March 20, 2017StaceyvodcastComments Off on Everything Korea, March 20 Episode Move Forward Within the Culture.
That’s my message this year in both commentaries and on-site presentations. It captures my work, which is to provide companies, leadership and teams with how best to work effectively… taking into account Culture plays a huge role in their workplaces.
March 13, 2017StaceyvodcastComments Off on Everything Korea March 13 Episode: Korea 101 Foundation for Understanding Korea Business
When you ask somewhat “what are you most passionate about?” It can be very revealing—family, work, hobbies, sports, and social issues.
For me and my work its sharing Korean business culture and, in particular, strategies to succeed with the Culture.
Since 2004 I have offered programs and mentoring to thousands across America and internationally. A flagship Korea 101 program has served as the core for this Korean business culture mentoring. In turn, this training and coaching builds upon current experiences of the teams, while providing new understandings that lead to solutions.
Both our on-site and web-based programs have been offered to teams not only in America, but also in Canada, UK, Belgium, Germany, Russia, AU, India, South Korea, and the Middle East.
Customized versions have been professionally recorded and distributed worldwide to organizations and incorporated in their in-house programs.
Ideally the program is on-site over 4 to 6 weeks—each class a 1½-hour session. That said, we have a number of options including half and full day immersion programs.
Korea 101 and 201 programs are also an integral part of on-boarding and mentoring for key executives and management.
I like to highlight that we find participants genuinely care about their work and the company, and acquiring the needed skills offered in Korea 101 specifically help them to move forward within the culture.
Finally, the key to the success of our Korea programs has been the strong endorsement of our partner firms’ CEOs, senior American and Korean management, and across their teams. As organizations they realize that their teams need support. Expecting employees to “get it” without training and coaching rarely works. We are proud to work with our partners and their teams.
To chat about Korea 101 or a Korean facing business question, Stacey stacey@koreabcw.com, my assistant can schedule us a time to meet or chat by phone. For all urgent matters, Text me at 310-866-3777
I’m taking a week off from sharing commentary on the Korean car brands, market entry best practices, the Korean presidential impeachment, the indictment of Samsung’s de facto leader, and North Korean sword rattling.
However, beginning next week a Korea 201 program on Korea corporate and business culture will have me back in The OC (Orange County, home to the US HQs for Hyundai Motor, Kia Motors, Genesis, MOBIS Parts, Innocean, GLOVIS, Autoever, the California design centers, and Hyundai Capital. )
Amid meetings, days are filling up, but times are still open on Wednesday and Thursday.
As always, Text, Facebook Message, Linkedin Message or Email, and we can arrange a time. Or, Stacey stacey@koreabcw.com, my assistant can schedule us a time to meet, or chat by phone. For all urgent matters, Text me at 310-866-3777
BTW
If you have not had an opportunity to read my recent articles, here are the links
Globalization Requires a Better Process for Korean Car Makers – Lessons https://brandinginasia.com/attracting-top-talent/ Analysis: South Korea – Four Best Practices for Market Entry https://brandinginasia.com/south-korea-market-entry-2/ Inside Look: South Korea – Market Entry and Barriers https://brandinginasia.com/south-korea-market-entry/ Creative Culture vs. Process in South Korea https://brandinginasia.com/creative-culture-korea/
February 28, 2017StaceyvodcastComments Off on 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.
February 6, 2017StaceyvodcastComments Off on 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.
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
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.
Returning from Seoul, I find myself pondering on the remaining days of 2016 as well as the upcoming year. Until recently a hot topic for local news in Korea, I saw less significant concern than I expected for Trump—with most recent focus on Prime Minister Hwang now heading up the government in the wake of the impeachment of South Korean President Park.
In reflecting on my meetings, I found some groups wanting to hold back on discussing new initiatives, their organization tied to the recent president scandal–the mood to lay low until the storm passed.
In other instances I saw annual restructuring underway and teams in a “wait and see” mode. As is common, restructuring bring with it changes in leadership, management and working teams. More so, on-going programs might be revisited and for the new year may be entirely dropped, downsized, or upgraded… again warranting teams waiting to see what unfolds.
For others, it is business full speed ahead, tight timelines requiring action even before the holiday break. In several instances my meetings centered on plans for 2017, colleagues discussing our next steps and now reporting them to the leadership before year-end.
As for my thoughts on what 2017 will bring, look for my upcoming year-end commentary due out over the holiday break.
Year-end Promotions, Re-structuring, and New Assignments: Korea’s Corporate Culture 2016
Year-end organization wide promotions, re-structuring, and new assignments for teams are part of Korean corporate culture. Top to bottom within Korean companies they occurs sometime between early December and early January, with the changes to senior leadership happening first, and team level changes as a norm made known the week just before or between Christmas and New Year’s Day.
After the Holidays, teams then report back to work. Some assume new roles frequently in departments they have little experience–requiring employees to acquire new skills–sink or swim. Meanwhile others are en-route to assignments in overseas operations; a challenge for those working outside Korea for the first time. In the days that follow those shuffled brief their replacements, as staff remaining in their jobs update new management teams on the status of projects and issues.
Some years we do see less re-organization of the teams, departments, and division—some years more. The later can be driven by leadership looking to “shake up” the organization to spur growth. All said, change is commonplace and an accepted side of Korean business.
This year’s concerns in the Korean economy had prompted the major Korean groups to initiate a November early start to the year-end re-structuring…. But no sooner than announced, the Korean Presidential scandals has required the Groups to re-consider, pushing off the early annual move. This said, LG, CJ and Kolon have finally started their annual shifting of staff…… Media reports Samsung and SK to do so very soon, too… with the Hyundai Motor Group planning to announce promotions of executives at the end of the month.
So what to look for later this month.
The top Chaebol will post their promotions and provide some insight on trends. For example, we’ll see public announcements in the Korean language business media on a total number of the leading chaebol executives promoted–those advancing from General Manager (bujang) to Director (e-sa), and above. The Chaebol usually also comment on whether this year’s promotion number is more or less than in the past and “why.”
More recently the number of female employees who are made executives with a Group has been highlighted, a gradual move upward by women in the ranks. This is in contrast to a time when they were considered temporary staff and not long-term staff on track to be considered for management.
Finally, for teams below Director, time in rank promotions follow a model of 3-4 years for each of the first tiers up to Manager. For each upper managerial level—Deputy General Manager and General Manager– 5 years in a common tenure between each grade level.
For global teams, I suggest you congratulate those promoted, but also be sensitive to team members who were passed over… time in grade just one criteria for promotion.
“Trump?”—a question that surfaced often while I attended the 2016 LA Auto Show Media Days. I fielded questions from both Korean and American auto industry leadership on the impact of the election. Many had been following my daily posts and recent commentary.
Assessing what next to share, I see several actions by the incoming U.S. administration.
First in contrast to the president-elect’s bold statements to take on NAFTA, I find the U.S. is less likely to purse extreme actions such the withdrawal from or a major renegotiation of the KORUS FTA.
That said, the U.S. is likely to strengthen “policy” measures that could restrict imports by imposing anti-dumping tariffs or countervailing duties. This is not new. For example, after a repeated pattern of pricing below cost by Samsung and LG on clothes washers over the years the Korean brands now pay hefty anti-dumping duties to offset margin and price advances over manufacturers and threatening American manufacturing jobs. The incoming president could direct the U.S. Department of Commerce to aggressively purse similar actions against Korean importers where local jobs are impacted.
The incoming president may also demand its trading partners revalue their currency, starting with those nations that we recently placed on its currency watch list. In April, the U.S. Treasury Department announced a list of countries on its watch list that includes South Korea it would closely monitor for any unfair trade practice. Weakening a currency can make goods produced for export more attractive however it leads to a trade deficient especially if the host country has a stronger currency as is the case with the Strong U.S. Dollar.
In recent days, the U.S. Dollar has continued to surge in value against currencies around the world following the election. Again, this may be good for American consumers buying foreign goods but makes U.S. manufacturing less competitive for export. As for the South Korean Won it has finally begun to strengthen against the Dollar following the shock U.S. election results.
More an issue than the Dollar to Won is if the U.S. targets and designates China as a currency manipulator and slaps up to 45-percent tariffs on Chinese imports to America. Korea will as a ripple effect suffer since their economy is increasing dependent on its export trade to China, which would slow.
Well-Stated Korean Concerns …
My longtime friend Yun Won-sik, who serves as the executive vice president for the Korea Trade-Investment Promotion Agency (KOTRA) recent statements capture the mood in Korea. He notes how major Korean exporters could potentially face increasingly unfavorable business conditions in the United States.
“Although it is too early to say what steps the Trump administration will take at the moment, it is certain that Korea will face greater pressure to open its legal and other services industries, and curb its shipments to the United States,” Yun said.
“It is unlikely that Trump will nullify the KORUS FTA but will instead choose to revise it in favor of U.S. companies. He will certainly raise trade barriers to keep out foreign goods to revitalize America’s faltering steel and other traditional manufacturing industries as he promised to marginalized blue-collar workers.”
Oh, one more thing…
On the encouraging side, earlier this year the International Trade Commission (ITC) showed the KORUS FTA did have a positive effect on the American economy and improving the trade balance.
The report pointed out that the KORUS FTA led to a $15.7 Billion improvement in the U.S. trade balance in 2015. The U.S. posted a $28.3 billion trade deficit with South Korea that year, but it would have been $44 Billion without the bilateral free trade pact
Building on this and to counter the fallout of Trump’s protectionist trade policies, last week the Korean government has begun to mobilize resources in an effort to sway the incoming U.S. administration that the KORUS FTA is mutually beneficial and, in particular, how South Korean investments in the U.S. has stimulated American jobs over the years.
I, too, see this as a strong argument as one only has to travel Route 85 South from Georgia into Alabama to see the growth spurred by the Kia Motors Manufacturing Georgia and Hyundai Motor Manufacturing Alabama plants. The rise of Tier One and Two providers along the corridor and the boost to the local economy is hard to ignore. More so, for those of us who visited the area prior to the opening of the car plants.
Stay tuned to my updates as new developments unfold. Questions and comments welcome. Questions@Koreabcw.com
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.