Everything Korea: February 27 Episode–Globalization Requires a Better Process—Firing and Hiring

I was recently asked by the editors of Korea Herald’s The Investor magazine to comment on the Korean car manufacturers, in particular Hyundai Motor.

My policy is never to speak about clients, but instead provide a perspective from a cultural standpoint. I’d like to share in condensed form, as well as with an epilogue, the guest contributor article titled: New considerations loom as Korean car brands strive to become more global

I noted, globally, the car industry in 2017 is more competitive than ever due to market fluctuations, shifting demand from sedans to SUVs and predictions that US car sales have peaked.

According to the Detroit Free Press an average of three separate industry forecasts from Kelley Blue Book, Edmunds.com and LMC Automotive predict overall U.S sales are expected to fall about 1.7%.

That said, Korean brands have done exceedingly well on a global scale. I see this trend continuing as Korean OEMs (original equipment manufactures) seek out top talent and adapt to changing conditions, even in an era of potential Trump protectionism.

And while success continues, there are still issues, some of which are rooted in culture that can still be a hindrance to the realization of full potential.

For example, in regard to talent, the abrupt dismissal of a Korean carmaker’s top Western executive can draw considerable attention in the local market’s media and industry.

Sources say these sudden departures are most often due to a failure to meet sales goals set by the headquarters in Seoul. But what’s behind these departures might very well be the real story of interest.

Korean vs. Western Norms

First, tenure for top Korean senior C level executives, excluding chaebol family members, is usually just several years and, in some cases, not even a single year. The career path for long-term Korean employees is to continually move up the hierarchy through a narrowing pyramid, with fewer and fewer advancing to the highest levels.

Even then, Chosun Ilbo noted only one out of 115 staff are likely to rise to a management position–this according to a study of 184 listed subsidiaries of the top conglomerates by market researcher CEO Score.

Among management, logistically only a select few can achieve vice president level and an even smaller number can become president or CEO. Studies have shown the average Korean CEO is 58.8 years old, graduated from a prestigious university and took 25 years to get to the top.

These executives recognize that at some point in their career they will be asked to retire and exit, allowing their juniors to advance. Most often these organizational changes occur during the end of year restructuring.

These practices align with norms of a collectivistic society and the Korean executive accepts the decision based on the group goals taking precedence over his or her individual objectives and desires. The goals and needs of the group supersede the comfort and satisfaction of the individual.

Following a somewhat different model, Korean overseas organizations have at times opted to assign a Korean to oversee the local OEM subsidiary. These employees work as expatriates for 3-5 years and then return to Korea for reassignment, retirement or exit.

Cultural Expectations

At other times Korean companies will hire seasoned western professionals for the top leadership positions. Local industry expectations are that the westerners will stay on the job for an extended period until they retire or move to another company. A gap occurs when Korean cultural expectations are that the western leader would only hold the job for at most five years.

While year-end restructuring with promotions, retirements and dismissals are accepted Korean business norms, timing for the departure of a key western leader can be an issue. In particular, with a year-end exit the holidays allow little if any progress on recruitment.

Typically, companies, Korean or Western, are well into the new year before they can effectively interview candidates, review options, and consult with senior management before reaching such an important decision. Even if the search is internal, the process takes months.

What is concerning in today’s global market is a top proven leader of that caliber needed to head up a brand may be unwilling to accept a position so tied to achieving robust sales goals as well as being responsible for the overall business, when design, product mix and production targets are also set by the Korean HQ.

An Alternative Approach

I do see some alternatives. Termination of senior leadership goes with business. However, as Korean car brands strive to become more global, deep consideration is needed to determine the best way executives should leave. With a well-managed process there is little damage to the brand, and the field is opened to the best potential candidates for the job.

As an epilogue to The Investor article, and as a trusted industry friend and market leader reinforced… changing executives does come with the territory.

Nevertheless, we have seen in the case with American CEOs John Mendel of Honda, Jim O’Sullivan of Mazda, and Jim Press of Toyota—plus most recently Nissan’s Carlos Ghosn stepping down from the role of CEO, there is a success model of well-crafted exit notices (retiring, leaving for family reasons, resigning to seek other opportunities). These reduce negative press and promote a more balanced, attractive workplace culture.

Everything Korea, February 19 Episode Market Entry Best Practices

I am a strong advocate of Korean global business. I see great opportunities and am passionate about seeing Korean brands succeed overseas as well as international brands thriving in Korea. However, as I have shared in a previous Brand in Asia article, my experience is that companies, Korean and global, need to recognize the considerable upfront investment required to enter markets outside their home countries.

In this follow up commentary I would like to share what I see as best practices.

Step 1: Do your homework

Invest time and resources in Discovery of the local market. Seek out an expert knowledgeable in both the local market and business sector to perform an objective detailed competitive analysis. The report should identify the strengths and weaknesses of the competition within the market, strategies that will provide you with a distinct advantage, the barriers that may prevent you from entering your market, and weaknesses in the competition that can be exploited.

Frankly, too often we see a company just scratch the surface. In some cases this is to control initial investment costs by assigning in-house teams to work remotely by researching via Google search. In other cases the staff at headquarters dispatches a team to do some “field work,” attend trade shows, and perhaps arrange to visit a few potential partners. This falls short of a legitimate competitive analysis.

Step 2: Get in front of the right people

For highly recognized U.S. or global brands, there is less a barrier in setting up meetings because product or service name recognition does open doors. I have found that this recognition at least generates enough interest for a potential partner to want to learn more. For Korean brands entering an overseas market there is considerably more effort in establishing upfront credibility.

I should point out that a cost comes with arranging solid introductions. This process is very time consuming for both international and Korea market entry. Additionally, anyone with the skill set, savvy and reputation to make introductions, especially with decision-makers, cannot be expected to do so as a favor.

Top consultants with a proven track record also do not work contingent on a potential partner and the company signing a contract.

Step 3: Share your brand, product and service like a first date

Although best done in person, I recognize introductions and first contact today is often “virtual.” That said, any content presented at this stage should be the very highest quality and well localized. Far too often, I see re-purposed PDF and PPT presentations—not unique, custom tailored content. Then, make sure the grammar, spelling and punctuation are double-checked by a native speaker, and the pages are free of format glitches.

Step 4: Share the Vision

During their screening and selection process global companies will select a top candidate among potential partners based on a number of criteria—foremost being the partner’s solid vision and business plan in the market. They will ask if the local partner has performed a detailed competitive analysis (see Step 1). They will then ask for a comprehensive Go To Market Business Plan. As a best practice, the Business Plan needs to be detailed, not a 3-4 page overview. As with PDFs or PPTs shared in introductions, the Plan needs to be free of glitches, poor grammar or spelling errors. The documents need to present an attractive, sound business opportunity.

All said, these 4 steps are best practices that can lead to a successful Memorandum of Understanding (MOU) and then agreement. They require time, resources, and commitment—with up front cost and many steps counter to past and current practices in Korea that traditionally require less investment.

Frankly, global business comes with challenges and risks. The effort requires embracing a new model and taking bold action by committing resources to a project that takes them into uncharted waters even when they feel a more practical approach is to tackle each stage as it unfolds.

Everything Korea February 13 Episode, Licensing: a Faulty Model

I have a history licensing Brands to Korea….

At times representing Korean firms licensing the foreign brand and at times the international company seeking a Korean partner. In the best cases, I bring partners together, resolve their differences, and work towards an amicable agreement. In less so pleasant circumstances, I have been engaged when terms of an agreement are in dispute.

For entry into Korea, the current model is for an international brand to request the potential Korean company to prepare a “go to market” Business Plan. The plan would usually include background on the company, the competition, a 5-year sales and revenue projection and the number of locations they will open over that time period.

This model of asking the local partner to outline their plan may work well internationally between western companies—similar norms shared. For Korea, this model has faults for a number of reasons and ends in Brands less than pleased over time. This experience is not uncommon.

First and foremost Korean companies have high uncertainty and prefer to minimize risk in new ventures. They feel circumstance may change and not wish to be locked in to a rigid commitment. More significant, they see an Agreement as a roadmap subject to constant “adjustment” (code word for downsizing) and modification. This means the Plan they craft may be one attractive on paper for the sake of securing the Brand—and open at a later date to re-negotiation.

What’s more, when asked to draft a Business Plan/ Go To Market Plan, the actual teams developing the plan may have limited (some no) experience in actually launching a brand with western expectations. In turn, their business plan on paper may be very different what they will do in reality.

So what does this mean for 2017?

Frankly, I have been increasingly hesitate when asked about approaching potential Korean partners for international brands knowing the current Korean mindset and their preferred business practices.

Instead, I strongly recommend international brands present their potential partners with the Brand’s business plan for the market vs. asking for their Korean team to prepare their version.

This, of course, is a new model, however, it is over time in both parties best interest with expectations agreed upon up front and less subject to disagreement down the road…

As for crafting a localized business plan, this is something I can assist ….

Everything Korea, February 6, Korea, Market Entry, and Opportunity 2017

With the start of every new year I am approached to consult on market entry and new business development projects that range in size and scale.

In addition to longtime and ongoing international support of major Korea Groups and their branding, marketing, sales, and manufacturing subsidiaries, I work with companies to secured overseas partnerships. This includes both Korean SME (Small to Medium size Enterprises) firms entering other countries (the U.S. for example) as well as foreign firms seeking opportunities into Korea.

Particularly for smaller Korean firms hoping to expand globally the challenges are many. In fact a recent Korea Times article, Korea seeks to boost SME exports points out SME struggle considerably more than the large group companies. I concur.

Why? Frankly, my experience is that global companies, even SME looking at Korea, recognize the considerable upfront investment required to enter the market. The companies invest time and resources in Discovery and hire experts to assist in the local market. As a benchmark based on recent projects this cost is easily a minimum of US$30,000- $50, 000…. just to accomplish an MOU with NO contingencies on fees for first securing a partnership. There are, of course, additional costs after an agreement is signed.

In contrast, Korean firms entering overseas markets prefer to take a different, more reserved approach. Sadly the success rate for Korea firms entering overseas markets is poor—even with the support of highly dedicated Korean government agencies such as KOTRA .

I can elaborate in more detail, but basically Korea companies tend to be very direct and want someone to focus on finding them a solid, committed overseas partner or client with little investment and upfront payment of fees to local experts in market entry — all compensation contingent upon first finding a potential partner. This rarely (never!) works.

More so, although Korean companies have websites, product, and company information (often in need of editing), they lack what is commonly accepted content for meeting presentations with potential partners, including, but not limited to, a detailed localized, savvy Go to Market Plan—often a high content 20-30 pages and a competitive market analysis. These western expectations are not options.

Even with adequate funding and preparation, getting in front of the right people is probably the greatest challenge in market entry. This is the same for Korean market entry or overseas market entry. For highly recognized U.S. or global brands, there is less a barrier in setting up meetings because of the strong desire for a top brand. For Korean brands entering an overseas market there is considerable more effort. In fact, I most often have to rely on my credentials to begin a dialogue with a potential partner vs. the Korean brand itself, which typically is little known outside Korea and East Asia.

All said, I am a strong advocate of Korean global business. I see great opportunity and am passionate about seeing Korean brands succeed overseas. However, as I have shared, this does require an upfront investment.

Everything Korea, January 30 Episode, A Matter of Process

Like a moth to a bright light, I am drawn to Korean facing business issues and trends. I explore and then provide commentary on the direction of Korean business from developments inside South Korea to their impact on international operations. To better define this task, my perspective is “culture.”

I’d like to share some thoughts from my most recent visit to Seoul, South Korea—the third in as many months. (This commentary is also available in Branding in Asia)

First, I see huge leaps in the culture that nurtures an emerging “creative class.” In America, as an example, startups, technology, and innovation have tended to evolve in cities with diversity and strong counter-cultures, all of which foster creativity. Those familiar with the Korean workplace … and by this I mean not only larger organizations but also the most progressive firms… once recognized the stark disparity in “creative” norms between Korea and the US.

That said, one can sense the change just strolling down a trendy urban district undergoing gentrification such as Hongdae or Sinsadong where streets and alleys are dotted with vogue shops and hip cafes. Likewise, as rent has soared in these areas, adjacent neighborhoods, Yeonnam-dong and Sangsu-dong, for example, have become home to Korean hipsters and young artists.

In particular, this emerging Korean creative class has generated a demand for and furthered the appeal for chic design, urban art, indie music, and hip, smart fashion as many look to stand out as individuals within a people once depicted cross-culturally as high in conformity. I see this latter trend as a critical shift in Korean society. As academic Richard Florida points out in The Rise of the Creative Class, creatives as a group reflect a “powerful and significant shift in values, norms, and attitudes.” He identifies these attitudes as:

1) Individualism

2) Meritocracy

3) Diversity and Openness (which can translate to gender, sexual preference, race and my favorite “personal idiosyncrasies”)

Gaps

This said, there are still gaps in applying a creative culture to business, especially when a project’s expectations are measured in global terms. Digging deeper perhaps the reason for the disparity is a matter of process and mindset. For example, in the West whether it is a business proposal, a go to market strategy or a roll out, seasoned veterans, in-house or contracted, work from Day 1 to define and flesh out the project. Complementing this approach, their working level teams are experienced. Overall, there is typically considerable investment in time and talent up front.

In contrast, the Korean approach is more to adapt and modify. Since the working teams involved tend to be comparatively less experienced, the project takes them into uncharted waters, so the more practical approach is to tackle each stage as it unfolds.

Additionally, in the West, high-level leadership, such as Vice Presidents, CMOs and COOs, are commonly directly engaged in the project. This enables a more hands-on approach that brings into play their talents and expertise. In Korea, we find it’s a working level team engaged on a day-to-day basis with leadership only periodically briefed on progress.

The challenge arises when western expectations call for detailed upfront plans following a proven model versus ones that are more general roadmaps with fewer specifics.

All and all, I see the engagement of Korean teams in global projects as a positive direction. This promotes the adoption of western approaches to project development enhanced with Korea’s emerging creative culture.

As always, we open to discussing your needs and concerns. Stacey, stacey@koreabcw.com, my assistant can schedule us a time to meet, or chat by phone. For urgent matters, Text me at 310-866-3777

Everything Korea: a Lunar New Year Culture Alert

The Year of the Red Rooster: industrious, outspoken, sharp-witted, and extravagant

Korea (as well as China, Vietnam, Laos, Singapore and other Asian countries) celebrate two New Year’s– one on Jan. 1 and the Lunar New Year celebration, which this year falls on January 28 of the Gregorian calendar, with the legal holiday in Korea from January 27 to January 30.

This year, 2017, is referred to as Jeongyunyeon (‘Jeong-‘ means ‘red’ and ‘-yu’ means a rooster) or “The Year of The Red (fire) Rooster.

Each lunar new year has an associated animal, as well as a related element like fire (red), water (black), earth (yellow), metal (white) and wood (blue), all which rotate over a 60-year cycle. Hence, Red (Fire) Rooster, or Black (Water) Snake, White (Metal) Dragon, etc.

It’s a great time to re-connect with Korean teams and friends. For your Korean colleagues (in Korea), you can wish them “Happy Lunar New Year” by phone, text, or email, by EOD on Wednesday, January 25 (so, Thursday AM in Korea, which is their last day in office prior to Holiday).

BTW Korean companies have Monday off, too.

For expat Koreans (as well as and ethnic Asians from China, Vietnam, and Laos) in your local operations, you can wish then Happy Lunar New Year on Friday, January 27 EOD before the holiday.

For Koreans, here is the formal greeting–Sae hae bok mani ba deu say yo.

You may recall we use the same greeting for the Holidays and New Years… ☺

Give it a try. You will find it will be greatly appreciated.

Questions, comments, thoughts?

Everything Korea, January 16: One More “Must Do”

Following up on my preview commentary, I’d like to add another “Must Do.”
As I have shared, teams and leadership initially will require Korean corporate culture immersion and then continuing support and mentoring.  This ranges from on-boarding folks new to your organization as well as anyone that may have moved into a new role and responsibilities that bring them in contact with Korean teams and exposure.  In the best cases, I am brought in literally day 1 with new leadership, in contrast to waiting for issues to surface that perplex and bring question.

As a caveat to this “on-boarding and support,” immersion should extend to vendors and service providers new to your organization.  Frankly, in my experience, the best partners embrace the opportunity to learn about your company’s Korean ties and influences. More so, it can pro-actively reduce many of the challenges that surface in the relationship and improve overall productivity.

I’d be happy to discuss to ensure we have a solid immersion and mentor program in place, as well as how best to provide support to your partners.

Stacey, stacey@koreabcw.com, my assistant can schedule us a time to meet, or chat by phone.  For urgent matters, Text me at 310-866-3777

Everything Korea, January 9 Episode, The Three Korea Facing Business “Must Do’s”

Must do #1
Stay informed on the economic and political issues in Korea that will impact business in 2017.  For many of you, I do this in daily updates.  If you are not receiving and would like to be better informed, please let us know and we’ll add you these updates.

Must do #2
Mentoring and coaching has never been as vital. Anyone in your organization that has exposure and interactions with Korean teams and leadership need this support.  This can range from training sessions to one-on -one mentoring.  Assuming teams will “get it” is like throwing someone in the deep end of the pool and expecting them to swim and not sink.  Sadly, the later has been the model, with a few exceptions…frankly this attributes to employee and leadership struggles—for example, trying to second guess Korea HQs perspectives,  or investing time and resources in projects only to have them stalled, postponed or dropped.  The investment in mentoring always offsets the huge costs tied to frustrating and misunderstanding that lead to leadership and staff turnover, not to mention poor performance.

Must do #3
Finally stay flexible and be seen as adaptive to change.  Provide options vs. singular solutions to challenges.  Offer, when appropriate, even an “out of the box” additional option.

All said, look for more “Must do’s” in the following weeks, with this as a good start for 2017.

As always, we open to discussing your needs and concerns. Stacey, stacey@koreabcw.com, my assistant can schedule us a time to meet, or chat by phone.  For urgent matters, Text me at 310-866-3777

 

Everything Korea, The New Year Episode: Gazing Back: A Look Forward

2016 in retrospect.  2017 before us.

From a string of weekly trips to OC/ Irvine, California, home to the U.S. HQ offices of Hyundai Motor, Kia Motors, Genesis, MOBIS Parts, Innocean and Hyundai Capital, to somewhat longer trips to a Vegas Dealer Show, NY and LA Auto Shows, HATCI R&D in Ann Arbor, KMMG and the Tier One’s in Georgia and Hyundai in Canada and even longer treks to Seoul, in 2016 I supported leadership across the Korean OEMs and their affiliates.

This said, it was a challenging year for both the western and Korean overseas teams. Bluntly, we all felt the frustration; the common thread—the need to hit steep sales targets. Layered on top was mounting anxiety from South Korea over a declining export economy and a weakening Won. Not to mention, the political scandals touched to the heart of Korean Groups—their Chairman called into the National Assembly and probed if pressured to contribute monies in exchange for special presidential treatment.

Sadly we also saw the abrupt exit of Hyundai Motor America’s CEO Dave Zuchowski, our long time friend who we advised on all things Korea. Still we are honored to support so many in leadership who come to us for advice and perspective—a role we take with utmost seriousness and hold in deep confidentially.

With 2016 also came new clients and a range of projects, among these working on the PyeongChang Winter Olympics.  Equally appreciated were the opportunities to share my thoughts and perspective to a wide audience including groups like KOTRA NYC, and in media– Branding In Asia who both highlighted work in an interview as well as published a number of commentaries.

So what’s before us in 2017…Trump, the Korean Presidential Election and Succession?

“Trump?”—a name and an uncertainty that surfaces often. I constantly field questions from both Korean and American business leadership on the impact of the election and the new administration. Who would know I would be asked to speak in December about Trump to 45 Korea executives.  I also find it interesting that diverse Trump scenarios tied to possible renegotiation of the North American Free Trade Accord by the new administration were mulled at the Hyundai Motor global strategy summit in Seoul.

Looking forward, trade agreements, US military support for South Korea and dealing with North Korea’s nuclear buildup still top the list. On the trade agreement front, my expectation is at some time during the next year it will be looked at deeper by the Trump administration. However, until there is a South Korean president in office, with the impeachment waiting to be upheld by the Courts, we’ll see no Trump-Korean President summit to drill deeper.

Korea’s Presidential Election 2017

What I will be probing for is the “tone” of presidential hopefuls—2017 an election year in South Korea.  One candidate, for example, is already demanding the Chaebol model be dismantled.

In particular, my thoughts were summed up in Forbes, a timely December Frank Ahrens’ article remarking it was likely an incoming Korean president could ride into office on a wave of populist anger directed at the nation’s elites. Still, says veteran South Korea business consultant Don Southerton, “a new administration will need chaebol support to drive the economy and jobs or quickly lose public support.”

I’d add we have experienced decades of “love-hate” between the Korean Groups and the government. One minute mandating new rounds of regulations such as restrictions on mutual investments and loan guarantees to curtail chaebols—the next minute persuading chaebol leadership to spur growth. The reality is Group support by Samsung, Hyundai, LG, Lotte and SK is needed to create jobs, invest in R&D and support an incoming president’s initiatives to grow the economy.

Less likely considering the emergence of a more cynical generation that may threaten to upend an old system, nevertheless seeing disruptive politics emerging globally, we could even a new president promising change but openly allied with the chaebol as engines of growth.  We’ll have to wait and see.  That said, at least in the short run post-scandal I see Groups coming under pressure in laws and regulations designed to increase financial transparency and accountability of family members.

Finally the Succession issue…

What stood out at the recent National Assembly grilling of the top chaebol Chairman, many men in their late 70s, was the targeting of now defacto head of Samsung, who has assumed his father’s role. With the mantle of Samsung now handed to the third generation of the Lee family, we may see similar at Hyundai and the other top Groups.  In fact, South Korea’s textile giant Hyosung just announced with year-end the ushering in the era of the group’s third-generation management.  I expect more announcements in the weeks to come…

What will this new generation bring forth? For one, Samsung’s successor Jay Y Lee has promised to abolish the conglomerate’s “control tower” the Future Strategy Office in response to criticism about the office’s role in the group-wide business command and control operations. No major decisions such as acquisitions or entering new businesses without the FSO’s scrutiny.   On a side note, Hyundai Motor Group is one of the few groups that doesn’t operate a de facto control tower. Unlike more diversified chaebol, Hyundai core business is automotive with its affiliates already aligned in supporting a common interest.

As for succession at Korea’s second largest conglomerate, Hyundai Motor Group’s heir E.S. Chung continues to take a more visible leadership role. For example, E.S. Chung has sought to break away from the old model of a strictly Korean leadership team to more diverse international team as part of his strategy to better position their brand. More recently he re-structured the annual year-end global strategy meeting of 50 Hyundai and Kia Motors Korean executives from their overseas branches. What stood out was the collaborative, open discussion based structure of the summit vs. an older conservative and hierarchical format in which the head of each overseas branch would give a one-way briefing to the Chairman.

We can assume E.S. Chung will continue to follow his design-loving passion, and consensus-building management style in 2017.

Summing up

2017 may be seen as a year of uncertainties—both domestically in Korea and internationally with the potential for a weakening global economy, more disruptive politics and tightening of budgets and spending.  The later is concerning since cutbacks would only hamper sales in what may be a tough market.

Everything Korea, December 26 Episode, New Year Greetings

Like many Asian countries, South Korea has two different New Year days—one that follows the solar calendar and one that uses the lunar calendar.

Traditionally the lunar New Year’s, called So-nal, has had greater cultural and familial significance (In 2017 the 3 day holiday will be celebrated on January 27 – 30).

As for the solar New Year’s celebration, in 1896, as part of reforms instituted to Westernize and modernize Korea, the Gregorian calendar was adopted, along with some of the West’s holidays such as the January 1st New Year’s celebration.

Today I find South Korea’s celebration of the Jan. 1 New Year similar to celebration in America. For example, Koreans make New Year’s resolutions where they promise to exercise regularly, eat fewer sweet things—such as chocolates and candy—or endeavor to study harder.

It’s appropriate to wish your Korean colleagues a seasonal greeting this week prior to the holiday, just as you will wish your non-Korean friends “Happy New Year.”

The good news is …

The Korean New Year greeting is “Sae hae bok mani ba deu say yo.”  It is a great phrase to learn because it will also be used again at the lunar New Years celebration in late January.

Again, pronounced: sae hae bok—mahne—bah deu say yo.

Oh, one more thing. This is the last Vodcast of 2016. Look for my upcoming thoughts for 2017 out early in 2017.

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