Friday, February 24, 2012

Selling Traditional Products to the World: The Korean Rice Wine Story

Even foreigners living in Korea cannot help but notice how makgeolli has taken on a new air of respectability. As a long-time imbiber of the brew - we are dubbed “makgeoholics” - this is good news!

I once was a Peace Corps volunteer who lived on a monthly stipend of 43,000 won for lodging, food and entertainment. That meant beer and other Western beverages were beyond my budget. So, during most after-hours events, my choices were pretty much limited to soju and makgeolli. But after some forgettable evenings and unforgettable mornings after, I soon realized that the soju of the 1970s was not healthy for living things.

Fortunately, I learned that makgeolli was not only cheap but even good for you. As an Irish-American, I have reverently believed that Guinness stout beer is good for you. In fact, the Irish say that Guinness is a meal in a glass. So, I was overjoyed when I heard from Eumseong townspeople that it is possible to survive a full two weeks on nothing but makgeolli. Having imbibed the stuff for over three decades, there is no doubt the creamy, tangy stuff is full of nutrients - and who knows what else.

And as a rural Peace Corps volunteer, I came to respect Korean farmers and small townspeople. These were real people, doing real work and drinking a real beverage. To me, soju was something akin to poison for a quick drunk, but makgeolli was a real man’s drink with which one can enjoy like a real man while not getting so drunk that the rest of the evening is only a hazy memory.

And, I might add, any woman who tells me she, too, loves makgeolli is immediately regarded by me as a superior sort of female. And that leads to my old friend from our shared Peace Corps days, the former U.S. Ambassador to Korea, Kathleen Stephens.

She has appreciated makgeolli for decades, and often served it at her official residence. While I cannot say her high regard for makgeolli is responsible for her success, I will say a woman who drinks it is likely to be up for any job.

All of which leads us back to the current fad, rediscovery and new ideas for exporting makgeolli. Frankly, I’m pretty excited about all of this. First, it opens the doors for further improvement of makgeolli. Back in the 1970s, under the Park Chung Hee regime, the amount of rice used in makgeolli production was curtailed as part of the nation’s efforts for grain self-sufficiency: a wise move since everyone knew how many Koreans would allocate their limited rice reserves towards the production of makgeolli.

Later on, as Korean agricultural production improved, the controls were removed and pure rice makgeolli became common. That was a major step forward and now makgeolli may be about to take the next important step in upgrading its quality.

When we order makgeolli at a restaurant, usually we really don’t know which type we are drinking. The stuff is served in a generic ceramic pot. In other words, unlike every other beverage on the menu, makgeolli is devoid of branding. As a result, one goes to those restaurants that serve “good makgeolli,” which means a beverage that is made by one of the better brewers and is fresh. Even good makgeolli sours relatively quickly, even when kept at optimum temperatures.

As a marketing professional, I see these negatives as allowing for future positives to be developed. First, by exporting abroad by brand, more competitive pressures will be placed on makgeolli brewers for consistent quality. Tetra Pak Korea, for example, is providing cartons to be used for the export of makgeolli, but so far, there has been no demand for these containers for domestic distribution. Rather, makgeolli is normally distributed only near the brewer’s facility.

But, when exporters fully master the means to deliver makgeolli abroad and as foreign consumers develop a thirst for the beverage, more Koreans will try to make money by exporting. And in so doing, branding will become more important. Furthermore, as brands become stronger, we may see the best brewers doing wider distribution domestically, taking advantage of new packaging - and possibly applying new refinements in brewing.

And that leads me to the second, likely development of makgeolli - new investments in improving the production of makgeolli so that it sours more slowly. In the past, there was regular soju and superior “tourism soju,” and I believe the Korean economy has outgrown that kind of product differentiation.

But I should add a word of warning. Given this upsurge in the creamy stuff’s popularity, I have been sometimes horrified as the unacquainted (usually female) imbibers shake the bottles to stir up the contents prior to uncapping. Frankly speaking, watching that kind of experience is only one level lower in anxiety than watching a sweet young thing pull out the pin from a hand grenade and ask what’s the purpose of the pin.

Should you see a well-meaning dining mate start shaking the bottle, immediately grab away the makgeolli bottle for everyone’s safety. Rather, hold the bottle by the top and slowly swing the bottle in downward arcs, almost as if you were ringing a chime or bell. The beverage deserves respect and your guests deserve to drink it, not wear it.

So next time you are out with your friends, lift your cup of makgeolli and toast what it once was and what it has become. Then dream of what makgeolli may soon be: a real beverage for real people around the world.

by Tom Coyner. This article appeared in the Korea Joonang Daily.



Wednesday, February 22, 2012

Hiring Employees for Positions in Asia by Senior Advisor to IPG

“Hiring is your most important task,” said the late Steve Jobs. Considering a wrong hiring decision can be extremely expensive to repair, let’s look at some recruiting options.

Ideally, a succession plan will have an internal candidate ready for promotion: advancing a rising star’s career and providing continuity with minimum controversy and a positive message to the workforce that capable people who do well will be recognized and rewarded.

Often, however, hiring from outside is required. If the company has a competent HR recruiting function, direct ads and in-house screening may be effective for lower and some midlevel positions.

For more important midlevel management or specialist positions, outside assistance may be needed. There are many recruiting companies. By going to any networking event, it is hard not to collect business cards from such firms.

Most recruitment firms offer contingency searches. Usually the process begins with interviewing the hiring managers and agreeing on a job description and compensation range. The recruiter ideally provides a long list of candidates and works with the client in coming up with a short list. In reality, the contingency recruiter usually relies on names from their database, or active job seekers. The recruiter may do some fundamental reference and credential checking before the final offer is made. The success fee is normally in the range of 20 to 30 percent of the first year compensation, including regular bonuses.

For lower-level positions the contingency approach is preferred, since a wrong hire is not likely to be a strategic setback. However, a hire of the wrong senior manager can be costly in terms of negative impact on the organization and lost time.

Some recruiting companies claim they do both retained and contingency searches. In reality, these are contingency recruiters that are thrilled to be paid up front - but still deliver a contingency-class service.

There is also a small number of retainer-only search consultancies that focus on identifying, evaluating and attracting “C-suite” executives (CEO, head of region or country and positions reporting directly to the region/country head) - and sometimes accept engagements one level lower. These senior professionals partner with the client in a consultative process aimed at selecting organizational leaders. Success in these partnerships depends upon a shared focus built on trust, candor and responsiveness throughout the process.

The search is conducted through an exclusive engagement with fees billed at the start and throughout the process. Consultant and client collaborate in determining leadership needs and defining executive positions. The consultant leads in identifying well-qualified individuals, selecting those best suited through a comprehensive evaluation process, and convincing them that the company/opportunity is a proper step in their career progression. Meanwhile, retained search consultants provide employers regular, detailed progress briefings.

This methodology proves to be the wisest option for senior leadership and other strategically critical hires. Some employers avoid retainer search due to the perceived costs, although in reality the total amount is not significantly higher than a contingency fee, and the risk of lost opportunity cost or reputation damage is greatly reduced. Most retained search firms are paid the equivalent to 33 to 35 percent of the total annual compensation, or in some cases a fixed fee not linked to compensation.

According to the Association of Executive Search Consultants, “Retained executive search consulting is a specialized form of management consulting. In addition to locating high-quality candidates, the retained search firm should provide information and feedback that not only helps direct the client’s search for executive talent but can also be used to run the client’s business more effectively. This feedback may include general market research regarding how the client’s organization is perceived in the market, competitive intelligence, and what kind of recruiting strategies may or may not be working at any given point in time.”

Retained searches most commonly take place when one or more of the following conditions apply:

Replacement of incumbent: There are times when a very high level of confidentiality must be maintained. As with other professional services firms - attorneys, accountants and strategic consultants - disciplined senior executive search professionals fully understand how to work with total discretion.

Difficult to find individual: Access to high-level executives who are not on the job market is fundamental, as is capability to invest time and resources thoroughly researching the target universe to identify key players.

Difficult internal promotion: Shareholder compliance (or internal debate) may necessitate a thorough look at external candidates in conjunction with independent evaluation of internal candidates.

The retained consultant will invest much more time than a contingency firm in understanding the client’s corporate culture, key executive personalities, vision, strategy and business objectives, and will be able to communicate this effectively to qualified individuals. Out of this process may emerge the “compelling story” critical to attracting a star executive.

A retained search firm will rigorously conduct reference checks with a broader range of people than those suggested by the candidate. It is in the best interest of the consultant as well as the client to flag concerns before an offer is finalized.

Most companies say “people are our most important asset,” yet often default to hiring friends of friends, applicants from newspaper or Internet ads, or resumes thrown at them from many sources. This may work for lower/midlevel positions, but tossing the dice when filling any key leadership role isn’t acceptable in today’s corporate environment.

In summary, there are a broad range of situations requiring different hiring strategies. The hiring executive has several options, and one recruiting strategy rarely fits all needs. 

IPG is not engaged in the executive recruiting business.  We have advised clients on the use of headhunting firms in Korea and China and have found, only, two companies we have worked with satisfactory.   Please choose carefully.

Sunday, February 19, 2012

Salaries in China on the Rise According to Recent Chinese Salary Survey

A Chinese salary survey conducted by J.M. Gemini which I noticed on Danwei, lists Chinese salaries in the Beijing, Shanghai and Guangzhou areas.  All sums are in RMB and refer to monthly salaries.  The monthly salaries are based on a 13-month per year gross payment basis.  Thus, the monthly payment includes severance in the monthly calculation.  

The following list was compiled by Danwei and includes a selection of listed jobs in the survey.  The complete survey lists  hundreds of jobs from junior positions to senior positions. 
Junior secretary: 2,500 – 3,500
Executive Secretary / PA: 13,000 – 21,000
Accountant: 10,000 – 15,000+
Finance Director: 65,000+
Quality control manager: 14,000 – 24,000
HR Manager: 20,000 – 35,000+
Translator: 8,000 – 18,000+
News editor: 5,000 – 8,500
Web Editor: 6,000 – 19,000+
IT Programmer: 5,000 – 9,000
CEO Advertising Agency: 70,000 – 100,000
Regional Sales Manager: 26,000 – 36,000+
Mechanical Engineer: 10,000 – 16,000
Senior Architect: 25,000 – 45,000

Thursday, February 16, 2012

China's Proview Takes a Bite out of Apple: The Proview v. Apple Saga

Most of our readers have probably already heard about Apple’s latest hurdle here in China, a costly mix up over the trademark ownership of the “iPad” name.

While one can easily see how Apple’s lawyers were confused as to which trademarks they were purchasing in 2006, it is ultimately inexcusable that America’s largest company, with arguably the world’s most valuable collection of patents, trademarks, and intellectual property, could have made such a costly legal oversight. This doesn’t appear to be a case of a sneaky Chinese company front running a predicted future Apple product name in hopes of a payout. The company is a legitimate manufacturer of LCD screens and registered the name in 2000, six years before the first iPhone. It was possibly their intention to suggest a nonexistent affiliation between their products and the reputed apple iMac, but there are plenty of other companies around the world, including the largely successful iHome, which successfully exist inside the Apple economy, without popular criticism.

Apple’s arguments have been weak in this case, especially knowing that they should be extra prepared when addressing Chinese courts against a local company. They contend of course that they were under the impression that they had purchased these patents in 2006, and that their lack of Chinese language skills has left them without the proper trademarks.

There is evidence that Apple’s attorneys uncovered the separate Chinese trademarks in 2006 after closing the $55,000 deal for the rest of the global trademarks, but rejected the then $10 million asking price. Now, after having launched iPad sales at their 4 China Apple Stores and 1,000 Chinese resellers, Apple’s strategy was to sue Proview for the iPad rights. Unfortunately, China operates under a first to file, not first to use, trademark basis.

This protects Proview’s ownership of the iPad name even if they haven’t brought a product called the iPad to market in the 10 years since they registered the trademark. Chinese courts found in favor of Proview and Apple is currently appealing. Poorly handled is an understatement.

Some are wondering why Proview would have sold the international trademarks to Apple for a measly $55,000, but at the time, Proview thought they were dealing with a small British company called IP Applications Development (IPAD), not knowing that IPAD was a wholly owned subsidiary of Apple Inc. The sneaky tactics seemed to be played on both sides, and in this case Apple has been outplayed.

The latest developments show just what Apple is up against. After winning the case in December and verifying their ownership, Proview filed a $1.3bil countersuit for trademark infringement that has since increased to $1.6bil. That number may have been set excessively high to attract press, but Proview does mean business. It is rumored that Proview is struggling financially, making a prolonged legal battle in Apple’s interest. Rather than wait for the outcome of the appeal, Proview has taken to the offense.

This week Proview convinced the local Administration for Industry and Commerce in Shijiazhuang to seize iPads from the shelves of resellers across the city. The resulting press led Apple resellers across the country to take down iPad advertisements and hide remaining stock for fear of having their own confiscated.

While the Apple stores in Shanghai and Beijing, as well as Apple’s online store continue to operate as usual, the uncertain future for resellers will likely hurt orders, as they fear future inventory seizures. Proview has announced that they intend to pull iPads from shelves in 30 more cities across China, and on Wednesday succeeded in having iPads in Zhengzhou at least sealed if not seized. Proview can legally resell the seized iPads domestically for now to fund their legal battle.

Proview admits that it is unlikely they will be able to convince customs officials to seize exports or halt production at Foxconn, but the latest jab should encourage Apple to reach a settlement. It is rumored that an iPad 3 will soon be released, China is an important market to maintain sales figures for iPad 2s in order to avoid steep discounts on excess inventory when the iPad 3s come out.

As we frequently remind the readers of these blogs, it is crucial to register your patents and trademarks separately in China, as international patents will not hold up. Let this be a reminder that failure to do so could end up costing you in bad press, halted sales and shipments, and in the worst case up to $1.5 billion.

by Frank Caruso. Chair, China Practice Team at IPG

Wednesday, February 8, 2012

Wages Increasing in China: Minimum Wage in Shenzhen, China

Beginning February 1, 2012 the minimum wage increased in the City of Shenzhen to ¥1,500 per month. This is the highest minimum wage in mainland China.

Overtime wages have also increased with the new law stating that overtime pay must be 1.5 times the hourly rate based upon the monthly wage and number of hours. Weekend overtime has also changed to 2 times the hourly rate and holiday overtime to 3 times hourly rate.

In addition, all employees must now contribute 18% of their minimum wage to the Pension Fund (Social Insurance) for a total of ¥270 with the employer responsible for paying ¥150 of the ¥270 and the employing paying ¥120.

Employers caught paying below the minimum wage may be fined ¥30,000 to ¥50,000 and may have their corporate charter suspended. Shenzhen usually increases its minimum wage in April of every year, however, this year Shenzhen, which is one of the most developed and expensive in China, decided to publish the increase early to allow companies to budget after the Chinese New Year.

Wednesday, February 1, 2012

North Korea Amends Foreign Investment Law: Is China Involved?

n a move to attract more investment from abroad, North Korea has amended the foreign investment law.   The amendment has been reported by the North Korean main news agency.

The details of the revisions have not, yet, been publicly announced by the North Korean government, but previous changes have been less substantive and more political in nature.

The amendments seem nothing more than a reaction to the Chinese dismissal of North Korea's efforts to entice China to invest in a free trade zone near the border between North Korea and China.

North Korea can learn a great deal from the Chinese manner of developing the economy, however, in the past - North Korea has quickly retreated after brief periods of hopeful developments that the nation will open up to the South, China and the West.  Maybe China has finally found a rationale ear.