Walking around Seoul in 2013, it is hard to believe that in just 1953, South Korea’s per capita GDP was on par with that of Indonesia and Egypt, when today it is closer to that of Portugal. Korea’s economic growth, referred to as “the Miracle on the Han River,” has been an export-driven process, which has transformed the economy from nearly zero to a trillion dollars. Korea’s economic success has brought with it: technological innovation, advancement in education, modernization, and incredible improvements in standards of living.
We had the opportunity to meet with some of the leading companies in the global marketplace such as Samsung, Hyundai Motors, Hyundai Heavy Industries, Lotte Group, SM Entertainment, and CJ Foods – it is impossible not to be impressed by South Korea, which is compounded in the context of just how much the country has developed in the past 60 years.
For many of us, this was the first of untold future Korean business interactions. From working at Korea’s multinational conglomerates (Samsung hires many CBS graduates) to investing in Korea to partnering with CBS classmates who call Korea home, my prediction is that “The Miracle on the Han River” will have significant global business implications for many of us going forward.
Graciously, a few classmates and fellow travelers have shared some highlights in their own words:
Jjimjilbang (Korean bathhouse) in Busan
“After a long day at Hyundai, we had the opportunity to finally relax at a luxurious Korean spa. The jjimjilbang (as bathhouses are called in Korea) is an essential part of Korean daily life. I was shocked by how many people were at the spa at 11pm on a Wednesday. After changing into out spa uniforms, the group enjoyed using the eighteen different saunas and numerous hot and cold springs. My favorite was the led sauna which had pulsating neon lights and sounds. This might not sound like a relaxing atmosphere but it certainly was.”
– Daniella Gold Zimmerman, CBS ‘14
K Pop at SM Entertainment
“During our visit to SM Entertainment, we heard from [one of the business executives] about the business side of the K-pop phenomenon – as he told us, it’s much more than Gangnam Style. We learned about the process of recruiting and training artists, and about the different audiences each group targets. It was a fascinating look into a cultural movement many of us knew little about before our trip, and I think most of us came away with an increased appreciation for K-pop, and more than a few catchy tunes stuck in our heads.”
– Alix Cody, CBS ‘13
Key takeaways from David (Zhibo) Liu
- “Family business succession is always a tough issue: Hyundai, founded by Mr. Chung Ju Yung, was ever the largest conglomerate in South Korea, but was split into a few groups due to the “War of the Prince”. Though Hyundai Motors and Hyundai Heavy Industries are still one of the largest players in their respective business worldwide, it still implies that the succession of family business is really a tough job
- $80K wage for the line workers at Hyundai Motors – the highest payment among automakers worldwide: such high compensation level is even rare in the US, where the auto workers can normally earn $40-60K per year. High labor cost is not a bad thing because it also guarantees high quality
- Again, low labor cost of competitors is not necessarily a competitive advantage, a viewpoint double confirmed by Hyundai Heavy Industries (HHI): when asked about the competition from Chinese shipbuilders, who have lower labor cost, the representative from HHI believed that low labor cost can only lead to low end products, though they also know that the competitors may catch up some day. Therefore, what they need to do include (1) try to prolong the catch-up period (at least 5 years based on today’s situation) (2) improve mid and high end products and strengthen the customer relationship (3) further diversify the business portfolio
- The persistent focus on R&D makes Samsung exceptional: there’re now 60,000+ staff in R&D, over 25% of total staff in Samsung Group, and the R&D expense is 5.5-6.0% of total sales; both figures are quite high, contributes to its $188 Bn sales in 2012, and form a solid foundation to achieve its target of $400 Bn in sales in 2020″
– David (Zhibo) Liu, CBS ‘14
– Yael Silverstein
Lastly, we would like to once again thank the organizers for all of their hard work on this flawless trip, and the Chazen Institute and Chairman Dong Bin-Shin for the opportunity to spend our Spring Break learning about South Korea. You have our most sincere gratitude. Gamsa hamnida!
Yael Silverstein, CBS ‘13
Writing from NYC