Thoughts on Korean Business by Don Southerton

By Don Southerton Few events in recent history have impacted South Koreans as significantly as the 1997-98 Asian financial crisis, commonly called the IMF Crisis. Thousands of Koreans lost their jobs and lifesavings as the crisis rocked the foundations of most Korean industrial groups or chaebol . In fact, no fewer than five major chaebol failed early in the crisis amid others who had to petition for bankruptcy. In the end, as many as 18 of the largest 30 chaebol would risk bankruptcy, and no more than a handful of the top 30 groups were seen as financially sound. For Kia Motors the IMF Crisis would be devastating. Although overseas sales and growth were steady, by early 1997 with ever-increasing development and labor costs, Kia found themselves heavily in debt. Perhaps of equal concern, Kia's difficulties were also a signal of problems throughout the South Korean automobile industry. The big three Korean automakers -- Hyundai, Kia and the Daewoo Motor Company—had created mo...

By Don Southerton Political and economic forces had long impacted the growth of the South Korean carmakers, including Hyundai, Daewoo, SsangYong, and Kia Motors. Despite the country’s economic success in the 1960s and 1970s, the growth model South Korea pursued was not immune to new challenges that would hit the country. In particular, two events would have significance impact on the country’s economy: the 1987 democratic transition and the Asian financial crisis of 1997-98. Kia Motors, which had grown into Korea’s second largest carmaker, would soon experience both international success and its own demise—the latter leading to a “second chance” under parent company Hyundai Motor. New Strategy By the mid 1980s, Kia's strategy looked overseas. They planned to fill the void at the low-cost end of the automotive market which was slowly being abdicated by the Japanese brands pursuing sales of more expensive models with higher profit margins. Compared to rival automakers in Japan,...

By Don Southerton, BCW Editor I recently spoke at the World Trade Center San Diego Asia Desk: Korea workshop. The session centered on business benefits for American companies under the new U.S. Korea Free Trade Agreement. Guest speakers also included KOTRA LA Director- General Yun and Korea University’s Moonsung Kang. Both gave specific details on the new treaty, which was implemented on March 15. A complex document, the KORUS FTA immediately eliminates some tariffs, with others removed over time. Automotiv e For example, the tariffs on auto parts manufactured in Korea are removed. With regard to cars, the tariff on US cars shipped to Korea is immediately reduced from 8% to 4%--the remaining 4% to be eliminated in 2 year. For Korean cars shipped to the US, the current 2.5% tariff remains in full effect, but will be eliminated in 2 years. Professional Services An aspect of the KORUS FTA is its impact on law and accounting services. In particular, the new FTA allows for US fir...

By Don Southerton The Kia Motors Company is one of the world's fastest moving global automotive brands. It has earned a reputation as an industry leader in design styling along with a full line of fuel-efficient vehicles that have earned critical acclaim and dramatically increased consumer awareness. That said, the carmaker had early roots as a Korean bicycle and motorcycle manufacturer. In the early 1960s Kia Motors Company moved beyond bicycles and motorcycles to produce a highly practical K360 three-wheel utility truck. Across much of Asia, similar vehicles met a demand for reliable low cost commercial transportation that could transport goods and products often in tight urban areas. Based on the Mazda Mazdago design, the K360 also signaled Kia Motors’ long technology alliance with the Japanese automaker with a number of cars and trucks eventually licensed from Mazda. During this era of budding Korea’s economic development, strong technology ties with foreign partners were...

By Don Southerton, BCW Editor On Wednesday May 9, 2012, I'll be a speaker for the World Trade Center San Diego Asia Desk Business Series: Korea. Also speaking at the event will be Moonsung Kang, Ph.D from Korea University’s Division of International Studies. I'll be sharing insights on how to benefit from the U.S--Korean Free Trade Agreement, including finding the right Korean partner, structuring your market entry strategy, and ways to avoid common pitfalls. Double click image to enlarge About Don Southerton When Fortune 500 companies, top Korean Groups, leading international law firms, and elite consultancies, such as Bain and Monitor, look for Korean-facing business strategy, coaching, and advice—they turn to Bridging Culture Worldwide and Don Southerton. With over 35 years’ experience, Don Southerton is the definitive authority on Korean-facing global business--from automotive, golf, and QSR sectors to New Urbanism and Green technology.  When problems and chal...