Korean Biz Model Attracts Renewed Global Attention

In early March, 37 graduate students from the University of Pennsylvania’s Wharton School of Business visited the semiconductor division of Samsung Electronics.

The students showed great interest in the company from management strategy and corporate culture to recruiting strategy and employee training programs. They also asked many questions about Samsung’s massive reorganization in January.

The company greeted 60 more foreign MBA students two weeks later, this time from the Sloan School of Management at MIT and the Harvard Kennedy School. Since 2006, more than 2,000 foreign MBA students have made a field trip to Samsung headquarters to learn more about the Korean corporate model.

The world has begun to see Korean companies with a renewed sense of admiration for their outstanding performance as the rest of the world suffers from the economic crisis that began in September last year. As a result, the international community is wondering what makes Korean companies strong.

Major Korean companies have performed well above expectations. In the first quarter last year, Samsung controlled 16.4 percent of the global mobile phone market, well behind Finland’s Nokia with 40.9 percent, in the number of handsets.

A year later, however, Samsung raised its market share to 18.7 percent. LG Electronics also raised its market share 1.8 percentage points over the same period, closing its gap with Sony from eight to 5.4 percentage points.

The two Korean companies largely benefited from external factors such as the weak won and commodity prices. Such advantages can hardly explain the remarkable performance of Kolon, however, which relies on exports for less than 50 percent of its operations. Kolon set a record high in operating profits in the first quarter of this year.

Though oil prices have steadily climbed up since early this year, LG Petrochemical is also expecting record high operating profits in the second quarter.

Dr. Lee Ji-hwan, a professor of business at the Korea Advanced Institute of Science and Technology, or KAIST, said, “There is growing interest over what business strategies Korean companies have adopted in staying ahead of the game in fields such as semiconductors and mobile phones. Their timely investment in high-risk industries is now beginning to pay off.”

Consequently, business circles are urging Korean companies to find their own strengths and the factors that make the Korean economic model exceptionally viable.

Merck Korea President Juergen Koenig said, “In times of crisis, Koreans become more creative in seeking positive change and more innovative in making them a reality. This is why Korean companies successfully rise to the challenge in crises.”

Samsung Petrochemical CEO Yun Soon-bong said, “The unique impatience and tendency of Koreans to rush, which had been previously frowned upon, enabled Korea to outpace its manufacturing archrival Japan. Korea’s strength as a small country with speed, openness and connectedness will make it a world leader in the digital era of the 21st century.”

The Dong-A Ilbo will run a three-part series on the business DNA that made Korean companies winners in the global economic crisis and what needs improvement for the continuous success of the Korean business model afterwards.

lovesong@donga.com