The Korean connection

November 1, 1996

Foreign investment in manufacturing industry can have a huge pay-off for British universities and research if all sides are willing to build a partnership, Yong-Doo Cho argues. The Koreans are coming!" is a catchphrase that has appeared in many newspaper articles recently. But the Koreans are already here. South Korea's three main electronics companies, Samsung, LG and Hyundai, have all announced manufacturing investment in various regions in the United Kingdom and some production facilities are already in operation.

Many other small and medium-sized companies from Korea either supply parts to Korean chaebol or big plants here or run their own businesses. Then there are non-manufacturing companies such as service and banking investment. If forecasters are correct, some large-scale investments from Korean companies are already in the pipeline. There was a time when "Europe 1992" stirred the interest and curiosity of business leaders and the general public in Korea. Questions, such as "What if Europe shut the door behind them after integration?" or "Will Europe be the largest consumer market?" abounded.

Pre-1992, Koreans saw Europe as a rather remote place both politically and economically. Korea was historically much more familiar with Japan and the United States. But from 1993, Korean companies began to make serious moves into Europe. Some saw this as part of the new government's drive towards "globalisation" and the chaebol's interest in moving overseas to evade domestic regulation and high labour costs.

But Korean investment has different motives for different regions. Direct investment in Southeast Asia, for example, can be mainly construed as seeking lower labour costs. The move to Europe is a bit more complex. Europe is big, spanning east and west. Korean companies have been active in both. For the past two years more than half of Korean investment in Western Europe has concentrated in Britain. Most manufacturing investment in Europe had just one purpose a few years ago: to avoid possible anti-dumping tariff. But this has changed. The companies are now coming to expand their market and, equally importantly, to get access to the technologies necessary to further their ultimate ambition: to be global players. Britain is regarded as a springboard to the rest of Europe and also offers the best market conditions for inward investors.

What kind of effect will the surge of Korean inward investment have on British universities? There are plenty of opportunities for both parties to form a partnership in science and technology. Science departments have built many successful links with Japanese companies and Korea is perceived as the next Japan. The worldwide reputation particular departments still enjoy means they can offer Korean companies access to key technologies.

More recently Korean companies have taken over major players in a particular market. Samsung took over AST research in the US and Daewoo acquired Thomson Multimedia. There are rumours that Samsung might soon take over Fokker and Daewoo is interested in buying Lotus.

These moves reflect an eagerness to get technologies and, perhaps more importantly, to associate famous brand names with Korean companies. This is understandable as it is extremely costly and painstaking for Korean companies to sell their own brand image in European countries. A few years ago a British television commercial on Hyundai cars focused on creating an image of Korea rather than Korean cars.

Partnerships with British universities will require Korean companies to be patient and have a longer term strategy. Partnership will offer companies considerable potential for developing joint research and training initiatives in science and technology. Having a research partnership with a good department will mean not only being able to draw on the research base of the university but also establishing relations with its science and business network.

Korean subsidiaries need to cultivate the local labour market as the Japanese did. Many South Korean subsidiaries have already made it clear they will pursue a policy of localising their company.

This is easier said than done. Korean corporate culture is a far cry from the British one and it will take time for a British-conditioned, Korean style of management to emerge. Korean companies will need local managers who can coordinate British corporate culture and Korean-style management culture with an understanding of and a responsiveness to the needs of Korean top management.

The local managers will have to be able to deal with cross-cultural conflict in the organisation. The influx of Korean companies will certainly have an impact on courses at British business schools and institutions, such as centres for Korean or East Asian studies. For example, existing MBA programmes may want to consider increasing East Asian or Korean components. Masters programmes that can equip students with managerial skills in East Asian cultural environment and preferably language skills will be in great demand.

University courses on Korean studies are very important in raising general awareness of Korea in terms of language, economics, politics and culture. In the US, Korean studies departments have been active in forming links between industry and the universities. Funding has often come from the Korean Foundation, but as the demand for Korean studies increases, it is possible that cash could come from Korean companies here and also British companies who are interested in doing business with Koreans.

Universities are already teaching Korean expatriates and prospective expatriates English-language skills and courses on how to be an effective manager in the international environment. When the announced investments are in full operation and Korean companies are major employers of UK staff, demand for East Asian-oriented business programmes and studies will rise sharply.

To sum up, if Korean investment materialises, good opportunities for a partnership will arise for both Korean companies and British universities. This will not be one-way but will have to be symbiotic and cooperative relationship for it to succeed. Korean companies and British universities will both benefit from the relationship if they have commitment and imagination. British universities will have to realise what they can provide and what Korean investment can bring. They have to be attentive to the changing needs of students and companies.

Korean investment is still at its initial stage. Some companies are just breaking the ground. However, once they settle in Europe and the UK, and continue to localise their company with long-term commitment, it is crucial that they make investment in these important intangible areas. This investment might have a long pay back period but it will certainly be useful in creating and enhancing "image" of Korean products and companies in the UK and Europe.

Yong-Doo Cho is director of Korean studies at the school of East Asian studies in the University of Sheffield.

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