The evolution of tiger management korean companies in global competition, 2nd edition

THE EVOLUTION OF TIGER MANAGEMENT Throughout the last several decades, Korean companies have become strong global competitors in a wide range of manufacturing industries How did they achieve this exceptional performance? The Evolution of Tiger Management uncovers the secret of their success through a comprehensive analysis of Korean-style management It explains how it has developed, why it works so well, what non-Koreans can learn from it, and what Korean companies need to to stay competitive in the future This book is an extended and significantly updated new edition of Tiger Management: Korean Companies on World Markets (Routledge, 2012) It tells the remarkable stories of how Korean firms, seemingly coming from nowhere, have successfully challenged their Western and Japanese competitors globally A new chapter highlights the rise of Korean venture firms and start-ups Next, the essence of Tiger Management is analyzed by showing that it consists of an effective combination of business strategy, leadership, and human resource management practices Finally, the evolution and future of Tiger Management is discussed by showing how Korean companies have adapted to changes at home and abroad, and how non-Korean companies can adopt Tiger Management A new final chapter discusses the way forward for Korean companies Martin Hemmert is Professor of International Business at Korea University in Seoul His research focuses on comparative management systems, innovation systems and technology alliances in East Asia He has published seven books and more than 30 articles in international peer reviewed journals THE EVOLUTION OF TIGER MANAGEMENT Korean Companies in Global Competition Martin Hemmert Second edition published 2018 by Routledge Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2018 Martin Hemmert The right of Martin Hemmert to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988 All rights reserved No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe First edition published by Routledge 2012 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book has been requested ISBN: 978-1-138-03925-4 (hbk) ISBN: 978-1-138-03926-1 (pbk) ISBN: 978-1-315-17600-0 (ebk) Typeset in Bembo by Apex CoVantage, LLC Dedicated to Mi-chan and Frank CONTENTS List of figures ix x List of tables Prefacexi Note on Korean names and language references xiii List of abbreviations xiv List of Korean words xv PART I Introduction1   Tiger Management: the growth and competitiveness of Korean firms PART II The rise of Korean companies and Tiger Management 13   The seeds of Tiger Management: foundations of Korean capitalism 15   Emerging Tigers: the early growth stages 25   Globalizing Tigers: Korean companies entering the world market 43   Struggling Tigers: the Asian financial crisis 55 viii Contents   Revitalized Tigers: Korean companies in the twenty-first century 67   New Tigers: Korean venture firms and start-ups 82 PART III Cornerstones of Tiger Management 99   Tiger strategy: how Korean companies compete 101   Tiger leadership: how Korean executives lead their companies 114 10 Recruiting, training, and rewarding Tiger employees: Korean-style human resource management 127 PART IV The evolution and future of Tiger Management 143 11 Tiger Management in the world: meeting the challenge of globalization 145 12 Dynamic Korea: domestic challenges for Tiger Management 159 13 Adopting Tiger Management: lessons for non-Korean companies174 14 Advancing Tiger Management: the way forward for Korean companies 186 Bibliography207 Index223 FIGURES 1.1 Revenues of the six largest Korean business groups 1.2 Profit/revenue ratio of the six largest Korean business groups 4.1 Development of Korea’s merchandise exports and imports (logarithmic scale) 44 4.2 Development of Korea’s merchandise exports and imports in relation to GDP 44 4.3 Development of Korea’s outward and inward foreign direct investment (logarithmic scale) 50 6.1 Indicators of Korean companies’ financial performance, 2000–2015 68 6.2 Korean companies’ global market shares in selected industries 69 6.3 Korean companies’ exports by region (in billion US-$) 70 6.4 Korean companies’ foreign direct investment flows by region 71 (in billion US-$) 7.1 Number of venture firms in Korea, 1998–2016 83 7.2 New venture capital investment in Korea, 2001–2016 (in billion 84 Korean Won) 12.1 Annual working hours in Korea and other selected OECD 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Management, 2009, 20(11): 2349–69 INDEX Africa 71 – 3, 76, 148 – 9 Ahn Cheol-soo 86 AhnLab 86 – 7 Algeria 74 American influence 20 – 1, 28 – 9 Amore Pacific 149 annual salary system see yeonbongchae Asian financial crisis 4, 55 – 65, 73, 76, 88, 164 – 5,  167 Asia Pacific 69 – 71 authority, centralization of 120 – 1, 123 – 4,  197 automobile industry: entry into 7, 38, 40, 46 – 7, 59; localization in 73 – 5, 147, 149; market share in 69; overseas investment in 52; supplier networks in 148, 154, 166 bankruptcies 56 – 9 Big Deal plan 60 – 1 biotechnology 93, 103, 108, 179, 193 BMW 190 Bobcat 78 Bosch 190 branding see global branding Brazil 72, 74 BRICs economies 74, 105, 178 business-government relations 31 – 2, 159 – 61 business groups see chaebols business planning 22, 106 – 7, 110, 121 – 2, 124, 165, 175 Byun Dae-gyu 86 Canada 52, 73, 105 centralization of authority see authority, centralization of central planning offices 121 – 2, 124, 165, 191 chaebols: crisis 58 – 66; definition 4; diversification 29 – 41, 47 – 8, 77 – 9, 102 – 5, 110, 191 – 3; dominance 88, 160 – 1, 166, 177; emergence 28 – 41; flexibility 107 – 10, 175; governance 62, 129, 160 – 1, 164 – 6, 187 – 90, 203; international expansion 51 – 2, 69 – 78; localization 52, 70 – 8, 146 – 53; training programs 130 – 2, 138, 152 – 3, 168, 176 changjo kyeongjae 93 charisma 115 – 16,  123 Cheil Industries 37 Cheil Jedang 37 chemyeon see face Chey Jong-kun 39 Chey Tae-won 127, 186 China: business in 78, 87, 95, 105, 154; exports to 69; imports from 18, 43; influence of 16; investment in 52, 58, 72, 74; localization in 147, 152; relationship with 18 Chosun dynasty 16, 18, 25 Christianity 21 chung 17 Chung Eui-son 189 Chung Ju-yung 37 – 8, 43, 46 – 7, 61, 115, 118, 120 224 Index Chung Mong-koo 74, 189 CJ Group 165, 188, 196 coherence, intra-organizational 122 – 4 company motto see sahoon compensation systems 63 – 4, 132 – 6, 138, 193, 196, 203 Confucianism 16 – 18, 23, 120, 122, 137, 163 – 4,  190 corporate governance 4, 62, 160 – 1, 164 – 5, 187 – 90,  203 corporate training centers 131 corporate values 116 – 17, 123, 166 corruption 20, 30 Coupang 94 – 5, 119 – 20 creative economy see changjo kyeongjae creativity 59, 130, 137, 151, 197 – 8, 203 – 4 crisis creation 118 – 20, 123 crisis management 60 – 3 cross-cultural communication 152 – 3 cross-cultural competence see inter-cultural competence cultural distance 180 – 2 customer orientation 75 – 6, 94 – 5, 148 – 9 customization 46 – 8, 76, 88, 146, 148 – 9 Czech Republic 74 Daewoo Group 36, 40, 47 – 8, 51 – 2, 57 – 9 debt/equity ratio 32, 58 debt guarantees see mutual debt guarantees decentralization 120, 155, 196, 200 – 2, 204 design 73 – 4, 108, 153 developing countries, business with 46, 51 – 2, 105,  109 development aid 20 – 1, 29, 43 – 4 diversification: failure of 59; into new countries 47, 104 – 5, 110; into new industries 29 – 30, 32 – 41, 48, 102 – 3, 110, 191 – 2; of zaibatsu 19 dongban seongchang 161 Doosan Group 57, 133, 165 Doosan Infracore 77 – 9 dragon economies 5 dynamic capabilities see meta-capabilities economic plans see five-year economic plans Ecuador 46, 109 education: level 31, 46; system 92, 139; value of 17, 23, 137 – 9, 163; zeal 17, 63, 137 – 9, 152,  163 efficiency see global efficiency electronics industry 7, 37, 39, 108, 119 emerging markets: business in 67, 74, 105, 109; competitive advantage in 156, 178 – 9; exports to 69 – 70; joint ventures in 75, 105; Korea as role model for 178 – 81; localization in 148, 150, 154 employees see Tiger employees employment, non-permanent see non-permanent employment English-based communication 202, 204 English language proficiency 45, 129, 152, 200 Europe: business in 74, 78, 109; exports to 50, 69 – 70; investment in 52, 71, 74 – 5, 89 – 90 expatriate managers 53, 150 – 3, 155 – 6, 199 – 202,  204 export promotion policy 30, 45 exports 8, 32, 39 – 40, 44 – 9, 69 – 72,  160 face 128, 135 failure, acceptance of 23, 197 – 8 family business 177 – 8, 188 – 90 family orientation 17, 23, 120, 187 – 90, 203 family ownership 190 family ties 128, 164 female managers 89, 162, 169, 194 – 5 female talent 163, 169 – 70, 194 – 7 financial crisis see Asian financial crisis five-year economic plans 22, 30 flexibility 74 – 7, 108 – 11, 150 – 1,  175 Ford Motor 7, 46, 108, 181 foreign direct investment 49 – 52, 70 – 8 foreign language proficiency 129, 152 – 3 France 149 gender equality 162 – 3, 194 – 5,  203 General Electric 49, 174 General Motors 182 Germany 74, 103 global branding 72 – 3 global communication: problems 198 – 9; standard 202, 204 global coordination and control 154 – 5 global efficiency 146 – 7, 156 globalization 51 – 3, 58, 69 – 79, 90, 145 – 56,  202 global marketing 72 – 3, 76, 148 – 50 global market penetration 69 – 70 goal setting 117 – 18, 123 – 4, 175 – 6 growth orientation 101 – 5 GS Group 61, 116, 165, 191 – 2 hallyu 8, 87, 89 Hanjin Group 57, 60, 116, 188, 192 Hanwha Group 57, 103, 116, 188, 192, 196 Hitachi 109 Index  225 holding companies 165, 188 Hong Kong 5, 69 HP 133 human resource management, Korean style 127 – 35, 152, 167 – 9, 179 – 80, 193 – 4,  203 Humax 84, 86 Hungary 52 Hynix Semiconductor 39, 60, 76 – 7, 79, 134, 150; see also SK Hynix hyo 17 Hyundai Construction 38, 51, 105, 109, 115 Hyundai Group 34, 37 – 8, 57, 60, 76 Hyundai Heavy Industries 61, 106, 116, 188, 192 Hyundai Motor: crisis management 118 – 19; exports 46 – 7, 109; foundation 7, 38; globalization 79; global market entry 52, 105; global strategy 73 – 5; international subsidiaries 150 – 2, 154; localization 148 – 50; R&D 104; speed 106 – 7; strikes 162; supplier relations 166 Hyundai Motor Group: business focus 61; core values 116 – 17; corporate governance 165, 188 – 9; diversification 192; female executives 195; growth 6 – 7, 34; incentives 134; origin 61; supplier relations 166 Hyundai Rotem 60 IDIS 90 – 1 IMF 4, 56 – 7, 60, 62, 160 imports 18, 20, 29 – 30, 32, 43 – 5, 47 – 8, 109 import substitution policy 29, 38, 45 India 7, 52, 74, 78, 148 – 52, 154 Indonesia 47, 52, 55 – 6, 89, 154 industrial relations 161 – 2, 167 – 70 in-house MBA programs 131, 152 inhwa 122 innovation 7 – 8, 49, 87 – 8, 107, 116, 178, 198 integration, vertical 37 – 8, 72, 148, 192 inter-cultural competence 152 – 3, 200 international knowledge transfer 155, 181 – 4 international subsidiaries: establishment of 47, 72 – 9, 86 – 90; management of 150 – 6, 179, 199 – 202,  204 international trade 30, 44 – 9 Internet business 83 – 4, 86 – 9,  94 Internet connectivity 164 Internet of Things 103, 179, 193 Internet recruiting 130 iRiver 64 IT industry 8, 91 – 5, 103, 178 – 81 IT revolution 164 Japan, business in 74, 89 Japanese assets, former 28, 41 Japanese competitors 45, 49, 75, 106, 119, 156 Japanese influence 18 – 20, 23 Japanese management 4, 182 Japanese occupation 18 – 20, 26 – 7, 40 – 1, 43, 136 jeong 122, 124, 199 – 200 jeongdo kyeongyeong 166 joint ventures 37, 49, 52, 75, 77, 105, 108, 149 Kakao 84, 94 kap-eul kwangye 166 Kia Group 56 – 7 Kia Motors 7, 73 – 4 Kim Beom-seok 94, 119 Kim Beom-su 94 Kim Dae-jung 160 Kim Kwang-ro 183 Kim Song-su 27 Kim Tack-jin  89 Kim Woo-choong 40, 59, 114 – 15 Kim Youngdal 82, 90 Kim Young-sam  160 knowledge transfer see international knowledge transfer Koo In-hwoi 38 Korean War 20 – 1, 28, 39, 136 Korean wave see hallyu KT 178 Kumho Asiana Group 57, 103 Kyongsong Textile Company 26 – 7 labor cost 46, 58, 72, 154, 161 labor unions 161 – 2, 167 land reform 19 – 21, 26 language proficiency see English language proficiency; foreign language proficiency Latin America 69 – 71,  78 layoffs 58, 63, 167 leadership see Tiger leadership leadership problems 59 – 60, 189 leadership style 64, 95, 106, 114 – 15, 122, 169 – 70,  203 lean production 74, 182 – 3 learning by doing 46 – 7, 53 Lee Byung-chul 15, 32, 48, 108, 115, 117, 119 Lee Hae-jin 89 226 Index Lee Jae-won 91 Lee Jae-yong 165, 189, 193 Lee Kun-hee 15, 67, 114, 117, 119 – 20, 166, 186, 198 Lee Myung-bak 161 Lee Sangchul 183 Lee Soo-man 87 LG Electronics: entry strategy 108; female executives 195; foundation 7; global strategy 75 – 6, 79; localization 147 – 8, 150; product customization 148 – 9; R&D 104 LG Group: core values 116 – 17; development 35, 38 – 9, 57, 192; foreign direct investment 52; growth 6; holding company 165, 187; localization 152 – 3; R&D 104 – 5; spin off 61; training programs 132 Libya 52 licensing 7, 108, 118 LIG group 191 localization 49, 70 – 8, 146 – 56 local responsiveness 59, 146 – 7, 199, 201 Lotte Group: core values 116; diversification 57, 192; foundation 102; global business 154; growth 5 – 6, 102 – 3; holding company 188; supplier relations 166 LS Group 61 Malaysia 52, 55 – 6, 72 Management by Objectives 117 – 18 Manchuria 27 marketing see global marketing market penetration, global see global market penetration market shares 7 – 8, 68 – 9,  74 MBA programs see in-house MBA programs Merck 190 meta-capabilities 176 – 7 Mexico 72, 136, 151 microelectronics industry see semiconductor industry Middle East 51, 69 – 71, 90, 105 military service 23 military-style industrialization 22 – 3, 197 Mitsubishi Motors 108, 118 Moon Jae-in 161 Moxy Engineering 78 mutual debt guarantees 58, 60, 187 Naver 84, 88 – 9 NCsoft 84, 88 – 90 Nigeria 46 Nikko 61 non-permanent employment 135 North America: business in 7; exports to 50, 69 – 70; investment in 52, 67, 71, 74 ODM 90 OEM 7, 49 outside directors 62, 165, 170, 188, 203 over-diversification 59, 191 owner management 188 – 91 Pakistan 52 palli palli 22, 106 Park Chung-hee 22, 30, 37 Park Geun-hye 93, 161 Park Hung-sik 27 patents 73, 75, 103, 109 Penney, J.C. 49 performance, corporate 5 – 9, 68 – 70, 118 – 20, 123,  190 Peru 46 Philippines 27 Philips 108 planning see business planning Poland 52 Portugal 52 POSCO: core values 116; corporate governance 188; diversification 192; female executives 195; foundation 7; growth 6 – 8; incentives 134; knowledge management system 107; privatization 178; speed in project execution 106 poverty 25, 136, 138 product quality see quality ProMOS Technologies  77 promotion systems 63 – 4, 132 – 6, 138, 195 – 6,  203 quality 46 – 7, 49, 52, 74 – 5, 115, 119, 134 R&D 49, 73, 75, 91, 103 – 4 recruitment systems 128 – 30, 135, 138, 152 – 3, 168 – 70, 176,  202 regional headquarters 154 – 5, 200 regional ties 128, 164 ReignCom 88 research and development see R&D resource sharing 40 – 1, 46, 72, 109 – 10, 192 responsiveness, local see local responsiveness restructuring 57 – 62 reverse engineering 49, 104, 108 Rhee Syngman 30, 37 Index  227 risk tolerance 19, 38 – 9, 48, 101 – 5, 110, 150, 175, 198 Roh Moo-hyun 161 Russia 74, 148, 154 sahoon 116 Samsung Corning 72 Samsung Electro-Mechanics 72 Samsung Electronics: crisis management 119; employee compensation system 133 – 4; entry strategy 48, 106, 117; foundation 7, 37; global design centers 153; global organizational structure 155; global strategy 72 – 3, 79; innovations 198; layoff 63; performance 7, 165; product customization 148 – 9; R&D 104; speed 107 Samsung Everland 165 Samsung Group: centralization 120; central planning office 165; core values 116 – 17; corporate governance 165, 188; delegation of management 189; development 5 – 7, 48 – 9; diversification 48 – 9, 57, 59, 103, 107 – 8, 191 – 3; flexible working hours 196; foreign executives 202; global expansion 52; human resource management 128, 133, 135; knowledge transfer systems 107, 110; leadership succession 189 – 90; overview 32 – 3, 37; recruiting 168; regional specialists 152; supplier relations 166 Samsung SDI 72 Samsung SDS 88 Sanyo 37 Saudi Arabia 46 school ties 128, 164 semiconductor industry: entry into 7, 37, 106, 115, 117, 119; innovation in 198; leadership in 7, 77, 102; market share in 68 – 9,  77 seniority-based compensation 63, 132 – 3, 135, 138, 150, 196, 203 shipbuilding industry 8, 68 – 9 Singapore 5, 47 SK Group: committee-based planning 165; core values 116; decentralization 196; development 36; diversification 192; foundation 39; global expansion 105; growth 6; holding company 165, 187; profit sharing systems 134 SK Hynix 76 – 7, 79; see also Hynix Semiconductor SK Telecom  103 Slovakia 74 SM Entertainment 87 – 8 South-East Asia 55 – 6, 58, 69 speed: decision-making 64, 107, 110, 175; implementation 22, 38, 46, 49, 64, 106 – 7, 110, 175; international localization 74, 150 start-up ecosystem 93 start-ups 91 – 5, 119 – 20,  135 steel industry 7 – 8 STMicroelectronics 77 strategy see Tiger strategy strikes 51, 161 – 2, 167 subsidiaries, international see international subsidiaries success, hunger for 136 – 7, 72 Sudan 51 Sunkyung Weaving Company 39 supplier linkages 8, 72, 75, 147 – 8, 154 – 6, 166 – 7 Suprema 91 Taiwan 5, 46, 77, 89 Thailand 51, 55 – 6, 89, 105, 109, 147 Tiger economies 5 Tiger employees 127 – 39 Tiger leadership 114 – 24 Tiger Management: adjustment 60 – 5, 159 – 71; adoption 177 – 85; advancement 186 – 204; definition 5; emergence 25 – 41; foundations 15 – 24; globalization 43 – 53, 145 – 56; key features 175 – 6 Tiger strategy 101 – 11 Toyota 150, 182 training centers see corporate training centers training of employees 27, 74, 87, 108, 130 – 2, 138, 150 – 3, 168,  176 Turkey 52, 74, 154 United Kingdom 52, 72 United States: competitors 117; exports to 48, 52, 69 – 70; influence see American influence; military 20; production in 74, 148; reconstruction aid 21, 28 – 9, 44; subsidiaries in78, 87, 89 – 90; see also North America values: Confucian 17, 130, 137; corporate see corporate values value systems, changes in 163 – 4 venture capital 83 – 5 venture firms 8, 83 – 93, 135 vertical integration see integration, vertical Vietnam 51, 105, 109 228 Index Welch, Jack 174 Whashin Department Stores 26 – 7 women managers see female managers working hours 137, 150, 168, 170, 193 workout programs 57, 60 workplace practices 193 – 6 yangban 18, 25 yeonbongchae 133 – 4 young talent 87, 132, 194 – 7 Yukong 39 Yun Jong-yong 166, 189 zaibatsu 19, 26 Zenith 75, 108 ... competitiveness of Korean firms PART II The rise of Korean companies and Tiger Management 13   The seeds of Tiger Management: foundations of Korean capitalism 15   Emerging Tigers: the early growth... stages 25   Globalizing Tigers: Korean companies entering the world market 43   Struggling Tigers: the Asian financial crisis 55 viii Contents   Revitalized Tigers: Korean companies in the twenty-first... lead their companies 114 10 Recruiting, training, and rewarding Tiger employees: Korean- style human resource management 127 PART IV The evolution and future of Tiger Management 143 11 Tiger Management