Thoughts on Korean Business by Don Southerton

Korean business and infrastructure faced paralysis this week when the Korean Confederation of Trade Unions went on general strike at 1 p.m. after a labor reform bill passed the committee stage in the National Assembly. The lines are drawn for a prolonged standoff between government and labor. The government has made clear that it regards the KTCU walkout as illegal because it is motivated by political gain and has vowed to take firm action. The Supreme Public Prosecutor's Office says it will seek arrest warrants for union leaders who call illegal strikes, and the Korea Employers Federation has warned it will bring civil and criminal lawsuits against unions that go on illegal strikes. We will continue general strikes until the National Assembly withdraws the non-regular workers bill, the KTCU said. It said some 150,000 workers (50,000 according to estimates by the Labor Ministry) including those with Hyundai Motor and Kia Motors took part in the strike. [ These are mostly non-regul...

Many Korean business owners see Starbucks as a model business. It's business model warrents frequent mention, even in the Korean university classroom. Korean Times Last week, I [the Korean writer] discussed the widespread emulation of the American coffeehouse chain Starbucks in Asia, but these copycats are poor substitutes for the power and allure packed into the original Starbucks brand. While a company can always copy the appearance of another company’s identity, it can never reproduce the sublimity of a brand’s history or inspiration, rendering it little more than a copycat corporation. This is particularly logical when considering the story behind the brand name and logo of Starbucks. The name Starbucks is derived from Herman Melville’s novel Moby Dick as noted by its chairman Howard Schultz in the book Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time. According to Schultz, one of the company’s founders tried to draw inspiration from the novel when namin...

Although I've been studying and observing Korean society for thirty years, I'm often surprised. One recent surprise is the frank, candid talk about sex. To many Westerners, Koreans are stereotyped as conservative and a women's role in society as restrictive and subservient. Not True... Modern Korean society is very cosmopolitan, That has many manifestitions outside of Starbucks, i-pods, and Gucci. Indicative of this modern cosmopolitan society is that even conservative papers like Chosun Ilbo openly discuss sex and gender roles. This article explores women's views toward sex and relationships. When Girls Want Sex [ DISCLAIMER:The title and views are the Korean paper's] Women are not that different from men. They feel desire for sex just as much, but they express it in different ways. The Chosun Ilbo asked modern women what turns them on and how to spot the signs. The famous line in the film [Korean film] One Fine Spring Day is, Want some ramen [noodles] before you...

This past week the Korean press has addressed both sides of the Hyundai-Kia labor wage issue. As I've noted, it's been a carefully watched topic for months, which has surfaced in heated debate with this week's wage freeze announcements by Hyundai Kia top management. This Chosun Ilbo editorial cites concerns from a Korea perspective... (you may wish to look at Businessweek's take on the issue, although I don't entirely agree with BW....controlling the union is still a huge issue.) See http://www.businessweek.com/magazine/content/06_10/b3974077.htm?chan=autos_autos+index+page_news Chosun Ilbo Some 11,000 managerial staff with Hyundai Motor and affiliate Kia Motors have voluntarily agreed to a salary freeze this year. Their decision encouraged officials at other subsidiaries of the Hyundai Automotive Group to announce a wage freeze, led by top executives including chairman Chung Mong-koo. Hyundai Motor has been accused of passing losses caused by the falling U....

No Korean meal is complete without Kimchi. As the health benefits of Korea's representative dish are being touted all around the world, Kimchi is emerging as a super food in the U.S. The Washington Post published a special feature article on kimchi in its Sunday edition that featured an interview with Korean food expert Shin Hi-soo (69) along with the recipe for kimchi pancakes. Kimchi has long been touted by Koreans as health super food that can cut cancer risk, lower cholesterol, improve skin, aide digestion and fight infection. Advocates claim that Kimchi’s fermentation process produces beneficial bacteria that destroys harmful microbes. Crushed garlic used in Kimchi yields compounds linked to reducing blood pressure and infection.

One of the topics this blog frequents is Korea's luxury car market. Last year import luxury cars made inroads. To combat reduced market share, Hyundai seeks to maintain its dominance. One dynamic is the desire by middle class families to own luxury sedans. I see upward mobility and conspicuous consumption as markers of modern Korean society. This article notes how Hyundai's luxury Grandeur (Azera in the U.S.) is outselling the Sonata. Chosun Ilbo The Hyundai Grandeur is taking the place of the Sonata as the middle class'’ favorite car. Since 1994, the Sonata has been Korea'’s bestselling car except in 1998 at the height of Asian fiscal crisis. (That year the Daewoo'’s low cost Matiz briefly took the top spot.) But since the end of last year, the more expensive Grandeur TG has overtaken the NF Sonata. Since its launch last May, the two cars have been in fierce competition for the monthly market lead, and by the end of the year the winner was clear. In December, 9,96...

Bridging Culture at HMMA. This week I'll be at Hyundai Motor Manufacturing Alabama. It's impressive driving down Route 65 south of Montgomery and coming upon the plant. ( In fact, even more impressive is a view from the service road as one nears the plant.) 2 Million square feet of car making technology. WOW. BTW We may soon hear of Kia Motors announcing their first American manufacturing facility. HMMA's tier one suppliers , like sister company Mobis, will also be providers to the Kia plant. The map shows the location of a number of the HMMA's Alabama tier one suppliers. One consideration for the Kia site centers on access to these suppliers.

My interest in the Korean coffee market comes not only from my study of Western-Korean business, but perhaps since I LOVE coffee shops. Some days I've been know to visit 3-4. Starbucks is where I start my business day, usually at 5AM pst. This routine doesn't change much whether at home in San Diego, in Orange County preparing for a day with a client or In Seoul (Korean Starbucks' usually don't open to 7AM.) Next week I'm in Montgomery Alabama, guess what? I'll be at Starbucks when they open. In fact, in my cross cultural work with Americans and Westerners in describing the vibrant, dynamic Korean workplace, I use Starbucks as linking East and West cultures.... Visit downtown Seoul at lunchtime and it's amazing how many professionals are at Starbucks getting drinks...the lines at times reach outside onto the street. By the way, most of my Korean friends drink Cafe Americano...they prefer a more watered down drink than I like. Some stats Starbucks worldwid...

Chosun Ilbo article highlights Korean Domestic Car production i 2005 The article notes Korea ranked fifth in the world in car production, pumping out 3.7 million cars last year, the Korea Automotive Manufacturers Association (KAMA) said Wednesday. The number includes only the automobiles that were produced in Korea. Putting the country back in striking distance to reclaim its status as the fifth-largest global car manufacturer four years after it was bumped to 6th place by rapidly-growing China in 2002. The U.S. held onto its 11-year reign with a production volume of 11.95 million cars, followed by Japan with 10.78 million and Germany with 5.76 million. China closely followed Germany with 5.71 million, up 12.6 percent from the previous year. The other Top 10 nations include France (3.5 million), Spain (2.75 million), Canada (2.69 million), Brazil (2.45 million), and Britain (1.80 million). The total number of cars produced worldwide last year increased 2 percent to 66.31 million rid...

Valentine's Day is celebrated on February 14 in Korea like the U.S. However, unlike here in America, in Korea many girls and young women give candy to their boyfriends. This means that throughout Korea, stores are crowded with female shoppers buying chocolates and other gifts for their sweethearts for Valentine's Day. BTW There is another special day like Valentine's Day in Korea. They call that day White Day. White Day is on March 14. It is similar to Valentine's Day, but with a twist... Many boys and young men give chocolates to their girl friends. Some confess their love to their girlfriends on that day; so I'm told many young women look forward to it.

Globalization is a keyword in Korean society. This article highlights trends in Korean global expansion. According to a recent Chosun Ilbo article, Korean family-run corporations are less and less rooted in the country that spawned them. The article cites this trend as developing into transnational corporations... entities that acquire many characteristics of nations themselves without depending on the country where they originated. How this manifests.. For example, operating in 42 countries with 76 foreign subsidiaries, LG Electronics faces an annual linguistic headache because it has to translate its CEO’s New Year’s speech or management guidelines into 25 languages. LG has launched a project to translate its in-house intranet and common regulations into English to make English the company’s official language by 2008. [ Samsung has similar plans, I'm sure all the large Korean Groups will follow.] Global Sales The Samsung Group tallied its 2005 sales at $140 billion. [ I'm...

I enjoy the traditions of Korea,especially celebrations like Daeborum. Seoul will celebrate Daeboreum, the first full moon of the lunar year, this Sunday (Feb. 19 in Korea, Monday in U.S. times zones) with a range of traditional folk events. A village of traditional Korean-style houses in the middle of the capital holds events such as: displaying seasoned greens, which Koreans eat on that day; making ogokpap-boiled rice with five pulses such as red beans, kidney beans and millet- and sharing nuts traditionally eaten on the day to ward off boils; as well as games like seesawing and kite-flying. Cheonggyecheon Plaza will see traditional Korean games such as tuho-throwing sticks into a barrel-and the local variety of shuttlecocks, which is played with the feet. Events include writing family precepts and releasing balloons carrying people's hopes. The Cheonggye Stream will also see the revival of a rite where people cross a bridge once for every year of their lives to guard against aff...

More signs of the Korean domestic market love of luxury cars...and the more expensive the car, the better! In fact, this is what is driving [no pun intended] Hyundai Motors to expand their full size luxury car line. The 2006 Hyundai Equus is based priced at an all time high of over $90, 000. Plans for the launch of the restyled new rear engined V-8 Equus are rumored for 2007. Hyundai plans to use this new Equus to maintain market share in Korea despite strong competition. This new model should launch Hyundai's entrance into the luxury market... Korea Herald Demand for imported luxury cars is resulting in a supply shortage. >>>The more expensive, the more popular they are. For those who ordered a Volkswagen Phaeton large sedan, it takes as long as three months to receive the car as demand was much larger than anticipated. Volkswagen Korea had expected last year's sales volume of the Phaeton, which was launched here in April, to be about 200 units. However, sales p...

Those of us who watch and study Korean big business and their complex corporate structures, find the relationship between the Groups and Korean government facinating. On one hand the government tries to regulate Korean bid business, one the other hand hampering the Groups might hurt the economy. One issue that continues to surface is the holding company issue. All of the major Korean business groups have a defacto holding company. Most often the defacto firm is wholely owned by the controlling family and used to transfer control from one generation to the next. This article notes a move by Korea's regulatory agency to push the Groups to better transparancy and less complex and clouded shareholder systems... Korea Times Fair Trade Commission (FTC) chairman Kang Chul-kyu Friday hinted that the anti-trust regulator will seek ways to give conglomerates incentives if they improve their long-standing conservative governing structures. In a closed-door meeting with chiefs of 15 conglom...

On Sunday, (Monday February 13 in North American time zones) Koreans celebrate a special traditional holiday commonly called Daeborum, Actually called Jongwol Daeborum, it has been observed for over 1,000 years. Jongwol Daeborum is the first full moon of the new lunar year. In the past, it was thought that because the moon was full, it was a day for driving away misfortune and evil. Thus, the foods eaten and the games played on this traditional holiday have had a hidden purpose of expelling misfortune and evil. Jongwol means the first of the month and Dae means big in Korean. Borum means round moon or full moon. (It’s pronounced as its spelled… “dae borum”). While Lunar New Year’s Day is a family-oriented day, in contrast, Jongwol Daeborum is communal. That means Koreans traditionally started a lunar year with their family and 15 days later celebrate the full moon at a community level. Jongwol Daeborum, then, is a day filled with folk games, customs, and rituals. Nowadays, the celebrat...

Concerns by Korean Big business over the strength of the Won and rising costs in South Korea have major firms looking to ship production outside the East Asian peninsular nation. One ramification is South Korean union unrest. This Chosun Ilbo article highlights the move overseas by the Hyundai Kia Auto Group, Korea's largest automaker Hyundai Motor will try to parry the effects of the strong won by more than doubling its production capacity in India to 600,000 cars a year. Hyundai Motor officials said Thursday the firm's chairman Chung Mong-koo, on a visit to the firm's plant in India'’s Chennai, disclosed the plan in a meeting with Indian government officials and Hyundai staff. The company will expand production capacity by building a second plant there as the country emerges as a market to rival China, they quoted Chung as saying. The chairman pointed to the urgency of boosting overseas production amid threats from the strong won and record-high oil prices. Hyundai wi...

Seoul has been picked as the Asian city with the best economic potential by British magazine Foreign Direct Investment. The magazine'’s survey Asian Cities & Regions of the Future 2005/06 published in its January edition saw Seoul evaluated well in almost all categories, scoring best economic potential and coming second in IT sectors. Other categories include cost effectiveness, human resources, transport, quality of life, and potential. Excessive rents both in the center and on the outskirts of the city was cited as a disadvantage. Last October, Seoul ranked 55th along with Singapore in a survey of the best cities to live by the Economist Intelligence Unit, still ranking second among Asian cities behind Hong Kong, which took 41st place in the overall ranking. Foreign Direct Investment is bimonthly magazine published by the Financial Times Business Group devoted to business environment and foreign investment trends across the world.

Watchers of Korean Big Business, cover Samsung and its family management carefully. This article on Samsung's head Lee Kun-hee highlight recent events. The article stresses Samsung's desire to comply with government regulations and regrets its past actions. A contrite Samsung Group chairman Lee Kun-hee has decided to fork out $800 million from his own pocket as an unconditional donation to society. The group will also separate its legal affairs office from the restructuring department, leading to further downsizing of the department whose personnel already shrank from 150 to 98 in January. Samsung said Tuesday it will do further penance by supporting a watchdog consisting of prominent figures and ensure independent management of its affiliates. The Samsung Group, which miraculously escaped the long arm of the law in a series of scandals last year, vowed to withdraw all legal action it has brought against the government, including a constitutional petition over a fair trade law ...

In its drive (no pun intended) to be among the top 5 global carmaker, the Hyundai-Kia Motor Groups continues to set new goals...this Korea Herald article notes the plan... Hyundai Motor Co. and Kia Motors Corp. plan to produce 922,000 and 145,000 vehicles, respectively, abroad in 2006. The combined overseas production volume of the two carmakers under Hyundai Automotive Group is therefore expected to surge 43.6 percent to more than 1 million units. The estimated volume is to cover 26 percent of their sales target for this year - 4.12 million units. HMMA Hyundai Motor plans to triple its U.S. production volume to 275,000 units as its Alabama factory goes into full operation. The annual production capacity of the automaker's Indian plant is expected to swell from 251,000 units last year to 280,000 units after its employees begin working in three shifts around mid-year. Hyundai's Beijing factory is also scheduled to churn out 300,000 vehicles this year, up from 230,000 units, as i...

To most Westerners, Hyundai and its sister company produce cars. They also produce a line of buses and trucks--quite apparent to anyone who visits South Korea. This article highlights new markets Hyundai has developed for its bus line. Hyundai Motor has signed a deal to provide 40 of its Aero Express luxury buses to the Kremlin. A Russian government official said the country ordered the vehicles for use at the upcoming G8 summit in Russia's second city, President Vladimir Putin‚'s hometown of St. Petersburg, on July 15-18. They will be refitted for the occasion with Hyundai's help. Much thought has reportedly been given to the selection of vehicles for the summit, Russia's first as host. The souped-up Aero Expresses will be used to transport delegations from member countries. Given a market price of some US$100,000 each, the order will fetch the firm some $5 million. The Kremlin wants to bullet-proof the buses and equip them with satellite TV and video equipment. Hyunda...

This article points out issues that warrant cross cultural understanding--the focus of Bridging Culture. Korea Times Why are sales of Apple's global bestseller iPod much lower than those of local-made MP3 players in South Korea? And why does U.S. giant Google struggle in the Korean Internet market and is less respected here than anywhere else? One big reason for such unpopularity of foreign brands in Korea is their poor translation into Korean on Web sites, user manuals and software programs, users say. When using Apple's iTunes program, I'd rather use the English version than the Korean one even though I am not a native English speaker, said 31-year-old Lee Sang-hak, who owns an iPod MP3 player and an iMac desktop PC. It is easier to understand the English version because the Korean translation is unnatural and sometimes looks very awkward. On Apple users' community sites such as withipod.net and Maczoo.com, people say that unnaturally translated words on Apple product...

Vista, California February 2, 2006— Bridging Culture, a global Korea and East Asia-focused consulting firm, will expand its executive coaching service. The new program is called Building Bridges™. Bridging Culture’s focus is creating and delivering training programs to better communications between Koreans and Americans. Bridging Culture now offers executive-level coaching for top management, especially for executives new to Korean and American firms. Bridging Culture President and CEO Don Southerton notes “Fostering effective cross-cultural communication and understanding among American and Korean top management is a vital component in a firm’s continued success. Moreover, communication that reduces misunderstandings, while building trust and improving cooperation is vital.” Southerton points out “To accomplish this mission Bridging Culture (BC) now offers executive level coaching and training intensives to educate top management on the cultural differences between Korean and western ...

I found this report by the Korea Institute of Industrial Economics and Trade on mega-trends insightful. By Lim Dongsoon / Ph. D., research fellow, KIET What will lead the Korean economy and industrial sectors in 2020? Which sectors will be particularly promising? Which investments offer particular potential for the improvement of value chains? These are tough questions to answer. It is always a daunting task to ask tomorrow's questions and get answers today. The future is, by nature, uncertain. One way to predict the future is to sort out probable trends that will fundamentally affect the future. We call the very influential trends "megatrends." The megatrend approach in industrial analysis has strong virtues as it helps us identify global drivers and estimate their impact on the world over the next few decades. The Korea Institute for Industrial Economics and Trade has identified 15 key megatrends and grouped them into five clusters: i) changes in the world economic orde...