Thoughts on Korean Business by Don Southerton

The workings of Korea's top conglomerates is fascinating. Much of this centers on family control. This article, although complex, highlights issues with SK, a top ranked Korean business group and its leadership. Korea Times notes: In SK, two groups of siblings sharing the same surname with different spellings are trying to split from each other. [ There are two ways to spell the same Korean name in English Chey and Choi.] On one side are SK Corp. chairman & CEO Chey Tae-won, 44, and SKE&S vice chairman Chey Jae-won, 42. On the other are their cousins, SKC chairman Choi Sin-won, 53, and SK Chemicals vice president Choi Chang-won, 41. The SK Corp. chairman and his brother Jae-won take charge of the business units of energy and telecommunications. The SKC chairman and his brother Chang-won manage the petrochemicals and biotechnology units. SK Group, established in 1962 as the nation's first petroleum company, is now jointly managed by the Chey and Choi brothers. SK founde...

This week conglomerate retail giant Lotte Shopping will launch an initial public offering (IPO). One result of the IPO is that Lotte Group vice chairman Shin Dong-bin may overtake Samsung Group chairman Lee Kun-hee and emerge as the second biggest holder of its listed stocks. With the IPO price of Lotte Shopping shares fixed at an unprecedented $40 per share, the market capitalization of the retail giant is expected to top 11.4 trillion won, greater than the 9.37 trillion won of its domestic archrival Shinsaege. When Lotte’s stock starts trading in London on Feb. 8 and in Seoul the following day, Shin, 50, Lotte Group chairman Shin Kyuk-ho’s second-eldest son, will instantly race up the ladder to be No. 3 after Hyundai Automotive Group chairman Chung Mong-koo and Samsung Group’s chairman Lee. As of last Friday, Chung, currently the richest stock investor in Korea, held more than 2.63 trillion won of shares in Hyundai Motor and other affiliated firms, including Hyundai Mobis, INI Stee...

Celebrating the Lunar New Year with traditional games

An article in the Korean media notes the buzz word in Korea's service industry for several years, from restaurants to fitness clubs, has been well-being. That has been bad news for the country’s fast-food market, one of the biggest in Asia, which enjoyed explosive growth until 2002, both in sales and the number of franchises. But a growing awareness among Koreans of the dangers of obesity prompted many consumers to turn elsewhere. This led to a noticeable decline in sales. To boost them and cater to changing tastes, fast food chains started offering lighter and healthier items. The biggest hit product in Korea's $3 billion fried-chicken industry last year was chicken fried in olive oil from the BBQ franchise. The company claims the olive-oil chicken is free of trans-fatty acid commonly found in hydrogenated vegetable oils that are linked to heart disease. Consumers have been taken by the marketing strategy. We introduced the Olive Oil Chicken last May and the response has been ...

Sunday is New Year's Day on the lunar calendar. On the day, Koreans traditionally eat ttokguk, steamed rice-cake soup in the morning after younger family members make their ceremonial bows, or sebae, to elders in exchange for advice and envelopes stuffed with cash. After that, they make symbolic offerings of food to their ancestors or give a trip to ancestral tombs. For many, especially families with children, the afternoon is a time spend visiting cultural centers and playing traditional games like top spinning.

Korea's telecommunications is seen as cutting edge. I often have difficulty explaining some of Korea's recent advancements. This Chosun Ilbo article does a great job on detailing DMB. DMB is technology that can provide digital video and audio content from various services connected to the mobile network. Chosun Ilbo Digital multimedia broadcasting or DMB, of both the terrestrial and satellite kind, is bringing television into the palm of consumers’ hands on the move. But how does it work, and what is the difference between the two? The Chosun Ilbo has the answers. The predecessor of DMB was digital audio broadcasting or DAB, first developed to transfer higher-quality audio to portable devices. As far back as 1987, European countries set up a project group named Eureka-147, and by 1995 they were ready to start the service. Korea began discussion about bringing in the technology in 1997, but by 2003 Korea undertook the development of its own improved version of DAB that would be ...

A new public square will be created in front of Gwanghwamun, the southern gate of Gyeongbok Palace, signaling a new round of construction projects that will reshape the landscape of the central part of Seoul. The government has set aside 5 billion won for rebuilding Gwanghwamun's main structure, and details for other related projects like the restoration of the Seoul fortress will be announced later. A new Gwanghwamun structure will be built from its original wood in the original location, far south in the area, by 2009.. The Cultural Heritage Administration plans to manage and protect the area systematically, while setting up various walking routes for the public on the mountain. The restoration of Gwanghwamun will include the original structures like woldae and haetae sculpture. And a large public square will be constructed in the area covering where the Culture Ministry and U.S. Embassy are now located. Woldae is a flight of stone steps that will heighten the majestic aspect of...

The 2006 Lunar New Year’s celebration (Seol) is this weekend Jan. 28-Jan. 30. This is the year of the Dog. Along with Chusok (the fall harvest festival), Seol is the most important of traditional Korean holidays. (see my article below). In Korea, Seol is a day of family activities including showing respect to elders and ancestors. Most Korean businesses are also closed for the holiday as millions of Koreans travel to join their families. In America, it’s a great opportunity for Westerners to wish their Korean colleagues “ Sae hae bok mani bah deu say oh “ ( “Happy Lunar New Year.”) Hint: I'll break down the pronunciation: “Sae hae bok—mah ne—bah deu say oh! Which means, "Please receive many New Year blessings!" Here is an article in Korea Times on Korean holiday travel 2006...with a comment or two from me... More than 30 million people will travel the country around the Jan. 28-30 Lunar New Year holiday, visiting their hometowns or taking vacations. [South Korea has a...

One of the topics I frequent in this information blog is the Korean workplace. Here's an article from Chosun Ilbo on Korean worker concerns. I think the article provides some valuable insights. Chosun Ilbo Most Korean workers feel insecure about their jobs as corporate restructuring and early retirement, a temporary fix during the IMF crisis in 1997, have become the norm regardless of the economic situation since 2000, a survey suggests. Internet recruitment site JobKorea on Thursday announced the results of a survey of 1,556 full-time workers showing that some 45.2 percent of respondents said they felt insecure about their jobs, while 36.2 percent said they did not. By age and gender, men in their 40s were most worried about their jobs, with a whopping 69.5 percent saying they felt insecure. Women workers in their 30s followed with 48.9 percent, 8.7 percentage points more than men in the same age group. Among those in their 20s, 37.5 percent of men felt insecure, but the figure fo...

With the upcoming Korean Lunar New Years holiday in late January this year, Korean retailers have begun to display traditional treats...

South Korea's Hyundai INI Steel Co. has signed a memorandum of understanding with BHP Billiton Ltd. (BHP) to receive iron ore and bituminous coal from the Australian mining company for ten years starting from 2010. During the period, BHP Billiton will supply 4 million to 5 million metric tons of iron ore and 2.5 million to 3.0 million tons of bituminous coal annually to Hyundai INI Steel. The amount equals 40% of Hyundai INI's annual consumption of the products. The long-term supply pact is in line with Hyundai INI's plan to build an additional domestic iron ore mill with a 7 million ton annual capacity in Songsan, South Korea by 2010, the company said. With the new steel mill, Hyundai INI, which is an affiliate of Hyundai Motor Group, South Korea's largest automative conglomerate in terms of sales, expects its total steel production to rise to 17 million tons annually.

A Major Strive...I've been watching this unfold for years... Hyundai INI Steel, an affiliate of the Hyundai Kia Motor Group, was given the go-ahead to build an integrated steel mill in the western Korean port city of Dangjin. The construction of an integrated steel mill that the late Hyundai Group founder Chung Ju-yung had envisioned for decades is finally kicking off. His son, and current Hyundai-Kia Chairman Chung Mong-koo has also sought the project for more than decade. In the past, government control thwarted the Group's efforts from entering the market. The steel company plans to invest a total of $5 billion in the project. The mill's first blast furnace is planned to be producing 3.5 million tons of slabs annually by 2010. The second blast furnace, with the same capacity, is scheduled to be completed a year later after breaking ground in 2008. Why? The projected integrated steel mill will sharply increase the supply of steel, helping the nation's car and shipbui...

My work centers on the dynamics of Korea and American business culture. I strive to foster strategic alignment within diverse management. On one level, for American clients I explain Korean business norms and practices; for Koreans, I explain American business norms and practices. My Korean friends and clients often ask me to tell them about interesting and unique aspects of American business. Since Korea is focused on high-tech, I thought this article I wrote on American entrepreneurship might be of interest to all. Buck's of Woodside: Mecca of the Dot.com Boom California's Silicon Valley is home to HP, Cisco, Yahoo, Apple, Oracle, and the dot.com industry. This high-tech intensive area, south of San Francisco, encompasses northern San Jose, Sunnyvale, Cupertino, Santa Clara, and Palo Alto, California. On a recent trip to Silicon Valley, my plans included a visit to the mecca of the early years for the dot.com industry--Buck's Restaurant of Woodside. I've read about B...

Korea's Samsung Electronics announced that its latest quarterly net profit soared 36 percent to 2.6 trillion won on its largest-ever revenue of 15.5 trillion won, thanks to strong demand for memory chips, mobile phones and display panels. The operating profit of the worldÂ’s largest chipmaker was 2.1 trillion won in the three-month quarter through December. The difference between the operating profit and the net profit indicates that some of its overseas subsidiariesÂ’ sales are categorized as non-operating profit, the firm said. The robust quarterly result helped Samsung post yearly revenue at 57.4 trillion won ( over $57 billion). Samsung also gave an upbeat forecast for this year. It projected that its revenue will reach 63.6 trillion won this year, which means an 11-percent jump from last year. It also said it will raise its R&D spending to 6.1 trillion won, up by 12 percent from what it spent last year.

I enjoy commenting on several aspects of Korean society--autos, psychographics, and coffee consumption--to name a few. This is a great article on Korean coffee shops. By Kim Hyun-cheol Staff Reporter, Korea Times As a coffee lover, one of my biggest complaints about living in Seoul is that it's quite hard to find a nice coffee place in this megalopolis. To go to a really nice cafe is just like a cult for its esoteric lovers. Almost all the cafes, seen on practically every corner, are those serving bland and characterless one or branches of import franchise tycoons selling the image without a drop of the original's qualification. I don't mean to say I'm one of those bashers of brands like Starbucks or Coffee Bean. Actually I'm not. But it's also undeniable the quality of the coffee served there is astonishingly uneven in different branches and inconsistent even at the same shop. Additionally, I have serious doubts about the quality of their beans used here. Coffe...

Korea hopes to prove itself to be a test bed for the global take-out coffee industry. [It's also seen as a great test market for high tech]. Starbucks Coffee Korea announced yesterday that its proposal to add green tea-flavored latte to the coffee giant's menu was approved by Starbucks Corp. to debut in other markets. Based on the consumer response of Green Tea Latte here in Korea, it has been agreed that the product would be launched in other Starbucks chains in Asia and parts of the United States by the second half of this year, said S.K. Chang, president of Starbucks Coffee Korea. The local chain's idea to create a green tea version of the latte was incited by the popularity of green tea in Korea, he emphasized. Korea Herald notes that Korea has become a test bed for global coffee chain Starbucks Corp. with the Green Tea Latte expected to debut in other markets. Noting that Korea has been a hot test bed for global information-technology companies seeking to size up the s...

Kia Motors' 2007 Optima is unveiled during a media preview at the North American International Auto Show in Detroit, Michigan January 9, 2006

Hyundai Motor America President and CEO Bob Cosmai unveils the 2007 Hyundai Sante Fe SUV featuring third row seating at a press preview of the North American International Auto Show in Detroit, Michigan. For the U.S. market, the new SUV will be produced at Hyundai's Alabama car plant.

Great Survey on Korea's top executives...it gives some insights into their tastes and psychographics Korea'’s top executives drive a Hyundai's full size luxury sedan, the Equus, fill their tanks at SK gas stations, stay at the Grand Intercontinental Hotel, and read the Chosun Ilbo, a survey suggests. A poll of 100 CEO'’s in top 500 corporations in 2005 by the top Korean monthly business magazine New Management found 49 percent of the respondents naming the Chosun Ilbo as their favorite newspaper. For TV news, 43 percent watched KBS, followed by MBC (21 percent), SBS (19 percent), and YTN (17 percent). The poll released Monday shows that 60 out of the 100 drove an Equus, and 77 had Samsung Anycall mobile phones, with 85 subscribing to SK Telecom's mobile service. The largest group or 27 had accounts with Kookmin Bank, while 42 shopped most frequently at the Lotte Department Store. For their indispensable golf supplies they favored Callaway, while Daks suits and Kumg...

I'm fascinated with the Korean big car market. One dynamics of this market is the topic of this Korea Times article.. What's driving diplomats in Korea? Embassy cars with blue license plates, tinted windows and little flags can be seen all over town but to appreciate the parade of high-end expensive automobiles favored by ambassadors, hang around one of the top hotels in Seoul area during a diplomatic reception honoring a country's national day. Traditionally, ambassadors prefer Mercedes because for most it offers the right balance of design, elegance, performance and a great boost to the ego that can only be matched by driving or being driven in a car worth more than the average annual household income. As it stands now, Mercedes and Hyundai lead the pack in foreign and domestic cars of choice by diplomats in Seoul. Trying to make a dent in this heated market is BMW, whose top models are considered by many aficionados as among the most enjoyable and distinctive cars to dr...

Several days ago I mentioned the Korea big car market. This announcement by Hyundai Motor notes the car manufacturers delay, but eventual entry into that market. Korea Herald. Hyundai Motor Co. has delayed the planned launch its new luxury sedan until the first half of next year.[2007] The project, dubbed BH, was originally scheduled to debut at end of this year but apparently requires more time, a Hyundai official said. The large sedan with an engine displacement of between 3.8 and 4.5 liters is mainly aimed export markets to compete against Toyota Motor Corp.'s Lexus ES330 and the BMW 5-series. The Korean carmaker is still mulling whether it should have its own brand. If we give it a separate brand name, we would have to set up an exclusive dealership network as well, said the company spokesman. It would be a high risk move for Hyundai, which has little experience in large car exports, to establish a separate dealer network. Therefore, the BH is likely to make its debut under the...

The LG Group will pump $10 billion into its facilities and research and development programs over the next two years. The conglomerate will be focused on raising the cash flow which it will committ to R&D in its three major industries -- electronics, chemical, and telecommunications. In electronics field, the group will focus the investment on developing next-generation mobile phones, digital televisions, liquid crystal display (LCD), plasma display panel (PDP), home network, and digital multimedia broadcasting (DMB). In the chemicals division, the company plans to concentrate on research of polyvinyl chloride (PVC), ABS, batteries, polarizing plates, and clean energy. For the telecommunication fields, it has keen interest in the triple play service (TPS), which wraps high-speed internet, internet calling and broadcasting into one, and broadband convergence network (BCN). LG Chairman Koo Bon-moo said in his New Year’s speech that core technology is essential in order to survive i...

Yestersday's blog focued on the Korea's Big Car market...this Korea Times article paints a picture of the rising import threat. For example, non-Korean carmakers will launch 80 new models in the Korean market this year, compared to about 20 models planned by domestic Korean carmakers. Aside from the big three automakers, or Mercedes-Benz, BMW and Lexus, more foreign players are preparing for an all-court press to increase their sale. These foreign carmakers have an eye on an increasing number of Koreans who can afford to buy the imported cars that come with a stiff price tag. [with tariffs and VAT it usually doubles the price of the import] They are joined by foreign carmakers with less influence in Korea, including Audi, Volvo, Peugeot, Saab, Cadillac, DaimlerChrysler and Volkswagen. Volkswagen, which set up its Korean office a year ago, will likely be the most aggressive as it is launching 15 new models in 2006. It will be the first foreign carmaker to unveil more than 10 mod...

Koreans love big cars...it comes as no surprise that the large sedan market share in Korea ever increases... Korea media notes... Sales of South Korea's domestic large sedans jumped 47.5 percent to 139,550 units last year commanding more than a fifth of total Korean passenger car sales reflecting a widening gap between income brackets. Hyundai Motor Co.'s Grandeur [Azera], Equus; Renault Samsung Motors Co.'s SM7; Kia Motors Corp.'s Opirus [Amanti]; Ssangyong Motor Co.'s Chairman and GM Daewoo Auto & Technology Co.'s Statesman took up 22.4 percent of 621,950 passenger cars sold in Korea last year. The addition of new models also spurred sales growth. Renault Samsung launched the SM7 sedan in late 2004 and GM Daewoo began selling the Australian-made Statesman in June last year. >>A revamped version of Hyundai's Grandeur[Azera] also made its market debut in May and became the bestselling Korean car in August and December. More than 73,600 Grandeurs...

Sehwa is a painting that wishes good luck and happiness for the New Year. During the Choson Kingdom (1392-1910), subjects would present sehwa to their king. People also gave them as gifts to their friends and families. Today, like in the past, Sehwa are hung in living spaces such as in the kitchen and on the front door. They representing not only one's hope for the future, but also the good community spirit.

Samsung Electronics and LG.Philips LCD simultaneously started the mass production of larger TV panels at their newest fabrication lines on Sunday Jan. 1 2006. This foretells an uphill battle for the leadership of the liquid-crystal display (LCD) market. LG.Philips LCD, a joint venture between LG Electronics and Royal Philips Electronics, announced on Sunday that it opened its seventh-generation LCD factory in Paju, north of Seoul. Samsung, the current market leader, also said that it started mass production at its second seventh-generation LCD line in Tangjong, south of Seoul, named 7-2 Line. Both Samsung and LG Philips factories will churn out 45,000 LCD plates per month. The opening of the new facilities are a few months ahead of the companies’ original plans, as they are competing to gain control of the industry standard for LCD panel size. Samsung cuts one seventh-generation plate into eight 40-inch panels or six 46-inch panels, while LG.Philips makes eight 42-inch or six 47-inch p...