Business Education Seminar

Cross Cultural Communication

& Business Development
Presented by
Peter Underwood, Senior Partner

8 September 2010
Challenging Assumptions

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 Assumptions Inhibit Understanding

“I don’t know who discovered water, but I am pretty sure that

it wasn’t a fish.”
~ Marshall McLuhan

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Cultural Differences not New

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 Weird or Just Different?

http://www.ted.com/talks/derek_sivers_weird_or_just_different.html

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 Korea IS Different!
Russia

Oriental Legacy
Korea
China Japan

Taiwan
India Hong Kong
Fr. Indochina

Western Colonial
Malaysia
Indonesia Singapore
Legacy

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Sources of Inter-Cultural Disconnect
 Inter-Cultural Disconnects

Homogeneity
Language & Alphabet
Hierarchy
Fixed Pie
Rule of Law
Group Orientation
Maintaining Harmony
Relationships
Status
Emotion
Information
Education
Religion
Nationalism

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 Homogeneity

Unified country since 668

One race (No minorities)
274 surnames (US 88,000)
Isolated
Unique language & writing system
One education system
Work well with each other

Don’t know how to deal with ‘others’

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Language & Alphabet

Alphabet invented in 1425

Source of national pride
Unique to Korea - Reinforces
homogeneity & nationalism

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 Hierarchy
King
Government
Officials

Agrarian Society Farmers

Artisans

Traders

Confucianism Slaves

King – subject
Father – son
Husband – wife
Older brother – younger brother
Friend – friend

Goal is stability, not progress

“There is no equality in Confucianism”

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 Fixed Pie

Agrarian
• Land, the only productive asset, fixed
quantity
• “Production” oriented, “trading”
(business) is parasitic.
The more you have, the less there
is for me

Zero sum mentality

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 Rule of Law

Law was tool for government to control the people

King ‘owns’ the country

Law is of, by and for the king
Institutions are tool of the government
Bureaucrats work for government

Circumventing law (and taxes) is

expected, even admired

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 Group Orientation

Confucianism stresses group orientation

Belonging to the winning group is road to
success
Strong sense of belonging / national identity
Conform or be ostracized
Sacrifice for the common good

Rewarded for loyalty not ability

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 Maintaining Harmony

Values – Different hierarchy of values:

Relationships higher than ethics
Loyalty more important than confidentiality or
honesty
Preserving face (체면) and kibun (기분) more
important than truth

Conflict avoidance:
To preserve relationships, resolve conflicts
through 3rd parties

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 Relationships

Institutions are hostile so must rely on family, friends

and colleagues
Success depends on developing, enhancing
relationships (supporting the group)
No separation of personal and professional
Loyalty / Fight to the finish / No ‘loyal opposition’
(‘winner takes all’ means nothing for losers to share)

Relationships are all important

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 Status

Appearances
Car, address, desk
Hosting (meals, drinks, trips)
Employees
Job titles:
Impart enormous status
Determines your “position” in the group (and
in society)

Appearances may be deceiving

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 Emotion

Appeals to relationships
Behavior / communication is
designed to influence people rather
than achieve specific outcomes
(face v.s. facts)

Capacity for rapid change

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 Impact of Emotion
Impatience (빨리, 빨리):
Urge to act quickly
Weak prioritization skills
Act quickly more important that act well

Logic:
Emotional rather than analytical
“Right spirit” more important than facts
Faith in gut instinct / self confidence
Propensity for “snap” (quick) decisions

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 Education
Education – Road to success:
“Scholar Official” had highest social status
Status provided access to privilege

Educational legacy:
The “Golden Age” was in the past,
Based on “classics”, knowledge of “sages” therefore, respect for
sages and ability to replicate the past (Copying – plagiarism) is
epitome of knowledge
Rote learning of known “truths” from acknowledged experts
Problem resolution depended on identifying and applying the right
“formula” to solve the problem
Critical thinking unimportant, discouraged

Diploma is important more than learning or thinking

process

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 Information
Sharing information:
Information is Power
Tool for developing / preserving
relationships not analysis and decision
making
Communication is to influence people
rather than communicate information
Impact of information more critical
than Factual Accuracy

Do not expect Confidentiality:

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 Religion

Other 3%
No
Christian Religious
26% Affiliation
45%
Buddhist
26%

Religion is not divisive in

Korean society

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 Nationalism

Nationalism:
Ethnocentric, xenophobic
“Hermit Kingdom”
Resistance to powerful
neighbors / invasions
Strong, pervasive culture

Until 1870’s it was

illegal to be a
foreigner in Korea

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Impact of Culture on Business Today

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 Cultural Impacts

Differing Business Styles

Strengths & Weaknesses
Opportunities & Threats
Law & Contracts
Characteristics of Korean Companies
Hierarchy Titles
Korean Economy Tomorrow

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 Understand Differing Business Styles

Western Firms Korean Firms

Professional managers Owner managed

Head defines overall goals Top down instructions

Departments, team, and Teams implement

individual goals are defined instructions / Poor intra-
organizational
communication

Agenda set many months in Difficulty scheduling many

advance weeks in advance / plans
might change

Decision made during a meeting Decisions seldom made with

(autonomous decision making) outsider present

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 Law & Contracts

Law – situational rather than absolute:

Tool for implementing government’s
objectives rather than rules for harmonious
co-existence or resolving conflict
Based on “moral judgment” not words

Contracts:
Defines current position rather than fixing the
relationship
Negotiation never ends, change with situation

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 Characteristics of Korean Companies

Hierarchy/Title System:
Seniority based rather than function based
Compensation linked to titles (seniority)
Promotions: Based on years of service and loyalty rather than
performance

Hiring:
Based on credentials rather than experience or capabilities
Job assignment unrelated to skills

Rotation – functional job changed every 3 years:

Prevents “silos”, limits corruption
Stunts professional expertise
Ignores individual suitability to tasks

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 Hierarchy Titles
Korean Chinese Pronunciation Translation
회장 會長 Hoi jang Chairman
대표이사 代表理事 Dae pyo isa Representative Director
사장 社長 Sa jang President
부사장 副社長 Bu sa jang Vice President
전무이사 專務理事 Chun moo isa Executive Managing
Director
상무이사 常務理事 Sang moo isa Managing Director
이사 理事 Isa Director
부장 部長 Bu jang General (Senior) Manager
차장 次長 Cha jang Manager
과장 課長 Kwa jang Section Chief (Manager)
대리 代理 Dae ri Assistant Manger
사원 社員 Sa won Clerk

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 Strengths & Weaknesses
STRENGTHS
•Highly educated workforce
•Strong work ethic
•Stable political system
•Advanced production technology
•Modern infrastructure
•Developed economy
•Capacity for rapid change (early
adaptors)
•Location (between China & Japan)
•No religious, racial, or regional
conflicts
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WEAKNESSES
•Raw materials all imported
•Heavy regulation (improving)
•Insufficient transparency (improving)
•High taxes (improving)
•High labor costs
•Shortage of people with global
experience ( “human software”
shortage)
•Lack of “core” technologies
•Language barrier
•Expensive logistics
 Opportunities & Threats

OPPORTUNITIES THREATS
•FTAs with Chile, Singapore, & •Militant unions (~10% unionized)
ASEAN in place. Others are •China is moving up the value chain
forthcoming. into Korea’s space
•Geographical proximity to China •Nationalism / Anti-foreign sentiment
•Politically more acceptable partner to •North Korea (biggest threat is
China than is Japan. deterrent to potential investors)
•Production base in China.
•Korean speaking population in China
•Cultural similarities to China.
•New industries drive economy /
Paradigm shift.
•North Korea (long term opportunity)

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 Korean Economy Tomorrow

Development of SMEs?
Must move up the value chain
Amazing capacity for:
Rapid change
Defying the odds
Will remain an important market for:
Industrial products
Inputs: primary resources/food/feed
More open economy / due to FTAs?
Dream of becoming a financial and logistics “hub”
of Asia?
Wildcard: North Korea

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 Key Intercultural
Success Factors
For Doing Business in Korea

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 Success Factors

Communications
Make an emotional connection
Develop relationships
Expat Manager’s role
Reward performance
Develop people
Don’t try to be Korean
The good news

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 Written Communication

Respond quickly
Copy all interested parties
State conclusion first
Summarize main points
Use bullet points rather than prose
Maximize visual aids: charts and diagrams
Quantify verbal descriptions where possible
Don’t assume confidentiality

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 Verbal Communication

Speak basic, standard English

Avoid idioms: “ball-park figure”, “hit the road”
“Yes” often means “I acknowledge you are
talking”
You are not likely to hear “No” – which is
generally avoided
Verify understanding / triangulate
Follow up telephone calls & meetings with
written summary

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 Commercial Considerations

Protect crucial technical / commercial info

Control through “black box” rather than contract
Be patient – let decisions take their course
Build flexibility into your commercial terms
Expect contracts to be contextual (not fixed):
Understand terms to be “guidelines”
Expect change when situation changes

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 Make an Emotional Connection
Empathize – care about people
Demonstrate interest in Korea and things
Korean
Mix business with pleasure (eating, drinking,
singing) – show your human side
Group activities: golf, hiking, company field day
Language: learn 5 to 10 Korean phrases, learn
한글
Create PRIDE in the company

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 Develop Relationships

Do it yourself, it cannot be delegated or

outsourced
Invest time with people – much more than
elsewhere
Do good, honest business
Help others without thought of compensation or
revenue
Apply these tactics inside and outside the
company
Start today

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 ExPat Manager’s Role
Deliver performance to contribute to corporate goals.

Communicate vision, goals for the Korea operation

Secure Resources to achieve objectives

Focus Operations on performance

Feedback to Head Office on opportunities and

challenges in Korea

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 Reward Performance

Define responsibilities & expectations explicitly

Measure performance: objective, fair,
transparent, consistent
Reward performance: public recognition (not
just compensation and promotion)

WARNING: Hierarchy must be incorporated into

process.
Convert from seniority to function and performance
Must deal with Korean titles

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 Develop People
Western corporate culture is fundamentally different
from Korean culture so reinforcing it is a never ending
task.

Communicate expectations
Define & reward performance
Introduce ‘foreign’ concepts (best practices)
Foster critical thinking
Provide opportunities for learning & personal growth

Korean culture is very strong and ingrained. Korean

organizations will ‘default’ back to Korean norms without
relentless efforts.

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Don’t Try to Be Korean

Understand Koreans
Understand behavior
Anticipate behavior
Avoid miscommunication

BUT…

Be yourself
Be clear about your values
Be consistent
Treat people with respect

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 The Good News
Korean employees are:
Hard working
Highly motivated
Well educated
Disciplined
Eager to learn
Eager to please
Excellent implementers
Respond well to performance driven culture

Good Leadership, Good Direction and

Sufficient Resources make Koreans TOP performers

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 Now you are experts!!

Will these products succeed in Korea?

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 Capitalizing on Differences!

Koreans don’t entertain at home – they have no convection ovens for baking
http://www.youtube.com/watch?v=VNx6qcpTQgE
70% of population is urban
Koreans live in apartments, not houses – space is limited
http://www.youtube.com/watch?v=WmKTACnCF1s&feature=related
Children’s health and education are priorities
Few Koreans can swim
Domestic delivery is affordable and fast
Everyone has a “rice cooker” to cook rice
http://www.youtube.com/watch?v=qE9j2K4Be50
Koreans don’t have salt and pepper shakers on the table
Students don’t have much “free time”. They’re activities are structured.

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 Successful Products?

Westerners coming to Korea

Lawn gazebos & garden furniture
Residential W2W carpeting
DIY store (B&Q)

Koreans going to the US

Phone Charm with transport card
Short distance car to car walky talky
Apartment blocks in rural Georgia

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 Market Entry Strategy
Know your market
Customers
Competitors
Channels (Hypermarkets, department stores, CVS, internet shopping, home
shopping, specialty)
Key Drivers
Industrial goods: quality (how defined), cost, availability, function
Consumer Goods: fad, fashion, flash & crash

Strategy
Go/No Go
Go it alone or Partnership?
Greenfield or Acquisition?

Implementation: Clean sheet of paper:

What needs to be done,
What can you do?
What do you need help with? (defines characteristics of resources required locally)

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 Closing the Gap:

IRC support for

Western Companies in Korea

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 IRC Limited

Korea focused Business Development Consultancy

27 year history in Korea
15 employees including 4 Westerners

Differentiators:
Local insight
Language ability and cultural knowledge
Access to Korean market information & contacts
Customized service
Proven success record

IRC’s global partnerships:

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 Clients

What do IRC clients look like?

Global Fortune 500 companies
Medium-large multinationals
Technically specialized niche players
Governments

What do IRC clients need?

To enter or expand in Korea
To align local office practices with expectations of
the parent

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 Business Development Services
Market Entry & Expansion Services
(Starting off on the right foot)

Market & Company

Strategic Search & Negotiation & Implementation
Industry
Planning Evaluation Deal Making
Surveys

Organizational Optimization

(Aligning Korea operations with head office expectations)

Needs Communication Systemization Performance Results

Assessment of Objectives of Processes Management Assessment

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 Thank you

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Seek and achieve your ambitious targets in Korea.

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