Korean Business Management Establishment of Korean Companies

Korean Business & Management: Establishment of Korean Companies I Week 2

1. The Purpose n What are the foundations of the Korean companies? - Understanding some of the seeds and backbone of Korean companies - Understanding the sources of Korean capitalism and her management - Understanding the role of Confucianism, Japanese influence, American influence and military-led industrialization to the foundation of Korean companies 2

Contents n n n Understanding the foundation of the Korean companies Confucianism Influence of Japan Influence of US Military led industrialization 3

Public statement by Korean business leaders “My dream is to develop a company and contribute to building national wealth. It is a businessman’s social responsibility and obligation to make a company profitable” Lee Byung Chull, Late founder of Samsung Group “Some men live without thinking. Other men with positive thinking achieve ten or one hundred times as much as ordinary people” Chung Ju-Yung, Late founder of Hyundai Group 4

Public statement by Korean business leaders (cont. ) “The incentive system is the greatest invention of the century, turning the tide favorable for capitalism” Lee Kun-Hee, Chairman of Samsung Group 5

The Foundations of Korean Capitalism & Companies n Some of the foundations are. . - Confucianism - Influence of Japan - Influence of US - Military-led industrialization 6

1. Confucianism n Confucianism is one aspect of Chinese culture and philosophy -Confucianism is the idea and Philosophy of Confucius, who is a Chinese scholar lived in China around 500 BC - It was introduced in Korea about 1, 000 years ago - It had a strong shaping influence on Korean society during the past 1, 000 years - During its settlement, Korea developed its own interpretation much stricter way than in China itself. 7

1. Confucianism n (cont. ) Five cardinal relationships - The relationship between farther & son - The relationship between monarch & subject - The relationship between husband & wife - The relationship between elder brother & younger brother - The relationship between friend & friend 8

1. Confucianism (cont. ) n Confucianism emphasizes the strict observance of human relationships in order to maintain order and harmony within a society n It is strictly hierarchical in nature n Everybody has a well-defined position and has to obey to individuals who are ranked higher 9

1. Confucianism n (cont. ) Determinants of culture 10

1. Confucianism n (cont. ) Dominant religions 11

1. Confucianism n (cont. ) Religious & Ethical systems -Religion: a system of shared beliefs and rituals that are concerned with the realm of the sacred -Religions with the greatest following are ¨ Christianity (1. 7 billion adherents) ¨ Islam (1 billion adherents) ¨ Hinduism (750 million adherents) ¨ Buddhism (350 million adherents) ¨ Confucianism also influences behavior and shapes culture in many parts of Asia 12

1. Confucianism (cont. ) n Christianity & work ethics n Christianity is the most widely practiced religion ¨ common throughout Europe, the Americas, and other countries settled by Europeans Question: What are the economic implications of Christianity? n Answer: In 1904, Max Weber suggested that it was the Protestant work ethic (focus on hard work, wealth creation, and frugality) that was the driving force of capitalism 13

1. Confucianism n n (cont. ) Islam & work ethics Islam is an all-embracing way of life that governs one's being ¨ Muslims believe that there is one true omnipotent God Question: What is Islamic fundamentalism? Answer: n Islamic fundamentalism is associated in the Western media with militants, terrorists, and violent upheavals, ¨ the vast majority of Muslims claim that Islam teaches peace, justice, and tolerance ¨ fundamentalists have gained political power in many Muslim countries, and have tried to make Islamic law the law of the land 14

1. Confucianism n (cont. ) Islam & work ethics Question: What are the economic implications of Islam? Answer: §Under Islam, people do not own property, but only act as stewards for God and thus must take care of that which they have been entrusted with §Islam is supportive of business, but the way business is practiced is prescribed §businesses that are perceived to be making a profit through the exploitation of others, by deception, or by breaking contractual obligations are unwelcome 15

1. Confucianism n n (cont. ) Hinduism & work ethics Hinduism - focuses on the importance of achieving spiritual growth and development, which may require material and physical self-denial ¨ practiced primarily on the Indian sub-continent Question: What are the economic implications of Hinduism? Answer: Hindus are valued by their spiritual rather than material achievements Promotion and adding new responsibilities may not be the goal of an employee, or may be infeasible due to the employee's caste 16

1. Confucianism n n (cont. ) Hinduism & work ethics Hinduism - focuses on the importance of achieving spiritual growth and development, which may require material and physical self-denial ¨ practiced primarily on the Indian sub-continent Question: What are the economic implications of Hinduism? Answer: Hindus are valued by their spiritual rather than material achievements Promotion and adding new responsibilities may not be the goal of an employee, or may be infeasible due to the employee's caste 17

1. Confucianism n n n (cont. ) Buddhism & work ethics Buddhists - stress spiritual growth and the afterlife, rather than achievement while in this world ¨ found mainly in Central and Southeast Asia, China, Korea, and Japan Question: What are the economic implications of Buddhism? Answer: Buddhism does not support the caste system, so individuals do have some mobility and can work with individuals from different classes ¨ entrepreneurial activity is acceptable 18

1. Confucianism n n n (cont. ) Confucianism & work ethics Confucianism - teaches the importance of attaining personal salvation through right action ¨ the need for high moral and ethical conduct and loyalty to others is central ¨ practiced mainly in China Question: What are the economic implications of Confucianism? Answer: Three key teachings of Confucianism - loyalty, reciprocal obligations, and honesty - may all lead to a lowering of the cost of doing business in Confucian societies 19

1. Confucianism n (cont. ) The Nature of Confucianism in Korea - The importance of relative ages of individuals - Strong family orientation - Strong emphasis on the value of education - “Chung” 20

1. Confucianism n (cont. ) The Nature of Confucianism in Korea - The Confucianism has dominated Korean society and social behavior of Korean people - Created strict hierarchical manner based on age & position - However, such Confucianism-based value appears outdated and Korean companies have faced increasing challenges due to this 21