. ``Mando is an attractive acquisition target and of course we have an interest in the race,Â’Â’ a Hyundai Motor official said, without confirming whether or not Hyundai has decided to bid. In June, Park Jeong-in, chairman of Hyundai Mobis, South KoreaÂ’s largest parts maker affiliated with Hyundai Motor, said he may want to purchase Mando. The chairman, however, denied a speculati...

A select few of South Korea's big business groups have for decades dominated that nation's economy. But never has one group commanded such a share... A report released by South Korea's Financial Supervisory Service found that Korea's largest conglomerate accounted for over 50 percent of the top-five domestic conglomerates' assets and profits. Total assets for the Samsung Group reached $198 billion in 2004, taking up 51.3 percent of the combined total assets of the top five business groups. These include Hyundai Motor Group, LG Group, SK Group and Hanwha Group. In addition, a recent report by the Korea Stock Exchange and the Korea Listed Companies Association showed that the Samsung Group also accounted for 24 percent of all the listed companies' total net profits last year.

South Korean-based Samsung Group's public criticism has surged as reports of graft continue to surface. These reports center on Samsung's leaderships involvement in yet another round of political bribery and influence-buying of government officials...this time in 1997! Government prosecutors will summon Lee Hak-soo, vice chairman of Samsung Group's corporate restructuring office. Lee is known as chairman Lee Kun-hee's right hand man. This latest round of controversy was triggered by a report on conversations between Lee Hak-soo and Hong Seok-hyun, former publisher of the JoongAng Ilbo. The controversial conversationss were taped by Korean secret agents. The two allegedly discussed ways of funding a conservative candidate in the 1997 presidential elections. After the recent revelation, Hong, a brother-in-law of the Samsung chairman, recently resigned from his post as U.S. ambassador. What stands out is not that Korean big business has been accused of but another instanc...

South Korea's LG Electronics has started to change around 5,000 outdoor ads as a part of its efforts to promote "premium LG" brand in 150 countries worldwide. Changing the existing outdoor ads will be completed in 2006. An article in the Korea Herald noted that last year the electronics company set up a "brand communication guideline" to better compete in the world. And this year, the company differentiates its advertising strategies: a global company with cutting edge IT products abroad while enhancing its brand recognition as "premium LG" at home. The new LG Electronics ads will focus on two groups of products: plasma display panels and mobile handsets. LGE said products, humans and lifestyle will be the three major components of its ads design, to make consumers recall "Life's Good," the company's slogan embraced last year for promotion in overseas markets.

South Korea'’s LG Group chairman Koo Bon-moo is taking bold action. Responding to a dip in group profits, the chairman will push for the new cash-generating businesses. Korea Times reported that to improve its bottom line for the remainder of the year, the head of Korea's third largest conglomerate held a series of strategy meetings with the top executives of LG subsidiaries. WHY? First, at LG there has been a sense of urgency to seek out the next big thing following the offshoot of GS last year. "A concern over a lack of new cash cows started because GS took away the existing cash cows, such as its oil refinery and retail businesses,"” a Korean market analyst notes. GS Group is now an independent business giant with 13 subsidiaries, including GS Caltex Oil, GS Mart, GS Home Shopping and GS Engineering & Construction. Second, LG'’s flagship businesses in electronics and chemicals face a battle against rising global competition. In particular, the cell-phone bu...