[Viewpoint] Leveraging the Korean initiative

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[Viewpoint] Leveraging the Korean initiative

When I first arrived in Korea as a Peace Corps volunteer in 1975, it quickly became clear to me that teaching here would be very different from teaching in the United States.

As a young man moving here from a foreign country, I noticed many tangible differences.

But over time I came to realize that some of the most critical differences were not obvious at all.

Three decades later - after working for Japanese companies in California, an American bank in Korea and U.S. high-tech firms in Japan and Korea and now running my own business while advising a local legal firm - I have come to understand many of the challenges managers doing business in a foreign country come up against.

When I began my business career here 30 years ago, only large Korean companies were active in international business.

Today, however, it is common for even midsize Korean companies to have substantial overseas investments. So one could reasonably expect that Korean business executives have become more sophisticated in launching businesses abroad, given the country now has a track record in doing so.

Well guess what? Although Korean and U.S. business executives have advanced in certain areas such as manufacturing, logistics and marketing, both groups can be surprisingly negligent in preparing for new offshore initiatives.

At the same time, Korean businesses retain a rather unique management style marked by strong leadership. In positive terms, this authoritarian approach to management is decisive, fast-moving and visionary. In not-so-positive terms, the same approach can be rash, reckless and intolerant of dissent within the ranks.

When I worked at an American bank in Seoul that had equal representation of Korean and Western senior managers, I witnessed almost weekly conflicts in management styles between the groups.

I naturally favored the mind-set of the Western managers, but after time I have come to respect the Korean mentality as well.

But right or wrong, Korean companies often have a very Korean way about making strategic decisions.

As a result, when Korean companies venture abroad and make the right decisions, they do remarkably well and often dominate their local markets.

Today in the United States, Hyundai Motor is highly respected, while Samsung and LG brands are losing the “Korean discount” as their images grow and strengthen.

On the other hand, when Korean executives get it wrong, any experienced international business manager can cite Korean failures that are sometimes epic in size.

But on balance, given the successes versus the failures, I certainly would not suggest that Korean companies should change their decision-making philosophies and processes. There is a great deal of competitive advantage within the Korean management style.

Still, improvements can be made.

For example, once an executive management team decides to invest abroad, there could be opportunities to upgrade international strategies and decision making.

I wish I could say that it comes as a surprise that Korean managers often are slow in consulting a competent Korean legal firm.

But the truth is, often American companies, too, make the same mistake. And both groups often end up facing similar penalties.

As obvious as it may seem, middle and senior managers in both countries are often negligent in performing legal diligence as their companies start looking at an overseas investment, such as forming a joint venture or some other kind of partnership with a foreign company.

For example, when I was responsible for setting up the Korean subsidiary of a U.S. software company, our regional management team used a very expensive international legal firm that had no direct representation in Korea.

As a result, my former employer paid top dollar for ridiculously simple and inadequate legal advice.

In any country, laws are primarily written to maintain some kind of equilibrium in the marketplace.

But of course, some laws are meant to protect the special interests of powerful players in a given market. So early on in the planning process it is critical to understand both the positive opportunities and the trade barriers, as represented by foreign laws and regulations.

Too often the approach is “let’s not worry about that until we need to cross that bridge.”

For small matters, that approach often works, but sometimes poor preparation can lead to unpleasant surprises, such as currency transfers procedures and regulations.

With 20/20 hindsight, I would have done many things differently if I were given a second chance. And what I have learned or witnessed makes me want to offer up advice and suggestions to other managers on how to avoid these pitfalls.

For example, I would suggest to those planning on initiating or expanding their offshore businesses to become familiar with a legal firm that is truly international in scope.

In the case of Korea, the firm should have a sufficient number of both Korean and foreign attorneys in a broad range of disciplines so they can handle the full array of relevant business issues abroad.

Ideally, many of these attorneys should be multilingual, but the most important consideration is how many attorneys in a chosen firm have in-depth overseas commercial experience.

Something that I have only recently come to appreciate is the value of using a legal firm that has strong Korean government relations.

For example, sometimes the local South Korean embassy staff members may introduce your Korean company to important local government officials - that is, provided you have someone who can get your company’s needs visible within the Korean government.

More obvious, perhaps, is the need for your legal firm to have a strong corresponding relationship with a legal firm in the foreign country.

There is no substitute for in-depth business and legal expertise by local professionals.

From my observations, many companies, including American corporations, often start their legal reviews too late and end up with poor legal preparation.

U.S. companies tend to rely more on local attorneys in the foreign country who may have stronger English skills than those with developed legal and commercial skills.

In the case of Korean companies, often the wrong lawyers are assigned to overseas investment projects. And in many cases, Korean attorneys are selected on the basis of their English skills even though they lack adequate international business experience.

In both American and Korean cases, I have come across internationally inexperienced attorneys lacking practical insight on how to structure a realistically functioning joint-venture or some other kind of partnership with an overseas partner.

They almost never have sufficient understanding of the foreign nation’s business practices, compliance requirements, labor regulations and environment protection regulations - all of which are essential for successfully doing business abroad.

On the other hand, in the cases of some of the larger and more sophisticated corporations,

I have seen how lower, middle and senior managers can bring into the planning process practical business considerations that carry the weight of law as well as identify the potentially catastrophic legal and commercial pitfalls. Managers can best serve their president before significant financial and time investments have been made.

The irony is that the same approach is easily within the capacities of even midsize and inexperienced companies.

But, in fact, only a few of these types of companies seek competent legal advice early.

Too often, they end up spending large legal fees later on for errors resulting from inadequate preparation.

Actually, if most companies knew how to engage legal firms earlier, many attorneys would end up earning less money. Most big legal fees result from cleaning up clients’ mistakes.

Looking back at having worked in the Korean business world on and off since 1977, I am more optimistic than ever about Korea’s international business expansion opportunities.

Having seen how some Korean companies wisely use legal service from the beginning, I am confident that the best of Korean management and initiatives may be possible.

That is, the best Korean companies will continue to have strong, visionary leadership at the top, but also have practical, pre-emptive planning in the middle.

With this combination of executive drive and middle-management prudence, there is no doubt that Korean companies will continue to expand the Korean economic miracle abroad.

*The writer is the president of Soft Landing Consulting and senior commercial adviser to Joowon Attorneys at Law.

by Tom Coyner
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