SOUTH KOREA
FRANCIS PIRON, Ph.D., 2013
KOREA
KOREA
• HDI
– .877 (#12) FINLAND .871, #16, JAPAN .884 #11
• INCOME INEQUALITY
–
–
–
–
GINI
FINLAND
JAPAN
CHINA
31.6,
26.9;
24.9
46.9
R/P 10% = 7.8, R/P 20% = 4.7
5.6
3.8
4.5
3.4
21.6
12.2
• DEMOCRACY INDEX
–
–
–
–
#20
8.11 FULL DEMOCRACY
FINLAND #7; 9.19
JAPAN #22;8.08
CHINA #136;3.14
• GENDER EMPOWERMENT
–
–
–
–
#61
.554
FINLAND #3; .902
JAPAN #57; .567
CHINA #72; .533
BACKGROUND
• COERCIVE RELATIONSHIPS WITH CHINA,
JAPAN & US
• UNIQUE MANAGERIAL APPROACH
BASED ON NEO-CONFUCIANISM
• HIGHLY EDUCATED & COMPETITIVE
SOCIETY (71% of pop. are internet users!)
• ECONOMY CONTROLLED BY CHAEBOL
(similar to Japanese KEIRETSU)
LOCAL ISSUES & EXTERNAL FORCES
INFLUENCING THE S. KOREAN MGMT CONTEXT
• MOSTLY MOUNTAINOUS COUNTRY
• HIGH POPULATION DENSITY; 50 MILLION
• ANTAGONISTIC AND COLLABORATIVE
RELATIONSHIPS WITH CHINA & JAPAN
=> COMMON HERITAGE
• SIGNIFICANT NATIONAL PRIDE: NATIONALISM
• UNIQUE WORK ETHICS
LOCAL ISSUES & EXTERNAL FORCES
INFLUENCING THE S. KOREAN MGMT CONTEXT
• COUNTRY UNITED FOR OVER 1,000 YEARS
– ESTABLISHED ADMINISTRATIVE SYSTEM
– NATIONAL HOMOGENEITY
– UNIFIED LINGUISTIC COMMUNICATION
• CHINESE INFLUENCE
– STRONG & OVER 1,000 YEARS OLD
– IDENTIFIABLE IN EVOLVING KOREAN POLITICAL,
LEGAL & SOCIAL SYSTEMS, AND ARTS & RELIGION
LOCAL ISSUES & EXTERNAL FORCES
INFLUENCING THE S. KOREAN MGMT CONTEXT
• RELIGIOUS & PHILOSOPHICAL INFLUENCES
– CONFUCIANISM, TAOISM AND BUDDHISM FROM CHINA
– CONFUCIANISM SHAPED CULTURE, SOCIETY,
INSTITUTIONAL STRUCTURES & GOVERNANCE
SYSTEMS
Religious Affiliation, Censuses
• NEO-CONFUCIAN SOCIETY
1995 SOCIAL
1985
– CONFUCIANISM DEFINES
RELATIONS AT ALL
No Religion
49.3% 57.4
LEVELS
Christian
26.3% 20.7
– HARMONIOUS
OF INDIVIDUALS INTO
Protestant INTEGRATION
19.7% 16.1
COLLECTIVITY
AS IN
HARMONIOUS
NATURE – PURSUIT
Catholic
6.6%
4.6
OF HARMONY
IS PARAMOUNT
Buddhist
23.2% 19.9 GOAL
Confucian OF TAOIST’S
0.5%
1.2
– SIGNIFICANCE
YIN & YANG –
Other
0.7%
0.8
FUNDAMENTAL
DUALISTIC
RELATIONSHIP
LOCAL ISSUES & EXTERNAL FORCES
INFLUENCING THE S. KOREAN MGMT CONTEXT
• NEO-CONFUCIAN SOCIETY
– OTHER RELATIONSHIPS INDICATE HIERARCHIES WITH
FATHER AT THE HIGHEST
– 4 HIERARCHICAL STRATA:
•
•
•
•
YANGBAN …… SCHOLARS & OFFICIALS
CHUNGIN ……..MIDDLE PEOPLE (TECHNICIANS, ADMIN.)
SANGMIN ……..COMMONERS (75% OF POP.)
CH’OMMIN …….BOTTOM OF SOCIETY
– THUS, HIGH VALUE OF EDUCATION
– MERITOCRATIC & SCHOLARLY SYSTEM
– FILIAL PIETY – IMPORTANCE & ROLE OF ELDEST SON
LOCAL ISSUES & EXTERNAL FORCES
INFLUENCING THE S. KOREAN MGMT CONTEXT
• INFLUENCE OF CHRISTIANITY
– EARLIER, ROMAN CATHOLICS
– 1880s ON, PROTESTANT DENOMINATIONS
• ASSOCIATION TO INDIVIDUALISM
• KOREAN CHRISTIANS TEND TO BE OUTSPOKEN
ADVOCATES … “UNKOREAN” BEHAVIOR
• KOREAN SOCIO-CULTURAL VALUES HAVE BEEN
THOROUGHLY ASSIMILATED IN KOREAN CHRISTIANITY
– THUS, A RELIGIOUS PLURALIST SOCIETY
– AS A RESULT, KOREAN BEHAVIOR PATTERNS EXHIBIT
BOTH INDIVIDUALISTIC & GROUP-ORIENTED
ACTIVITIES
LOCAL ISSUES & EXTERNAL FORCES
INFLUENCING THE S. KOREAN MGMT CONTEXT
• JAPANESE COLONIAL PERIOD
– ALMOST HALF A CENTURY!
– 1905-1945: KOREANS LOST OPPORTUNITY TO
MODERNIZE ACCORDING TO THEIR NEEDS
– INDEPENDENT DEVT. ONLY AVAILABLE THROUGH
EDUCATION
– COMPLEX NATURE OF KOREAN & NATIONALISM CAN
BE TRACED TO JAPANESE OCCUPATION
• POLITICAL ECONOMY
– LIBERAL DEMOCRACY
– PRESIDENT IS ELECTED FOR A SINGLE TERM …
SOURCE OF CORRUPTION?
THE MGMT OF S. KOREAN
INSTITUTIONAL INFRASTRUCTURE
• GOVT-LED APPROACH TO INDUSTRIALIZATION
– EXTRAORDINARILY RAPID PROCESS OF INDUSTRIALIZATION
– CONTEMPORARY INDUSTRIAL POWER
– 1960’s – NEED TO DEVELOP HEAVY INDUSTRIES
• SERIES OF 5-YEAR ECONOMIC PLANS
• FOCUS ON DEVT. OF EXPORT ORIENTED MANUFACTURING
• STRONG GOVT. SUPPORT
– 1997 ASIAN FINANCIAL CRISIS => NEED TO ADDRESS
FUNDAMENTAL ECONOMIC ISSUES = CLOSE RELATIONSHIP
BTW CHAEBOL AND GOVT. = “KOREA INC.”
– GOVT. TYPICALLY CONTROLLED ACCESS TO CAPITAL AND
THUS DICTATED STRATEGIES & OPERATIONS OF CHAEBOLS
THE MGMT OF S. KOREAN
INSTITUTIONAL INFRASTRUCTURE
• DRIVERS OF GLOBALIZATION & FOREIGN INVESTMENT
POLICY
– STRONG FDI POLICY (US, UK, JAPAN, GERMANY)
– STRONG OVERSEAS DIRECT INVESTMENT POLICY (ASIAN,
AMERICA & EUROPE)
– GLOBAL MARKET ORIENTATION
– 4 STRATEGIC MGMT ENABLERS
•
•
•
•
GOVT ENABLERS
DEMAND-SIDE ENABLERS
SUPPY-SIDE ENABLERS
MARKET ENABLERS
THE MGMT OF S. KOREAN
INSTITUTIONAL INFRASTRUCTURE
• GOVERNMENT ENABLERS
– EXPORT-ORIENTED, PROTECTED DOMESTIC ECONOMY
– ATTRACTIVE INVESTMENT CLIMATE
• GRANTING OF DOMESTIC STATUS TO FOREIGN
INVESTORS
• FOREIGN INVESTMENT PROMOTION ACT
• FINANCING & TAXATION BENEFITS FOR FDI
– INITIATIVES TOWARDS REDUCING & DISMANTLING
RESTRICTIVE TRADE BARRIERS
THE MGMT OF S. KOREAN
INSTITUTIONAL INFRASTRUCTURE
DB 2011
Rank
DB 2010
Rank
60
55
-5
22
22
No change
74
72
-2
Getting Credit
15
14
-1
Protecting
Investors
74
73
-1
Paying Taxes
49
48
-1
8
8
No change
5
5
No change
13
12
Topic Rankings
Doing Business Doing Business
2011 Rank
2010 Rank
16
15
Starting a
Business
Dealing with
Construction
Permits
Registering
Property
Trading Across
Borders
Enforcing
Contracts
Closing a
Business
Change in Rank
THE MGMT OF S. KOREAN
INSTITUTIONAL INFRASTRUCTURE
• DEMAND-SIDE ENABLERS
– GROWING IMPORTANCE AS A GLOBAL PLAYER
– GLOBAL COMPANIES HAVE DEVELOPED KEEN INTEREST
IN KOREAN PC MARKET
– AS A CENTER OF INDUSTRIAL INNOVATION, FOREIGN
MNCs ARE EAGER TO ENTER KOREAN MARKET IN
SEARCH OF COMPETITIVE ADVANTAGE (HI-TECH &
SERVICE SECTORS)
– HOME OF THE FUTURE
THE MGMT OF S. KOREAN
INSTITUTIONAL INFRASTRUCTURE
• SUPPLY-SIDE ENABLERS
– NO LONGER A LOW LABOR-COST COUNTRY
– WELL-EDUCATED, HIGHLY TRAINED WORKFORCE
PROVIDES OPERATIONAL EFFICIENCIES
– ADVANTAGE IN ABILITY TO ADOPT AND DEPLOY
TECHNOLOGY
– CONTINUOUS UPGRADE OF GOVT. INFRASTRUCTURE =>
ATTRACTIVE BUSINESS LOCATION
THE KOREAN INNOVATION SYSTEM:
OVERALL EVALUATION
• STRENGTHS:
STRONG COMPETITIVENESS IN
SOME HIGH-TECH INDUSTRIES
• WEAKNESSES:
STILL HEAVY CONCENTRATION
OF RESOURCES ON CHAEBOL
SME/VENTURE SECTOR NEEDS
RAPID EXPANSION & SKILL
FORMATION
COMPREHENSIVE STRUCTURAL
ADJUSTMENT
STRENGTHENEING SCIENCE
BASE
FURTHER DEVELOPMENT
OPEN NETWORK CULTURE /
INTERORGANIZATIONL LINKS
SLOWLY EVOLVING
THE MGMT OF S. KOREAN
INSTITUTIONAL INFRASTRUCTURE
• MARKET ENABLERS
– HIGHER DISPOSABLE INCOME
• RISE IN LIVING STANDARDS
• CHANGE IN CONSUMER TASTES & PREFERENCES
• YOUNGER CONSUMERS – INTERNATIONAL GOODS
– GROWING POPULATION (50 MILLION 2008-2009)
– WELL-ESTABLISHED FOREIGN COMPANIES: KFC, PIZZA
HUT, PHILIPS, SIEMENS, ETC.
– WELL-OPENED DISTRIBUTION NETWORKS
– GOVT. WANTS TO INCREASE COMPETITION IN
DOMESTIC MARKET TO STIMULATE CHAEBOLs
THE MGMT OF S. KOREAN
INSTITUTIONAL INFRASTRUCTURE
• ORGANIZATIONAL CHARACTERISTICS OF CHAEBOLs
– GROUP OF LARGE COMPANIES OWNED & MANAGED BY
FAMILY MEMBERS & RELATIVES
– DIVERSIFIED BUSINESSES
– 3 TYPES OF CHAEBOLs
• LATE 1950s CHAEBOL CREATED BY SELF-MADE MEN WHO
BENEFITED FROM GOVT. RELATIONSHIPS
• 1960s CHAEBOL FORMED WITH THE HELP OF FOREIGN
LOANS
• 1970s CHAEBOL RESULTS OF THE RAPID GROWTH IN
EXPORTS & LOCAL DEMAND
THE MGMT OF S. KOREAN
INSTITUTIONAL INFRASTRUCTURE
• CHARACTERISTICS OF CHAEBOLs
– NOT ASSOCIATED/RELATED TO BANKS AS JAPANESE
KEIRETSU
– MORE DEPENDENT ON GOVERNMENT APPROVAL
– SPREAD ACROSS MANY INDUSTRIES
– HIGH LEVEL OF ENTREPRENEURSHIP
– FAMILY-DOMINATED: STRICT BLOOD RELATIONSHIP
– 3 TYPES OF CHAEBOL OWNERSHIP
• DIRECT & SOLE OWNERSHIP – DESCENDANTS OF
FOUNDER
• DOMINATED BY A HOLDING COMPANY
• INTERLOCKING MUTUAL OWNERSHIP – FOUNDER &
FAMILY OWN THE HOLDING COMPANY
CRITICAL TRADITIONAL, TRANSITIONAL &
TRANSFORMATIONAL ISSUES IN KOREAN MANAGEMENT
• INSIDE THE CHAEBOL
– PRESENTLY - RADICAL CORPORATE RESTRUCTURING
– ORGANIZATIONAL STRUCTURE
• OWN MGMT STYLE – “K-TYPE MGMT “– INTERPETATION
OF NEO-CONFUCIAN IDEAS + JAPANESE & AMERICAN
INFLUENCES
– UNIQUE BLEND OF WESTERN & EASTERN MGMT
PHILOSOPHIES & PRACICES
– TRADITIONALLY HARD-WORKING PEOPLE
– CONCEPT OF EUI-YOK PROVIDES INTERNAL DRIVE,
MOTIVATION TO SUCCEED & ACCOMPLISH SOMETHING
OF VALUE … FROM WHICH THE GROUP OR COMPANY
CAN BENEFIT
– CONTRASTS WITH PROTESTANT WORK-ETHIC OF
INDIVIDUAL PERFORMANCE
CRITICAL TRADITIONAL, TRANSITIONAL &
TRANSFORMATIONAL ISSUES IN KOREAN MANAGEMENT
• INSIDE THE CHAEBOL
– NEO-CONFUCIAN VALUES
• ABSOLUTE LOYALTY TO HIERARCHY
• TRUST BTW FRIENDS & WORKING COLLEAGUES
• ALLIANCE & RESPECT TO PARENTS; ORDERLY, CLEARLY
DEFINED CONDUCT BTW CHILDREN & ADULTS
• SEPARATION OF HUSBAND & WIFE IN TERMS OF
ACTIVITIES
– CORPORATE CULTURE – SAHOON – K-TYPE MGMT
•
•
•
•
•
•
•
TOP-DOWN DECISION-MAKING, PLANNING, COORDINATION
AUTHORITARIAN, PATERNALISTIC LEADERSHIP
HARMONY-ORIENTED CULTURAL VALUES - INHWA
CENTRALIZED MANAGEMENT
FLEXIBLE LIFETIME EMPLOYMENT
COMPENSATION BASED ON SENIORITY & MERIT
HIGH WORKER MOBILITY
CRITICAL TRADITIONAL, TRANSITIONAL &
TRANSFORMATIONAL ISSUES IN KOREAN MANAGEMENT
• HUMAN RESOUCE MGMT
– RECRUITMENT & TRAINING
• 3 CATEGORIES OF EMPLOYEES:
– CORE – TOP MGMT
– BASIC – PERMANENT STAFF
– TEMPORARY
• MOST HIRING IS DONE THROUGH WORD-OF-MOUTH
• JOBS ARE NOT CLEARLY STRUCTURED, NO JOB DESCRIPTION
• IN-HOUSE TRAINING - FOCUS ON MOULDING & NURTURING
TOWARD BLENDING WITH COMPANY’S CORE VALUES & CULTURE
• EXPECT UNRESERVED COMMITMENT TO THE COMPANY
– COMPENSATION & PROMOTION
• BASED ON SENIORITY & MERIT
• PERFORMANCE APPRAISAL IS DIFFICULT
• PROMOTION IS BASED ON SENIORITY, PEFORMANCE,
PERSONALITY, FAMILY RELATIONSHIPS, SCHOOL & REGION