Making Korean brands sexy

Dr Chris Baumann

Dr Chris Baumann is an associate professor at Macquarie University in Sydney, researching competitiveness, education, East Asia and customer loyalty. He has authored more than 50 refereed journal articles and conference papers with more than 350 citations. He has been awarded for his research and teaching, including from the Australian government for enthusiastic approach to education. Dr Baumann is also visiting professor at Seoul National University (SNU) in Korea and at Aarhus University, Denmark. He introduced ground breaking concepts: Competitive Productivity, Latecomer Brand, Premium Generic Brand (PGB) and the ‘country of origin of service staff (COSS)’ effect. He has a long-standing relationship with Simon Fraser University (SFU), Canada, as MBA Alumni and research collaborator.

If you told someone in the 1980s that South Korean brands would one day supersede many Western and Japanese competitors for innovation, brand management and profitability, they would have declared you insane.

But that is exactly what has happened. Samsung is now the world’s seventh-strongest brand (worth nearly US$50 billion), whereas Sony is ranked 52nd with dropping brand value of less than US$10bn.

Hyundai is now the world’s fastest growing car manufacturer and one of the most profitable. The brand has emerged as a provider of high-quality cars and is the world’s 40th most valued brand (roughly US$10 billion), superseding Audi, Nissan and Porsche, Chevrolet and Land Rover, to name a few.

Korean brands have taken centre stage because they pursued a textbook style brand-building approach. The formula is simple: A clear focus on performance, achievement and delivery of promised value. But its execution needs discipline, and that is where Korean Confucian culture comes into play.

While some have argued Korean brands historically focused on Western product innovation that could later be adapted, we can observe a reverse effect today. Samsung’s Galaxy line is at the forefront of product innovation. The same applies to Hyundai’s car design, and service providers such as Lotte are associated with high-quality hospitality.

Consumers trust Korean brands because of their robust product/service quality. Some also cleverly use secondary associations, such as Jeju Air (Korea’s third-largest airline), which associates its brand with popular K-pop stars and includes their photos in its planes’ livery. Not only Korean but Chinese, Japanese and Western consumers are attracted to the beauty and talent of these stars, adding brand value.

Strong Korean brands are nearly always centred around conglomerates, so called chaebols, and often represent a branded house, or one brand used in a variety of product and service categories. Samsung, for example, makes whitegoods besides consumer electronics. Some represent a house of brands such as the Hanjin Group that owns Korean Air and also the Hanjin Shipping Company.

The brand and product portfolios of Korean chaebols are remarkable in their diversity. Hyundai makes ships, elevators, is involved in retailing, and even runs schools, initially set up around the factories for workers’ children. These schools have reached top rankings and feed into elite universities. Kumho Asiana Group, meanwhile, makes tyres, is involved in chemicals, and runs Asiana, an award-winning airline.

All of these powerful conglomerates are in one way or another involved in tourism, and they all own real estate in Korea for employees and beyond. They are nearly always managed by a powerful chairman.

A concentrated and centralised brand management approach allows for well-orchestrated brand building efforts where brands build emotional bridges with their loyal and new customers. There is little distraction from bureaucratic or overly administrated processes since the East Asian Kaizen management approach eliminates Muda, or waste.

Not least influenced by a Confucian spirit so prominent in East Asia, human interactions are characterised by respect, harmony and tradition. That also spills over into Korean brand building and their positioning as customer focused. Other brands have often lost that loving care for customers and are perceived as too commercial. Asiana in Korea, however, wants to treat passengers like family, and Lotte hotels offer Asian hospitality with detailed care around customer wishes.

While Korean brands are successful in managing diverse brand portfolios and have succeeded with global brand building, Western firms often had less success. Of course Nestle, Unilever and P&G are masters of brand building and managing their brand portfolios, but there are many counter-examples. Western Airlines’ attempt to run hotel chains and catering, for instance, can only be regarded as failure.

Korean conglomerates have succeeded in managing diverse brand and product portfolios since they can rely on the Korean education system to provide a well-disciplined and highly competitive work force at all levels. That has ultimately led to the creation of innovative and performance oriented brands that deliver. Now that is pretty sexy.

about the authors Dr Chris Baumann and Dr Hume Winzar work in Macquarie University’s Faculty of Business and Economics (FBE). This department offers undergraduate and postgraduate courses and academic research in accounting and finance, actuarial studies, business, marketing, economics and business law.

Tags: brand strategy

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