Wake-up call for Korean business

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Wake-up call for Korean business

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Song Su-hyun

At the largest-ever business forum between Korea and China last Friday during President Xi Jinping’s state visit, jaws dropped among Korean business leaders and officials from the Industry Ministry. They were amazed at the totally new image of Chinese businesspeople, notably the heads of the country’s three hottest IT companies - Alibaba, Baidu and Huawei.

“Chinese businessmen looked so different from our first meeting a few years ago,” said Oh Young-ho, CEO of the Korea Trade-Investment Promotion Agency (Kotra).

Oh cited Jack Ma, chairman of Alibaba, the largest e-commerce business in China. “Ma told me Korea has grown a lot, but I wanted to tell him, ‘You have grown a lot more,’” he said with a laugh.

For a Korean business community frustrated by sluggish growth in recent years, the success story of Alibaba may sound like a fairy tale. Or at least a Chinese version of the Steve Jobs story.

Ma, founder of Alibaba Group Holdings, has become a hero in the global online retail market, as his company has grown strong enough to beat eBay and Yahoo in the Chinese online market.

What motivated him to start Alibaba was a trivial episode on his first trip to the United States in 1995. Ma, who used the Internet for the first time at a friend’s house, typed “beer” into a search engine and was disappointed at getting back no results from China. Ma decided to fix it, and Alibaba was born. He started off selling about 20 products on the Internet in his living room in 1999. Alibaba is now one of biggest online marketplaces in the world, with as many as seven million retailers selling about 170 trillion won ($168 billion) in products and services annually.

The 49-year-old entrepreneur is the third-richest man in China and one of the 100 richest in the world.

There are two noteworthy lessons from Ma’s story: The chairman himself and the company are incredibly globalized and the company has greatly impacted people’s lives.

Ma, who was an English teacher, reportedly used to mill around outside hotels in his hometown of Hangzhou to practice speaking English with tourists. It seems he was very open to Western culture, too.

His decision to make an initial public offering on the New York Stock Exchange to raise an estimated $20 billion also demonstrates Ma’s global business mind.

Another lesson may sound like a cliche, but Korean businesses need to remind themselves of it: change. Ma’s crowning achievement is that he completely changed how things were bought in China.

As the Kotra CEO said, in less than a decade, Chinese businesses have managed a successful makeover. They have grown at an unimaginable pace and showed off their growth at last Friday’s forum.

Many Korean leaders couldn’t hide their surprise at the faster-than-expected growth of those Chinese companies at a time when many Korean businesses have been crawling.

It is not surprising that the technology gap between Korean and Chinese businesses has narrowed significantly, and the Chinese have already caught up with their Korean rivals in machinery, steel and some manufacturing sectors.

Korea, an export-driven economy, also is losing ground to the Chinese in the global export market. Competition is intensifying worldwide, with Korea accounting for 3.1 percent of exports and China 12.1 percent, according to the Hyundai Research Institute.

The Korean government successfully welcomed the Chinese president and 200 or so Chinese business moguls, many of whom said they are willing to invest in Korean software, IT, cultural content and real estate.

Korea cannot afford to be naive about the expected inflow of Chinese capital. Korean companies should be aware that if the current trend continues, Chinese companies will be the leaders of every industry, including the global IT market.

The Chinese are much more globalized than Koreans think and more aggressive in pushing for change, as seen in the case of IT businesses.

Since last year, the Korean government has planned to ease regulations and boost growth of the software, content and service industries, yet there has been almost no progress. Korean businesses are moving slowly, too.

Korea’s representative success story is Samsung Electronics, which has been leading the global smartphone market for the past five years or so. But the company did not accomplish it because of new ideas or the ability to create change. In Korea, it is hard to find a story like Jack Ma’s, and that’s a pity.

By Song Su-hyun [ssh@joongang.co.kr]




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