Thoughts on Korean Business by Don Southerton

My watch of Korea big business this week is centered on the Lone Star investment issue in Korea... This has been a week of raids and probes into Korean businesses-Hyundai-Kia, Hyundai Development (not connected to the motor company), and Lone Star... Some feel South Korean prosecutors' raid on Seoul office of Dallas-based Lone Star Funds could dampen foreign investment and weaken international confidence in the Korean economy. Why are their concerns... Korea hopes to be a East Asian fiscal hub. Korean media notes... Government prosecutors raided the Korean office of U.S. private equity fund, Lone Star, to seize documents and computer files in its probe into the investor's alleged tax evasion, and illegal transfer of funds abroad and other irregularities. An executive of the Korean subsidiary of a U.S. information technology (IT) firm said that the recent development may appear as the Korean government is putting foreign investors under fire just for reaping big profits in ...

Anyone who knows the Korean workplace recognize that many Korean men are smokers...a new report published in Chosun Ilbo cites some change. The number of men who smoke in what remains a comparative bastion of unfettered tobacco consumption has dwindled below 50 percent for the first time, a survey suggests. The Ministry of Health and Welfare said Tuesday a Gallup Korea poll it commissioned asked 751 adult men across Korea whether they smoked and heard that 49.2 percent of them did. After peaking at 79.3 percent in 1980, the number steadily declined. By 2003 the proportion had fallen below 60 percent, to 56.7 percent, rising to 57.8 percent in September 2004 but declining more steeply afterwards to reach 52.3 percent last year. The ministry attributes the decrease to continuously rising prices of cigarettes as well as more clinics helping smokers to quit and concerted anti-smoking campaigns. However, a survey of 774 women showed the proportion of smokers among them has started increasin...

I was recently asked about the Korean job market and unemployment. Overall Korean unemployment is low, except for recent graduates.. JobKorea, an online recruiting information provider, notes only three out of ten jobseekers who graduated from colleges and graduate schools this February (2006) succeeded in getting jobs, showing the job market is tight for young people. It seems that 28.5 percent of 1,728 graduates have been given employment notices from companies. The ratio was higher among junior college graduates with 32.9 percent, while only 22.2 percent of those who completed graduate schools this February got hiring notices. By gender, the employment ratio stood at 29.4 percent for male graduates and 26.8 percent for females. Those who majored in business management or economics were sought after most by companies, with 35.2 percent of them hired. Science and engineering majors showed the next highest employment ratio of 29.7 percent, while only 20.1 percent of social science maj...

Frequent readers of this column will note my ongoing study and commentary on Korean Big Business. One dynamic of Korean business is the Love-Hate relationship between the Korean government and it major conglomerates. (By the way, this has been going on for twenty-five years.) On one hand, Korea's global corporations are vital to South Korea's economic well-being. On the other hand, the structuring of Korean big business conflicts with South Korean government mandates for corporate transparency and open management. Ironically, when a company complies with the government mandates it is more open for hostile takeover--such as the recent Carl Ichan-led move against Korean Tobacco and Ginseng. Last year and into the first months of 2006, Samsung and its Chairman were target of government probes. Now, the Hyundai-Kia Motor Group, Korea's second largest group, its Chairman, and 20 key executives are the subject of a massive probe. Why such attacks on Korean Big Business... Ou...

Korean family life insights... The Ministry of Gender Equality and Family has released a special report on Korean families. The report showed how families have changed. The report indicated that children and parents need to try to better understand each other. Over 60 percent of parents said they are good at giving advice to their children. About 35 percent of children talk about problems with their parents. Only 4 percent of children between ages 15 and 24 talk about problems with their fathers. The report showed that fathers rarely do household chores and help with child rearing. Less than 10 percent of fathers do activities with their children and help with homework. Thus, many fathers spend less time with their children than mothers. When asked if they enjoy doing cultural activities with their children, such as going to movies and concerts, 6.5 percent of fathers said yes. About 20 percent of fathers do outdoor activities with their children. These activities include playing sport...

Yes, It's another blog on Starbucks, and coffee consumption in Korea. What is suprising is the disclosure of their numbers. Starbucks headquarters in the U.S. earns $. 20 for every $4 cup of coffee Starbucks Korea sells. The local Starbucks pays 5 percent of sales in royalties to headquarters, netting Seattle $4.56 million in royalties from Korea alone last year, up from $1.38 million in 2001. In total, it has taken as much as $15.14 million over the last five years in Korea. Starbucks Korea is also paying dividends of $6 million, more than 60 percent of its net income of last year, it said in its latest audit report. As a result, Starbucks U.S., which owns half of Starbucks Korea, the other half being owned by Korean conglomerate Shinsegae, earns $3 million in dividends on top of the royalties. And still the coffee franchise keeps expanding. It opened 34 new branches in Korea last year and recently opened its 154th branch in Seoul. Yet Seattle only ever invested $10 million. Sta...

Most Koreans have adequate English language proficiency--at least when compared to Anglos with Korean language skills. Nevertheless, some Koreans misuse common English terms. This article by a Korean professor points outs gaps Koreans have with some English terms. I find the automotive terms relevant to those in the car business. Korea Herald Few Koreans seem to realize that they are frequently using incorrect English terms known to be coined in Korea or Japan. The term "Mama boy," for example, has been widely used in Korea for the past few years. Yet, the correct English term is not "Mama boy" but "Mama's boy." Likewise, Koreans say "ice tea" and "a ball pen" but they are supposed to be "iced tea'" and "a ball-point pen," even though the distinction between the two may be disintegrating in oral expressions. When it comes to automobile parts, the gap is even wider and thus reconciliation seems almost inconc...

Not so different than in the American workplace. That was my first thought when I read the results of a Samsung young workers survey. A website for information exchange between the younger generation of workers operated by Samsung, called Youngsamsung.com released the results of a survey on the most common untruths told at the workplace. The survey of some 1,000 workers showed that " talking big, and not backing it up" was the most common type of deceit. For example, "It's almost done," "Just putting the finishing touches on it now" and "Sure, I'll get right on that" topped the list with 48 percent. Other excuses such as "I had an emergency at the house" or "I've been sick" came in second with 15 percent, followed by feigned expressions of enthusiasm such as "I'll do my best" or "Just leave it to me" with 10 percent, and flattery such as "You're amazing" or "You look gr...

South Korea has five makers. GM Daewoo rose out of the ashes of a bankrupt Daewoo Group. This article discusses recent success at GM Daewoo. Chosun Ilbo Union and management representatives of GM Daewoo Auto & Technology on Friday announced an agreement to rehire by the end of May all 1,725 workers laid off in restructuring in 2001, when GM acquired Daewoo Motors. GM Daewoo is the first company in the country that has ever hired back every last worker it rationalized out. As a condition for taking over Daewoo Motors five years ago, GM demanded restructuring including substantial cuts to the workforce at the Bupyeong plant, which was the least productive among the moribund company’s factories. Laid-off workers took to the street at the time, and their families clashed with police in the course of violent protests that saw hundreds injured and arrested. That is why the accord to hire them back has a special significance for union and management of GM Daewoo. It is worth pondering the...

I'm often asked about food in Korea... I tell my clients that Western influnce is popular--Starbucks, Outback, Krispy Kreme are common...not to mention pizza and burgers. I just found out about this Korean business, Lucy's Pie Shop. I'll make sure to check it out on my next visit to Seoul Korea Times During the 13 years I[ the reporter] have been back in Korea, bakeries in Seoul, though certainly plenty in number, have been of little help in satisfying my craving for a piece of good pie. In the smaller shops, I still walk in asking to see their pecan pies and when asked, ``wouldn't a walnut pie do?’’ I turn right around to walk out. The two ARE different and no, walnut pie will not do when the other is in order. In the more well-known shops, often I see the recipes tweaked a wee bit too far and the pies come off looking and tasting far different from the home-baked feel that I had come to love. Growing up in a family who loves their desserts, I am particular about how ...

Much of Korean business in focused on the global market. Key to this is localization, an area I focus on. This article is on the Korean ministry responsible for promoting Korean business abroad and how they are addressing localization. The Korea Trade Investment Promotion Agency on Thursday published a guide to negotiating the pitfalls of doing business abroad based on the experience of veteran expatriates. Among other useful tips, it discourages asking for cell phone numbers in Russia, where mobile phone users have to pay for incoming calls from abroad. It is inappropriate to ask for a cell phone number before the buyer offers it to you and tells you to call. The person who receives the call has to pay for it, and most companies don't cover cell phone use for employees, so the cost comes out of their own pockets,” KOTRA warns. Even if you know the buyer's cell phone number, the agency says, calling them up without their permission is very rude, a reason secretaries do not fr...

Korean marketing trends is a subject I follow. Interestingly, employment in the Ad business is seen as one of the top careers by many Gen Y and 20:30 Koreans. Korea Herald Amid growing concerns over foreign ownership of home-grown companies,[ I'm watching the Icahn-KT&G takeover carefully] the world's second largest marketing group WPP bought LG Ad and Diamond Ad in 2003 and merged Diamond with its existing local arm, Ogilvy & Mather Korea, late last year. It is a unique case where a foreign agency has merged with a wholly-owned domestic agency, said Miles Young, chairman of Diamond Ogilvy Group and Ogilvy & Mather Asia Pacific. [ In a country that's highly nationalistic this might not of been smart]. We certainly are interested in acquiring more companies in Korea, said Young who had helped WPP on a freelance basis by introducing it to LG Ad. WPP holds a 28 percent controlling stake in LG Ad. But of course, organic growth is more important. Diamond Ogilvy Gro...

Kia Motors CEO Chung Eui-sun, left, and Georgia State Governor Sonny Perdue sign a memorandum of understanding on building the Korean automaker’s first U.S. plant in West Point, Georgia.. The agreement was signed at the headquarters of the Hyundai-Kia Automotive Group in Seoul. I've been following the project since August 2005. The new plant will be located near the Alabama-Georgia border . See Map

Elite Confucian society lauded scholarly achievements. Modern Korean society sees the importance of education in equal light. Korea is also a wired society, so a recent announcement by Seoul's Office of Education comes as no surprise. Parents Get School Records via Cell Phone Parents will receive various information about their children's activities in elementary and secondary schools in Seoul via cellular phone messages. The Seoul Metropolitan Office of Education decided Sunday to expand the message services to all elementary, middle and high schools in the city as a similar pilot program in several schools has drawn positive response from parents. The services would allow parents to receive set school information, including grades and schedules, via a cellular phone's text message service. Parents will also be able to consult with teachers about various issues regarding their children through the mobile communication service.

I'm always looking at the domestic Korean car business...here's a list of promotions to boost sales in Korea South Korean carmakers went into a marketing war this month to fight the slumping domestic demand, giving discounts of up to $6000 and extending the term for free maintenance service. GM Daewoo Auto & Technology Co. cut the price of its Statesman large sedans for those who are paying in regular installments and another $3000 off for cars that were brought into the country before September last year. Current owners of GM Daewoo cars can pay $400 less for the Statesman and get an additional discount of $500 by using an Auto Save credit card issued by the Industrial Bank of Korea. Kia Motors Corp. expanded its drawback to all models this month. A $200 discount is given for the new Lotze midsize which was released in November. The popular Sportage sport-utility vehicle is also marked down by $100 won for the first time. Other models are subject to discounts of up to $900...

The chairman of Korea'’s Samsung Group Lee Kun-hee was ranked the 82nd richest man on earth in Forbes magazine's 2006 list of the world's wealthiest people. With a net worth estimated at $6.6 billion, the head of Korea's largest industrial conglomerate moved up 40 places from last year. Hyundai-Kia Auto Group Chairman Chung Mong- Koo fortune was estimated at $3.3 billion. Microsoft co-founder Bill Gates was again the world's richest man. Gates topped the list for the 12th year in a row with a net worth of $50 billion, followed by investor Warren Buffett of Berkshire Hathaway, who was worth $42 billion.

Can't wait to walk through the gate...

I thought this article on preferences of business lunch was interesting. One reason the topic is soups is that Koreans, everbusy, take short lunches often in hurry before returned to work. Soup makes a quick lunch, One key aspect of the article is the generational preferences...BTW I prefer the Kimchi soup. Korean executives mouths water for mudfish soup (Chueotang) while lower-ranking employees could do without the dish. A recent survey conducted by the office catering business Samsung Everland that studied 5,071 workers between their teens and 50s on their favorite dishes at the canteen proves that might just be true. According to the poll, mudfish soup made the top ten list with a score of 74.5 out of 100 among deputy managing directors and managing directors (most who wouuld be in their late 40s and 50s), but only managed a score of 55.6 among lower-ranking employees. Grilled flatfish and ox-blood soup were also picked as favorite dishes among directors while they were far from ...

Korean online job search firm Saramin asked this question...Have you experienced discrimination based on your gender while looking for a job? The majority of female workers in Korea think that sexual discrimination is prevalent in both the job search and in the workplace, according to a survey by the online job-search site Saramin (www.saramin.co.kr). Some 57.5 percent of 573 female workers surveyed answered affirmatively to the question, "Have you experienced discrimination based on your gender while looking for a job?" Among the types of discrimination women experienced while seeking employment, “age cap” topped the list at 35.6 percent, followed “interview question discrepancy” (i.e. being asked whether they would be willing to run errands, make copies, or fetch coffee etc. for their colleagues or bosses) with 24.3 percent, “marriage status” with 20.1 percent, “appearance” with 11.2 percent, and “height and weight restrictions” with 8.8 percent. When asked if they had expe...

Most foreign based firms send management and workers to host countries. We call these workers and executives expatriates. In addition to demands for achieving company and project goals, adjusting to a new culture is challenging. I call this adjustment Culture Shock, which is localization to a new geographic region and its unique business culture, norms and practices, not to mention the stresses to the expats family. Adding to stresses inherent to working abroad, recent arrests and convictions of Korean expat executives are causing addition concerns. Why? Essentially, Korean companies need to be very careful, not only in the semiconductor industry but also in the LCD, TV, shipbuilding and auto industries, where they have growing market shares. An American lawyer familiar with the case notes, "They'’re making a big mistake if they think they will never go to jail in the U.S. for price fixing [ or other illegal practice] just because they're not a resident there." I see...

An upbeat story of Hyundai in America. ( I helped a little). And may we wish your spouse a happy birthday? Hyundai leader seeks to create an international family Sunday, February 26, 2006 BY MIKE RAMSEY News Business Reporter Here's a benefit to those working at the new Hyundai-Kia America Technical Center Inc.: spouses get flowers on their birthday. It's a little thing that Won Suk Cho, president of the center, does for employees. The act gives a little insight on Cho, who came to Ann Arbor three years ago to help open the research, development and testing facility located in Superior Township. Cho is one of Washtenaw County's most important business leaders, though his name may not be familiar to many people yet. He feels that a family environment is important to building a strong company. And with an international staff that's growing geometrically, building a company culture requires the extra details like that. He manages a staff of 150 now, but in four years, th...

One historic site that attracts great interest is Seoul's 600 year old city gates. Part of the city's ancient fortifications, several of the city's gates have survived Japanese colonialism, moderization, and urbanization. The Namdaemun Gate commonly called the Great South Gate was a center of commerce in Korea for hundreds of years. In fact, early Anglos on the peninsula noted its stature. Numerous pictures by these Anglos document it a century ago. My book_Intrepid Americans: Bold Koreans_ points out the economic and social significance of the gate. On my recent trip to Korea I was able to get within feet of the gate. What I really wanted to do was walk through the gate. Good News, as the photo shows, the structure is now open to visitors. I look forward on my next trip to Korea to enter the gate like thousands of visitors to Seoul did in the past.

To follow up on yesterday's topic on Korean luxury cars and status. I've been asked "What do the luxury imports cost Koreans?' Korea luxury import cars are disproportionately expensive in Korea compared to the U.S. or even Japan. For example in Korea a Lexus LS430 costs around $115,000 including VAT. {There are about 11 VAT's in Korea} The same model costs half that in the U.S., where the price tag is about $56,000. Even with all the extras, U.S. consumers can buy the LS430 for $74,000. That means Americans pay $40,000 less than Koreans. The same is true for the Mercedes Benz SL600, which costs $261, 000 in Korea, but about $140, 000 in the states This means that status can costs lots in Korea...a price tag many upwardly mobile Koreans will pay. BTW My firm Bridging Culture did a study on the Korean import car tariffs and VATs. It's available upon request.

It seems that almost every week an article surfaces on the Korean luxury car market. I see this interest in luxury cars as a strong indicator of societal and eceonomic upward mobility. At the top of the list are foreign luxury cars, which occording to this article are most popular in the Kangnam and Socho area of Seoul. Korea Times Of every four large-sized automobiles sold in South Korea, sedans and sport utility vehicles included, one is foreign. Imported cars posted a market share of 23.9 percent in the sales of domestic and foreign automobiles with an engine capacity of 3.0-liter or more in 2005. Foreign carmakers, such as Lexus and BMW, sold 11,350 large vehicles sized 3,000 cc or more, while the combined sales of large-sized cars, including domestic ones, was 47,296. The ratio of 23.9 percent is noteworthy as imported cars captured only 3.27 percent of all (small, mid and large-sized vehicle) sales last year. Imported cars accounted for only 7 percent of the large-sized autom...