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Home / General Information / Korea Business Success eZine / Korea Business
Success eZine – Summer 2009
Korea Business Success eZine – Summer 2009
Welcome to the Summer 2009 issue of the Korea Business Success eZine of Korean Consulting & Translation Service, Inc. We hope you find this information helpful to your business in Korea and with Koreans everywhere. Table of Contents
Given the state of the global economy and its impact upon Korea's export driven economy, the country is aggressively seeking to expand its free trade network through Free Trade Agreements (FTAs) in order to increase automotive and electronics exports. Here is a brief update (as of the beginning of July) on the status of some of these potential FTAs:
[ top ] The Death of Former President Roh The recent suicide of former President Roh Moo-hyun has brought the world spotlight onto South Korean politics and internal affairs -- especially given the recent missile tests conducted by the North. To briefly recap, it is alleged that the wife and son of Roh, who had campaigned on a platform of reform where he vowed to fight corruption and improve relations with the North, had allegedly accepted a bribe of US$6 million (7.7 billion Won) from a relatively obscure businessman. Although Roh claimed that he knew nothing of the bribe while he was President, the strain of the ensuing investigation apparently proved too much for him. Although the incident is an unfortunate tragedy and does show the grubbier side of Korean politics (in fact, it is common practice in Korea for the current president to solidify his power base by having his predecessor thoroughly investigated), politics in Korea remain a free affair and it is hoped that Roh's death will lead to further reforms of the political system to avoid such tragedies in the future.
[ top ] Architect Daniel Libeskind to Give Seoul a Facelift Daniel Libeskind, the architect behind the new World Trade Center site, has just won an international competition to master plan a US$20 billion (25.9 trillion Won), 34-million-square-foot riverfront project in Seoul's Yongsan international business district. The site will include clusters of skyscrapers in residential, office, retail, education and cultural areas that will be built like islands around a riverside park. The site is also located near the current South Korean headquarters for the USA military which will move to a new base south of the city by 2012. The project is being developed by a consortium led by the state-run Korean Railroad Corp and includes funding by the Samsung Group and the National Pension Service. Groundbreaking is slated for 2011 with a 2016 completion date. [ top ] Hyundai Gains Ground Amid Economic Uncertainty Despite the state of the global economy and auto sales in particular, Hyundai has managed to increase its sales in the USA by 14% in January compared to a year earlier while sales for the entire USA auto market fell by 37%. In fact, Hyundai's market share in America has increased from 2.1% in January of 2008 to 3.7% in January of 2009 -- making it the fastest growing auto company in the USA in terms of market share growth. Meanwhile and in the first three months of this year, the automaker's global market share has risen to 4.7% from 4% a year earlier while global sales for 2008 rose 2% with revenues rising by 5%. Why is Hyundai succeeding while American and other automakers are struggling? Thanks to investments made years ago in quality control programs and new models like the luxury Genesis, Hyundai is now succeeding while its competitors continue to falter. Moreover, the automaker made a huge splash earlier this year with its Hyundai Assurance program that allowed car buyers in the USA to return a car if they loose their job.
[ top ] Dunkin' Donuts Announces Expansion Plans Dunkin' Donuts has operated in Korea since 1992. In fact, approximately 47% of Dunkin' Brands' non-USA doughnut division revenue in 2008 came from sales in Korea while international operations accounted for 10% of the total US$5.5 billion in revenue. Recently Dunkin' Donuts announced plans to open an additional 100 outlets by the end of this year. This will add to the 191 outlets opened in Korea last year and the 663 total outlets in the country right now. In fact, the company says that it plans to double the number of outlets in Korea in the next decade. In addition, Dunkin' Donuts has also recently opened its first coffee-roasting facility outside of the USA in Korea so that it no longer has to import coffee from America. [ top ] Feature Article: Korea as a Brand South Koreans, especially South Korean policy makers, have long complained about what they perceive as South Korea's "image problem" and "low" status as a brand in the world -- especially in the West. In fact, in a recent Nation Brands Index, South Korea was ranked 33rd among 50 nations -- just behind countries such as Poland and the Czech Republic which have much smaller economies. Furthermore, many South Korean policy makers feel the country has been dealt a bad hand by being wedged in between better known China and Japan while sharing a name with a rogue state hasn't helped either as its usually negative news about North Korea that brings attention to the Korean peninsula. Moreover, while China has the "Great Wall of China" and Japan has Mt. Fuji, Korea tends to be viewed as a drab and featureless peninsula by Western tourists while Korean achievements, names and brands are often still not well known or worst, they are wrongly associated with China or Japan. Hence, South Korean policy makers are spending millions of dollars to develop a "national brand" and President Lee Myung-bak has even formed a Presidential Council on Nation Branding with the stated goal of moving Korea into 15th place on the Nation Brands Index by 2013. Ironically though, at the same time that Korea policy makers perceive the country to suffer from a global image problem, Korean pop-culture has taken much of Asia by storm. In fact, the Chinese media in 1999 coined the term the "Korean Wave" to describe the deluge of Korean pop culture that had entranced much of the country's youth and since then, this wave of Korean actors, musicians, music videos, movies, television dramas, cartoons, animated characters and computer games have swept through much of Asia and have even penetrated ethnic communities in the West. Moreover, government policies that led to the development of dynamic cutting edge infrastructure (such as broadband internet) has turned Korea into a hotbed for new innovative high-tech products and services while the 1997 financial crisis forced many Korean companies to focus on core industries -- creating the first world class Korean brands such as Samsung mobile phones and Hyundai cars. In 2005, Korean policy makers began to shift away from an earlier branding campaign that incorporated the slogan "Dynamic Korea" towards a new national brand campaign that eventually incorporated a new slogan: "Korea, Sparkling." This slogan was developed in attempt to change the perceived image of Korea as a drab, characterless, unknown and featureless country into one that is fresh and revitalized -- in other words, "sparkling." However, it is too early to tell whether or not the "Korean, Sparkling" slogan or the Presidential Council on Nation Branding will have any noticeable economic impact (i.e. attracting more tourists to Korea) or for that matter, any impact on policy maker perceptions that Koreans, in spite of the "Korean Wave" and a number of world class Korean brands, still should care about whether or not the country may have an "image problem" abroad and a "low" status in the world.
[ top ] For most of the first half of the 20th century, Korea was occupied by Japan and since then, relations between the two countries have been further complicated by the presence of a substantial number of ethnic Koreans living in Japan. In fact, Koreans constitute the largest ethnic minority in Japan -- numbering some 900,000 strong. The majority of these Koreans are known as Zainichi Koreans, or simply as Zainichi ("staying in Japan"). Numbering at roughly half a million, these Koreans are long term permanent residents of Japan who either still have citizenship from the old and undivided Korea or they have South Korean citizenship. In addition, there are close to 300,000 Koreans who are now naturalized citizens of Japan thanks to a 1985 naturalization law revision. Most of the Koreans living in Japan trace their origins to the days of the Japanese occupation of Korea when hundreds of thousands of Koreans either immigrated to or were conscripted to work in Japan. By the end of World War II, there were close to 2.5 million Koreans living in Japan and most ended up being repatriated back home after the war -- leaving roughly 650,000 Koreans in Japan. When Japan formerly gave up its territorial claims to the Korean peninsula, the remaining Koreans were effectively left in limbo as they also lost their Japanese citizenship. Further complicating matters was the division of Korea between North and South as some Koreans and Korean organizations in Japan favored the North while others favored the South. In fact, Koreans in Japan continued to be repatriated to the North well into the 1960s until the true conditions there became more readily apparent. Today, Koreans in Japan represent a stable minority whose activism has increasingly made them more a part of mainstream Japanese society without completely loosing their Korean identity. However, those who remain long-term permanent residents and have not adopted Japanese citizenship still face some challenges such as the lack of voting rights. Moreover, several immigration reform bills have recently come before the Japanese Diet including one that would replace the current alien registration card with a new "zairyu" (residence) card that would need to be carried by foreign residents all the time. These bills are strongly opposed by some Korean groups in the country but reportedly a deal has been reached between the LDP-New Komeito ruling coalition and the Democratic Party of Japan that would exempt Koreans from carrying the new card. [ top ] Culture: Understanding the Korean Corporate Structure Korean corporate structure is a reflection of Korean society -- in other words, highly centralized and very hierarchical. In fact, the Korean "chaebol" or large business conglomerate is considered to be similar to the Japanese "keiretsu" with the primary differences being that Korean chaebols tend to still be controlled by the founding family with ownership centralized while Japanese keiretsu tend to be controlled by groups of professional managers with overall ownership more decentralized. Furthermore, Korean chaebols often create subsidiaries to act as their suppliers while their Japanese counterparts often use outside subcontractors as their suppliers. Nevertheless, Korean firms still have unique characteristics that visitors coming to Korea for business need to be aware of. These unique characteristics include:
Knowing about and understanding the above characteristics of Korean corporations will greatly aide when seeking to do business with one. [ top ] Some geographic place names inevitably evoke controversy or bring up historical grievances and one such example is the name often used to refer to the body of water that is surrounded by the Korean peninsula, the Japanese archipelago and the Russian mainland. If you were to look up the name of that body of water on most English language maps, you would see it labeled as the "Sea of Japan." However, South Korea insists that the same body of water should be referred to as the "East Sea" while North Korea insists that it should be referred to as the "East Sea of Korea." In fact, both North and South Korea have lobbied the UN Conference on the Standardization of Geographical Names for name changes while South Korea has gone so far as to pay for an ad in the New York Times to argue its point of view. To understand why the name evokes such strong emotions by Koreans, one must look back on Japan's place in Korean history. From roughly 1905 until the end of World War II, Korea was occupied by Japan and suffered one of the most brutal colonial occupations in modern times. Hence, the vary name "Sea of Japan" in Korea will evoke memories of Japan's imperialist expansion days. Thus, Koreans argue that the name is both insulting and insensitive. In 2002, South Korea successfully used this argument to lobby the International Hydrographic Organisation to omit the name "Sea of Japan" from drafts of its signature publication, Limits of Oceans and Seas. However, Japan immediately filed a protest and the Japanese Ministry of Foreign Affairs even went so far as to conduct a survey 370 publications and it found that 97% of them refer to the body of water simply as the Sea of Japan. Moreover, the Japanese argued that the name "Sea of Japan" has been in use for more than 200 years - long before Japan began its imperialistic expansion phase at the beginning of the 20th century. In 2007, the UN Conference on the Standardization of Geographical Names held discussions of the matter and proposed that the two Koreas and Japan continue these discussions and report on the results at the next conference meeting in 2012. Hence and until the naming controversy is resolved once and for all, visitors to Korea should be aware of the emotions surrounding the issue. Although referring to the body of water by its internationally recognized name of "Sea of Japan" is certainly not a major faux pas, referring to it as the "East Sea" instead will go a long way towards letting Koreans know that you have made an effort to understand something about their history and cultural sensitivities. [ top ] Knowing a few basic phrases or words will go a long way in aiding one's stay in Korea and help to build the personal relationships and rapport required for successful business and personal relationships in Korea. Below are some common corporate departmental titles that an expatriate or a business traveler may encounter while doing business in Korea. Recognizing the appropriate character and knowing its correct pronunciation will certainly go a long way in helping a visitor navigate him or herself around a corporate office in Korea:
Source: LifeinKorea [ top ] In 2007, Korea was the 14th biggest economy in the world. However, the global economic downturn will likely show that Korea fell to 15th place in 2008 and will fall to 16th place in 2009 but then rebound to the 14th spot after 2010.1 Currently, the USA economy is about 14 times bigger than the Korean economy while the Japanese economy is about 4.5 times bigger.2 According to the World Economic Forum's 2009 Global Enabling Trade Report which provides a ranking of countries that are good to do business with, Korea is ranked in 26th place overall while the USA ranks 14th, Japan 23rd and China 48th. Specifically, Korea ranked 106th in terms of market access, 22nd in cross-border procedures, 21st in infrastructure and 26th in business environment. The Korean doughnut market is currently valued at about US$222 million (300 billion Won) and has grown 30% annually for the past three years. Due to the doughnut market's attractiveness and latent growth potential, it is expected to grow another two-fold in the coming years.3 Krispy Kreme, which has 30 stores in Korea and first-year sales of about US$7.7 million (10 billion Won) in 2005, is estimated to have had US$46.3 (60 billion Won) in sales for 2008.4 Japan based Mister Donut will grow from 12 outlets at the end of 2008 to 30 outlets by the end of 2009 while Doughnut Plant New York City which had 11 outlets at the end of 2008 will open another 15 outlets in 2009.5 The instant coffee mix market is now estimated to account for about 80% of all domestic coffee consumption in Korea.6 Some well known Koreans in Japanese include Son Masayoshi, the CEO of Softbank; Shin Kyuk-ho, CEO and founder of Lotte; and Han Chang-Woo, the CEO of Maruhan (Japan's largest pachinko operator). 1) "Korea
world's 14th largest economy," Korea Herald, May 15, 2009. [ top ]
"Country Report: South Korea." The Economist Intelligence Unit (July 2009). [ top ] |
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