Key word for Korea Inc. in 2012 is survival
Even the emerging markets that emerged robustly from the global financial crisis of 2008 are showing some signs of slowing down.
Korean companies have been here before, and the ones that survived the IMF crisis of the late 1990s and the post-Lehman Brothers financial crash are arguably stronger than ever.
So what’s the gene in Korea Inc. that helps get our companies through such turmoil?
The Korea JoongAng Daily pored over the New Year’s speeches made by the top five conglomerates in the country - those whose sales account for nearly half of the nation’s gross domestic product (GDP) - to find the secret of survival and this year’s common strategy.
Focus in 2012: Survival
This year’s economic crisis is expected to be harsh because it’s not limited to the financial industry but rather a crisis generated by government fiscal problems, meaning stimulus packages are not available as a remedy.
Even loosening monetary policy is off the list since key borrowing rates in many countries including the U.S. are already low or near zero.
Samsung Electronics Chairman Lee Kun-hee in his New Year’s speech yesterday emphasized the need for a change in the corporate culture to be more open, flexible and innovative.
“The global economy this year will prolong low growth and the uncertainties in the management environment will not easily dissipate,” said Lee.
“Samsung would have to put all its efforts in overcoming the crisis under such difficulties.”
The chairman said the future of Samsung lies in new businesses, new products and new technologies.
“We have to break existing structures and think only of what is new,” Lee said.
Hyundai Motor Group Chairman Chung Mong-koo stressed the need for stability.
“We have to ensure internal stability though our management activities more than ever and strengthen our foundations in leaping to become one of the leading global companies,” the chairman said.
Chung cited his group’s achievements of last year.
“Hyundai-Kia Motors’ production and sales have grown roughly 15 percent from the previous year with 6.6 million units - and we have solidified our position in the world’s top five automakers,” Chung said.
“[This year] we have to further strengthen our quality management,” the chairman added, noting that with a third plant in Beijing and a plant in Brazil, this year marks the initiation of the company’s global production system.
Hyundai-Kia Motors has 30 plants in nine countries.
Chung set this year’s sales target at 7 million units and stressed cooperation and smooth communication among sales networks across the globe.
LG Group Chairman Koo Bon-moo in his New Year’s speech stressed the need for focus and performance. LG Group struggled last year especially in the smartphone business, and Koo, who in previous years emphasized customer satisfaction, took a more aggressive approach.
“This is a time when we must focus and deliver performances with a stronger determination than ever,” Koo said in his speech. “By businesses we have to set distinctive directions and create differentiated values,” the chairman said.
Lotte Group Chairman-in-Chief Shin Kyuk-ho stressed the need to solidify its core businesses.
“In times of uncertainties [we] need to increase management efficiency and strengthen the constitution of our core businesses,” Koo said. “It is when core businesses grow that it’s possible to expand to nearby markets.”
Past crisis: Sacrifice and global expansion
Korean businesses now have an unparalleled presence in the global market. In the IMF crisis that began in 1997, it was revealed that the nation’s foreign reserves were scraping bottom and most conglomerates were heavily in debt. Companies were hit with severe liquidity crunches and major conglomerates like Daewoo Group crumbled. Unprecedented layoffs completely changed the concept of employment and how conglomerates operate.
In his 1998 New Year’s speech, Lee Kun-hee, said it was regrettable that businesses had failed to keep the economy from collapsing. “Without a country there is no company, and if there is no company, there is no me,” Lee said. “With such determination we have to tighten our belts and share the suffering.”
The Samsung chairman said, “The weapon that would break through the current crisis is international competitiveness and maximum management efficiency.”
He stressed the need for a swift corporate restructuring. “We need to end the vicious cycle of high cost-low efficiency,” Lee said. “The harder the wind blows, the higher a kite can fly,” Lee said. “What we need is to make this crisis into opportunity and work, sacrifice, have courage and wisdom in strengthening the business’ constitution in times of stagnation.”
The crisis of 2008 further pushed companies to seek out global market as new growth prospects.
Three years ago, governments across the globe acted swiftly by pumping up their economies with stimulus packages while loosening monetary policies, actions that fostered a faster recovery.
Local companies turned crisis into opportunity to expand their global presence. In his 2009 New Year’s speech, Lee Soo-bin, Chairman of Samsung Life Insurance and temporary representative of Samsung Group, emphasized innovation and change as ways to survive the crisis.
“Numerous companies will disappear in history amid unlimited competition,” Lee said in his speech. The acting-chairman asked that employees start again from scratch. “This year demands us to once again innovate and reform.”
Other heads of leading businesses made similar comments in 2009.
Chairman Chung Mong-koo, during his New Year speech in 2009, emphasized aggressive sales expansion in the global market.
“In 2009 every department of the company will focus on strengthening its sales capability in the global market,” Chung said in his 2009 New Year’s speech.
“All employees have to keep in mind that the only way to overcome the global economic crisis is by expanding sales,” he said, noting that even during the IMF crisis, Hyundai Motor and Kia Motors were able to expand their presences in the U.S. market through an innovative strategy involving quality guarantees.
Chung became the head of Hyundai Motor Group in March 1999.
SK Group Chairman Chey Tae-won, who became chairman in January 1999, stressed swift decisions and flexibility as a survival strategy in 2009.
“We are facing another crisis that reminds us of 10 years ago,” Chey said in his 2009 speech. “If the past 10 years was a time for us to prepare, now is the time for us to show our abilities on the field.
“Our future could be different if we act quickly and flexibly in facing [a changing] environment and how effectively we can execute it,” Chey said.
Bigger role in social responsibility and sharing
Another change in this year’s speeches was a emphasis on social responsibility and cooperation with small and midsize companies.
Chairman Lee Kun-hee said, “It is [our] given responsibility to develop the people’s economy and create a foundation for sustainable growth.”
In 1998, the chairman in his New Year’s speech asked that business be free from politics and government.
In yesterday’s speech Lee said, “Samsung should perform its social responsibility as a people’s company and do its best to win society’s trust and love.”
He also added that Samsung needs to put efforts into helping [smaller] business partners to gain global competitiveness while participating in developing Korean society by helping struggling neighbors and the socially neglected.
Hyundai Motor Chairman Chung Mong-koo made a similar comment, saying that those in the neglected class should be taken care of and that the automaker will step up its social contribution and joint development with businesses partners.
“We will do our best in becoming a model company,” Chung said.
Shin Kyuk-ho of Lotte Group said Lotte’s resources should be utilized in creating values that will benefit both society and the company.
“A company’s brand value and competitiveness grows when it shares its know-how in society and with customers,” Shin said.
Special reporting team [firstname.lastname@example.org]
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