I enjoy sharing Korean business insights. This insight is one of my most popular.
I often say “Similar brings us together…”
Global business requires colleagues of different cultures to work together daily.
How we perceive each other culturally is often based on differences, such as language, and similarities, like shared values such as family. I prefer to concentrate on the similarities, as differences can create distance while similarities unite us.
It is crucial for Western teams collaborating with Korean operations to gain a deep understanding of the workplace culture in Korea, including the 2024 norms, practices, and daily life. The workplace is under constant change, and we can easily fixate on things that may have been distorted by hearsay or a lack of understanding.
The same principle applies to Korean global teams assigned to support overseas operations. We all need to become learners, adept in local and overseas practices. Expecting global teams to conform to Korean business norms rarely works; it often leads to delays and stalled projects.
As I noted above, recognizing similarities is one of the most powerful cross-cultural bridges. In other words, how can you relate to the nuances in communications and day-to-day life? This requires identifying the local beliefs, values, expectations, traditions, and culture
The information provided helps us gain a deeper understanding of how our teams think and what they expect.
Outcomes
Although there is bound to be friction between home and host country cultural values, a successful model accomplishes…
1. Awareness and appreciation of the home and host country with the ability to gain insight into one’s personal traits, strengths, weaknesses, attitudes, and interests.
2. Realization of shared cross-cultural values, along with an awareness of and respect for cultural differences.
Call to Action
Are you dealing with Korea-facing issues, challenges, or impasses? I provide workarounds and solutions.
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.
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 ….
January 10, 2017StaceyCommentaryComments Off on 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
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.
November 28, 2016StaceyCommentaryComments Off on Everything Korea: November 28 Episode, South Korean Impeachment, a Growing Likelihood?
Commenting on the impact of the Trump election on Korean trade for the past weeks—Korea-facing trade an area of my expertise– I have been hesitant as a Westerner to offer my views on the indictments against South Korean President Park.
Nevertheless, impeachment seems a growing likelihood. Politicos now predict the National Assembly will secure the required two-thirds majority vote needed to pass an impeachment bill. To this point, I feel the compelled to share what “next steps” we may see unfold. Pouring over scholarly updates including my longtime friend Professor Steph Haggard’s insightful “ Park Unraveling” series https://piie.com/blogs/north-korea-witness-transformation, I present a number of “If’s,” in short of President Park stepping down and resigning.
The “If’s.”
1. If the National Assembly moves forward and passes an impeachment bill, the Constitutional Court is then responsible for deliberating the case. In addition, President Park’s powers would be suspended with the Prime Minister charged to lead the nation during the interim.
2. The Court then has 180 days to make a ruling on whether charges against the president warrant impeachment. If the Constitutional Court upholds the impeachment bill, the South Korean Constitution stipulates a presidential election must be held within 60 days. That means if the Court takes the full six months to rule on the case, the election would be held in August 2017.
3. If the Court rules in favor of impeachment, President Park would be stripped of her post and could face criminal and civil charges. Under Korean law, presidents while in office are immune from prosecution short of treason or insurrection.
4. It is worth noting, the next South Korean presidential election is scheduled for December 20, 2017. In the event, the Court rules in favor of President Park, incumbent Korean presidents are limited to a single 5-year term in office, and President Park could not seek re-election.
5. With no clear favorite yet for 2017 presidential election along with if President Park is impeached triggering an earlier election, pundits do feel the current United Nations Secretary-General Ban Ki-moon, a former Korean Prime Minister, positioned well as the front-runner amid a field of opposition party hopefuls.
All noted, with the situation subject to change and fluid, we’ll have to take a wait and see approach to what unfolds next.
“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
I would not be fitting without sharing my thoughts on the recent US presidential election and its potential impact on US Korea global business. To many in Korea the election results are troubling… another layer of stress and concern amid a downturn in Korean exports.
Trade agreements, US military support for South Korea and dealing with North Korea top the list. On the trade agreement front, I was a supporter of KORUS FTA both prior to its ratification and contributing a number of high profile articles on the benefits of the treaty.
More so, I’ve commonly referred to KORUS FTA is news articles, interviews and speaking engagements.
My clients Hyundai Motor America, Kia Motors America and well as Mobis Parts America benefit from the treaty… although I’m told 60% of the two OEMs finished product sold in America are made in US plants. (Some engines and a number of Tier 1, 2 and 3 components are still imported, but much less than when the plants were established).
Frankly, I am more concerned with trade agreements with Mexico. Korean Groups, Hyundai, Samsung and LG operate plants across Mexico for local demand and export to America.
As an example, a new Kia Motors Mexico plant opened earlier in 2016 with plans to supply up to 80% of their capacity for export. A heavy trade tariff on Mexican goods exported to the US would be troubling not only to Kia, but a growing wave of Korean Tier providers. On a side note, opening a plant in Mexico for an OEM is not only about labor costs and savings, but eliminates a heavy tariff on vehicles the brand also wishes to imports into Mexico.
In addition and less know as another example is Hyundai Motor Group affiliate Hyundai Translead, who I have also supported. First developed under the maquiladora program, trailers made in the Mexico plant currently are sold in the US—check out the back of a Wal-Mart trailer you see on the highway for the Hyundai logo… or this Hyundai Translead video.
As for Samsung Electronics, since the 1980s, with the construction of an electronics complex (SAMEX) in Tijuana, where TVs, color monitors, and mobile phones are currently being produced. Samsung Electronics Mexico (SEM), a local sales subsidiary, was established in 1995, and now the operation has been expanded to include refrigerator and air conditioner production. Samsung Electronics also has local production of side-by-side refrigerators, front-loading washing machines and other high-end appliances.
All said, Detroit’s Big Three automakers — GM, Ford and Chrysler — all have production plants in Mexico, and any hefty tariff would impact them as well. In addition, GM’s Korea plants produce cars for the US market.
With more questions that answers, I’ll be revisiting the impact of the elections as it unfolds over time. So stay tuned.
Oh one more thing-
Regarding North Korea, I see with President- elect Trump’s unpredictable, and aggressive way of thinking it may make Pyongyang more cautious about its military provocations.
June Session of Korea 101: The Intensive
Register today for the June Session of Korea 101: The Intensive
Space is limited. Register at https://buy.stripe.com/7sI03M8q17vJgLubIJ
$495.00 Credit cards accepted.
or to register, go to https://www.bridgingculture.com to register.
Dsoutherton@bridgingculture.com or Text/ Call 310-866-3777
Weekly online classes will cover topics including…
1. Working with the Korean Business Culture
2. Developing and Maintaining Korean Business Relations
3. Do’s and Don’ts for Korea Business
4. Korean Decision-making
5. Managing Expectations
6. Legal Agreements–Subject to Change and Revision
7. What to expect in 2024
8. Weekly current events and Q & A Discussion