Joint business ventures are frequently seen as 'marriages' between companies. As in a marriage, cross-cultural business ventures demand a generous degree of give-and-take, understanding, patience and forbearance. It has been noted that to regard marriage as a 50-50 proposition is a mistake. Marriage might be more properly regarded as an 80-80 proposition. The same is true of corporate partnerships. Joint business ventures are frequently seen as 'marriages' between companies. As in a marriage, cross-cultural business ventures demand a generous degree of give-and-take, understanding, patience and forbearance.
It has been noted that to regard marriage as a 50-50 proposition is a mistake. Marriage might be more properly regarded as an 80-80 proposition. The same is true of corporate partnerships. Nonetheless, when looking for a bride, it is critical to know your future spouse's limits before reporting home. As obvious as this may seem, often wishful thinking takes the place of doing one's homework. Some years ago, one of the large chaebol companies was willing to go 50/50 on a joint venture with a large American company. When the assigned American VP went back to the executive board in the United States, he was asked if the American firm could have a 51% share. He made the mistake of saying, 'I think that may be possible' when he should have said 'no way.'
When he returned to Korea with the 51/49 authorized offer, the Korean company told him to get lost. The plant that was to come from this JV, producing a product for use in Korea and exported to the rest of Northeast Asia, was instead built in Taiwan. The American VP was later fired. The VP's blunder was agreeing to an impossible request because he did not fully understand the limits of his prospective partner. One other common blunder comes from foreigners believing a common overstatement from a prospective partner belonging to a chaebol. Too often the prospect exaggerates their capacity to sell to other companies in the same chaebol group. As enticing or logical as it may seem, in fact this is rarely the case.
The messenger who predicates setting up a joint venture on this exaggeration could be heading for some nasty turns in his or her career. Nearly every joint venture in Korea has some sort of adversity between partners sooner or later. Sometimes complete breakdowns occur due to severe partner conflict. In such cases, the unfortunate result is a traumatic divorce causing permanent damage and injury.
Perhaps many of these situations could have been avoided or overcome with adequate counsel and understanding of the unique dynamics involved on both sides. Several factors may enhance the sensitivity to cultural differences, and bring about an awareness of potential areas of conflict, their prevention or resolution. Let's consider the following:
Dominant National Traits
As in any human organization or enterprise, control of one's own destiny is the name-of-the-game. This deep-seated emotional response is especially prominent in the Korean national psychology. Koreans want to maintain their independence and self-reliance, free of any domination by foreign business. They are a people who successfully maintained their distinctive identity throughout a history of repeated war and domination by neighboring powers.
Therefore, in dealing with their foreign partners, it is natural that Koreans are sensitive and concerned about the degree of control that they can maintain. It should be readily recognizable that some of the behavior of Korean partners is due to their fear of losing control of the company. Koreans can behave quite chauvinistically in spite of their realization of the benefits of being more open and cosmopolitan.
Expectations from a Foreign Partner Position and Status
Most Korean employees will certainly be paying close attention to which executives will have the majority influence on their long-term well-being. So the relatively short-term foreign director may have special challenges in obtaining the same level of loyalty and dedication as received by the Korean counterpart. Because of this, there is a general tendency of the Korean partner's employees to generally ignore the foreign staff and work around them. It is, therefore, critical for the foreign company to send someone who is mature in many ways as well as having superb people skills.
The biggest mistake is to send some young MBA or Ph.D. hotshot lacking in excellent cross-cultural political skills. Generally speaking, the foreign representa tive really should be approximately the same age bracket as the Korean counterpart.
Someone who is quite a bit younger is likely to be not taken seriously by the Korean rank and file for this senior position. While Korean business people are profit oriented, profit is not the only objective that Korean business people seek from an association with a foreign company. They also want sustained growth and a larger market share: with foreign products, technology, capital, and export capability.
Small companies, sometimes, seem more interested in building their image by an affiliation with a reputable foreign company than in immediate profits.
In an association with a foreign partner, the Korean executive usually wants to occupy a position with status and recognition, even though the position does not necessarily accompany major responsibility in the company. Job title is important, since it signifies social standing in Korea's highly hierarchical society.
The Korean partner normally finds satisfaction in a situation where a smooth relationship exists and, at the same time, he can meet his ego needs. In Korean psychology, 'kibun' is an extremely important factor in ego fulfillment. This is the personal feeling, the attitude, the mood, the mental state. Once the 'kibun' is unpleasant or unsatisfactory and 'face' is lost in a relationship with a foreign partner, the Korean partner's representative might be willing to sacrifice any monetary benefit to recover good kibun.
Sources of Conflict
Let's try to identify some of the possible causes of conflict. Just as in individuals, each organization has its own personality or culture, unique to itself. Just as in human relationships, two organizations can be quite incompatible. Many points of friction are related to differences in the culture and the (in)flexibility of the style of management. Incompatibility, both in its personal and organizational aspects, can lead to serious conflicts.
Priority Differences
Each organization has its own set of priorities. The global strategy of a major multinational corporation may not necessarily be aligned with those of its Korean partner.
The most common priority differences arising between Korean and foreign partners are:
* Profit versus the market share,
* Dividend declaration and profit remittance,
* Marketing strategy.
In the early stages of a joint venture, management control is usually contested, even in a situation where the JV contract stipulates that the foreign partner has full responsibility of managing the operation.
Management Style
The style of management, especially concerning personal policies, is frequently a cause for conflict in such matters as:
* Employment and promotion policies
-Salary increases
* Management information system
-Customer relations
-Marketing and selling practices
* Transfer pricing in less common cases can be another source of conflict. Prevention of Conflict
In a joint operation, partners should make every effort to prevent differences in management and organizations from causing conflict in the first place.
Procedure Formula
A set of positive 'rules of the game' must be established in the formation of the joint venture and maintained throughout the entire engagement. Some joint ventures have made it a point to have formal, annual review meetings to ensure that both sides are pulling in the same direction and ultimately if it still makes sense to continue to partner. It is desirable to discuss and lay out as much as possible the management of the companies, anticipating some of the possible problem areas. Records and minutes of negotiations and ongoing consultations should be kept in good order and in detail for future reference. If misunderstandings arise it is always helpful to go back to the record, thus avoiding uncertainty and doubt that could create instability and deteriorate the partnership.
Communication Channels
It is important to maintain regular and sincere open lines of personal communication between the partners for an effective, productive and harmonious business relationship. As long as there is dialogue, solutions can be found, even to differences of major proportions.
The issues involved in working with a chaebol can be completely different than working with a medium-sized partner.
While one can assume a chaebol-class company will have staff with the English language and backgrounds to communicate effectively and easily with the foreign partner, this is often not the case with the smaller companies. Therefore, special diligence is needed to make sure that employees with language and communication skills are on board when considering partnering with a medium-sized or smaller company.
(More can be found at www.softlandingkorea.com)
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