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September 2016

Three Absolutely Incredible Interviews Charles Ju Dilip Sundaram David Richardson Korea Intelligence Asia-Pacific Office Overview 2016 by Cushman & Wakefield

Talent

Without our people, it is lights out.

Korea Voices Bryan Hopkins Rodney J. Johnson Michael Conforme Jocelyn Clark


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In This Month’s Issue Founders’ Message

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KBLA Update Upcoming KBLA Events

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Upgrading Korea’s Competitiveness Creativity in Korean Industry KBLA Dinner Two Days Down South

New Members This Month

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Charles Ju

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David Richardson

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KBLA Community

Toshiba Medical Systems Korea TMSK President, Charles Ju, gives us the insight into the Korean medical system we’ve always wanted.

Dilip Sundaram

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Mahindra and ICCK Korea and India are two countries that have enormous promise to offer each other. If they can only find each other.

Korea’s Brand Whisperer Few people, if any, have experienced the transformation of Korea’s economy at the company and brand level like David Richardson has.

Korea Intelligence Trade, Finance, & Industry

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Economics

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Technology

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Risk Management

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Infrastructure/Transportation

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Real Estate

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Legal Analysis

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Asan Institute Retrospect

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In This Month’s Issue

Photo by Anuj Madan

Korea Voices Bryan Hopkins

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HR from a Legal Risk Perspective

Rodney J. Johnson

Jocelyn Clark In this Olympic Year, Some Thoughts on Giving Our All

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Michael Conforme On What Basis Do you Compete?

25+1 Rules For Entering New Markets

Special Feature Making Photos

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There is a story behind every image, or, at least, there should be.

About the KBLA

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Photo by Anuj Madan

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Founders’ Message

The game is tennis, not golf. T

here are dinosaurs among us, dead men walking. Analog organizations in a digital world will be eaten by smaller, faster, smarter competitors unless they change how they search for and pursue success. Commonly accepted business wisdom has always had it that slow and steady wins the race. No. Not anymore. Many of the trends of the last 20 years have turned accepted truth into misguidance. Organizations that continue to function today as they did 20 years ago will soon find themselves in a strange, unknown competitive landscape in which not much makes sense anymore. These organizations struggle with fundamental decision making about their activities, “Should we do what was right yesterday, what got us to this point? Should we do what seems to be working for others now?” Paralysis can set in - right before they die. So what changed? Chief among the changes has been the declining cost of failure, allowing smaller, less financially endowed competitors to iterate their way to better solutions to customer problems than their larger, more mature, richer industrial-age competitors. The game is no longer golf. It is now tennis. In golf, players get one shot from a particular lie and one shot only. There is no opportunity for learning, no opportunities for iteration. If you miss, you miss, and move on. You may never, in your entire life, end up with the exact same opportunity for performance again. And, perhaps strangely, in golf, the player who plays the game the least wins. That’s the way business used to be when financial capital was a key determinant

of success and wasting it was a cardinal sin. Today it is not like that at all. In tennis, players get many shots from the same position on the court, even in the same match. There can be plenty of misses, and, therefore, plenty of opportunities for feedback, adjustment, and learning. The tennis player says, “I put that one in the net, but watch what I do with the next one.” In tennis, it is not necessarily the person who minimizes errors who wins, but the person who maximizes successes in proportion to errors. A tennis player may lose more points than her match competitor and still win the match. (Do the math for yourself if you don’t believe it!) Failures are no longer as painful or as expensive as they once were, allowing us to tolerate more of them. So, every company, every organization, today should be concerned not with minimizing failures, but with optimizing the processes used to search for successes.

Rodney J. Johnson President, Erudite Risk Co-Founder, KBLA

Steve McKinney President, McKinney Consulting Co-Founder, KBLA


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Upcoming KBLA Events

Friday September 2, 2016 Sansoon Room, Grand Hyatt Seoul This event is limited to KBLA Members and specially invited guests only.


Upcoming KBLA Events

Friday September 9, 2016 Namsan V, Grand Hyatt Seoul This event is open to the public.

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Upcoming KBLA Events

Friday September 23, 2016 Wolfgang’s Steakhouse, Gangnam, Seoul This event is limited to KBLA Members and specially invited guests only.


Upcoming KBLA Events

Two Days Down South

KBLA South Dinner Friday October 21, 2016 This event is limited to KBLA Members and specially invited guests only.

Chartered Deep Sea Fishing Expedition Saturday October 22, 2016 This event is limited to KBLA Members, member families and specially invited guests only.

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New KBLA Members This Month Mr. Greg Sheen Executive Relations Liaison Zuellig Pharma

Mr. Lon Garwood Sr. Advisor Global Sae-A Co., Ltd.

Mr. Hank Morris Adviser, North Asia Argentarius Group

Mr. Andreas Harbauer Representative Draeger Korea Co., Ltd.

Mr. Dongju Lee HR Manager Samsung SDS

Ms. Joan Hester Director of Admissions Seoul Foreign School

Mr. John Hakjun Kim Country Manager Aggreko South Korea Ltd.

Mr. SahngHo Song Managing Director Owens Corning Korea Co., Ltd.

Mr. Dirk Lukat Director Schenker Korea Ltd.

Mr. Sam Cho Country Manager SAS Korea Ltd.

Mr. Eric Swanson General Manager Millennium Seoul Hilton

Ms. Megan Migyo Chung Marketing Director SAS Korea Ltd.

Ms. Margaret Key APAC CEO Burson-Marsteller Korea Co., Ltd.

Mr. Dan Kim Executive Director Cushman & Wakefield (Korea) Ltd.

Mr. Christopher Howie President & Representative Director Oilgear Towler Korea

Mr. Jeff Shin General Director Korea International School

Mr. Bernhard A. Brender General Manager Grand Hilton Seoul

Mr. Patrick Cox Director of Admissions Korea International School

Mr. Walter Kalteis President Austrian Korea Society

Ms. Sunny Park Assist. General Counsel Microsoft Korea, Inc.

Ms. Sunny Myung President Tiwi Trade

Mr. Jin-Chul Kim Representative Director Solvay Silica Korea

Mr. Edward KT Han CEO/Chairman Sam Joo S.M.C. Co., Ltd.

Mr. Sid Solanki Executive Assistant Manager - Marketing Millennium Seoul Hilton

Mr. HeungTae Kim Representative Director Harting Korea Limited

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KBLA Community

Charles Ju

Charting a path for the medical device industry in Korea President of Toshiba Medical Systems Korea enlightens us on the inner workings of the medical devices and medical care ecosystems in Korea.

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ell us something of your background and how you came to be in your current professional role at Toshiba Medical Systems Korea. It’s a long story to tell you about my background. Two major businesses (or companies) that I worked for before Toshiba were LG Precision, a Korean defense industry company, and Barco, a Belgian company doing business in visualization solutions. I was in charge of various command & control system programs in LG Precision as a program manager for nearly 13 years from 1983 before I moved to Barco in 1999. My major business partners at that time included those global defense industry giants like Lockheed (now Lockheed Martin), Raytheon, Hughes Aircraft (now Raytheon), Thales Netherland, the US Forces Korea, and of course the Korean government, including Tri Forces. I learned a lot about international business, culture, people and how to work with them as well. By the time I was sick of the defense business, I decided to change my career path and find a chance in a more commercial sector. Barco proposed that I take a sales and marketing manager position in Korea in 1999, to take care of their rugged display and graphics solutions business. Out of a total of 10 years at Barco, I was in charge of the medical display business for 8 years, following 2 years in the rugged display solutions business.

At the end of 2008, the Toshiba medical distributor in Korea went bankrupt. Toshiba Japan had to find a new partner to continue its business. Infinitt Co., a leading healthcare IT company in Korea, which has more than 70% of market share in PACS (picture archiving and communications system) was chosen as the partner for Toshiba and they set up a joint venture between the two companies, named TI Medical Systems (TIMS, in short). I was appointed as the representative director (President) of TIMS in March 2009 at the launch of the company. In 2013, Toshiba Medical Systems Corp., a minor shareholder of TIMS holding 30% of the shares at the time, decided to acquire the 70% of TIMS shares held by Infinitt and then set up Toshiba Medical Systems Korea (TMSK in short) to make a wholly owned TMSC subsidiary.

“I decided to change my career path and find a chance in a more commercial sector.” TMSK is responsible for providing advanced diagnostic medical imaging system solutions like Computed Tomography (CT),


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Magnetic Resonance Imaging (MRI), Angiography systems, Ultrasound, various medical 3D medical SW, and services to Korean customers. As the president of TMSK, I am responsible for almost everything not limited to sales & marketing, income statement, operation, and customer service, but also regulatory issues. Tell us about the market for medical devices in Korea. What is the ecosystem of the industry? How do importers fit in versus local suppliers? How do hospitals and clinics differ and fit into the whole ecosystem. Korean medical device markets are growing every year with CAGR of more than 6%. Out of total global medical device market volume of 357 billion USD, Korean market takes only 1.2% (4 billion USD). The largest single market is, of course, the USA (133.8 BUSD) followed by Japan (31.1 BUSD) and Germany (26.8 BUSD). From the perspective of market size, Korea is not very lucrative or considered a high potential market, while China is becoming one of the major markets. It is expected to grow fast, from 18.8 BUSD in 2014 to 38.1 BUSD by 2019.

I do not have a full picture of the ecosystem of the whole medical device industry but only of the diagnostic imaging systems. Conclusively saying, the industry is not very healthy due to heavy competition, the less globalized procurement practices of customers, and finally a very irrational national insurance reimbursement system. Most vendors are suffering while trying to make a profit out of selling hardware systems, especially importers. They also have to try to recoup the losses from their service and maintenance businesses. There is no particular local vendor producing high-end diagnostic imaging systems like CT, MRI and Angiography systems, hence competition is mostly between importers such as Toshiba, Siemens, GE and Philips. These major importers usually maintain two business channels, one is direct sales and the other channel sales through local dealers or distributors. They normally segment markets, for direct sales and channel sales, by the number of beds in a hospital. For instance, the head office takes care of direct sales to hospitals of more than 300 beds and the channel – dealer or distributor – less than 300 beds.

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KBLA Community The total number of medical facilities in Korea is 64,000. That includes all the way from top-tier university hospitals down to oriental medicine clinics. Out of this, our target market should be around 3,000 plus, including 43 top-tier university medical centers, 281 general hospitals and about 2,700 hospitals. In addition, some numbers of imaging centers, health screening centers and veterinary hospitals are also parts of our target markets. Local clinics, dental hospitals, and public health centers are not buying any diagnostic imaging equipment. What makes it unique and different from other countries? What is the most challenging aspect of the market in Korea? In Korea, the private sector is overwhelmingly more attractive than the public sector. Private hospitals represent more than 94% of all the medical facilities in Korea, while the public sector takes only 5.6%. This is a huge difference from other OECD countries where the public sector takes more than 30% on average. This statistics indicates clearly that Korean healthcare system is completely dependent upon the private sector. The number of hospitals per 1 million people is 56.9 in Korea as of the year 2010, the second largest out of the major 6 OECD countries: USA (18.6), Japan (67.7), Germany (40.4), France (41.8), and Canada (21.2), according to OECD Health Data. On the other hand, the number of

public hospitals per 1 million people is 3.8 in Korea, the lowest out of the 6 major OECD countries: USA (4.9), Japan (12.1), Germany (10.4), France (14.7), and Canada (21.0).

“Investment in highend equipment is also incomparably higher than that of other countries.� Due to the high density of hospitals in the private sector, competition between hospitals to attract patients is incomparably higher than that of other countries, causing them to spend a lot of effort to reduce their operational costs, including procurement costs for equipment, labor, materials and facilities. On the other hand, investment in highend equipment is also incomparably higher than that of other countries. For example, number of CT scanners per 1 million people in Korea is 35.9, the 3rd largest out of the 6 major OECD countries, followed by Japan (101.3) and USA (40.9). The number of MRIs per 1 million people in Korea is 21.3, which is also the 3rd largest out of the 6 major OECD countries followed by Japan (46.9) and USA (32.0). This situation proves that Korean hospitals, mostly belonging to the private sector, are spending a lot


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of money for advanced medical systems for a couple of reasons: first to differentiate their position and the second, thanks to high ROI from these equipment. In spite of low insurance reimbursement rate, hospitals can make a profit from in-depth patient examinations using the systems. The most challenging aspect of the market is low reimbursement rate from the national insurance program. Hospitals and doctors associations have complained for many years to the government for the rationalization of the insurance reimbursement rate, which is deemed to barely cover 80% of the actual medical treatment costs incurred at the hospital treating patients. However, the government has been stubborn in accepting these claims and alleges that the insurance can cover up to 90% of the costs. Either way, 80% or 90%, it is apparent that the insurance is insufficient to cover costs. In order to recoup this negative profit from the low reimbursement, the hospitals and doctors had have to develop various ‘expedients’ due to the government’s connivance. Low insurance reimbursement is the root cause of distortion in whole healthcare system of the country and the medical device market cannot be an exception.

Medical care is one of those industries that is difficult to understand from the outside looking in. What should we all know about the healthcare industry in Korea that we probably don’t know today? As Mr. Obama said, Korea has the most ideal medical care system in the world in terms of coverage of beneficiaries. Almost 100% of Koreans can be covered by the national medical insurance system and then at a relatively low cost. Depending on the type of medical care, a patient is only required to pay 20~30% of the total cost and the rest is paid by the national insurance system. However, there is a huge loophole in the system. The types of the care that can be covered by insurance do not include all maladies but only those defined in the system. This means, fatal diseases like cancer, leukemia, cardiac disorders, brain disease, and metabolic disorders, all of which take a long time, with huge costs involved, are not covered by the insurance and therefore personal expenditure would be enormous. According to OECD Health data of 2011, the personal medical expenditure rate of Korea is 36% while other OECD countries like Japan (14%), Germany (13%), England (9%),

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KBLA Community France (7.5%), Canada (14.5%), and USA (12%). These statistics prove that Koreans get poorer quality of medical service in spite of the high coverage national insurance system. Although Mr. Obama likes to benchmark the Korean national insurance system, he is watching only the bright side of the moon; the coverage but not the quality. Of course, the medicare system of the USA greatly depends on a private medical insurance system that costs a huge amount of money for both people and industries. But, cheap gets cheap! In addition, the government subsidy for the medical insurance system is no more than 10% annually. 90% of the insurance fund is directly from the pockets of the people. But the government has full control on the fund’s expenditure and management. Let me put it this way. It is like, a minor shareholder holding only 10% of the shares is taking 100% of the voting rights on the board of directors. Isn’t it funny? Is regulation significantly impacting medical care cost for the worse in Korea? Is it too much? Not enough? The conservative ruling party of Korea has kept saying “deregulation” (since 2009 when MB Lee became the president of Korea) to support business and industries and thereby to boost the whole Korean economy. However, I wonder how many people or industries can really realize benefits from deregulation? From ordinary people or industry’s perspective, the regulations set by the government - or deregulated as they allege – do not really seem to impact on saving medical care costs. One example is the reinforcement of insurance payments for 4 major intensive diseases like cancer, cardiac and brain disorders, and rare incurable diseases. The Park Administration announced this policy in 2013 so that people can get benefits for treatment of these diseases by paying up to 10% of the total cost. The policy will be realized by 2016. However, this resulted in nothing due to there being no way to secure the required budget.

Is corruption and fraud decreasing in the healthcare sector? What are the main causes? What are the rules regarding gifts, and commissions, in the medical device industry relating to sales to hospitals? Yes, indeed. Since the government enacted a law, the so called “Dual Punishment Law”, in October of 2010 that penalizes both ‘givers’ and ‘receivers’ of rebates, corruption and fraud seems to have been reduced in the healthcare sector, especially in pharmaceutical markets. Corruption or fraud in the medical device market, especially in the radiological products, seems to have already reached the saturation point before the enforcement of the law due to poor profitability of the business. Procurement practices in the radiology sector is changing from a form of a single decision maker to group

“Since the government enacted a law, the so called “Dual Punishment Law”, in October of 2010 that penalizes both ‘givers’ and ‘receivers’ of rebates, corruption and fraud seems to have been reduced in the healthcare sector, especially in pharmaceutical markets.” decision making, which eliminates the possibility of fraud in the process. The law, with its subsidiary rules and code, stipulates very much in detail what is to be allowed and what is not. For instance, you are not allowed to offer a meal of more than 100,000 won to a doctor, per meal, or a gift/ giveaway of more than 50,000 won at your own product promotional event. If you visit a hospital to do a similar activity, the ceiling amount becomes even lower than these, allowing less than 100,000 won per day per person and the giveaway should be less than 10,000 won. In addition, the maximum allowable amount of sponsorships per local and international events, discount


KBLA Community rates per payment term, grants for research, post market survey fees, donation of samples, etc., are clearly defined in the law. Recently, the Korean government announced that a new anti-corruption law called “Kim Young Ran Law” will be enforced from September 2016. The target group of this law is officials working in public sector including all government officials, teachers & professors, and journalists. According to this new law, which narrows the ceiling amounts for entertainment and any trial of corrupt activity, we are not allowed to offer a meal more than 30,000 won per time. If anybody belonged to such category aforementioned takes more than 1 million won a year, he or she will be punished regardless of the purpose of the money. Medical doctors working in the university hospitals are all subject to this law. Industries show concern over enforcement of this law as they argue that it may shrink the domestic economy. The National Assembly and the some parts of government are trying to ease the ceiling amount defined in the draft. However, many people support the purpose of the law: that it will prohibit corruption by officials in the public sector, a group who have often been accused of undesirable behavior in the past. What are the major changes that are coming to the medical device industry in the near future? Are they technology-driven changes? How is technology changing the industry? Most people in the industry and other experts anticipate that AI (artificial intelligence) will be the major change in the medical device industry in the near future. In diagnostic imaging markets especially, AI may threaten the status of radiologists. As you may know, deep learning capability of AI has been proved recently at the ‘Go’ match between the world champion, Lee Se-dol, and an AI Go engine, Google’s AlphaGo, which defeated the world champion by 4 to 1. Before the match, few people expected a win by the machine against a human in the match, which is arguably a much more challenging game than chess because it has a much higher branching factor.

AI can learn image reading techniques as it can read, analyze, evaluate, compare, and store literally unlimited cases. It does not eat, sleep, go on vacation from time to time, need to be paid or given a promotion, but can work 24 hours a day, 365 days a year. Recent research in the radiology area using AI at even a very early stage shows an accuracy of reading equal to or higher than that of human. IBM is already using AI in the medical area to suggest optimized pharmaceutical prescriptions, after taking into account the examinations and treatment history of the patient. AI will soon replace many of the seats where radiologists currently sit with a higher accuracy and at less cost. What is next for Charles Ju and Toshiba Medical Systems in Korea? What is the next challenge? As a matter of fact, I do not seriously consider anything in mind after Toshiba, which will be turned into Canon soon. Personally, I hope to retire and enjoy the rest of my life doing what I would like to do, not working for somebody. I would like to spend some time travelling around the world, if my pocket allows, and find a place to spend the rest of my life. Gardening is one of my dreams or running a small winery. But dream is just a dream if my wife would not allow it! Haha! I have been working for companies for nearly 40 years if I retire at 65 or by year 2022. This is too far to wait. What else would you like to tell us? I appreciate your kindness and KBLA giving me this opportunity. I am always happy to participate in KBLA activities, as often as possible, to share ideas and thoughts with many people from around the globe. It’s nice and wonderful experience to me and I learn a lot. I hope I can also help them in return.

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Dilip Sundaram

Bridging the business culture gap between India and Korea As CEO of Mahindra and Chairman of the Indian Chamber of Commerce in Korea, Dilip Sundaram, is a key piece of the puzzle. Tell us something of your background and how you came to be in your current professional role at Mahindra. I am a Chartered Accountant and have a MBA. I started my career in a financial role and transferred to roles in Mergers & Acquisition and Strategy, which led me to general management, and turnaround roles. How did you come to be in Korea? Mahindra was in the process of acquiring SsangYong Motors out of bankruptcy in Korea. I was hired by Mahindra to come over to Korea to be the Chief Financial Officer of SsangYong Motors and bring the company out of bankruptcy. How does Korea compare to other countries you’ve worked in, in terms of professional challenges and rewards? What have been the most challenging issues that you never expected to face? It is neither easy nor possible to compare the professional challenges an expat faces in Korea to other countries. Korea presents its own unique challenges and rewards. One of the biggest challenges is culture. It takes considerable time and effort to get a grasp of the culture to be effective in Korea. On the other hand, this is a very polite, considerate, efficient and process driven society. And because of that, accomplishing


KBLA Community tasks is relatively easy. Tell us about the Indian Chamber of Commerce in Korea, its size, role, and makeup. The Indian Chamber of Commerce in Korea (ICCK) was established in 2010 on the heels of Korea and India entering into a comprehensive economic partnership agreement (CEPA). ICCK has a mix of Korean and Indian companies as members.

“The popular misconception in Korea is that it is difficult to do business in India. NOT TRUE. In fact it is easier to do business in India than a lot of other countries around the globe.” Being a relatively new chamber of commerce in Korea, it does not have too many members but ICCK is also the fastest growing chamber of commerce in Korea. What are the biggest challenges in trying to coordinate business between India and Korea? Korean business in general is completely oblivious to India’s potential and market size and the incredible opportunities India provides. The reverse is equally true. What are some of the biggest opportunities that exist today in doing business between India and Korea? Korea offers many things of great value to India – technology, knowhow, process, etc. India offers one

of the largest markets in the world, low cost, and great incentives to manufacture in India. In a way it is a match made in heaven – if only Koreans and Indians knew about each other. If you could tell Indian businessmen and entrepreneurs in India one thing about Korea, related to doing business in Korea, what would it be? The Korean customer knows quality and is extremely discerning. If you can win in Korea you can win anywhere in the world. The government and the people are very business friendly. If you could tell Koreans one thing about doing business in India, or correct one misunderstanding, what would it be? The popular misconception in Korea is that it is difficult to do business in India. NOT TRUE. In fact it is easier to do business in India than a lot of other countries around the globe. In addition, the Indian Government has eased many of the restrictions and rules to encourage business in India. India is the fastest growing market. The size of the Indian middle-class is as big as the population of the US and represents one of the largest single markets in the world. Is India the “next big thing” for Korean industry? Is it the next big thing for the world, the antidote for a slowing China? It should be. Many of the Korean industries are under threat and not surprisingly, from China. India offers the perfect hedge to Korea. Take shipping for example – Korean shipping industry has become uncompetitive. Now Koreans can use Indian dockyards, Indian incentives, and Indian labor to become competitive again and this is a winwin for both India and Korea. In your opinion, in order for Korea to seize the future and continue to thrive, with regard to India or anywhere, what things must the

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country do differently? Better? A global perspective is essential for Korea to continue to grow. Lack of English language skill is a huge deterrent to Korean aspirations to be a global economic center. High labor costs in Korea clearly indicate that Korea must transform itself from a manufacturing economy to a knowledge economy. Lastly, the low birth rates in Korea will result in an ageing population and Korea must review its immigration policies to alleviate the pressures of an ageing population on the economy. What’s next for you? Are you in Korea for the long haul? What’s the next challenge? I have stopped predicting the future. But I have never stopped preparing for the future. I came to Korea as an expat with an expectation that

I will be here for about 3 years. I have already been here 5 years. It has been fun. I will continue to be here as long as I am adding value to Mahindra. What’s next for Mahindra and other Indian industry in Korea? Indian industry in Korea is represented by the Big Three…. Tata Group (Tata Daewoo), Mahindra & Mahindra (Ssangyong Motors), and Aditya Birla Group (Novelis). In addition, there a number of other technology companies trying to make inroads into the Korean market. Now that Indian industry has gotten its feet wet here in Korea there is more comfort about doing business here. I expect to see a dramatic increase in the number of JVs between Korean and Indian businesses in the near future.


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David Richardson

Korea’s Brand Whisperer Over the last 30 years in Korea, David Richardson has experienced first-hand how Korean brands and Korea consumers have evolved.

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ou’ve been in Korea a long time. Tell us how you got here and how you ended up spending your career here. I wanted to go someplace very different and the Korea of 1985 was poor, under a military dictatorship, and the only thing Korea had was its people, but there was a sense of expectation in the air that was compelling to those of us looking for something else. Tell us about your current venture. Is running your own company something you’ve always wanted to do? This is my fifth or sixth business that I have started and even when I worked in larger companies I ran them as my own business. Large firms often aspire to act in an entrepreneurial fashion, which in simple language means doing what you think is best for the business and paying the consequences if you are wrong. It is so much fun to be able to do what you know is best whether you have the luxury of owning your own business or are empowered by a management team that believes in your leadership. How does running a small business differ from working for a multinational, even though it is the same industry? What are some of the differences you didn’t expect? What is the best part? What is the most challenging part?

I started TNS as a small business, which was later acquired by a global network, so I experienced the natural evolution of a small business that evolved into a regional leader. A small business has terrible ups and downs which takes a while to know how to manage. At between 20 and 80 people you reach this wonderful size when your business becomes more than just what you as the owner can bring to the business, but you still have a strong sense of family. It is really enjoyable to be the patriarch of such a family. Larger firms run the risk of becoming too numbers driven and losing focus on the purpose of the business. Now I am operating a one man consultancy without the pressures to generate income for a large family of colleagues. Such a firm has the freedom to concentrate and do the best possible job for your chosen clients but the trade-off is you are working more on your own without the collegial atmosphere of a large team. Tell us about how Korea’s demand for and use of market research has changed over time? How has the Internet affected the industry and business’s perspective of market research?


KBLA Community In the past Korea was a small market and budgets were a lot smaller than they are today. As such, the country manager or marketing director was the decision-maker for market research and as a result you could design bespoke research projects that addressed the needs of the business. Today’s larger firms are often more removed from their customers and market research is commissioned rather than cocreated by mid-level managers

“Today’s larger firms are often more removed from their customers and market research is commissioned rather than co-created by mid-level managers who usually don’t ask the broader questions that market research is perfectly placed to answer.” who usually don’t ask the broader questions that market research is perfectly placed to answer. In Korea, we watched the budgets for a large project shift from $20,000 to $5,000,000, with the larger projects being global field and tab projects, and as a result our industry became less interested in Korea and more interested in doing work for the major Korean firms in the USA, Europe and China. Interest in understanding Korea as a market declined and for most of the major firms it now accounts for less than half their business. That is a shame as Korea itself is very interesting and was the original reason why I loved doing market research. I loved learning about Korea and still do! The digital revolution and the overall fragmentation of communication channels is changing the game and

forcing CEOs, country managers and marketing directors to ask the broader questions or miss out entirely as industries shift to new distribution channels, consumers spend hours each day becoming very knowledgeable about their choices on Naver and social media and as TV and Newspaper give way to the new forms of communication. Now, marketing managers more than ever need to be bold in their decision making as whatever works today probably won’t work next week. In such a fast changing world market research can help empower managers to make better decisions but the old P&G style of using research to make the decisions is, in my view outdated. Do you see demand for market research from smaller companies than in the past? If not, should some of the SMEs out there be doing more market research? Why aren’t they? What are the obstacles? The problem for SMEs is that market research is expensive. Market research has always been one of the tools used by rich companies that effectively kept the small companies out of the game. The trick for SMEs, and most multinationals are in fact like SMEs in Korea, is to use more qualitative research and directional research and stop trying to do market research in Korea in the same manner that one does in the USA with the huge budgets that can be afforded in the USA. A pair of focus groups and or an online survey can go a long way to help optimize a business offer or model in Korea. Forget doing large, complex and expensive projects which take too long anyway. We are living in a world where good enough rules. How have Korean consumer market brands changed over time? Prior to 1995 Korean firms thought marketing was sales and multinational firms outperformed Korean firms even when trying to appeal to Korean consumers. Today, Korean firms understand marketing

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and also understand Korean consumers and Korea’s unique social media environment better than most multinationals which has made success in Korea more and more difficult for casual international players trying to sell products or services in Korea. One must be fully dedicated over a long period of time to be successful these days in Korea. What are the biggest differences between how local Korean brands approach the Korean market and foreign brands approach the market? What can foreign brands learn from watching their local competitors? International firms are reluctant to customize their products or services for a given market whereas for Korean firms the local market is usually their largest market and so are quite willing to continuously change with the market. The biggest strength of Korean firms is their commitment to speed which generally allows Korean firms to neutralize competitive advantages so quickly that it is sometimes difficult to distinguish between the innovator

and the copy cat. Do foreign brands have an easier or more difficult time competing in Korea, overall, today versus, say 20 years ago? What are some of the things that got easier over time? What are some of the things that got more difficult? Foreign products were generally superior to Korean products 20 years

“Don’t enter the Korean market unless you are committed to competing aggressively.” ago which gave international firms an advantage if those chose to invest their time and effort in this small and relatively poor country. Today Korean consumers pay top prices for their products and services which makes


KBLA Community the market more attractive but the competition now is world class with a home field advantage. Is it time for Chinese brands to start making an impact in Korea? What are some of the challenges they face to breaking out? The key advantage Chinese brands have in global markets is low price. In general low price equals low quality in the minds of most Koreans which will make it difficult for Chinese brands to be successful in Korea.

“Korean consumers have replaced the Japanese consumers as the world’s most sophisticated consumers.” If you could tell foreign brand owners entering the Korea market one thing, what would it be? Don’t enter the Korean market unless you are committed to competing aggressively and spend a little money on research and customization before you spend big money launching a product or service into Korea that does not appeal to Korean consumers. If you could tell Korean brands one thing about defending their turf against all competition, local and foreign, what would it be? Never forget to play to your strengths which for Korean firms are generally speed, customization to Korean tastes and a willingness to outspend and outfight a new market player.

What’s next for David Richardson? What’s on the horizon? Over the past 30 years, I have had the chance to work with most international firms when they entered Korea and helped all of the major Korean firms as they expanded beyond Korea. For the next 10 years or so I plan on providing consumer research with a lot of free market understanding, wrapped around that research to marketing managers that I like who listen and have the authority to compete to win in Korea. Is there anything else you’d like to tell us? Korean consumers have replaced the Japanese consumers as the world’s most sophisticated consumers. They research their purchase decisions on Naver, listen more to social media than traditional media, they look at all distribution channels and payment options, expect the best service in the world and in general are willing to pay some of the highest prices in the world and they expect it, their way immediately. Amore Pacific may be the most innovative cosmetic firm in the world, not because they are so creative and progressive but rather because their customers make them world best. Competing in Korea gives western firms an observation window on the future.

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Korea Intelligence | Trade, Finance, & Industry

Hiring Criteria in 2016 On August 24, the Ministry of Employment and Labor (MOEL) and Korea Chamber of Commerce and Industry (KCCI) published the results of a survey conducted of 518 companies regarding their hiring practices and criteria. The report found that the smaller the company was, the more likely they were to favor qualifications or certifications in hiring, while larger companies tended to have more criteria in hiring.

Smaller companies (50 to 299) employees were more likely than larger ones to emphasize qualifications or certifications (자격사항) and internships over education history (학력) as their primary criteria (“Spec” 스펙) for selecting new employees.

Data MEOL, KCCI, Table and Translation KBLA

While not necessarily the most preferred criteria, large percentages of companies, and especially larger companies, ask for a wide array of background specifications from new applicants. Internship experience in particular is gaining popularity.

Data MEOL, KCCI, Table and Translation KBLA


Korea Intelligence | Trade, Finance, & Industry

Corporate Entities Formed in 1H 2016 On July 29, the Small and Medium Business Administration (SMBA) announced that a record number of new corporate entities were established in 1H 2016. Nearly 50,000 new corporate entities were established in 1H 2016, up roughly two percent year-on-year. Roughly one-fifth of the new entities were wholesale or retail stores.

Data SMBA, Chart and Translation KBLA

Per the report, with the exception of wholesale and retail stores (which were popular across the board), individuals in their 30s and 40s were most likely to establish imagery and information services, while those in their 50s were most likely to establish facilities management services.

Data SMBA, Chart and Translation KBLA

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Korea Intelligence | Trade, Finance, & Industry

Company Performance Evaluations, 1H and Annual 2016 On July 29, the Federation of Korean Industries (FKI) issued the results of a survey which it conducted regarding respondent companies’ abilities to meet their performance forecasts for 1H and 2016. For the most part, a plurality of respondents indicated that 1H 2016 performance fell short of expectations, and a plurality also predicted that their 2016 annual performance would fall short of expectations. The survey also asked which pending or proposed legislation respondents were most worried about; increasing corporate tax rates were identified as the greatest issue.

41.7% of respondents indicated that 1H performance fell short of expectations; 25.7% indicated that performance exceeded expectations. 38.7% of respondents believe 2016 performance will fall short of targets, while 25.4% expect to exceed targets.

Data FKI, Chart and Translation KBLA

Among pending or proposed legislation, respondents were most concerned about proposals to increase corporate tax rates. Their biggest worry regarding such increases was a decrease in investment and hiring.

Data FKI, Chart and Translation KBLA


Korea Intelligence | Trade, Finance, & Industry

1H 2016 Online Retail Channels On July 28, the Ministry of Trade, Industry, and Energy (MOTIE) issued a report on important retail channel growth in June and 1H 2016. Overall, online retail continues to grow, with open market and social commerce sites seeing higher growth than established online shopping portals. Of note, the following data has been compiled from twelve major online retail sites. The report does not reflect any activity other than the sites listed below.

Open market site sales grew an average of 21.5%, social commerce sales grew 23.8%, and general online shopping sales grew 4.9% year-on-year in 1H 2016. According to the report, growth in June likely dropped due to an elevated baseline from the June 2015 MERS outbreak.

Data MOTIE, Table and Translation KBLA

Almost one-third of products purchased on open market sites are appliances or electronics, lifestyle goods and furniture are the most popular product on social commerce, while general online shopping sites are most used for food. Social commerce sites saw the greatest year-on-year sales growth in 1H, at 23.9%.

Data MOTIE, Table and Translation KBLA

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Korea Intelligence | Economics

2016 Tax Revision Bill On July 28, the Ministry of Strategy and Finance (MOSF) posted an English language translated summary of the government’s Tax Revision Bill, 2016. According to the report, “the government expects to earn a total of 317.1 billion KRW of tax revenue due to these revisions.” The 317 billion KRW in revenue is expected to come over the five or more years, and the plan apparently expects to relieve working class and SMEs of 380.5 billion KRW in taxes, while imposing 725.2 billion KRW in new taxes on high income earners and large conglomerates.

While a complete outline of major proposed revisions can be found at the website, here is a small selection of ones of particular interest.

The following are some of the major point addressed in the plan would could potentially impact foreigners or foreign companies living or operating in Korea.

Data Statistics Korea, Table and Translation KBLA

Data MOSF


Korea Intelligence | Economics

Real GDP 2Q 2016 On July 26, the Bank of Korea (BOK) issued its advance estimate of the country’s real GDP in 2Q 2016. According to the report, the GDP is expected to have increased 3.2% year-on-year in 2Q, up from 2.8% in 1Q.

“Real gross domestic product (chained volume measure of GDP) grew by 0.7 percent in the second quarter of 2016 compared to the previous quarter. Real gross domestic income (GDI) fell by 0.4 percent during the same period. On the expenditure side, private consumption was up by 0.9, as expenditures on durable goods and semi-durable goods such as clothing increased. Construction investment expanded by 2.9 percent, centering around residential building construction.

Data BOK

Facilities investment grew by 2.9 percent, as investment in transport equipment expanded. Intellectual property products investment rose by 1.1 percent, centering around software investment. The rate of growth in exports was up by 0.9 percent, as exports of goods such as semiconductors, petroleum and chemical products increased. Imports grew by 1.9 percent, mainly on increases in crude oil and automobiles.”

Data BOK

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Korea Intelligence | Economics

Monthly Industrial Statistics, June 2016 On July 29, Statistics Korea published its report, “Monthly Industrial Statistics, June 2016.� Overall industrial production increased 4.8% year-onyear, or 0.6% month-on-month.

Data Statistics Korea


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Korea Intelligence | Technology

Usage of Secondary Media Devices While Watching Television On August 15, the Korea Information Society Development Institute (KISDI) issued a report on how individuals use their secondary media devices (including smartphones) while viewing television. Smartphones were the most common secondary media device; KISDI maintains that using smartphones while watching television may actually provide a more active viewing experience, especially with younger people, as younger respondents indicated they were using their phones to search for information regarding, or talk with friends about, things they were watching on television.

Smartphones remain the most popular secondary media device used while individuals watch television, although it appears that fewer individuals used them in 2015 than the year before.

Data KISDI, Table and Translation KBLA

Data KISDI, Table and Translation KBLA

Four in ten of all respondents stated that when they used social media or messaging services while watching television, that their content and conversations were related to what they were watching. In general, as the respondent’s age increased, it was more likely that posts or messages were related to what they were watching.


Korea Intelligence | Technology

KCC Sanctions for Alleged Customer Personal Information Violations On August 11, the Korea Communications Commission (KCC) announced that it had levied a total of 180 million KRW in penalty surcharges, and 170 million KRW in fines for negligence, against eleven mobile app operators for alleged violations of the Act on the Promotion of Information and Communications Network Utilization and Information Protection (Network Act). All companies sanctioned were cited for allegedly violating Article 24-2 (Consent to Provision of Personal Information (to a Third Party)), Article 28 ((Technical) Protective Measures for Personal Information) or Article 29 (Destruction of Personal Information) of the Act. The sole penalty surcharge of 180 million KRW arose from alleged violations of Article 24-2, related to the provision of customer personal information to a third party. Woori.com is alleged to have provided personal information for 29,628 of 3.24 million customers to a third party, during the period July 2007 to March 2014.

Data KCC, Table and Translation KBLA

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Korea Intelligence | Risk Management

Large Companies Identified as Candidates for Restructuring in 2016 On August 8, the Financial Supervisory Service (FSS) published the results of a periodic evaluation it conducted of the credit risk faced by large Korean companies. Among 1,973 large companies with more than 50 billion KRW in outstanding credit to financial institutions, the FSS conducted detailed screenings of 602; of the 602 screened, a total of 32 companies were identified as candidates for restructuring.

There were three fewer large companies identified as candidates for restructuring this year than last year, although the total assets (24.4 trillion KRW) and credit (19.5 trillion KRW) of those companies identified as candidates were 130% and 175% greater respectively.

Data FSS, Table and Translation KBLA

In terms of industry, shipbuilding, construction, and electronics saw the greatest number of candidates for restructuring.

Data FSS, Table and Translation KBLA


Korea Intelligence | Risk Management

Public Safety Barometer, 1H 2016 On August 18, the Ministry of Public Safety and Security (MPSS) issued the results of its “social safety barometer” (국민안전 체감도) for 1H 2016. In 1H 2016, adult respondents averaged 2.79 in terms of how safe they felt (note that safety is measured on a 0-5 scale, with “0” being completely unsafe, and “5” being completely safe), down from 2.97 in 2H 2015. A series of highly publicized incidents in the spring of 2016 likely influenced the decline.

General adult citizens’ sense of safety appears to have been influenced by several highly publicized safety incidents this last spring, with a continuous decline from April to June. In general, adult respondents appeared to be most confident in their safety regarding natural disasters, with traffic accidents in a distant second. Respondents felt the least safe when it came to dealing with new infectious diseases. Note that multiple answers were ranked, with the below figures representing respondents’ first and second choices (the fields which they considered the most and second most safe).

Data MPSS, Chart and Translation KBLA

Data MPSS, Chart and Translation KBLA

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Korea Intelligence | Infrastructure/Transportation

2015 Public Transportation Usage Numbers On August 18, the Ministry of Land, Infrastructure, and Transport (MOLIT) published its survey on the state and usage of public transportation in 2015. Per the report, a daily average of roughly 12.8 million individuals rode public transportation, to include metro trains such as subways, and city buses, in 2015, with roughly three-quarters of those in the Seoul Capital Area. Six of the country’s top ten busiest bus stops are located in Gyeonggi Province, with four located at Suwon Station (in Suwon), and Yatap Station in Seongnam (Bundang) alone. Those 12.8 million individuals, or slightly over one-fifth of the country’s population, made an average of 21.6 million unique trips per days.

The top ten busiest bus stations in Korea service roughly 330,000 individuals per day. Of note, while both “Suwon AK Plaza,” and “Yatap Station/Bus Terminal” both repeat, the original report clarifies that the there are several distinct bus station (and bus station codes) at both locations, which is what the table reflects. The single busiest bus route in Korea is the Gyeongi Province #88 bus, from Daejang-dong in Bucheon to Yeouido, which sees 46,153 passengers daily.


Korea Intelligence | Infrastructure/Transportation

Korail continues to expand highspeed cargo transport On July 27, Korail announced that starting August 1, it would expand its high-speed cargo transport trains from four to six. The high-speed cargo program has expanded from two to six trains in the last year. The trains, which

operate at roughly 120 kilometers per hour, transport cargo from Busan to Obong Station (in Uiwang, Gyeonggi Province), in a little less than five hours, which is 72 minutes faster than a regular train.

Suseo High Speed Railway Speed Tests Successful On August 25, the Ministry of Land, Infrastructure, and Transport (MOLIT) announced that it had successfully completed acceleration testing on its Suseo High Speed Railway (SHSR). During the testing, which began August 8, trains reached speeds of up to 310 kilometers per hour.

in Gangnam, Seoul, to Pyeongtaek in Gyeonggi Province, on which construction began in May 2011. According to the report, major construction on the project is complete, and the line will open this coming December following final inspections and testing.

The SHSR is a 61.1 kilometer section of track running from Suseo-dong

Gyeonggang Line to Open on September 24 On August 28, the Ministry of Land, Infrastructure, and Transport (MOLIT) announced that the Gyeonggang [Metro/Subway] Line will begin operations in earnest on Saturday, September 24, 2016. The route will run 57 kilometers through eleven stations, from Pangyo Station in Seongnam (Bundang), to Yeoju

Station in Gyeonggi Province, and will connect the cities of Yeoju, Icheon, and (Gyeonggi) Gwangju to the Seoul metro system. A formal opening ceremony will be held at 3:00 PM on September 23.

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Korea Intelligence |

Real Estate by Cushman & Wakefield


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Real Estate by Cushman & Wakefield

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Real Estate by Cushman & Wakefield


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Real Estate by Cushman & Wakefield

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Real Estate by Cushman & Wakefield


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Legal Analysis

Breaking Down the Just-Cause Barrier: A Systematic Approach of Securing Greater Flexibility in Managing Poor Performing Employees

I

magine being a foreign employer in Korea and maintaining a business operation with over 50 local employees. Imagine further that amongst these employees, one individual (“Employee X”) has been missing his sales targets by a margin greater than 70% for the past four consecutive months. Although he has no history of disciplinary sanctions, Employee X slouches around the office, is unmotivated and appears overly relaxed. He also shows no outward display of initiative to turn his performance situation around. As an employer, you decide that he is unfit for continued employment, and as you may have done in other jurisdictions, you seek to terminate Employee X for inadequate performance. However, under Korean law, you may lack just-cause for terminating Employee X despite his blatant performance shortcomings, and employers in Korea have often expressed tremendous frustration when they are forced to continue retaining an employee who, like Employee X, consistently fails to perform. Therefore, in response to the growing employers’ frustration, the Ministry of Employment and Labor (“MOEL”) issued its Official Human Resources Guideline (“Guideline”) in January 2016. The Guideline consolidated and summarized the factors that the Korean courts consider when determining the validity of a termination based on performance and the MOEL’s recommended steps for an employer to increase its ability to terminate their respective Employee X’s.

Standard for Employee Termination under Korean Law Korea does not recognize the at-will doctrine. Instead, under Article 23 of the Korean Labor Standards Act, an employee may be terminated only for just-cause. While there is no clear definition of just-cause, the courts have described it as a “cause that is attributable to the employee which, under the socially-accepted principles, makes the continuation of the employment impossible.” Categories where just-cause may be found would depend on the totality of the circumstances and may include, but are not limited to, serious and repeated violations of internal employment regulations; conviction of a serious crime; falsification of one’s resume and detrimental reliance by the company; disclosure of trade secrets; and sexual harassment. However, as a matter of general practice, the Korean courts tend not to find inadequate performance (in and of itself) as a sufficient just-cause for an employee’s termination. In the face of such legal standards, foreign employers express the greatest amount of frustration. Their frustration is exacerbated because, in other jurisdictions, the inadequate performance of an employee may be considered not only as a legally sufficient just-cause for termination, but also a logical and reasonable employer response. For example, the employment at-will doctrine in the US provides that an employee without a contract for a fixed term may be fired for any reason or no reason at all (although the US at-will doctrine has been limited by various exceptions and other recognized causes of actions against terminations).

Legal analysis provided by Lee & Ko.


Legal Analysis Notwithstanding, the just-cause requirement is not an entirely foreign concept under US employment laws and may arise under three settings: (1) an employment contract for a definite term that is trying to be terminated without cause before the expiration of the term; (2) a written employment contract containing explicit just-cause protection; and (3) employee handbooks or employer practices have created just-cause protection. Similar to Korean law, just-cause in the United States may be categorized as either a business reason that is unrelated to the employee concerned or an employee-based reason. However, in contrast to Korean law, the US recognizes inadequate performance as an employee-based reason for termination. In fact, some employment contracts, known as “satisfaction contracts,” expressly permit termination if an employee’s performance is not “acceptable” or “satisfactory” to the employer. Courts in the US have generally upheld an employer’s termination on the basis of performance so long as the employer is actually and in good faith dissatisfied with the employee, and employees challenging a termination based on a satisfaction contract must demonstrate that the employer was not in fact dissatisfied with them or that the employer fired them for reasons other than dissatisfaction with performance. The Official Human Resources Guideline In recognition of the comparative difficulty in terminating poor performing employees under Korean law, all employers should take heed to the MOEL’s Guideline from January 2016. According to the Guideline, the MOEL’s four (4) major steps for increasing an employer’s ability to terminate an employee for inadequate performance are: (1) amendment of the rules of employment or the collective bargaining agreement (if any); (2) adherence to an objective system of performance evaluations; (3)

education/training/reassignment efforts; and (4) fair and objective selection criteria for termination. (1) Amendment to the Rules of Employment (and/or Collective Bargaining Agreement) In principle, an employer may establish just-cause for termination if (1) the employee concerned is unable to perform his/her contractual duties or is capable of only partially completing his/ her duties; and (2) the termination ground(s) is (are) prescribed in the relevant Rules of Employment (“ROE”) or the Collective Bargaining Agreement (“CBA”). Therefore, to reduce the legal risk of disputes and to better create a basis for justifying inadequate performance as a grounds for termination, the MOEL recommends that employers explicitly include “inadequate capabilities” or “poor performance” as grounds for termination in their respective ROEs or the CBAs, as applicable. Please note that when an employer wishes to make disadvantageous changes to a working term/condition, the employer must, in principle, obtain consent from the majority union, or if no such union exists, from the majority of the employees. However, as one may argue that the insertion of additional grounds for termination is to provide clarity and specificity to an overly broad ROE provision, the legal procedure for making disadvantageous changes may be unnecessary. If in the latter, the employer would only be required to hear the opinions of the majority union or the majority of the employees, as applicable. (2) Establishment of a Fair and Objective System of Performance Evaluations The Guideline recommends that an employer establishes a fair and objective system of evaluations consisting of the following components:

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Legal Analysis a. System Establishment

Appeals

1. The employer must determine the criteria (e.g., categories, performance levels, etc.) for selecting the employee candidates who will be subject to the evaluation system;

(3) Education / Training / Reassignment Efforts

2. The employer must select specific and diversified standards of evaluation (e.g., evaluated functions and performance areas); 3. The employer must consult with and incorporate the opinions of the Labor Management Council (if required or applicable) in the evaluation system. b. System Implementation 1. Evaluation Unit – The employer must determine whether the performance of a relevant department or group will be factored into an employee’s individual evaluation or if the individual evaluation will be strictly based on the personal performance of the employee. Please note that the MOEL considers evaluations that are independent of the performance of others to be more objective. 2. Evaluation Standards– When selecting the evaluation standards, the employer must try to base the evaluations on objective criteria (e.g., sales amount, etc.) as opposed to subjective criteria such as employer satisfaction or workplace attitude. 3. Evaluation Method – Evaluations based only on the individual and not the based on the comparative score relative to other employees will be considered as more objective and fair. 4. Appeals Process – The employer may provide an appeals process so that employees may object to their performance evaluations results. 5. Evaluation Process – System Establishment → System Implementation → Evaluation → Notice of Results → System for

The employer must objectively select the training candidates through evaluations and provide opportunities (e.g., additional education, training, guidance) to the candidate to improve work performance. Additionally, the employer must make other efforts to avoid termination (e.g., reassignments in accordance with the law, target readjustments, etc.). The various efforts must not simply be mere formalities aimed at satisfying the factors to ultimately terminate the employee. Instead, the employee must be allowed with a reasonable amount of time to receive the training and demonstrate improvement. However, despite the foregoing, if the improvement of the employee is nevertheless impossible or the employee’s performance caused or is causing significant harm to the employer’s business, a termination for inadequate performance may be considered. (4) Fair and Objective Selection Criteria for Termination The employer may proceed with the termination after adequately, fairly, and objectively completing the steps outlined above. Recommendation in Practice The legal landscape for employee termination in Korea is unique and may be more difficult to navigate than in other jurisdictions, including the United States. Given the strict just-cause requirement for employee terminations and the courts’ tendency to not find inadequate performance (in and of itself) as a sufficient just-cause, employers in Korea must strive to secure their own flexibility to manage their workforces. It is recommended that employers spend a considerable amount of time reviewing and understanding the


Legal Analysis MOEL’s Guideline before structuring or revamping their performance evaluation systems. Two additional points of consideration are: 1. Please note that the MOEL’s Guideline is a non-binding document. That is, structuring a performance evaluation system in accordance with the Guideline will increase the employer’s ability to terminate an employee for inadequate performance. The Guideline steps do not guarantee that a termination pursuant to the performance evaluation system will be upheld if challenged. 2. As a matter of practice, the performance evaluation process should be administrated over a period of at least 6~12 months. For example, an employer’s process that completes within 1-2 months will most likely be insufficient.

Sang Hoon LEE Partner Sang Hoon LEE is a partner in Labor and Employment Group. He has been selected as a top employment and labor lawyer by legal international publications such as Asia Law, Chambers Asia, Legal 500 and Who’s Who Legal: Pensions & Benefits. Mr. Lee has a great deal of experience and a proven track record in traditional employment and labor law areas such as individual employment relationships (including employment agreements, termination, wages, etc.) and collective labor relationships (including collective bargaining agreements, strikes, crisis management, etc.).

William Woojong KIM Associate William KIM is a foreign attorney and member of the Labor & Employment Group. Prior to joining Lee & Ko, Mr. Kim served as a corporate inhouse counsel for Hyundai Heavy Industries (HHI). At HHI, Mr. Kim assisted in protecting the company’s legal interests throughout all phases of its multi-billion dollar construction projects in the Middle East, advising on local content laws, EPC terms and conditions, jointventure negotiations, and international commercial disputes.

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Asan Institute Retrospect

Searching for Answers to South Korea’s Challenges Although much of South Korea was focused on the Rio Olympics during the month of August, there were some notable developments related to North Korea, the economy, and corruption reform. We highlight these developments in this issue of the Asan Retrospect. Thae Yong Ho’s Defection Thae Yong Ho, the deputy ambassador at the North Korean embassy in the United Kingdom, has defected to South Korea with his family. Among the reasons cited for his defection, two have gained most traction: 1) he was concerned about the future of his children who were born and raised in Europe; and 2) unlike most diplomats, Thae was able to defect with his family who accompanied him on his diplomatic mission. The South Korean government interpreted this incident as a sign of growing instability within North Korea and warned that Kim may resort to further provocations to centralize his control. The Kim regime has already ordered the return of Hyon Hak-bong, the ambassador at the North Korean embassy where Thae served. He is likely to be interrogated concerning his failure to deter, investigate, and readily report Thae’s defection. The regime has also strengthened border security near China, rewarding smugglers for handing over defectors. SLBM & Ulchi Freedom Guardian On Aug 24, North Korea successfully test fired a Submarine Launched Ballistic Missile (SLBM). The SLBM was launched on the third day of the UFG exercises, which involved approximately 50,000 South Korean and 25,000 US troops. The

command-and-control exercise simulated taking offensive measures against North Korean nuclear and missile targets. Amid heightened tensions, Park Jiewon of People’s Party (PP) criticized the government for failing to effectively respond to repeated North Korean provocations and misleading the public regarding the progress of North Korean nuclear and missile programs. Meanwhile, on August 24th, South Korea, Japan, and China jointly condemned North Korea’s SLBM launch, calling it an “unacceptable provocation.” Wang Yi, the Chinese minister of foreign affairs, firmly disapproved North Korea’s nuclear and missile policy, but also called upon relevant parties to refrain from aggravating tensions on the peninsula, presumably referring to the planned THAAD deployment. Supplementary Budget The National Assembly has yet to reach an agreement on the third supplementary budget due to disagreements over the special oversight hearing on restructuring. The supplementary budget worth KRW 11 trillion is critical for supporting the government’s policy for stabilizing and revitalizing the Korean economy. The Blue House expects the supplementary budget to create 68 thousand more jobs and increase annual economic growth by 0.2% to 0.3% points. To pass the supplementary budget, however, the opposition parties are demanding that Choi Kyung-hwan (the Former Deputy Prime Minister of the Economy), Ahn Jong-beom (Blue House Chief Secretary for Policy Coordination), and the former KDB president Hong Gi-teak appear

Authors Han Minjeong, Eun A Jo, J. James Kim


Asan Institute Retrospect before a special legislative hearing on restructuring. The ruling National Frontier (Saenuri) Party opposes calling both Choi and Ahn. In the latest round of discussion, the opposition parties have agreed to pass the budget by August 30th without calling on either Choi or Ahn in exchange for a separate hearing involving Baek Nam-gi, the farmer who fell into coma after being shot by the police water cannon during a demonstration. Restructuring The painful restructuring process in the shipping sector is moving ahead with the latest development involving Hanjin. Hanjin Shipping submitted its final voluntary restructuring plan to the creditors on August 25th. The plan calls for an adjustment amounting to KRW 500 billion, which is still short of KRW 200 billion that the creditors are demanding. The creditors will review the new plan and announce a decision on whether to extend the voluntary workout after Aug 30. The creditors will need to consider the economic impact of placing Hanjin under the court receivership. If the process moves forward, Hanjin will be expelled from the shipping alliance and major ports are likely to file for provisional seizure of Hanjin’s vessels. Cargo owners may terminate their contracts and change shipping partners. Many observers point out that the court receivership would lead to bankruptcy for Hanjin. However, the creditors argue that additional assistance for the company would benefit mainly foreign businesses. Reform of the Prosecutor’s Office Series of corruption scandals involving current and former prosecutors have led to calls for reforming the Korean Prosecution Service (PS). The office is considering whether to establish a “permanent special prosecution office” to investigate the illegal activities of the PS. Currently, the office only allows for an ad hoc special investigation unit when

a need arises to investigate its activities. The Korean Bar Association also proposed to i) elect the heads of high and district prosecutors’ offices; ii) institute “the Prosecutors Assessment Body;” iii) abolish or reduce the appointment of former prosecutors to other public institutions, including the Blue House and iv) establish a special department on legal corruption at the district level, among others. The TDP and PP have also formed a coalition to establish an independent special investigation unit for high-profile government officials. The Korean National Police Agency (NPA) may be using this opportunity to chip away at the PS’s authority and jurisdiction. The newly appointed NPA head, Lee Cheol-seong, stated that the history of corruption in Korean prosecutor’s office is rooted in the excessive centralization of power and legal authority around the PS. Traditionally, the Korean prosecutors control major aspects of all criminal investigation, including the investigation itself, activities of the Korean police force, issuance of arrest warrants, and indictment. Lee suggested a need to reconsider the distribution of power and authority in the Korean enforcement and justice system.

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Korea Voices

HR from a Legal Risk Perspective To in house lawyers or former in house lawyers like me, HR has always been a major source of risk and irritation- in essence a black hole that sucks in resumes or job applications and spits out litigation and employment related claims. In many countries, making wrong decisions in the workplace can damage a company’s reputation/ brand and cost the company a great deal of money. HR is a major part of risk that any company faces and of course needs to be dealt with seriously. As many companies around the world, including the US and Korea face an increasing number of employment related claims, clear employment processes are vital. In other words, what can you do and what should you not do in the employment space? Legal and reputational exposure is now enormous. An HR department that fails to implement proper processes or provide adequate training will in the long run expose the company to major litigation and reputational harm. In the US, there are many dos and don’ts that an HR department must follow in order to avoid causing problems for the company. For instance, when interviewing candidates for a position, HR personnel should not make notes based on a person’s race, age, national origin, place of birth or any other “protected characteristic.” As you cannot base an employment decision on these “protected characteristics” there is no reason to make note of them. Making notes based on a protected characteristic could provide evidence of an unlawful employment action. Remember, in the US, interview notes must be kept for 1 year and can be obtained in a lawsuit if a disgruntled former candidate files an action against the company. Also remember, there could be severe penalties, including jail time for destroying documents the company

is required to keep, including interview notes. So any manager in the hiring mode needs to be careful when interviewing candidates. There is always the risk that someone would ask the wrong question and take notes. Managers and in house lawyers should work closely with HR whenever considering adverse employment actions; otherwise you may be acting without all of the facts and laying the foundation for a retaliation (or discrimination) claim. If in doubt, you should ask questions before acting. Be alert to the timing of adverse employment actions (such as discipline or an unsatisfactory performance rating) in relation to a person’s engaging in “protected activity.” Sudden claims of behavior or performance issues become suspect when they arise in connection with or soon after a person engages in “protected activity.” In the U.S., most states follow the “Employment At Will” doctrine. The Employment At Will doctrine states that an employer may discharge an employee for any reason or no reason but not for an unlawful reason; and the employee may leave at any time. The trouble is of course that in some states the basic employment at will rule is usually not enforced. The real rule is that an employer needs a legitimate reason to terminate employment of an employee. Therefore, before terminating an employee, an employer should take steps to prevent employee lawsuits, such as following all corporate HR processes and establishing the basis of a legitimate reason to terminate employment. On the other hand, companies in Korea don’t even have an “Employment At Will” doctrine. Instead, under Article 23 of the Korean Labor Standards Act, an

Bryan Hopkins Special Counsel, Lee & Ko bryan.hopkins@leeko.com


Korea Voices employee may only be terminated for just-cause. What is just-cause? Though there is no clear definition, the courts in Korea have described it as a “cause that is attributable to the employee,which, under the socially accepted principles, makes the continuation of the employment impossible.” Besides just-cause issues, Korean companies have other issues to worry about when dealing with employment related matter. For example, in Korea, a demotion may be viewed as a form of disciplinary action. As such, if a company demotes an employee without substantive justification, the employee may file a confirmation of the validity of a disciplinary sanction claim with the Korean courts or he may file a request for relief alleging wrongful disciplinary sanctions with the Labor Relations Commission. Needless to say, this could cost the company money. Considering the seriousness of employment related litigation and the potential exposure to claims, managers should minimize the risk by follow the law and the Company’s policies; If you don’t know or aren’t sure, ask HR. In reporting to HR persistent behaviors, serious infractions, or other important information that could create risk remember that these items should be taken seriously. During the interview and recruitment process, care must be taken not to take action or make inquiries that could trigger an unfair competition lawsuit. For example, do not make inquiries regarding a competitor’s confidential information, such as product plans, marketing plans, customers, etc. You should ask applicants to identify any sort of employment agreements with their existing/former employers which contain any provision providing for the protection of trade secrets and/ or proprietary information. To the extent an applicant has a contractual agreement with his/ her former employer, care should be taken to analyze the terms (i.e. non-solicitation or non-compete

provisions) with the assistance of counsel. Applicants should be told during the interview process not to solicit or recruit any co-workers for employment. The applicant should be encouraged to view the recruitment and interview process as completely confidential. In the event that a company is interviewing more than one applicant from the same company, the interview and hiring process for each applicant should be kept completely separate. Offers of employment should be made on an individual basis and should not be made contingent upon another individual’s acceptance of employment. Under no circumstances should employees be recruited as a team or a group. This could open the door to unfair trade practice claims and litigation. As I mentioned at the beginning, HR is a great source of risk for any company in many countries. To get a handle on risk, it is advisable to look at things from a risk management perspective or standpoint. This will entail taking certain steps such as: (i) performing a risk audit on company employment policies (has Legal or HR looked at the current policies?); (ii) publishing or reviewing the company employee handbook. (is the employee handbook up to date?); ADR – Is there an ADR in place to handle employee disputes? and (iv) training – has Legal or HR provided management with training on sexual harassment, age discrimination, and hostile work environment issues? Are the company’s disciplinary action procedures being followed? Are the procedures adequate? Regarding Korean companies- are the Relevant Rules of Employment (ROE) adequate? Are the ROE provisions specific enough or overly broad? Employment and labor laws of many countries can be tricky, especially in the US and Korea. HR therefore will always be a source of risk for the company and should therefore be given adequate resources to handle the legal and operational issues that it confronts on a regular basis.

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In this Olympic Year, Some Thoughts on Giving Our All When I consider how my light is spent Ere half my days, in this dark world and wide, And that one Talent, which is death to hide, Lodg’d with me useless, though my Soul more bent To serve therewith my Maker, and present My true account, lest he, returning, chide … —from “Sonnet 19” by John Milton (1651) In modern English, the word “talent” means a natural skill or aptitude— innate competence or mastery. But for the Greeks it was a unit of measure equaling 36 kilograms (80 pounds). “Talent” was also a unit of currency representing about $20,000 in today’s money. In Greek times, it was believed to amount to approximately 20 years of labor. (Under Korea’s proposed 2017 increased minimum wage, with 6,470 won (5.70 USD) paid per hour over a 40-hour week (a mere dream for most of us), a “talent” today would be worth 269,152,000 won or $237,120.) One might think of it as an ancient Bitcoin. We most frequently hear this old usage in the biblical story to which Milton refers in his “Sonnet 19”: the “Parable of the Talents” in Matthew 25:14-30, wherein a master, about to go on a long trip, entrusts his property to his servants. One servant receives five talents, the second servant receives two talents, and the third, one talent. Upon returning home, the master asks for an accounting. The first two servants explain that they each invested their talents and doubled their value. The third servant, however, not wanting to risk his talent, buries it for safekeeping. For this, he is not only unrewarded by the master, but is “thrown into the outer darkness, where there will be weeping and gnashing of teeth.” Milton joins this parable to our modern definition of “talent” in his sonnet, written in mid-life, as his blindness was worsening. The poet laments the impending tragedy of his “one talent” (the epic poem that would become

Paradise Lost) remaining hidden after his “light” is “spent.” To fail to create an epic art piece out of the talent God had given him was to be thrown into a darkness of weeping and gnashing of teeth. Any musician who has failed to practice adequately before a major concert knows well the contours of this dark place. In August, Michael Phelps broke a 2,000-year-old medals count record set by Leonidas of Rhodes in 152 BCE. Until fairly recently, it wasn’t clear Phelps would even make it to the edge of Rio’s mysterious dark green pools. According to news reports, since his last Olympic performance, Michael had taken to burying his talent in a bottle, resulting in more than one charge of driving while intoxicated. But then he fell in love. He grew a Samsonian beard, reached deep down inside himself to retrieve the last remnants of his youth, and began, for the first time, to give his “all.” As he disclosed in an interview with Tim Nudd for AdWeek, until that time, he had apparently only been giving it his “part.” As it turns out, Phelps has for all of these years been being the best without having to try very hard. Sometime during my first three years of life, when we still lived in Washington, D.C., I began taking Japanese “pika-pika boshi”-style Suzuki violin lessons on a 1/16th sized luth-of-privilege. I have been told I was pretty good. But, when it came time for group lessons, I lay down on the hardwood floor of Georgetown like it were a wintry lawn and, with the instrument in one hand and the bow in

Professor Jocelyn Clark Professor, Pai Chai University KBLA Arts Ambassador jocelyn.clark@kbla.info


Korea Voices the other, commenced to make a snow angel while staring up at the pika-pika little stars above in my imagination. Afraid of my less-than-cherubic behavior, my teacher barred me from what would have been the first concert of my life. Never too young to feel and act annoyed, I was more than mildly perturbed that, even though I could do all that was asked of me, I was still excluded from the performance of our toddlers’ trio. Shortly thereafter, we moved permanently to Alaska, where, because there was no violin teacher, I moved on to piano. Again, group lessons. And, again, I didn’t really need to practice much to play on par with the others. Michael Phelps is known for his arrogance, but I confess to understanding where that comes from. Why try when you don’t need to? Why invest your talent when you can easily bury it in the loose soil of a successful status quo? Phelps no doubt discovered the answer to that question when a young hard-working Filipino who had been a fan of Phelps growing up passed him in the 100-meter fly; I discovered it in the second grade. Up to about age six, not working very hard had worked for me. Then, suddenly, those who had been working hard at the piano (and at reading and a growing host of other disciplines) began to put me to shame. Michael Phelps admitted to Nudd that his performance in the Beijing Olympics in 2008 “was more about having banked strength through years of preparation than a 100 percent effort on the day.” Phelps is not just naturally good at swimming--he is a swimmer. As Friedrich Nietzsche wrote in 1878, “If one is something, one does not actually need to do anything—and nevertheless does a great deal.” But, he added that, over time, “[w]hat a person IS begins to betray itself when his talent decreases—when he ceases to show what he CAN do. Talent is also an adornment; an adornment is also a concealment.” The mythology around talent, or as it is sometimes called, “genius,” holds that it comes from God, or Heaven, or the deities—that it is bestowed by some supernatural (or just natural) power. But to be among the gifted and subscribe to this notion is sure folly. Yes, there are those who have natural advantages in this world, though in

our stratified global class system it is increasingly difficult to separate natural talent from economic privilege. But the early advantage, whether of the natural or economic kind, will take you only so far. In the end, success flows from persistent, and often painful, practice. As the English saying goes, you need to do three things to get to Carnegie Hall: “practice, practice, practice.” A German post card I keep on my fridge shouts at me every day in Prussian gold letters “üben, üben, üben!” Peter Drucker, an American management consultant, writes that it is the little things that, taken together, produce excellence. “To be effective,” he writes in The Effective Executive (1985), “does not require special gifts, special aptitude, or special training. Effectiveness as an executive demands doing certain—and fairly simple—things. It consists of a small number of practices.” These words echo Nietzsche’s admonition from a century earlier: “Do not talk about giftedness, inborn talents! One can name great men of all kinds who were very little gifted. They acquired greatness, became ‘geniuses’ (as we put it), through qualities . . . of the efficient workman [who] first learns to construct the parts properly before [venturing] to fashion a great whole; they allowed themselves time for it, because they took more pleasure in making the little, secondary things well than in the effect of a dazzling whole.” Earlier this year, MacArthur “genius grant” recipient Angela Duckworth came out with her book Grit: the Power of Passion and Perseverance. In it, she imagines the conversation she would have with her dad, who endlessly reminded her as a child growing up, “You’re no genius,” now that she’s an officially recognized “genius.” “In the long run, Dad,” she tells him in her head, “grit may matter more than talent.” When I was a child, my dad left the house to go to work at his law firm at 4:00 every morning. He never told me I wasn’t a genius. But, one day, when my performance in school suffered from lack of preparation, he did say, “We Clarks are not usually the smartest ones in the room—or at least I wasn’t when I was going to school— but I often found that when I had it in me to work harder than everyone else, I would surpass the smart and talented

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Korea Voices ones in the end.” These words made an impression on me and stayed in my mind as I, too, began to leave to the house at 4:00 a.m. to walk with my too-short legs to swim practice before school, through the Southeast Alaska sleet, the ravens dive-bombing my head all along the way. My arms were (and are) as short as my legs, but I worked hard and once, very proudly, even placed 3rd in my age group’s swim club yearly high point award ceremony. Coach Rick Madge, in a November 1, 2014, post on his blog “Mighty Tritons Swimming,” wrote the following in response to a parent asking, “Can a short swimmer successfully compete at the highest levels?” Truly elite swimmers have almost every possible performance factor going for them. Not just height, but toughness, discipline, technique, resiliency, competitiveness, body proportions, etc. And they have a team behind them that provides the best coaching, nutrition, sports psychology, emotional support, etc. But since no swimmer is superior in all areas, it opens the door to swimmers who have one or more factors that aren’t optimal. This is where short swimmers come in. While being short is a serious handicap, this can be more than made up [for] with very hard work, great technique, killer attitude, and some genetic luck in terms of body proportions, superior adaptation to training, joint resiliency, etc. A height disadvantage can be overcome. An inability to work hard or pay attention, or bad technique, usually can’t be. Coach Rick’s words reiterate Nietzsche’s 19th century observation: “In such a highly developed humanity as the present, each individual naturally has access to many talents. Each has an inborn talent, but only in a few is that degree of toughness, endurance, and energy born and trained that he really becomes a talent.” I would leave swimming for water polo in college and eventually step out of the pool altogether when the water began to soften and weaken the calluses on my fingers so essential to my gayageum career. As a musician, I quickly discovered the process for

succeeding in the arts is the same as in sports—the hours, the tears, the desire, the deliberate practice . . . and the mythologizing of a few “stars” are all aspects shared by both realms. Writing on talent, philosopher JeanPaul Sartre observed, “What people would like is that a coward or a hero be born that way.” As social theorist Daniel F. Chambliss notes in his 1989 article “The Mundanity of Excellence,” ascribing to this way of thinking “protects us by degrading the very achievements that it pretends to elevate; magically separating us from those people . . . ensuring that we are incomparable to them; and relieving those of us who are not excellent of the responsibility for our own condition . . . In the mystified notion of talent, the unanalyzed pseudo-explanation of outstanding performance, we codify our own deep psychological resistance to the simple reality of the world, to the overwhelming mundanity of excellence.” Thrown into the darkness of near-total blindness in his middle years, Milton had still not started on his epic. While he found he could manage life without his eyesight, he could not bear that dark realm of “weeping and gnashing of teeth” into which fate tosses those who have been endowed with talent and have failed to increase it. Enlisting one of his daughters as his scribe, he then dictated his complete Paradise Lost. Later, he would write another famous poem titled Paradise Regained. In it, only after Jesus survives an extended series of trials over a long period of time in the desert, does he finally gain the strength to defeat Satan. What Nietzsche, Duckworth, Drucker, Sartre, Chambliss, Coach Rick, Michael Phelps, and Milton all seem to be telling us is that the lane to victory is marked not by the others we pass but by the degree to which we overcome the parts of ourselves that keep us from giving our all.


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25+1 Rules For Entering New Markets For many businesses, entering new markets is not an option. It is a market imperative for continued survival in our ultra-competitive world today. Unfortunately, establishing a foothold and thriving in new markets is easier said than done. Besides all of the increased risk we face when we do so, there are also some tough competitive realities we have to come to grips with. The following 25+1 principles outline some of the many concerns and some of the ways to address them. 0. Commit If you aren’t going to be committed to the new market and the mission of making it work, don’t even try. Local competitors can smell an uncommitted foreign entrant. When they do, they’ll bleed you out of the market by making competition unbearable until you fold and go home. They’ve already figured out it won’t take long to make you pack your bags.

And So It Begins 1. Know your target market This is a no brainer. Having said that, it is very important to be explicit about what we do and do not know about a target market. What do we need to know (that we still don’t know) to ensure we will be successful there? What do we know about where our risk lies there? 2. Identify problems in the target market your company will solve Even if there are already similar competitors there, no one is exactly like you and therefore, no two companies should ever be aiming at exactly the same set of problems to solve. There will be some service or product points that are unique. This becomes a positioning issue.

What space in the minds of your target market’s consumers will you occupy? 3. Organize to minimize risk and maximize power Don’t commit to a strategy that has not been thought out and understood, given items 1 and 2. By focusing strongly on a specific niche, organize your new entity to have maximum impact on the target market without betting the bank. 4. Be sure your ecosystem will exist and be right Why do some companies fail with a product, and the very next year a similar idea comes along and succeeds? The time wasn’t right. What makes the time right? Sometimes, existence of the full ecosystem - technological support, demand, customer attitudes (discontent with existing solutions) regulatory, full market support, is the difference. Does the ecosystem necessary for you to win exist in place? 5. Baby steps Don’t commit so much that you can’t change your plan as requirements change. “Ready. Fire. Aim.” Iterate. Iterate. Changing horses midstream is no longer bad advice. You are the champion over here, but you are the challenger over there. That one fact changes everything. 6. Bring the locals in on the cause Whether you hire them or partner with them, make sure you have local champions supporting the cause. They know what you don’t. They know which short-cuts can be taken, and which ones can’t. Make sure their cooperation is win-win, by giving them some skin in the game. 7. Hire a leader, Trust him Hiring your local leader is the single

Rodney J. Johnson President, Erudite Risk rodney.johnson@eruditerisk.com


Korea Voices biggest move you’ll make. Work hard to hire the right one and see a twoway interchange of ideas flourish, as the company grows and learns in the new market. Hire the wrong one and watch him build a fiefdom you’ll have trouble penetrating later. Once you do hire the right leader, don’t second guess his insights and advice. 8. Support your leader with a talented team A leader can’t be a leader without someone to lead. Companies seeking to capture a market can benefit from a plurality of excellent brains, insights, and points of view. Get a team, because you can’t predict where your superstar insights will come from. 9. Set goals You’ve done all your homework, now it’s time to make a plan and execute it.

It’s On Like Donkey Kong 10. You’re there! Yay! Tell people you’re there! You’re there. Make sure everyone knows about it. Just being here with your big brand will attract help to your cause. Potential vendors will come. Potential distributors will approach you. Partners will show interest. Customers will take notice. 11. First impressions are overrated, Last impressions are what count Don’t get scared by early results and change your plan irrationally. If you’ve done your homework, have the right team, and are committed, you’ll be able to tell the difference between the right signals and the wrong ones the market is sending. 12. Give your local team some autonomy You put them in the seats, and now that things are moving along, you can put them in charge. They’ll move faster. And by the way, if incentives have been structured right, they have as much at stake in your success as you do.

13. Execute the plan beyond the company’s walls Make sure your local team gets out of the office. Spend as much time with customers as possible. Build your network. A lot of what good that happens, happens just by being out there and being active. 14. Go after the low hanging fruit first Get some early wins so your PR guys will have something to work with and the results will bolster your team’s morale. Convince your competition you can execute in your new market. Convince your more prudent customers that you’re here to stay so they can trust to make use of your services. 15. Close the door behind you Go after some victories just to keep them out of the hands of your competitors or other companies that might try to follow you into the market. Where possible, erase all the handholds you may have used to enter by filling them up with your products and services. 16. Make the rounds Go ahead, go talk to everyone who wants to talk - with an open mind. You’re flexible. You’re not here to hurt anyone, everyone can win. Putting ideas in the heads of the different market participants that they have options (join you, abandon supporting your competitors) and their own bargaining power, will make life hard for your competition. 17. Remember the people back home and elsewhere Victories in your new market will cascade across the world and help your brand everywhere. Failures will hurt you everywhere. Lack of integrity will hurt your brand at home and abroad no matter if you win or lose a specific fight. 18. Go after the sweetest customers Some customers are sweet on their own. Some customers are sweet because they are models and

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influencers for everyone else. Not all customers are equal and equally profitable. Find the customers that matter to building what you want to build and go after them. 19. Keep the data flowing If you don’t measure it, you don’t care about it. Some things you are used to measuring will be difficult there. Some things will be easier. Some data will make you want to change how you do things back home! One of the big bonuses of entering a new market is new lessons learned that you can apply everywhere.

The Long Haul 20. Stick to your story Iterate, yes. Change, yes. But don’t ever change your brand’s story. It won’t matter anyway, customers know who you are. Customers know what story you are really telling. Trying to change it just makes you look like a liar. 21. Become local if that is good, Stay foreign if that is good You know what I’m talking about here from a marketing point of view, but it also applies to operations. Sometimes going local is just plain better for executing. Look at what local companies do well and how they do it - mimic that. Why? Because the market is already set up to build those strengths in, and customers expect those things. 22. Pick your battles well Mimicking the local winners doesn’t mean butting heads with them straight on. Taking your own space means “defining” your own space. Define what you do to be something that only you can do well and dominate that space. From that protected space you can chip away at your competitors’ strengths without ever actually meeting them in open battle. 23. Small is beautiful. Small - that’s you over there. Use it, don’t deny it.

24. Keep the initiative If you keep on moving, you keep on forcing others to react to you. Once you start reacting to your competitors moves you are playing their game. Everything you’ve done until now has been done to play your game well. You have to keep everyone else playing your game, too.

Foreign Yes, Strange No 25. Relax You’re playing in the global game now. Through your industriousness, your trade, and your ideas, you’ve helped make the world a more interconnected, safer, more prosperous place to live. Thanks for that.


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On What Basis Do you Compete? Strategy is a complicated, multifaceted and ever-changing subject. In broad terms, though, much of its focus centers around one fundamental thing – the Competition – and, more specifically, as business leaders: where we should compete; how we should compete; and, what products/services we should compete with. In my previous article in Value Chain – ‘Are you going to Milk the Cow or Shoot the Dog?’ – I touched upon the practical challenges for CEOs relating to the selection of products/services (the ‘what’). This time around, let’s consider how we should compete – in essence, how to get that je ne sais quoi, that indefinable edge – to attract, retain and then generate value from our end-consumers.

As with many areas of strategy, there is no simple right or wrong answer, and no one-size-fits-all approach. Our job as business leaders is to understand the core principles, and synthesize them into a unique strategic cocktail for our own companies. In this case, competition contains two overarching viewpoints: (a) Organizations compete with other Organizations; or, (b) Products/Services compete with other Products/Services. In some ways, these views are opposed to one another – in effect, they are competing views of competitive strategy! The first and – arguably – the traditional viewpoint is the Organizational approach. Much has been written on Business A versus Business B type strategies, perhaps most notably by Michael Porter

Michael Conforme CEO, Michael Conforme International michael.conforme@kbla.info


Korea Voices (“Competitive strategy: techniques for analyzing industries and competitors”, Free Press, New York. Porter, M.E. 1980). This being said, in today’s consumer-driven market, it’s also hard to ignore the viewpoint Products/Services compete with other Products/Services. Here, the strategic argument is simple: endconsumers select and purchase a Product or Service, and not a Business. The purpose of this article is not to recommend which of these viewpoints is right or wrong, or argue which is better or worse for your business. Instead, let me make a rather bold assertion – it’s about both these dimensions and – of critical importance – it’s about the People that create the products, manage the business, and define the strategy itself. In many regards, an Organization is the sum of its constituent Products/ Services, right? For instance, Apple – the Organization – comprises of Products (e.g. iPhone, iPad) and Services (iTunes, AppleTV). Some consumers will be buying the Apple brand and some consumers will be buying an iPhone, but all of them are buying the output of Apple’s People. It sounds obvious when it’s written in black and white, but companies, products and services do not conceive, launch and manage themselves; instead, they are the result of People. It’s our People that bring their education, experience and enthusiasm – to create uniqueness – to create differentiation – to create that indefinable edge – to create competitive advantage. To create exceptional companies, with exceptional products and services requires exceptional People. Despite this, in most financial & annual reports, our staff are simply categorized as ‘cost’. Yet, if it’s their ideas, their innovations, and their talents that drive the business forward – shouldn’t we consider them as ‘assets’? Simply put, as CEOs, we need to shift gears –

change our mindset – and start competing to attract and retain the best staff. In this regards, perhaps we can learn from the world of major league sports. After all, teams like the Denver Broncos, Kansas City Royals, and the Cleveland Cavaliers are successful businesses in their own right. In the world of professional sports, it’s commonplace for a Head Coach to say, ‘We need to attract the best players to ensure we’re more competitive – next season’. As CEOs, perhaps we should adapt this to become: ‘We need to compete for the best people to ensure we’re more competitive – right now!

About the Author Mike Conforme is an angel investor, entrepreneur and mentor based in Asia. He helps clients accelerate growth with a focus on business development, leadership, sales and team building.

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Special Feature: Making Photos

The Beauty of Black and White I’d like to share my thoughts on black and white photographs. The ‘why’ questions being the most interesting to me, I’ll be spending most of my words answering first, why I choose to present black and white photos over color sometimes, and secondly, why, in a world of dynamic color images, they have stood the test of time i.e how they still deliver more impact in certain cases. “The wind blows where it wishes and you hear the sound of it, but do not know where it comes from and where it is going; so is everyone who is born of the Spirit.” - John 3:8 When I first became interested in photography as an artistic outlet, I found myself attracted much more to black and white photos than color ones. Looking back, I can imagine a few different reasons for this. For one, black and white is so far removed from the reality of dynamic colors that we see around us all day that it forces us to see the photo as art rather than a representation of reality, or as a document. Perhaps it appeals to my right brain more than my left? Another reason is that black and white photos represent purity and tradition. Alternatively, if you agree with, “what is a photo if not a story” then black and white photos seem to have an inherent story built in. When I see a color photo, I often step back and see it as a whole. A good color photo is pleasing to the eye in it’s entirety - the big picture. When I see a black and white photo however, I find myself moving in closer. Have you done that too? I look for details, I look for what the story is because I’m not mesmerized by the colors, or the realism (perhaps comparing it to a painting), nor do I get lost in the image as if I were there (a goal for most color photos). No, I look, or rather I seek, and that stimulation is the gift of a black and white image, and your gift to its artist - a genuinely interested reaction that leads to some action (the looking for…). I mentioned before black and white images lighting up our right brains (artistry rather than

documentation), but here I make the case that they activate our left brain to see objectively what is, rather than imagine what could be. It is perhaps this balance between the two sides, which if stuck perfectly, makes a black and white photo the most stimulating for me. So when I take photos, they are indeed in color, but in post processing I have choice to make. I remind myself of a quote I read from a friends interview a few years back, “If color doesn’t add anything to the image, then stick with black and white”. Although the quote is apt, I also feel that sometimes removing the color even adds to the story. As visual beings we have a tendency to get attracted and distracted by vivid images easily. So in terms of making the viewer view the subject, composition, and seek out the story, I feel black and white often does a better job. Also, sometimes, patterns can be communicated more clearly in monochrome, the photo to the right being a good example. You can see the crosswalks (Zebra crossing as I called it growing up) grey and white matches quite well with the nun’s umbrella and her dress. For me there is a harmony in minimalism, and one’s persona and expressions making one stand out rather than one’s use of colors, adds depth to the subject in a subtle yet deeper way. Finally, the communication of motion in this photo is very important, and aside from the bending umbrella and the flowing dress, the lines of the crosswalk help create that idea of movement. I suppose what I’m trying to say is, sometimes we have to prioritize. We choose to highlight the most prominent aspects and the trick is to learn to do it efficiently, by removing noise, rather than adding to it. The most important thing to remember is that be it color or black and white, neither is better in of itself. It is the artist’s prerogative to communicate most efficiently and effectively what he or she intends to share with the world.

Anuj Madan Principal Photographer, Anuj Madan Photography


Special Feature: Making Photos

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Special Feature: Making Photos

Going Against The Grain - It May Be Cliche, But It’s Still Cool The second technique I’d like to discuss in this two part series on black and white photographs is something called “selective color” or “color splash”. I find this format intriguing because it blends the beauty of black and white with the curiosity for color we crave. Let me explain my reasons. So I’ve already explained previously why black and white photos are important (pulling one into the photo to search for details), and how it’s got its own place in a world full of color photography. But here is this strange mix that doesn’t quite seem to fit either. Interestingly, among photographers, “selective color” photos are considered an amateur tactic, a cliche, the boxed wine of photographer snobbery if you will. But not to me. To be fair, all professional photos are

edited by their creators, whether it’s in the cropping, the editing for tone and contrast, or full on photoshop. Even before the technological portion, photos are edited by the photographers eye in framing and timing the shot. So, the whole color splash thing is but one more form of editing an image and if done right (not to say I am doing it right) can add to a story. And as I keep saying, image creation is about storytelling, and using all or any tools to tell a more interesting one is an artist’s prerogative. The ‘how’ is easy by the way, as long as you’re using a digital camera and an editing software. My camera actually has a few custom settings where I can isolate blue, red, green, and yellow while taking a monochromatic shot. But I can also take a regular color photo, and in Adobe Lightroom/ Photoshop dial down the saturation of certain colors while increase others to create such an image.


Special Feature: Making Photos As for the ‘why’, well that’s more subjective and up for debate. The most obvious reason for using color splash is to make the subject pop, even more so because everything else is black, white, or grey. But if that’s the only reason, then you’re not doing the format justice. After all, there are so many ways to make the subject pop that this seems like the laziest way - if

it is indeed the easiest, why don’t we see it more often? I believe the answer lies in the fact that people don’t often want to explain or even think about the use of a tool unless it is widely and positively accepted. Well, here I’ll tell you why I personally like to use it sometimes.

Take these two images for example, there is an intentional use of color splash to communicate two different things respectively. Can you guess what it is? If i’m doing a good job, I think you don’t need to guess because you can see it.

dancing spectator in the background. Black and white is nice, but it wouldn’t do this image justice. Not in my eyes.

The girl in the first picture, in just black and white, standing in the rain alone, seemed lonely, even blending into the crosswalk stripes, like she was invisible to the world. But what I wanted to convey was that she isn’t unhappy, or lonely, in fact, she had headphones on and was singing along with the music when I saw her. Perhaps she’s about to pop on over to that store across the street (notice the color splash match). A person standing alone on a street with an umbrella while it rains brings out a certain emotion, but it doesn’t have to if I don’t want it too. I control what you feel in a way, isn’t that amazing? The second image is even easier to decipher isn’t it? You can follow the music from the DJ’s earphones in the foreground straight through to the

So, in conclusion, subjective as this all is, I use colors, black and whites, splashes, to share a feeling, a mood, an idea, or sometimes just the way things ought to be. This is my art. Anuj Madan is an Indian born, American photographer living in S. Korea. He shoots for established brands and smaller clients alike, often preferring to shoot events, and corporate gigs. His portfolio is at www. AnujMadan.com, he uses the usual social media avenues often, and hopes to learn, grow, and shoot extensively in Seoul and around Asia over the next few years. You can reach him at 010-3938-2685, or via email at anuj@global.t-bird.edu

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About the KBLA Value Chain Advertisers Index EDITOR IN CHIEF Rodney J. Johnson

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CONTENT EDITOR Kyle Johnson CONTRIBUTORS Bryan Hopkins Jocelyn Clark Michael Conforme J. James Kim Han Minjeong Eun A Jo Sanghoon Lee William Woojong Kim Kyle Johnson Anuj Madan ADVERTISING Julia Kim (김주희) PUBLIC RELATIONS Jennifer Kim (김잔디)

Value Chain is published monthly by the Korea Business Leaders Alliance on the ground, in Seoul, Korea. Value Chain is a digital-only publication available in PDF and online forms. For advertising and distribution inquiries contact us at admin@kbla.info.

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“It is an uncontrolled truth, that no man ever made an ill figure who understood his own talents, nor a good one who mistook them.� -- Jonathan Swift

Value Chain September 2016 Edition  

The Monthly Magazine of the Korea Business Leaders Alliance