South Korea Business Structures

Korean companies have traditionally been characterised by a high degree of both centralisation and vertical hierarchy.

Most large chaebols (large business conglomerates) have been family affairs with the founder’s family continuing to exert a great deal of direct executive authority. This has led to a system where most decisions are executed at the top and delegated downwards along strong lines of authority.

Basic Confucian tenets of respect for age, seniority and family have ensured an adherence to, and acceptance of, this system. The introduction of modern, western management theories (often introduced by American-educated Koreans) will obviously add new tensions to this approach and the recent economic problems and corporate scandals have added impetus to the calls for reform of Korean company structures and dependencies.

As well as the formal hierarchy which often stresses specialisation of function and task, those dealing with Korean companies would do well to try to gain some insight into the informal structures which are often the real internal power mechanisms. These informal structures are usually dependent upon a complex web of personal relationships and loyalties and can be difficult to see or understand without the help of a local guide.

A brief overview of some key concepts to consider when doing business in South Korea

Written and Produced by Keith Warburton

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Overview

In little over half a century (since the end of Korean War), South Korea has managed to transform itself from a deeply impoverished nation to one of the world’s leading economies. It achieved this whilst at the same time restricting Direct Foreign Investment (FDI) and with a strongly interventionist government which dictated policy and goal-setting to local industry. Over the same period, it moved from being a follower of product development to a global leader of innovation. And this has massively improved the overall affluence of its citizens.

How did South Korea succeed where so many other countries have tried and failed? What does South Korea have which other countries lack? In a word, the answer is culture. South Korea is steeped in key Confucian attitudes which have enabled this economic miracle to occur. Confucianism extols the virtues of education; South Korea’s approach to education is universally lauded and endlessly studied. Confucianism places emphasis on frugality and loyalty; hard work and acceptance of temporary hardship, bringing their own rewards over time.

If you are thinking of doing business in South Korea (and you really should be), then one of the key elements of successful engagement with South Korean counterparts and potential partners must be linked to gaining a better understanding of South Korean business culture. If you don’t understand how companies are structured locally, how do you know who you should be speaking to? If you are not aware that South Korea is group-oriented in its approach, how can you understand the local decision-making process?

This country profile provides an overview of some of the key aspects of South Korean business culture in a concise, easy to follow-format. The document includes information on:

  • Background to business
  • Business Structures
  • Management style
  • Meetings
  • Teamwork
  • Communication
  • Women in business
  • Entertaining
  • Top tips