K-Management from Incheon

Young Myon Lee, Youn Sung Kim, Young Myon Lee, Youn Sung Kim

• Publisher: Knowledge Platform
• Year: 2021
• eBook ISBN: 9791188910687
• Topic: Business
• Subtopic: Business History
• Index: Business

This book is meant as a collection of success stories achieved by various organizations based in the Incheon area. It is of great significance in that it is possible to grasp the success factors of Korean management by examining the meaning of managerial leadership and management philosophy, starting from the region and growing up to being recognized in the global market and achieving results. In this respect, the collection of "K-Management Blossoming in Incheon Korea" will be a very good reference material for understanding and analyzing Korean management. In the future, it is expected to be used for the discovery and analysis of success cases in other regions of Korea. K-Pop such as BTS, Hallyu, mainly Korean films such as Parasite, Minari (Water Parsley), and Space Sweepers, in addition, the Korean brand due to K-Defense in the Pandemic Era is recognized worldwide. At this time, interest in the Korean management method (K-management) that is resistant to the crisis is also increasing. The publication of this book is the starting point for fulfilling the academic mission of establishing K-management in global management as the results of the Korea Management Association Convergence Conference held in Incheon in August 2020 lead to \'K Management from Incheon Korea\'.

PART I.
PRIVATE SECTOR

1. Korean Air’s ‘Moments of Truth’ Realized through the Management Philosophy ⸢SAFER⸥

Ki-Chan Park and Kee-Hong Woo

Currently, Korea is well received as a world-class aviation powerhouse. The financial and operational efficiency of airports, including Incheon International Airport and Korean Air, is also among the best in the world. In 2019, the International Air Transport Association Annual General Meeting (IATA-AGM), called the UN Conference of the World Aviation Industry, which had profound impact on the global aviation policies, was held in Seoul.

Such a global status and the competitive environment of the Korean aviation industry are set by the Korean Air’s fierce challenges and innovations, such as the pioneering of routes led by the CEO and the sincere efforts of the employees.

Chairman Cho Yang-Ho, who unfortunately passed away on the 50th anniversary of the founding of Korean Air, was not only the chief executive who made Korean Air a global airline, but also played a role as a driving force for Korean aviation industry being a world-class level. He joined Korean Air in 1974 and overcame the serious crises as the first and second oil shocks, IMF economic crisis, 9/11 terrorism, 2008 global financial crisis, etc. He made it possible with a rational decision-making system that values the customer’s time.

As of 2020, the pandemic of COVID-19 is facing a severe economic crisis not only in the aviation industry but also in almost all countries around the world. Therefore, the business environment analysis method and differentiated management strategies that Chairman Cho employed to overcome the crisis will have great implications for managers.

This study examined the achievements of Chairman Cho Yang-Ho, focusing on empirical cases driven and based on his SAFER (System-Angle-Field-Empowerment-Rational management) ideology for sustainable development.

As a result of the analysis, Korean Air’s global growth mechanism appeared as follows: Foresight leadership overcoming the crisis with a mindset to find new opportunities; Global alliance strategy in responding to environmental changes in the aviation industry; Creating shared value for better customer-service based on “Excellence in Flight & Excellence in Freight.”

CEO’s Philosophy That Creates a Success Mechanism

Korea’s semiconductor, automobile, shipbuilding, telecommunications, and aviation industries have been pioneered by the founder’s tenacity and driving forces, sharing its trajectory with rapid economic growth. Overseas cases such as Microsoft, Apple, Intel, Alibaba, Facebook, and Tesla are also products of the founder’s extraordinary tenacity and bold determination demonstrating success mechanisms with factors such as unique leadership, the ability to preemptively respond to environmental changes, and core capabilities that have been built up as key resources within the organization. Although there have always been issues and news about the harmful effects of hereditary management of large corporations, it is also true that, in Korea, there are many successful cases in which second-generation managers have grown the business into a global enterprise.

The importance of “management based on philosophy” can be seen not only through companies, but also through the artistic and cultural maneuvering of Medici family, who led the Renaissance from the 14th to 16th century. Indeed, business leaders such as Steve Jobs, Bill Gates, Jack Ma and Elon Musk, and politicians like Reverend Martin Luther King Jr., President John F. Kennedy, Mao Zedong, and the Medici family, have practiced their clear management philosophies that led sustainable growth with unique leadership and framing.

In particular, the management philosophy of the leaders with distinct management expertise or characteristics, such as the aviation industry, requires differentiated capabilities from other industrial groups. A global mindset is essential for the aviation companies to compete in the global market and to flexibly respond to various political, economic and social changes, as the domestic market cannot be overlooked. In addition, the aviation industry is immediately affected by external factors such as oil prices, foreign exchange rates, interest rates and load factors of passenger and cargo. Therefore, it is not possible to attract customers or seize the market without making management decisions one step ahead of other environmental changes.

This study examined Korean Air’s growth mechanism, more specifically philosophy and leadership of the CEO, the strategy and ability to respond to changes and new challenges of the future. To identify the phenomena, we applied the organizational sociological research method of M. Crozier & E. Friedberg (Actors and Systems, 1980), and the metagame theoretical analysis of D.S. Cho (Mechanism-Based View, 2014) generated from the SER-M paradigm variables consist of Subject, Environment, Resource, and Mechanism.

Subject

The principal actor as subject variable (S) is based on the argument that a company’s fate depends on the CEO’s ideas; leadership; decision-making behavior; intellectual, value, and psychological characteristics; age; experience; career path; academic background; socio-economic foundation; financial level; and social group characteristics. This analysis puts a special focus on leadership and decision-making activities.

Environment

The environment variable (E) is the factor that analyzes the nature of the industrial structure, competition, formal and informal constraints, level of concentration in the business, as well as government policies, market power, oil prices, exchange rates and interest rates. In the case of the aviation industry, it analyzes the strengths and weaknesses of the organization in addressing environmental uncertainty and complexity related to external factors that are not within the company’s control such as load factor. Although the SWOT analysis often outlines comprehensive environmental characteristics, the dynamic nature of environmental changes results in the involvement of the CEO’s personal experience, knowledge, and insight. However, decision-making is subject to environmental restrictions and managers face a certain range of behavioral acceptance. For this reason, managers face internal and external resistance when they try to make decisions beyond the area of acceptance of behavior. They are often criticized for their political or reckless decisions that ignore rational decisions at the technical and economic levels. Therefore, the most important capability of the CEO is to preemptively read environmental changes and create new rules of the game to overcome the constraints of the environment, namely, the limitations of the acceptance range.

Resource

The resource variable (R) includes all physical resources both tangible, intangible assets, human resources such as manpower and organizational capabilities, business size, patent rights, brand value, responsiveness, business structure, financing power, process technology, factory structure, the advantage in input cost, technology, marketing, distribution, and service networks. In general, resource variables are core competencies of the organization, and are analyzed by valuable, rare, inimitable, and non-substitutable (VRIN) factors or by tangible, intangible resources like image, reputation, technology, patent, know-how, etc. and human resources.

Mechanism

Operated as a system, the mechanism (M) is a dynamic reality rather than a single independent variable, that combines factors such as the leadership of the principal subject, the nature of the environment, and the capacity of resources. Just as a driver (S) drives a sports car (R) on a highway (E), the mechanism (M) is described as a comprehensive phenomenon that records zero accidents in a virtuous cycle or causes frequent accidents in a vicious circle. On the other hand, the establishment and changes of these operating mechanisms are consequently linked to the financial and non-financial performance of the organization.

This study analyzed, according to the SER-M paradigm, especially the management philosophy and management capabilities of Chairman Cho Yang-Ho, who built Korean Air into a global airline following the footsteps of the founder Cho Choong-Hoon.

Korean Air’s 50-Year History

“My wish is to travel abroad on our national flag carrier!”

In 1969, Chairman Cho Choong-Hoon took over the ailing Korean Air Corporation at the request of President Park Chung-Hee. He made a bold decision for the Republic of Korea, saying, “Some business needs to be operated regardless of profits. The acquisition of Korean Air Corporation, a troubled state-run company, should be considered with the national and public interests in mind.” In other words, the acquisition of Korean Air Corporation was based on the spirit of ‘patriotism through transportation’.

In 1969, the same year the company was established, Korean Air opened the Seoul-Saigon route as the first step. This decision stemmed from the founding chairman’s belief that our soldiers and engineers dispatched to the Vietnam War must be sent on the national flag carrier. In the 1970s, he devoted himself to pioneering Pacific and European routes. In the 1980s, Korean Air continued to expand its passenger and cargo routes to the Americas and Europe.

The company also made investments in infrastructure for the aviation industry. It opened exclusive cargo terminals at the Los Angeles Airport and New York’s JFK Airport, in 1981 and 1983 respectively. The Incheon Flight Training Center was opened in 1984, and the “Korean Air Flying School” was opened in 1989 to train its own pilots. This is part of bold investments in specialized human resources for different sectors of the aviation industry, which could not be done at general universities.

<Table 1.1> SWOT Analysis of Korean Air by Period

Korean Air’s half-century of history, which has grown with the excitement of travel on “Our Wings,” has indeed been a series of hardships and crises in which had to overcome step by step to make it this far. To see how Korean Air overcame environmental uncertainties through the leadership of CEO and to look at how effective its strategic decisions were, a SWOT matrix <Table 1.1> has been prepared to analyze and summarize major internal (strengths and weaknesses) and external factors (opportunities and threats).

Pioneering Period (1969 - 1989): Cargo-First Strategy

Founder Cho Choong-Hoon focused on expanding Korea’s aviation territory through growth centered on the 1970s’ economic boom in the Middle East and the Olympic effect of the 1980s. In 1979, according to the International Civil Aviation Organization (ICAO), South Korea ranked 10th in the world in terms of passenger volume on international routes. Korea’s aviation status, which ranked 98th in 1969, rose to a global level in just 10 years since the launch of Korean Air.

When Korean Air was launched in 1969, it only had three routes to Japan. The number of international destinations increa...

Table of contents

• Table of Contents
• About the Editors
• List of Contributors
• Editor’s Note
• Conglatulatory Messages
• PART I. PRIVATE SECTOR
• PART II. NON-PROFIT SECTOR
• PART III. PUBLIC SECTOR