The Evidence from Korea1

Running Head: ASIAN MANAGEMENT STYLES

Asian Management Styles:

The Evidence from Korea

Donna Marie F. Yap, RPh; MBA

Saint Louis University

May 2010

The Evidence from Korea2

Asian Management Styles: The Evidence from Korea

All management systems have a common feature: They strive to enhance the

performance of organizations in the most effective way to achieve the organization’s goals,

sharing universally applicable principles of planning, organization, control, leadership and

motivation. The meaningful comparison of the history of firms and business systems among

countries requires a thorough understanding of the political, social, economic and institutional

contexts. In the paper reviewed, there is a limitation on the number of references collated to

come up with only two models that pertain to Japanese and Korean management styles.

Both Japanese and Korea have rich histories before the occurrence of World War II. It

would be pleasant to revisit their histories and see how the foundations of their businesses and

practices were made. Despite the common notion from the West that management practices were

not being carried out in Asia, management practices have already been used in as early as the

1500s in Japan, with business being likened to battle, employing tactical strategy to succeed.

Japan’s society can be identified as blood-prone. It was only after Japan’s quick economic

growth after the war that attention has been focused on them. Not until business practices were

given named by foreign analysts were these recognized accordingly. One example of a business

practice in Japan is the Japanese Candlestick System, developed by Munehisa Homna from a

rice-trading family of Japan, was used in the early 16 th century to give rice traders an overview of

open, high, low and close market prices of rice over a certain period. The traders discovered that

the resulting candlestick charts is a reliable basis for future rice demand. The candlestick system

has only been applied in Western investment practices in the early 1900s. (The History of

Japanese Candlesticks, 2003)

The Evidence from Korea3

Family businesses in Japan contribute much economic development. Family-owned

business tend to outperform non-family operated businesses (José Allouche, 2008), therefore it

would be a good basis to start looking into this avenue to understand more about the Japanese

management styles. During the Meiji restoration onwards, family businesses in Japan played a

strategic role in combining western advancements with the traditional eastern values. They have

defined family as those contributing to the economic welfare of the group irrespective of lineage.

They practiced primogeniture long before World War II, establishing structure and family

holding practices of large businesses or zaibatsu. The longevity of Japanese family companies

may be attributed to often turning sons-in-law into true family insiders, broadening the pool for

successors and talented managers without involving non-family members (Barclays Wealth &

The Economist Intelligence Unit, 2009). Salaried managers were delegated to manage the

enterprise (families reigned but did not govern) and had the opportunity to move up the

company’s hierarchy through internal promotion. Japan has a peculiar concept of family which is

based not only on consanguinity but also on adoption (Colli, 2003). The long-standing practice

of keeping the business in the family contributes much to the hierarchical, broad-based structures

and loyalty of the employees that is demonstrated by Japanese businesses today. Profit

maximization, through just-in-time inventory keeping and value-added measures look more like

effects of sustainable relationships that are fostered within the business (employees) and out

(suppliers, customers). For this Japanese management style to be applied in the western setting, it

would involve changing business relationships to a more intimate, familial kind. All in all, the

following characteristics can be seen from Japanese management systems: Consensus decision-

making, lifetime employment, team spirit, strong loyalty, paternalistic leadership, personal

The Evidence from Korea4

approach, active participation of rank and file, satisfactory relationship between labor and

management, Confucian work ethic.

Just like in Korea, broad-based models of sustainable family-businesses make sure that

there is a communal relationship between family and business systems in an effort to foster the

synchronized development of functional families and profitable firms.

When Japan colonized Korea, they were imposing Japan-Western technology and

management practices to Korea; however, Korea absorbed the Japanese management system into

their own. One example would be the hierarchical structure business organizations have. The

Korean War left 1.5M South Koreans dead, 100,000 orphans, millions homeless and separated

from their families. Disorder continued due to a corrupt government led by Rhee. Because of

this, Korea became a blood-taboo society. Park Chung-Hee saw the need for rapid social and

economic development through authoritarian presidential leadership. Larger chaebols were

easier to keep track of than small or medium enterprises (Kaslow, 2006). Chaebols were

managed under government intervention (quid pro quo relationship), providing them with

subsidies, cheap credit and protection against foreign competition. Labor had a traditional work

ethic of long hours and low pay. From the early 1960s to the late 1990s, Korea exhibited a fast-

growing, export-fueled economy that was called The Miracle of Han River that has been based

on the relationship of business and government, wherein a supplementary and complementary

relationship was been maintained. The Korean management system in itself is unique and would

be more understood based on the context of culture. The characteristics of Korean management

are: decision-making by consensus with some qualifications, lifetime employment with some

qualifications, individualism in group settings, loyalty, inter-organizational mobility, significance

of promotion, close relationship between business and government with qualifications, harmony.

The Evidence from Korea5

The Asian Economic crisis, as well as globalization became major points for Korea to re-

think management styles, however this does not mean letting go of culture. When Daewoo has

undergone bankruptcy in (Daewoo, 2010), the new Korean government has given value to small

and medium family-owned enterprises. These are engaged in traditional low-tech industries into

high-tech knowledge-based business start-ups. In this model, the financial resources and business

skills of the parents are combined with the skills and resources of their future-oriented,

technology-savvy, college-educated children. These are introducing professional management,

using strategies to increase performance, and becoming more market-driven. Currently, family

businesses make up 86.55% of all businesses in Korea (Kaslow, 2006).

The implications of cultural identity to management between the similarities and

differences of Japanese and Korean management involve: blood on behaviors (Japanese –

restrained, Korean –aggressive), mythic tradition (Japanese – flexible, innovative and creative,

Korean – less flexible, innovative and creative), territorial location (Japanese – sense of security

and long-range goals, Korean – extreme insecurity and short-range goals), family and blood

relationship (Japanese – family member involvement to business is important, Korean – family

member involvement to business is extremely important), education (Japanese – high zeal,

Korean – extremely high zeal), regionalism (Japanese – not a critical factor for career success,

Korean – critically important for career success), and reciprocity (Japanese – absolutely

important, absolute loyalty to superiors and paternalism, Korean – critically important, strong

loyalty to superiors and paternalism) (Chang & Chang, 2004).

There is no single model for successful or unsuccessful capitalism. There are many ways

of understanding management styles such as identifying culture or heritage. Each country has its

own management system shaped by its cultural identity and historical experience. Japanese and

The Evidence from Korea6

Korean management styles are in many ways similar, and also variedly different. The

management concepts that are applied cannot be explained by cultural identity alone, however

this approach would give a clearer understanding of the country’s management system. In Japan,

the five-volume Nihon keiei shi or Japanese Business History gives an overview of management

styles in Japan that go as far back to the 1700s (Amatori & Jones, 2003). This shows that even

for older cultures, successful management models need an intensive study of the past.

The Evidence from Korea7

References

Amatori, F., & Jones, G. (2003). Business History Around the World. Cambridge: Cambridge University

Press.

Barclays Wealth & The Economist Intelligence Unit. (2009). Family Business: In Safe Hands? Barclays

Wealth Insights vol 8 .

Chang, C. S., & Chang, N. J. (2004). The Korean Management System: Cultural, Political, Economic

Foundations. Connecticut: Quorum Books .

Colli, A. (2003). The History of Family Business: 1850 - 2000. Cambridge: Cambridge University Press.

Daewoo. (2010, April 13). Retrieved May 13, 2010, from Wikipedia The Free Encyclopedia:

http://en.wikipedia.org/wiki/Daewoo

José Allouche, B. A. (2008). The Impact of Family Control on the Performance and Financial

Characteristics of Family Versus Nonfamily Businesses in Japan: A Matched-Pair Investigation.

Family Business Review vol 8 .

Kaslow, F. W. (2006). Handbook of Family Business and Family Business Consultation: A Global

Perspective. Binghamton: The Hawthorne Press, Inc.

The History of Japanese Candlesticks. (2003). Retrieved May 13, 2010, from Candlestick Trading Forum:

http://www.candlestickforum.com/PPF/Parameters/1_279_/candlestick.asp