Thoughts on Korean Business by Don Southerton

Following yesterday's blog regarding Hyundai-Kia expansion plans... South Korea's Hyundai Motor plans to build a 1 billion euro ($1.2 billion) car plant in the Czech Republic to meet rising demand for its compact cars in Europe. Hyundai Motor's Chairman Chung Mong Koo, who met with Czech Prime Minister Jiri Paroubek (following his trip to Slovakia), is considering three sites for the plant in Ostrava, the third-largest Czech city. Hyundai Motor, which sells three out of every four cars overseas, is expanding in Europe after its sales in the region rose 12 percent this year on demand for Getz and Atoz models. The Ostrava factory, which follows rival Toyota Motor Corp.'s decision to begin production in the country, will add to output from Hyundai's new plants in the U.S., China and India.

The Hyundai Kia Motor Group has no intention of slowing its international expansion and is working to complete an overseas plant in Slovakia after completing a car plant in the southern U.S. Korea'’s largest automobile group announced it is also looking to build a plant for small Hyundai cars in the Czech Republic and considering a plant for Kia Motors sports utility vehicles and pick-up trucks in Mississippi. Experts estimate that the group will need 1.2 billion euros for the Eastern European plant and $1.2 billion for the U.S. factory. The group spent $1.1 billion on building the plant with an annual production capacity of 150,000 units in Alabama and started producing its new Sonatas there in May. Its affiliate Kia Motor is building a plant with an annual production capacity of 300,000 units in Zilina, Slovakia. Slated for completion late next year, it costs 1.1 billion euros. A Hyundai Kia Group spokesman said, We are accelerating the construction of overseas plants because sa...

In a recent Korea Herald interview GM Korea Head Nick Reilly describes the his tenure in Korea. The past four years were a highly transitional period for the Korean auto industry. Strong exports drove domestic carmakers up from the aftermath of the 1997-1998 Asian financial crisis under new ownership. GM Daewoo Auto & Technology Co. chief executive Nick Reilly, who has led the recovery of the nation's No.3 automaker since late 2001, recalls four years ago as complete turmoil. After the acquisition in 2002, GM Daewoo has gone through three phases. The first was to calm it down from the turmoil. Employee moral was very low and sales were going down. So we had to steady the ship a little bit, Reilly notes The second phase for GM Daewoo was to get their first real growth. GM Daewoo has been successful in this as well as their exports grew from 127,000 units in 2002 to 800,000 units last year. The company expects its export volume to reach a million cars this year. We have just ent...

I'm always intrigued by the importance of appearance in Korean society. Korean papers and magazine abound with articles and ads to better one's looks. I see this as usually a good thing...except when taken to extremes. Chosun Ilbo notes.. Korean women are among the most insecure about their looks in Asia and thus the most open to plastic surgery, a survey suggests. The poll of 2,100 women across Asia by Unilever showed only 33 percent of Korean respondents satisfied with their appearance, the second lowest among nine countries surveyed following Japan. Of Korean respondents, 43 percent said they were overweight. More than half or 53 percent of Korean women answered they considered having plastic surgery, the highest among surveyed countries. The cosmetic surgery rate of Korean women is already the world's highest with 17 percent. A staggering 80 percent of plastic surgery patients said they were dissatisfied with the results. About 42 percent of respondents appeared to put ...

I thought this article in the Korea Herald does a good job of describing two of Seoul's major districts--Kangnam and Kangbuk. South of the Han River and North of the Han River. Investment in Kangnam has been unfair by many, as noted in the article. This drive to earn money with property began in the early 1970s to 1980s when the government transformed the rice paddies and dry fields of Kangnam into residential areas, strategically building apartment complexes and giving priority to government officials to buy the units at a premium price. The Kangnam area was the first in Seoul to be developed as a modern residential district. In 40 years, the land in Kangnam has soared 160,000 times from the original price. In 1978, the government gave 220 high-ranking government officials and socially prominent people priority in buying units of the Hyundai Apartments in Apgujeong-dong, which enabled them to each collect a premium of around 40 to 50 million won. People who bought land in Kangnam...

According to Chosun Ilbo, Sony has launched an all-out campaign to overtake Samsung Electronics in the North American market with sales promotions, new products and ad campaigns. The Japanese electronics maker believes it failed to ward off Samsung’s brisk sales growth over the past decade. To combat the assult, Samsung Electronics' North American headquarters has been working overtime and on weekends to counter the Japanese offensive. Sony believes its biggest disadvantage compared to Samsung was in the TV market.

An insightful Dong A Ilbo article notes... The Hyundai-Kia Automotive Group makes regular executive changes in the beginning or at the end of each year. For vice presidents and higher-level executives, however, these regular personnel shifts do not have any significant meaning. This year alone, the company'?s chairman, Chung Mong-koo, made 10 times of promotional or transfer decisions on each affiliate??s senior executives higher than vice president, including the latest personnel moves. Such frequent executive changes are rare among other large conglomerates. Not only the timing, but also the details of the executive shifts are quite a surprise. For Yoon Yeo-chul, the former manager of the Hyundai Motors plant at Ulsan, who was promoted to president in the latest shift, it took 24 years to obtain a seat on the board of directors in 2003 after joining the company in 1979. In less than a year, however, he was appointed as managing director, and after three months, he became the exec...

Top Ten , originally uploaded by dsoutherton . The total value of shares held by Hyundai Automotive Group chairman Chung Mong-koo is the highest among owners of the country’s top 10 largest conglomerates, surpassing that of Samsung Group chairman Lee Kun-hee.

YI Hyundai-Kia Automotive Group is likely to speed up the transfer of power from chairman Chung Mong-koo to his only son, Chung Eui-sun, following TuesdayÂ?s management shakeup that showed old stalwarts the door. In the surprise change of powers, the carmaker dismissed Park Jeong-in as CEO and chairman of Hyundai Mobis, a Hyundai Motor affiliate that holds the largest stake of 14.59 percent at the carmaker. The company said Park will continue to be part of important corporate decisions as an advisor. The chairman has brought in new and younger faces to top management to draw up the future course of the largest automaker in South Korea. On another level, Korean corporations are extremely hierarchical and seniority based. That mean that for promotions eventaully those at the top need to retire or step down, for the next level to move upwards. Hyundai Mobis president Han Kyu-hwan, 55, was promoted to vice chairman and Chung Suk-soo, 52, president of Hyundai Powertech, an automatic tran...

A recent study in Chosun Ilbo notes that over the past years the income of Koreans in the U.S. was higher than in Korea. For example, the per-capita gross national income of Korean Americans in 1999 was 3.3 times higher than that of Koreans in their own country. Kim Tae-gi, an economist at Chonnam National University, calculated the Korean-American economy based on various data including a 2000 U.S. census in an article for the Journal of Regional Development and Research. According to the research, per capita GNI of Korean Americans in 1999 was $28,095, more than three times the figure for Korea. Koreans in San Francisco had the highest per-capita income with $38,258, 4.49 times more than their stay-at-home brethren. The per-capita GNI in Los Angeles was below the U.S. average with $27,536. Seattle was the city where Koreans earned the least money. Unrelated to the study, Korean Americans are among the most entrepreneurial of all groups in the U.S.--in fact 1/3 own their own small bus...

After rounds of talks, often cloaked in frustration and impasses, a joint statement of principles was announced by delegations from both Koreas, the United States, China, Japan and Russia. Essentially, North Korea has agreed to give up all its nuclear weapons and programs and rejoin the Non Proliferation Treaty in return for normal diplomatic ties with Washington, energy products, and other assistance from key participants. The participants in the six-party talks agreed to respect North Korea'?s right to use nuclear energy peacefully and to discuss the provision of light-water reactors at an appropriate time. How the provisions of the new agreement will be crafted and unfold will be interesting--the Devil being in the details...

One of the norms of Korean corporate life was long term employment at a firm. Unlike Japan where the guarantee of life time employment was a norm, Korean accept that companies often need to downsize and let workers go. Nevertheless, Korean hope and seek long term employment. This does appear to be changing...according to Chosun Ibo, Salaried peopleÂ’s concept of their jobs is changing. Many recognize they are not guaranteed life-long employment anymore. Rather than the traditional survival strategy to climb the promotion ladder through internal competition in one company, salaried people are more and more embracing "career management technology" to build up professional experiences in various companies and to receive higher annual salaries. Online job portal Joblink'’s survey of 1,089 salaried people shows that 67.2 percent of respondents are willing to move to another job. Of the potential job switchers, 28.9 percent cited undeserved performance evaluations and underpay...

I'm often quizzed about the changing role of women in Korean business and society. I thought this article in Korea Herald reflects modern changes in Korean society...a silent revolution. The Chuseok holiday, Sept. 17-19, is a precious time of year for sharing and giving thanks to ancestors for the year's harvest although for many married Korean women, it has traditionally been a time of domestic suffering. Chuseok, like other traditional holidays, has long been a source of pain to married women, since they have to spend the entire holiday preparing Charye-sang, a feast set to honor ancestors, while their husbands spend the day idling, leaving all the work to their wives. But society is slowly changing. Young Korean wives mostly in their late 20s and early 30s who are not as submissive as previous generations of married women are pursuing a "silent revolution" in their families. These women are better educated and career-oriented which has lead to a shift in the unders...

With the upcoming Chuseok holidays, millions of Koreans will brave massive traffic jams to return to their hometowns, where they meet with old friends and take part in traditional ceremonies. Those who stay in Seoul can still enjoy the holiday. With shops that close early or don't even open at all, some Korean may feel that there is almost nothing to do over the Chuseok holidays except l watch boring reruns of old Chuseok movies. But, Korea Herald notes a number of activities, including... A concert is planned to celebrate the opening of the second annual Gukak Festival, an event organized by the Korean Culture and Arts Foundation, Kayageum master Hwang Byung-ki, a female Kayageum ensemble Yeoul and a fusion band Vinalogue will perform together with acid jazz trio Clazziquai. A Kayageum is a traditional Korean 12-stringed instrument. Together, they bring a traditional spin to well-known Western music, from Led Zeppelin's "Stairway to Heaven" to F. Schubert's ...

In a report recently released by the International Finance Corporation (IFC), South Korea ranked among low other nations in its prception as a haven for global business. The IFC is the private sector arm of the World Bank Group. South Korea’s labor flexibility stood at the bottom of the world’s ranking as local companies face difficulties in hiring and firing workers due largely to the country’s strong labor unions. It ranked 105th among 155 countries in conditions for the hiring and firing of workers, reflecting its rigid labor market, according to Among the 10 subcategories, South Korea placed 13th for the convenience in closing businesses and 16th in ease of trading across borders. It posted 25th in both dealing with business licenses and access with regard to credit. Cumulatively,to many these conditions form a invsibile barrior for foreigners to operate businesses in Korea. Nevertheless, the Korean government is agressively working to improve ability to do business in South Korea...

One of the keystones of Korean Confucianism was education. As in Korea's past, today education ranks as a high priority. In a recent Chosun elbow article its notes: Korean parents spend more than any others on public and private education, with public education expenditure on average four times that of other OCT member nations. The report titled ?Education at a Glance 2005 is based on data from the 30 OCT member countries and 19 non-members. It found that Korea spends 7.1 percent of its gross domestic product (SDTV) on public education. That is more than the top spenders France (6.1 percent), the U (5.9 percent), Germany (5.3 percent) and Japan (4.7 percent).

South Korea-based GM Daewoo will acquire the main plant of the former Daewoo Motor firm on Sept. 30 in a move to boost its capacity. The Pupyung plant, located in Inchon, west of Seoul, had been left out of the 2002 deal in which General Motors Corp. and partners took a majority stake in some of the assets of bankrupt Daewoo Motor. Since the takeover the Pupyung plant has operating separately as Daewoo Incheon Motor Co. Ltd. GM Daewoo had previously announced it would acquire the plant when a number of conditions -- including reducing labor strife -- were met. The acquisition is seen as part of GM Daewoo's efforts to broaden its product line into sedans and sport utility vehicles to compete with its bigger rivals Hyundai Motor and Kia Motors.

Hyundai Motor Manufacturing Alabama (HMMA) is donating $1 million to the Alabama Governor's Emergency Relief Fund. HMMA president Joo Soo Ahn presented the check to Governor Bob Riley. The money will be used to help Alabama disaster victims.

Apple Computer launched its ultra-lightweight i-Pod nano flash memory player recently. The U.S. company holds 50 percent of the global market share with its iPod series. The i-Pod nano can store up to 1,000 songs or 4 GB, the biggest storage capacity yet for a flash memory player. The new players cost $249 for the 4 GB version and $199 for 2 GB. Thus is about half the price of existing products. Apple president Steven Jobs said the i-Pod nano was the most groundbreaking player since the iPod was launched. Some experts say the iPod nano owes its low price to Samsung Electronics, the maker of its flash memory.. Memory chips affect more than 50 percent of MP3 players' prices. Some speculate that Apple bought the flash memory chips at a 50 percent discount from Samsung.

Like any large manufacturer the Hyundai-Kia Auto Group works to insure efficient flow of product from their suppliers. One solution is to acquire key suppliers. Hyundai-Kia Automotive Group chairman Chung Mong-koo announced that the is interested in taking over Mando, a major Korean automobile parts maker, Financial Times reported. It is the first time that the carmaker has expressed interest in the deal over Mando. The price tag is thought to be around $2 billion. Sunsage, a joint investment firm between JP Morgan Partners and Affinity Capital, owns a 73.11 percent stake in Mando, and wants to complete its sale by the end of this year.. Why take over Mando? With Hyundai, which controls about 70 percent of the Korean market along with its affiliate Kia Motors, in the bidding, the competition is expected to heat up over the parts maker, which is heavily dependent on the automaker for its revenue. Hyundai and Kia account for about 70 percent of Mando's sales. Hyundai officials said ...

As the summer of 2005 draws to a close, I’d like to share some thoughts. First, one of Korea’s major holidays Chuesok, the lunar-based Fall Harvest festival, will be celebrated on September 18 (which is actually August 15 on the lunar-based Asian calendar). Chuseok is celebrated for a total of three days, the day before and after the actual holiday (Sep. 17-19). Most Korean businesses are closed during this important holiday period. That means Koreans will take off from work next Friday and return to work on the following Tuesday. (For the U.S. that corresponds with the time zone difference to Korean being out of the office on Thursday September 15 (our time) and returning on Monday September 19, 2005. (Updates and details surrounding the holiday such as its traditions will be emailed in the next few days.) BTW, I happy to say I’ve just completed my second book. In fact, it is currently at the publisher and is due to be released in mid-late October ‘05. The book is the first publica...

South Korea's Hyundai Motor expects to sell 15,000 new Sonatas a year in Japan. The new Sonata will hit the Japanese market on Sept. 10. Hyundai captures less than 1 percent of the Japanese market. The price of the Sonata ranges from 2.1 million yen to 2.68 million yen. Hyundai has enlisted the endorsement of one of Japan'?s favorite Korean stars, Bae Yong-joon, to promote the car. The actor is the star of the highly popular TV drama Winter Sonata. Hyundai sold 418,615 cars in the U.S. in 2004 up 4.6 percent, and 2,524 in Japan, far short of its goal of 5,000.

Strike talks continue... Hyundai Motor Co. and its unions made some progress in wage talks on Monday, but the union said it would continue strike actions.. Unionised workers at Hyundai, South Korea's top auto maker, have stopped work for several hours each day since August 25, causing millions in lost production Hyundai Motor has estimated. Its affiliate Kia Motors Corp., the country's No. 2 carmaker, also has suffered similar stoppages since August 29 and seen an estimated $257.1 million in losses. Some good news... Hyundai's 42,500-strong union said in its Web site it had reached agreement with the company on Monday on terms of medical and other benefits but remained at odds over key issues. Union officials noted "We have discussed other unsettled issues, but the talks ended after arguments due to differences." Hyundai expressed hope that the two sides could reach a deal. ""I think we've made some progress and are heading to a full agreement,"...

Who are the highest wage earners in Korea? According to a Korea Times article its senior executives of Korea's dae ki-eop (big business). In fact, these senior entrepreneurs are the largest income earners in Korea far ahead of lawyers, pilots and doctors. A study conducted by South Korea's Central Employment Information Office (CEIO) notes the average monthly income of executives at companies with 300 employees or more was about $7000 per month, more than four times the average monthly income of all Korean job holders. Managers at financial companies and owners of small- and mid-sized companies received an average $5000 per month, grabbing second place. The study was conducted between September and December 2004, based on interviews with 50,000 households across the nation.

As America enters a long Labor Day weekend, a recent Chosun Ilbo article offers insights into issues impacting the Korean workplace and labor force. The article call them Deadly Sins indicative of the seven types of bad workers. The insights were released by the LG Economic Research Institute. (Most of the big Korean firms have similar think tanks). According to the Korean LG study they are: 1. Employees who are always grumble about any innovation in the company and habitually criticize colleagues and superiors. 2. Workers who are not loyal to their current job and always look for better opportunities and positions. 3. Workers who don't take care of coworkers or consider other people’s feelings, making competent colleagues leave the company. 4. Employees who avoid conflict and risk at any cost. 5. Workers who manage the organization inefficiently without a clear purpose, inflicting damage on the company. 6. Those who steal the achievements of colleagues or subordinates. 7. Staff...

Koreans look to the large Korean corporates for the nation's top jobs. Chosun Ilbo reports that Korea’s big corporations will hire some 20,000 new workers in the second half of the 2005., The Samsung Group’s 27 subsidiaries will hire 5,000 new staff in the second half of the year, with special consideration given to the people with disabilities. Samsung will hire a total of 8,300 new people this year including 3,300 in the first half, up 300 from last year. Flagship companies Samsung Electronics and Samsung SDS will employ 2,500 and 450. In Korea, applicants apply online only at Samsung’s recruit homepage (www.dearsamsung.co.kr). The group plans to fill 80 percent of vacancies with science and engineering graduates. It will expand the proportion of female employees to over 30 percent. Other hirings include SK Telecom 140-150, Woori Bank some 100, Kookmin Bank 120, Lotte Mart 100-200, CJ Home Shopping 100, POSCO Engineering and Construction 100, Kumgang Korea Chemical 100 and the ...