Thoughts on Korean Business by Don Southerton

For the past few weeks I have been reflecting on relevant business events that occurred in 2005. I’d like to share these thoughts along with my forecast on trends that will impact 2006. First, 2005 saw the continued growth of Korean-based big businesses not only in North America, but also China, India and Eastern Europe. Eager to embrace new markets, Samsung, Hyundai, Kia, and LG have allocated millions of dollars in global expansion projects--for example, Hyundai Motor Manufacturing Alabama’s (HMMA) billion-dollar car manufacturing plant. In early 2006, Kia should also announce the site of their first American car plant. In the future expect more Korean big business to locate R&D, manufacturing, and production facilities in the states. Trends… 24/7/365 After reading Thomas L. Friedman’s The World is Flat: A Brief History of the Twenty-first Century I’ve been able to better clarify my views on globalization. I recommend you get a copy. One point that stands out in Freidman’s work a...

Each year the heads of Korean big business herald in the New Year with company proclamations. I see these messages as insightful into the Group's corporate culture and its direction for the upcoming year. Here is the Samsung Group Chairman Lee Kun-hee message for a "truly global enterprise." In his New Year'’s speech released to the press in advance on Friday Dec. 30, Lee said that Samsung should become a global business leader by building its worldwide reputation. This year, we should build up second Samsungs in many foreign countries, and should make more no.1 products in order to be settled as a truly global company, he said in the statement which will be announced to the ALL the group'’s employees on Monday. To do this, we have to speed up the decision making process and the research and development process, and have to improve our soft power, such as design and brand image. Building other Samsungs means making it a top brand in foreign countries, at the same ...

On my recent trip to Seoul, the main gate to the Deoksu Palace complex was closed and being restored. It's now re-opened. The Deoksu complex (one of several traditional royal palaces in Seoul) was the last residence for Korea monarch Kojang during the early 20th century. The newly restored gate called Daehanmun mean Great Han ( the true name for the Korean people) Gate.

GM Daewoo Auto & Technology Co. annonved that it began construction of its fourth knockdown packing facility at the western port city of Incheon in cooperation with Hanjin Transportation Co. and Korea Express Co. The new KD center, which is slated to begin operation in the second half of 2006, will have the capacity to pack and export 570,000 kits annually to countries in Asia Pacific, Latin America and Europe. With the new facility, GM Daewoo's annual KD export volume will reach 1,420,000 kits. In 2004, GM Daewoo shipped off 337,110 KD vehicles, ranking first among Korean automakers. In the first 11 months of 2005, its KD exports were running 49.6 percent ahead of the same period last year, totaling 448,425 units. Hanjin and KOREX will construct and manage the buildings where GM Daewoo will install necessary machinery and equipment. The carmaker is leasing the land and buildings for a period of 10 years. Knockdowns, which are exported for assembly, range from nearly fully-ass...

Chosun Ilbo When compared to Americans or Germans, South Koreans, work more and sleep less, often caught between work and family. This is the result of a comprehensive analysis of the 2004 Time Use Survey notes The Ministry of Gender Equality and Family and the National Statistical Office. The average amount of hours Koreans between the ages of 20 and 74 spend working, is 4 hours 57 minutes, which is almost 2 hours more than the 3 hours 39 minutes Americans spend, and the 2hours 53 minutes of Germans. Furthermore, the average amount of time Koreans sleep is 7 hours 44 minutes, compared with 8 hours 34 minutes of Americans and 8 hours 15 minutes of Germans. Koreans in their 20's or older spend an average of 13 minutes a day learning foreign languages, computers or hobby-related study, which falls short of even half the 29 minutes of Americans or 16 minutes of Germans. By age group, Koreans between 15 and 24 years of age, devote the greatest amount of time to study with 5 hours 19 m...

This Chosun Ilbo article on stress is interesting...Especially the causes respect to gender and martial status. I agree with most of the findings in my experiences with Koreans. The greatest cause of distress to married women in 2005 was their husbands, but married men were most upset by their colleagues. According to the survey 30 percent of 6,555 married female respondents said it was their husbands who depressed them most this year. This was followed by colleagues and in-laws with 27 percent each and children with 17 percent. In stark contrast, a whopping 76 percent of male respondents reported their bosses and juniors distressed them most, while 15 percent cited their wives and 7 percent their children, suggesting that men and women remain wired differently when it comes to stress. Asked when they are most stressed, most women answered when they have to work as well as handle the household on their own (35 percent), when their children disobey them or fall sick (20 percent), when ...

I'm writing a historic novel set in Korea over a century ago. In my research I came upon an account of the first “official” Christmas tree in Korea. Since it is Christmas Eve in Southern California, I thought I’d share the story… Since the mid 1880s, Anglos merchant, diplomats, and missionaries who lived and worked in Korea celebrated their respective national and religious holidays. Most often these were small affairs as there were few foreigners dwelling in Korea—most Anglos concentrated in the port towns and Seoul. Naturally some Koreans were curious of these strange western ceremonies and started asking questions, especially about Christmas. The Korean royal family was no exception. In December 1893, King Kojong and his wife Queen Min became very curious about the holiday and started to inquire about its significance. In fact, Queen Min summoned her closest western friend and personal physician, missionary Lillias Underwood to explain about Christmas. That year on Christmas da...

Snapshots of Christmas In Seoul, young Koreans embrace the Western cultural custom of giving Christmas gifts to family members and friends. In the busy shopping district of Myeong-dong, central Seoul, a large crowd in their 20s and 30s are busy buying something for their loved ones. I'm going to give my boyfriend a watch, said a 22-year-old university student at Mini Gold, an accessory store. The shop owner Jeong Sun-mi said accessories that target couples are quite popular compared to other products. Elsewhere in Seoul, the Salvation Army's red buckets signal the coming of holiday season. "Neighbors need your help. Let's share our love," shouts a Salvation Army officer into a microphone To some, it may be too cold this year for people to pull their hands out of the pockets and open their wallets. This winter has been the coldest in years with the temperature going below minus 10 to 15 degrees Celsius for several consecutive days around the country. The weather is...

The Shanghai Automotive Industry Corp. (SAIC) has committed $1 billion to strengthen Ssanyong Motor, in which it has a controlling stake. >> Ssangyong is Korea's Number 4 ranked car manufacturer. During his meeting with the union leaders of Ssangyong in Shanghai last week, Hu Maoyuan, chairman of SAIC Motor and a CEO of the parent SAIC Group, said the Chinese shareholder plans to invest about $1 billion in the Korean subsidiary over the next five years. As Shanghai Automotive, which acquired Ssangyong Motor a year ago, hesitated to unveil its projects to develop the company, the union directly went to China and met the chairman. According to the union, Hu Maoyuan said SAIC Motor will unveil its mid and long-term business projects, involving investment totaling $1 billion early next year after holding a board of directorsÂ’ meeting on Dec. 27. The chairman also said it is necessary for Ssangyong Motor to resolve some of its structural problems, including management systems, th...

As I noted in last week’s Korean Culture Update, Christmas is a popular holiday in South Korea. Nevertheless, Christmas is seen as a distinctly Christian holiday. So, did Korea have a seasonal holiday before Christian Christmas? Yes, Dongji, or the winter solstice, was as significant as Lunar New Year's Day in Old Korea since it was when the days started to become longer than the nights. People offered rituals for the gods and their ancestors on that day, calling it A-Se or little New Year's Day. Traditionally the winter solstice, which falls on December 22 this year, was a time to makeup a new calendar and mark it with the seasonal sub divisions corresponding with the agricultural seasons. In Korea, this tradition lives on today in the modern practice of giving calendars as year-end gifts. Although Dongji is no longer considered as big a holiday as Chuseok (Harvest Full Moon) and Seol (Lunar New Year's Day), there still remain important customs associated with celebrating ...

I mentioned that Christmas decorations are appearing in more stores and businesses in South Korea, especially Seoul. Nevertheless, in Korea, Christmas is seen as a distinctly Christian holiday. So, how do Korean Christians celebrate Christmas? Like in many American churches, on Christmas Eve the Korean congregations and its youth have a traditional Christmas pageant as part service, but that service usually lasts for hours. Interestingly, after the service and beginning at midnight until about 5 am (on Christmas morning), church youth break into small groups and go caroling at the homes of the congregation. It is traditional that when they hear the carolers outside their home, Korean Christians open the door and listen to the songs. Then the family invites the entire group into their home for hot drinks and snacks. The group then proceeds to the next home, etc. until early Christmas morning. After catching an hour or two of sleep, the teens and families return to church at 11 am on Chr...

Winter arrives early this year to Seoul as snow-covered ice floats in the Han River.

Businessweek notes that Korea-based Samsung and Hyundai-Kia Motors' rankings in market capitalization surged in 2005. General Electric remained the worldÂ’s biggest company in terms of market capitalization for a second consecutive year, ahead of ExxonMobile and Microsoft, in a ranking by BusinessWeek of 1,200 corporations worldwide, the U.S. magazine said Saturday. GE was valued at US$377.4 billion and Exxon at $361 billion. Microsoft came third with $296.4 billion, and Citi Group and BP took fourth and fifth place with $245.6 billion and $236.2 billion. Their ranking was the same as last year. Among Korean companies, Samsung Electronics saw its ranking surge from 48th to 32nd with $100.3 billion. The countryÂ’s largest lender Kookmin Bank and automaker Hyundai Motor ranked 273rd and 277th, up from 438th and 466th last year.

Each year Christmas decorations appear in more stores and businesses in South Korea, especially Seoul. Nevertheless, in Korea, Christmas is seen as a distinctly Christian holiday. In contrast, in America, Christmas finds even non-Christians singing about snowmen, jingle bells, Santa Claus, and yuletide cheer. So, how do Korean Christians celebrate Christmas? Like in many American churches, on Christmas Eve the Korean congregations and its youth often have a traditional Christmas pageant as part service, but that service usually lasts for hours. Interestingly, after the service from about midnight until 5 am (on Christmas morning), church youth often break into small groups and go caroling at the homes of the congregation. It is traditional that when they hear the carolers outside their home, Korean Christians open the door and listen to the songs. Then the family invites the entire group into their home for hot drinks and snacks. After catching an hour or two of sleep, the teens and f...

Korea Times notes... The gross national incomes (GNI) of South Korea and the North Korea showed the widest gap ever in 2004. The National Statistical Office (NSO) said that South Korea’s GNI, the nation’s real purchasing power, was 32.8 times larger than that of the reclusive communist nation last year. A statistical comparison between the two Koreas released Thursday by the NSO showed that North Korea’s GNI stood at $20.8 billion last year, far smaller than $681 billion of the South. Per-capita gross national income of the South reached $14,162, about 1,550 percent greater than the North’s $914. The gap in per person national income widened from $5,005 in 1990 to $10,398 in 1995, $10,084 in 2000 and $11,902 in 2003. The widening gap is attributed to a recent surge in the South’s per capita national income, which jumped to $12,720 in 2003 from $11,499 in 2002, and the dwindling income of the North. The North’s per capital national income shrank to $757 in 2000 from $1,142 in 1990, but ...

In the downtown area, Seoul City Plaza is brilliantly illuminated as part of Luminarie, the popular festival of lights.

The success of Korean big business has led a number of global firms to move parts and component manufacturing operations closer to their clients in Korea. The move is especially centered on the car industry sector. Automobile parts maker Bosch has just completed its second Korean plant in Daejeon at a cost of $20 million. The German firm will make core auto parts for Hyundai Motor at the plant. Its compatriot Siemens, the electrical and electronic engineering giant, is also strengthening cooperation with Hyundai, taking over auto parts company Hyundai Autonet together with Hyundai Motor in July and setting up a joint company to develop vehicle control systems in November. Two of the world's three largest auto parts makers -- CanadaÂ’s Magna and ITW of the U.S. -- will invest US$30 million each in Korea. U.S. chemical giant Dupont, meanwhile, is in talks with Korean automobile and electronics companies to establish a joint venture. Dupont Korea says working with conglomerates from t...

I'm often quizzed on the differences in Korean and American management. Here's a great article from Dong-A Ilbo ( plus some of my insights and edits) on the compensation, benefits, and downside of the promotion. In some ways, it's a "careful for what you wish for" situation--lots of status, but lots of stress. By definition, an executive is upper level management above the position of General Manager. The first executive position is Director (e-sa), then Managing Director (sang-moo), Senior Managing Director (cheon moo), and then VP and President. The article notes: It is difficult to become an executive, but the position offers benefits.>>I've read where less that 5% of all General Managers are promoted to Director. Doubling Salary- There is a slight difference depending on corporations, but salary rockets 1.5 times to twice that of general manager(bujang) if one is promoted to an executive-level director's position. >>>In the case of lar...

Economy watchers in the U.S. look carefully at holiday sales as an indicator of consumer confidnce...so, too, in Korea. A Chosun Ilbo article notes: Korea’s major department stores are seeing revenues for Christmas sales grow in the double digits: a sign, industry insiders say, that domestic consumption is recovering. Hyundai Department Store said combined revenue of seven branches in the capital area during the year-end sale from Dec. 2-10 increased 14.1 percent from last year. It seems consumers are opening their purses expecting an economic recovery due to the recent bullish stock market and hence their end-year bonus, a Hyundai staffer said. Lotte Department Store saw sales during the same period rise 31.3 percent on-year. Shinsegae and Galleria achieved a 30.7 percent and 21.1 percent increase compared to last year.

Dr. Andrei Lankov wrote an interesting article for his Korea Times newspaper column on Early Modern Era Korea. The title is the Bean and the Leaf. His topic is the tradltional tabang tea shop, which is the forerunner for today's modern coffee shops. One reason for the popularity and success of modern Korean coffee culture is the place the tabang had in Korean society. One point not covered in the article is that today many Koreans see the tabang as catering to older and lower status Koreans, or that the tabang's in some cases had been a front for prostitution. The Bean and the Leaf For decades, one of the most typical Korean institutions was the tea house (or, rather, the coffee shop), known as a tabang (lit. “tea room). I still remember the times when a tabang could be found within a five-minute walk from any given point in Seoul. Alas, the most recent decade witnessed a demise of this quintessentially Korean institution. The old good tabangs have been pushed aside by the pr...

I found this article in Chosun Ilbo facinating... As the number of working women increases, the nation’s offices face two growing problems: sexual discrimination and conflicts between women. In a Chosun Ilbo survey of 303 women working in 10 major companies including Hyosung, Hyundai, Amore Pacific and L’Oreal Korea, 85.2 percent said they experienced conflict with women colleagues. Among them, 67.2 percent said they felt unexpressed tension with a female colleague and 18 percent said they had been involved in an outward argument or fight. ◆Female Bosses More Macho than Men “Women bosses tend to be proud of their survival in the fierce struggle against male colleagues and usually act tough. They push us to be strong,” says Lee Jeong-eun (not her real name, 28), an employee with a large firm. “Sometimes female bosses are more authoritarian than male bosses and more difficult to work with.” Hwang Yu-jin says, “I thought my boss, who is also a housewife like me, would be more understandin...

A strike by Korean Air’s pilot union caused havoc for export shipments and inconvenience to passengers, when the carrier grounded some 204 or 53 percent of its scheduled flights. More trouble looms as some 176 of its 212 domestic flights, 54 of its 157 international flights and 23 of its 30 cargo flights are expected to be cancelled on Friday. The Labor Ministry remained cautious about exercising an emergency arbitration right that would end the strike immediately, fearing this would give the impression that the government intervenes in labor conflicts too often. That fueled concerns that the walkout could last throughout the weekend or beyond. Many passengers were angry, saying another rich union of high-salaried pilots was holding the nation to ransom after Asiana Airlines pilots went on a protracted strike at the height of the summer holiday season. Rumor has it that the hidden reason for the strike is a union demand to restore a number of fired pilots to their jobs, though ostensib...

Reports out today note that production volume in Korea'’s auto industry will exceed 5 million vehicles in 2005, for the first time due to an explosive increase in exports. Soon only 20 percent of Korean production will be intended for the domestic market. The Korea Automobile Manufacturers Association (KAMA) estimated production will reach 5.15 million this year after exceeding 4 million only a year ago. Exports increased from 2.37 million last year to 2.6 million this year and overseas production from 410,000 last year to 700,000. Production for parts assembly is also likely to increase by roughly 150,000 to 750,000. Meanwhile, the local market has been sluggish since 2003. The number of cars sold here decreased from 1.3 million in 2003 to 1.1 million last year and is expected to show up flat when figures for this year are in. Some experts feel a figure of 6 million for next year does not seem too far-fetched if the local economy revives and full-scale overseas production gets un...

Burger Wars... An increasingly desperate fast food industry is vying for customer attention. To gain customers many fast food chains are giving out freebies worth as much as the purchase required to get them. Korea’s leading fast food chain Lotteria (owned by the Lotte Group) said it will give out cell phone call vouchers worth about $4 to customers who buy set menus for the same price. In addition, South Korean fast food firms continue to slash prices for set menus amid fierce competition in a dwindling market. Set menus typically consist of a burger, French fries and soft drink, and prices have already dropped to below $3 in some chains, making a single hamburger more expensive than a combo. After McDonalds started selling set menus at $3 during lunchtime in May, Lotteria cut its set menu prices to $2.90. The industry is also attempting to attract customers with improved services. Lotteria, McDonalds and Burger King have renovated some branches to make them look like cafés rather th...

Snow arrived in Seoul

LG Electronics has announced that 11 of its products including a plasma display panel TV won iF Design Awards from the German design forum. LG has won iF awards every year since 2002 and will put the 11 winning products on display at the CeBIT 2006 in Hanover in March. Besides the PDP TV, the products include the firm’s Chocolate cell phone, a slim digital multimedia broadcasting cell phone and a wall-hanging projector. The Chocolate cell phone also won the Grand Prix of the Good Product Design Awards of the Year hosted by the Ministry of Commerce, Industry and Energy, and the Korea Institute of Design Promotion.

Korea Herald... Liquor companies have kicked off their year-end events aimed at captivating consumers and boosting their market presence. Jinro Ballantines Co., Korea's leading distributor of whiskey, said it has organized year-end events that will help promote its brands and further fortify its position in the local market. A key marketing strategy will be prize give-away events at local bars that will bustle with people holding year-end celebrations. Sluggish sales have prompted liquor companies to market whiskies and other liquor products by building a trendy brand image to make them more appealing and approachable to a wider group of consumers. Why? Whiskey sales in Korea, the world's fourth-largest market, have been declining since 2003 when a credit card binge left many households struggling with debt and dampened consumption.