Thoughts on Korean Business by Don Southerton

I'm in Seoul for a week and stopped by the Chogye-sa temple. Here's why...the normally scerene temple was full of commotion. Korea Times Rev. Ji Kwan became the 32nd top administrator of the nation’s biggest Buddhist order Monday, winning a majority 165 votes out of the order’s 320 representatives. According to the Chogye Order of Korea Buddhism, the 72-year-old Buddhist monk won over Rev. Jung Nyun by 19 votes in a ballot held at Chogye-sa Temple in central Seoul. The runner-up won 146 votes. Eight votes were discounted while one vote went to a minor candidate. With the result, Ji Kwan is entitled to lead the order for the next four years, following his predecessor Rev. Bub Jang, who died of heart attack in September. The order’s new executive director of administration was born Dec. 9, 1932 and became a monk at Haein-sa Temple in South Kyongsang Province in 1947. He served as head monk at the temple from 1970 to 1972 and has worked as a professor of Dongguk University. He was...

Korean mobile phones have topped a U.S. consumer satisfaction survey in design, function and durability. The annual J.D. Power and Associates survey announced Thursday saw LG Electronics come first overall and Samsung Electronics third. The study measured the satisfaction of some 17,000 customers who owned their handset for more than two years in five categories: design, operation, features, durability, and battery function. LG Electronics garnered 107 points with top marks for design and battery function while Samsung gained 104 points. The world’s largest and second-largest mobile phone makers Nokia and Motorola lagged behind, gaining only a mediocre 91 and 96 points, below the average mark of 97. Samsung and LG ranked second and third in last year’s survey. An LG Electronics official said, We command the largest share in the U.S. CDMA mobile phone market and our GSM-type phones are also gaining growing popularity. He said the company expects to make strides in the third generation W...

Chosun Ilbo notes... The nation’s biggest carmaker Hyundai Motor performed below par in the first three quarters of the year. But, the firm notes that prospects for the fourth quarter are rosy. Hyundai said it recorded operating profit of S$1.48 billion in January through September. Sales dropped 3.3 percent and operating profit 36 percent from the same period last year. A surge in raw materials prices, slow growth in sales and a strong won have hurt the figures, Hyundai executive Hwang Yoo-no said. The won has been on an upward spiral against the dollar and euro since last year’s fourth quarter. Third-quarter results suffered not because of sluggish sales but because of lagging production, Hwang said, indirectly fingering partial strikes in late August which halted production of the flagship Sonata and Grandeur sedans. But Hwang said fourth-quarter sales would top $8 billion as the Hyundai’s Korean factories were now working to 100 percent capacity.

SK-EarthLink, Inc. has branded itself as HELIO, Inc. The new mobile brand custom built for young, tech-savvy consumers. The company is a $440 million joint venture between SK Telecom (NYSE:SKM),one of the world's most advanced wireless carriers, and EarthLink(Nasdaq:ELNK), the nation's next generation Internet service provider(ISP). According to their press release the name HELIO comes from the Heliocentric view, radical when Copernicus promoted it in the 16th century, held that the sun was at the center of thesolar system. In the same way, HELIO recognizes that for millions ofyoung consumers today, the mobile device is at the center of their lives. HELIO brings together the strengths of its parent companies withextensive market research to deliver the only premium, custom built mobile experience for young, tech-savvy consumers. About HELIO Hello. We're a new mobile brand dedicated to giving young,passionate consumers the type of wireless experience we've beenwaiting f...

Korea Herald Korea's fast-food chains are showing signs of recovery after a three-year slump, industry experts have noted. Fast-food companies have been struggling to improve sales amid criticism that they contribute to obesity. The well-being trend, which has driven consumers towards healthier eating choices, has also compounded the challenges. McDonald's, Lotteria and Burger King said sales have begun to grow this year compared to a year ago. As unlisted companies, the burger chains declined to reveal figures. Sales were dealt the greatest blow in 2004 as the award-winning documentary called Super Size Me hurt the image of McDonald's and the whole fast-food industry, experts said. Sales this year have picked up compared to last year, which was when the Super Size Me documentary brought all the negative publicity to our industry,said Kim Ok-hui, speaking for Lotteria, Korea's leading burger franchise. The burger companies put the recovery down to menu innovation and ag...

The Korean daily, Han Kook Ilbo, has an interesting article on how the Hyundai Motor plant in Alabama will impact the company in Korea. Stock prices of the Hyundai Automotive Group are likely to rise in sync over the next few months on the back of high profitability of a manufacturing plant in Montgomery, Alabama, which went into operation in May 2005. The Alabama plant produces 73 units per hour, boasting higher profitability than that of the domestic plant in Asan (63 units of per hour). Automobile research analysts say the overseas plant will have a significant effect on the market share of the groupÂ’s subsidiaries Hyundai Motor, Kia Motors and Hyundai Mobis in the U.S. market. The expected increase in market share will push up the stock prices of the companies on the Korea Exchange (KRX), they predict. The Alabama plant will see its financial accounts turn to surplus soon by passing the point of profit and loss next year, a Korean Sejong Securities analyst noted. He expected a s...

The Korean daily, Han Kook Ilbo, has an interesting article on the Hyundai Motor plant in Alabama and how its success will impact the company in Korea. Stock prices of the Hyundai Automotive Group are likely to rise in sync over the next few months on the back of high profitability of a manufacturing plant in Montgomery, Alabama, which went into operation in May 2005. The Alabama plant produces 73 units per hour, boasting higher profitability than that of the domestic plant in Asan (63 units of per hour). [I'm told the plant has been averaging about 800 units a day]. Automobile research analysts say the overseas plant will have a significant effect on the market share of the groupÂ’s subsidiaries Hyundai Motor, Kia Motors and Hyundai Mobis in the U.S. market. The expected increase in market share will push up the stock prices of the companies on the Korea Exchange (KRX), they predict. The Alabama plant will see its financial accounts turn to surplus soon by passing the point of...

The Korean daily, Han Kook Ilbo, has an interesting article on how the Hyundai Motor plant in Alabama will impact the company in Korea. Stock prices of the Hyundai Automotive Group are likely to rise in sync over the next few months on the back of high profitability of a manufacturing plant in Montgomery, Alabama, which went into operation in May 2005. The Alabama plant produces 73 units per hour, boasting higher profitability than that of the domestic plant in Asan (63 units of per hour). Automobile research analysts say the overseas plant will have a significant effect on the market share of the groupÂ’s subsidiaries Hyundai Motor, Kia Motors and Hyundai Mobis in the U.S. market. The expected increase in market share will push up the stock prices of the companies on the Korea Exchange (KRX), they predict. The Alabama plant will see its financial accounts turn to surplus soon by passing the point of profit and loss next year, a Korean Sejong Securities analyst noted. He expected a s...

Korean global mobile phone shipments are hitting a record high in the third quarter. Korea's top two mobile phone makers maintained their third and fourth places in terms of worldwide shipments, according to tallies released Friday by IDC. Samsung Electronics’ handset shipments rose 18.1 percent on-year to 26.8 million units in the third quarter, capturing 12.9 percent of the global market share. However, Samsung Electronics’ gap with world’s second-largest manufacturer Motorola widened by another 11.9 million units in the three months. Motorola saw shipments jump a whopping 66 percent in the period. LG Electronics came in fourth, capturing a global market share of 5.7 percent by shipping 15.5 million units, outdoing Sony Ericsson Mobile Communications, a joint venture between Sony of Japan and Ericsson of Sweden which provided 13.8 million units. The world’s largest mobile phone maker Nokia consolidated its lead by shipping 66.6 million units and capturing 32 percent of the global...

Spam, the canned meant considered by some as barely fit for human consumption is seen as a delicacy in Korea, to the bafflement of the LA Times. Spam, made by the U.S. firm Hormel, is produced in Korea by distributors CJ, which bought the rights and started making its own version from 1987. CJ-made Spam is adapted to suit Korean tastes, with less salt than Hormel-made Spam. The luncheon meat might be the subject of satire in the U.S., but in South Korea it is positively classy, the LA daily said Monday. In Korea the processed meat is expensive, costing $44 for a set of 12 cans, so that on the Chuseok holiday alone, eight million cans of Spam change hands. With $136 million in sales, South Korea is the largest market in the world for Spam outside the U.S..

Bloomberg New and New York Times... Long focused on internal development, South Korea is quietly becoming a weighty investor in Asia, with multinationals like Hyundai and Samsung proving to be tenacious matches for Japanese, American and European companies in China and elsewhere in the region. Samsung's 29 plants in China, like this one in Tianjin, operate alongside traditional forms of commerce. South Korea has emerged as perhaps the largest single source of foreign investment in China, making $6.25 billion in fixed investments there last year, according to data from the Chinese Ministry of Commerce. And as investor attention swivels to India, South Korea's largest steel company, Posco, has agreed to make the largest Korean investment in another country, in a $12 billion iron mine and steel mill in the Indian state of Orissa. Though it is overshadowed by the Asian giants China and Japan, South Korea has grown to become the 11th-largest economy in the world. Reflecting the nati...

South Korea's LG Electronics third-quarter operating profit recovered to well above $200 million, defying market expectation as the consumer electronics giant’s four main business divisions all finished in the black, with the handset division newly swinging into profit. Nevertheless, the company lowered its sales target for the year to $23 billion despite the positive 3rd Q result. The robust operating profit is attributable to the strong performance of the handset division, also the biggest contributor to the company's sales.

Korea Times Korean drivers have many complaints about cars produced in the United States and Germany, according to a Korean automobile research company. The Marketing Insight, a research agency, said on that DaimlerChrysler of the U.S. topped the disgraceful list among domestic and foreign cars here. In its survey of 1,347 drivers of foreign and domestic cars, the agency has found that DaimlerChrysler buyers are the most discontent with performance and after-sale service. The U.S. car marked 333 in the index of the stress per hundred vehicles (SPH) calculated by the Marketing Insight, the only carmaker that received a dissatisfaction score surpassing 300. Customers of Chrysler picked a variety of reasons for their complaints, which included frequent breakdowns and higher repair costs. Germany-based Audi ranked second with an index of 255. A number of Audi drivers said that the car manufacturer had failed to repair some defects. About 13 percent of Audi customers responded that they wo...

Korea Times... GM Daewoo Auto and Technology plans to push for business expansion buoyed by its sharp sales increase, while the parent General Motors has faced financial distress. Some in Korea are concerned that the issues confronting GM in the U.S. it will affect that of the Korean subsidiary. GM Daewoo exported 720,620 cars and vehicle kits during the first nine months of 2005. This represented a 29 percent sales growth from the same period of 2004. The Korean subsidiary marked a 263 percent increase in sales over the past three years since GM acquired Daewoo Motor in Oct. 2002. Daewoo GM CEO Nick Reilly has stressed his commitment to aggressive investment during the company's investor relations (IR) sessions in regional cities, including Inchon, Poryong and Kunsan. A GM Daewoo official said it is in a position to make another takeoff. Considering the scheduled takeover of Daewoo Pupyong factory and establishment of a research and development center, I believe the status of GM D...

Korea Times notes that one in five automobile customers in Russia are buying cars produced by Hyundai Motor or Kia Motors. The market share of Hyundai in Russia reached 17.4 percent as of August. Toyota captured 12.3 percent, Uzbek-Daewoo 10.5 percent, Mitsubishi 9.8 percent and Ford 8.7 percent. With Kia Motors, an affiliate of Hyundai Motor, ranked at eighth with 4.1 percent, the combined market share of Hyundai and Kia stood at 22 percent. Hyundai Motor took the top place in the Russian market in May 2004, outperforming global competitors such as Toyota, Ford and BMW. While the automaker stood at the ranking of 10th in 2002 and fourth in 2003 there, it overtook Toyota/Lexus in 2004 and maintains the top place this year. Kia posted between fifth and 10th over the past few years. Hyundai saw its sales for the first eight months of the year surge 114.8 percent, compared with the same period of 2004 _ from 28,175 to 60,530. The growth rate far outpaces that of its competitors. The growt...

Korea Times notes that Korean women scored the lowest in terms of prospects of advancement in their socio-economic status among nations of the Asia-Pacific region, according to a survey. The MasterIndex of Women’s Advancement, conducted by MasterCard, projects, scores and averages women’s empowerment in four areas: labor force participation, tertiary education, managerial position and income. Korean women are 72.8, 74.4, 16.4 and 18.8, respectively in each of the four areas. A score of 72.8 in labor force participation, for instance, means that for every 100 men in the labor force, there are 72.8 women. In spite of their relatively high labor participation rate and education level, the overall score is pulled down by their employment status and income said Yuwa Hedrick-Wong, senior economist in Asia for MasterCard International. For every 100 Korean men who believe they are in managerial positions, only 16.4 women entertain the same belief. Similarly, for every 100 of Korean men who be...

NHN will launch a game portal site in the United States next March, enabling 2 million users worldwide to play simultaneously. NHN CEO Kim Beom-su remarked in the Electronic Times that his nfirm was already set up the basic operational plan and will start the U.S. service in March 2006. The company’s public relations manager, Cho Eun-hyun, also said that 10 staff members are currently working at the U.S. branch. NHN operates Naver, South Korea’s largest portal site, and Hangame, the largest online game site. Hangame has around 1.1 million users connected to its game servers during peak hours as the company estimates to have 230,000 users in South Korea, 100,000 in Japan and 750,000 in China. Experts forecast that with the rapid growth in the Chinese market, the total number of worldwide users can grow to up to 2 million next year when it begins service in the U.S.

Korea's top 10 big businesses posted a 31.4 percent gain in combined market capitalization this year, benefiting from the stock market rally. According to the Korea Exchange (KRX) Monday, the combined market capitalization of the top 10 conglomerates by assets amounted to $263.5 billion.. The biggest gainer in market capitalization was Hyundai Heavy Industries (HHI) Group, which has two listed affiliates. HHI Group saw the combined market value of its two publicly traded affiliates rise 122 percent in the past 10 months. HHI Group was trailed by Hanwha Group, which saw the market cap of its five listed affiliates growing by 56 percent in the cited period, and Hyundai Automotive Group. The market cap of auto giant’s eight listed affiliates climbed 53 percent. Samsung Group, which has 14 large-cap affiliates such as Samsung Electronics under its wing, maintained a steadfast lead in market capitalization but the growth rate of its market cap remained humdrum at 32.67 percent. Samsung ...

Korean big business in an effort to embrace globalization required high English language skills among its new recruits. A Chosun Ilbo article notes that Korea's top firms require high English scores on tests like the Test of English for International Communication (TOEIC), Test of English as a Foreign Language (TOEFL) and Test of English Proficiency (TEPS). For example, Samsung Electronics asks for a score of at least 730 out of 990 in the TOEIC, 201 out of 300 in the TOEFL and 630 out of 990 in the TEPS. LG Electronics requires at least 700 in the TOEIC, 210 in the TOEFL and 600 in the TEPS. Hanjin Group, GM Daewoo Auto and Technology Company, Daewoo Shipbuilding and Marine Engineering, KCC, and Hansol all require a minimum TOEIC score of 700.

One fascinating aspect of Korean commerce and marketing is its dynamics. Top Asian-based global firms see South Korea as a perfect test market for new products, especially those that target the younger consumer segment. The LG Economic Research Institute , a think tank recently released a report that cites that companies should make better use of cyber space to win Internet-savvy young consumers. The report said businesses should actively use chat rooms and similar Internet space to advertise their products as more consumers depend on product reviews to make purchasing decisions. How a company keeps tabs on postings on the Internet has become increasingly important, They should take the initiative to use Internet space to provide more information on their products. A key aspect of the report notes... categorized younger Korean consumers into five types: Twinsumer; Contents Generation, Cool Hunter, and Fantasticism., The report offers marketing tips accordingly. Twinsumers tend to mak...

Chosun Il Bo notes that Samsung Electronics will invest about $3 billion in 2006 to build a new semiconductor plant in Austin, Texas, the largest overseas investment ever by a Korean company. Hyundai Motor Company invested over $1.2 billion in their auto plant in Alabama. Samsung notes it will clinch the deal with the U.S. city as early as next month. A Samsung Electronics executive reports the the company tentatively decided to build additional 300-mm wafer production lines in Austin starting early next year. Samsung Electronics produces DRAM memory chips in its existing Austin factory, which was built in 1998 and plans to manufacture NAND Flash memory chips in the new factory. The world’s largest chip maker expects the new plant to strengthen its dominance in the global Flash memory market.

Korean companies should not just emulate American companies, but find strength and harmony in its Confucian culture, said Thomas W. Malone MIT Sloan School of Management professor. Malone visits Korea for the first time to deliver a keynote speech of Entrue World 2005: Dynamic Enterprise held at the Intercontinental Hotel, Seoul. Most Korean companies can still be characterized by the existing customs such as hierarchical status and respect for authority, Malone said. A way to harmonize the Confucian culture and the ongoing worldwide trend of decentralized decision making can be a newfound emphasis on leadership, according to Malone. Koreans have developed a tradition that they select the most appropriate leader for their organizations and follow his or her leadership. If that leader learns how to give freedom to his followers or employees, the employees will be more motivated and happy, Malone said.

I'm often asked about payscales in Korea. Here's a recent study in Chosun Ilbo on entry level wage. In South Korea new college graduates on average earn $27,670 a year working for big corporations according to a survey of 263 firms by job portal Incruit and job information provider OpenSalary. Daelim Industrial offers the highest annual salary of about $38, 000 to new staff with a university degree, while a food company pays the lowest of $18,000. As for sectors, the financial industry was the most generous with S31, 000 on average while the restaurant and food industry came in last with $23, 000. The auto industry pays about $27, 000, slightly more that the telecommunications industry.

Pantech Co., the nation's third largest handset maker announced yesterday its bid to become one of the world's top five mobile phone manufacturers by 2007. Forecasting that only 5 to 6 major players would survive in the world's handset market, Pantech's chief executive Lee Sung-kyu said the company plans to propel ourselves to the ranks of the world's top five cell phone manufacturers. Pantech is less known to overseas consumers than Samsung Electronics Co. and LG Electronics Co., the world's number 3 and 4 cell phone vendors respectively. Its scheduled launching of new product lines with biotechnology and nanotechnology functions is expected to boost Pantech's chances at advancing in the world market. The chief executive also revealed that the company is negotiating the terms with America Movil, one of the leading telecommunications carriers in South America, to provide nearly 500,000 mobile phones by the year end. America Movil has over 73.8 million subscr...

Chosun Ilbo notes... The main customers of luxury brands are getting younger, with shoppers in their 20s and 30s outnumbering those in their 40s and 50s at high-end department stores like Lotte's Avenuel and Galleria. The industry targets them as “young luxury customers,” but there are fears that that will aggravate an unhealthy consumption habit since few of them are economically independent. People in their 20s and 30s accounted for 48 percent of customers who bought luxury goods at Avenuel in July, 10 percentage points more than those in their 40s and 50s. The proportion of 20-somethings has been going up by a percentage point a month from 12.3 percent in April to 16.9 percent in July. The same goes for Galleria Department Store with its longer history of selling luxury goods. People in their 20s and 30s constituted 57.1 percent of the storeÂ’s luxury customers in July. Ha Seong-dong of Lotte Department Store says the young, unlike their parents, have grown up surrounded by lux...

I found this article on Kia and LG branding very interested. In fact, I've known many Koreans who are learning English and comment on Kia's name. As I tell my Korean friends most Americans see no connection between the K.I.A. term and Kia Motors. Korea Times In its endeavor to retaliate against a band of Muslim fundamentalists holing up in Afghanistan following the 9/11 terrorist attacks on New York and Washington in 2001, the U.S. government launched military action in early 2002 under the operation code name Infinite Justice. For some reason, however, the code name was swiftly changed to “Enduring Freedom.” The rationale behind the renaming decision was the inappropriate use of the expression, Infinite Justice, since according to the Islamic belief, only Allah can give infinite justice. Also, the expression runs the risk of insulting the entire Muslim world due to its implications that the U.S. is right and that the Islamic world is wrong. The political implications of th...