Partnering for progress
I recently went on a Han River cruise. I was a guest at an event where a large company signed an agreement for symbiotic growth with 100 subcontractors. CEOs of the companies and the government’s Korean Commission for Corporate Partnership signed the deal. The head of the host company apologized for not having paid sufficient attention to contract partners and promised to do better in the future.
He bowed deeply to the executives and staff of smaller business partners. He kneeled to put a pair of the company’s shoes on the feet of a subcontractor’s female CEO. The ceremony was intentionally held aboard a river vessel to symbolize that big and small business partners are in the same boat.
Companies invited to the event promised to manufacture the best quality materials for their corporate client. I offered a congratulatory remark dubbing the congregation a Korean-style Mayflower Compact, the manifesto signed in November 1620 by Pilgrims fleeing to America to escape religious persecution by the king of England. I gave my blessing to the potential birth of a global brand through the partnership of big and small Korean companies.
The Mayflower Compact was a covenant among the passengers, who pledged to abide by the agreed-upon rules and regulations after arriving in the new land. They agreed “the civil covenant would provide the basis for a secular government in America.”
The 35 Pilgrim Fathers and 66 passengers arrived at Plymouth, Massachusetts, after sailing more than 60 days. The covenant to establish a new type of world with freedom of religion and the pursuit of common good set the tone and grounds for the American Revolution and Constitution.
Aboard our ship on the Han, the corporate apparel names on the pact were once among mainstay made-in-Korea merchandise. The fashion and apparel industry has turned sophisticated in material, design, color and function.
The global apparel and textile market in 2012 reached $710 billion. The clothes market alone totaled $423 billion. The same year, Korea exported $13.9 billion in textiles, accounting for 2 percent of the world market. Fashion is dubbed one of the “late industries” that continue to grow in high-income economies. Three years ago, I visited the headquarters of Zara, one of the largest international fashion companies with a ubiquitous presence around the world.
The Spanish company that introduced the concept of fast fashion decades ago has built an unrivaled design, manufacturing and distribution system by working closely with its subcontractors to achieve its trademark feature of delivering fashion items quickly.
To maintain its identity of speed and responsiveness, Zara closely monitors its stores around the world. Sales of each item in every store are numbered and compiled in the main computer at Zara headquarters, known as the Cube. The company has long employed big data when designing and producing clothes to meet online consumer demand.
Can Korea develop its fashion brands with as much global reach and appeal as K-pop culture? The fashion industry relies on quality materials. Small manufacturers must be able to make intermediary goods well and bigger companies should be good at designing and coloring. Such networking and partnerships can produce goods that sell well in the global market. The high-end market using expensive and functional or scientific materials must be targeted.
Cooperation among small, midsize and large companies is a must for the viability of the Korea Inc. brand. Korean companies are being seriously challenged by their Chinese counterparts in shipbuilding, steelmaking and electronics. Many Chinese apparel companies that made money primarily on pirated designs and copycat items now turn out designer, original and high-end brands.
China accounted for 43 percent of the world textile market in 2012. If we do not stay vigilant, we may find ourselves behind China in not only completed outputs, but also intermediary inputs like materials and semifinished goods. Once the bilateral free trade agreement goes into effect, Chinese products will flow more easily into the Korean market.
Japan, despite its lost decades, still maintains rank as the third largest economy in the world. This is possible because of corporate winners in the areas of parts and materials. We still rely on Japan for high-end parts and materials, and Korean industrial products are losing competitiveness against their Japanese rivals due to the cheaper yen. To survive between China and Japan, Korean companies must closely work together.
Large companies should reach out beyond their traditional contractor network to independent companies skilled in the manufacturing of parts and materials. There are many engineers and researchers who have retired from large companies, and they could serve as valuable resources to help small and midsize companies and start-ups, as well as act as mediators between them and large companies.
The onboard partnership pact should not end as a one-time event. It must continue to flow and help Korea Inc. sail the globe world.
JoongAng Ilbo, Dec. 19, Page 35
*The author is the chairman of the National Commission for Corporate Partnership and professor of Chung-Ang University Graduate School of International Studies.
by Ahn Choong-yong