Korean businesses have experienced tremendous growth over the last 30 years, but the product-driven companies must embrace more service-based portfolios if they are to continue their success, said Yong Nam, Vice Chairman and CEO of LG Electronics, at a Woodrow Wilson Center Director's Forum on November 3. Throughout his address, Nam referred to not only his own company but to other major Korean businesses such as Samsung and Hyundai, emphasizing the nation's position as a place of commerce.
"Over my lifetime, I have seen a remarkable transformation of Korea and the Korean economy," Nam said. "Our economy has grown by more than six times in the last 38 years, putting us second only to China" among Asian economies.
Almost half of total sales for South Korea's 10 largest companies come outside of Korea, as does one-third of the companies' combined employment. For LGE, the international imprint is even larger; 85 percent of LGE's sales are outside the country, as is two-thirds of its employees.
To add services to its business portfolio, LGE is developing solutions like Pro:Centric, a computer screen menu-driven service in hotel rooms that allows guests to control their room's facilities, from the TV to the thermostat to the curtains and blinds. It is representative of the steps Nam believes they must take to maintain their standing as manufacturing companies face commoditization. For example, companies like Digital Equipment, Silicon Graphics and Gateway no longer exist. Meanwhile, IBM and Apple have succeeded by positioning themselves as service-oriented companies, IBM with business solutions and Apple with personal electronics such as iTunes and iPhone service.
Nam also commended innovation from other Korean companies such as Hyundai, which is weathering the economic recession with its Hyundai Assurance Program, which allows customers to return their recently purchased car if they lose their job.
"The program has a simple proposition," he said. "'Lose your job, and you can return your car to us.'"
Korean companies also must face a shrinking pool of professional talent—in LGE's case, engineers and executives. The company is addressing this challenge in part by hiring outside the country.
But the South Korean government is also playing a role in developing Korean business with the Incheon Songdo project, an international business complex being built in Incheon. The complex will include businesses as well as entertainment, schools, and facilities such as hospitals—a sort of campus housed in a skyscraper.
Nam closed with optimism about the growth of his company, which has grown to a $50 billion company that leads markets in Brazil, India, Canada, Mexico, Indonesia and Ukraine.
"We have grown tremendously and successfully over the past few decades and that gives us a strong base from which to build."
by Orr Shtuhl