MASTER OF MANAGEMENT

GADJAH MADA UNIVERSITY

OPERATION MANAGEMENT

“Comparison Services and High-Tech in

South Korea”

By: Irwan A. Bachtiar

Content

Content.....................................................................................................1

Figures......................................................................................................2

Abstract....................................................................................................3

Country Overview.....................................................................................4

Background..............................................................................................6
Terminology and Definition.......................................................................12

Banking Services in South Korea..............................................................19

South Korea Micro Electronics Industries..................................................23

Resume About Comparing Two Sectors....................................................25

Managing Quality......................................................................................26

Prospect & Potential High-Technology.......................................................34

Commentary.............................................................................................35

Conclusion................................................................................................36

Sources.....................................................................................................37

Figures
Figure 1. South Korea 2007......................................................................4

Figure 2. South Korea Economic Growth (1960 – 2007)...........................5

Figure 3. Samsung Cell-Phones Products.................................................7

Figure 4. EveR-3, an android capable of expressing some human emotions

.................................................................................................................9

Figure 5. M-Banking..................................................................................18

Figure 6. South Kore Bank........................................................................21

Figure 7. Hynix microchips semi-conductor..............................................22

Figure 8. Samsung logo............................................................................23

Figure 9. Samsung Experience Store........................................................24

Figure 10. J-i-T in e-learning concepts......................................................28

Figure 11. Taguchi quality loss function...................................................28

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Figure 12. Part of the employee...............................................................31

Figure 13. The Kano Model.......................................................................33

Abstract
South Korea as one of The Four Asian Tigers (along with Taiwan,
Singapore and Hong Kong) is a develop country that has so many
improving in many sectors. Government and public has try to elaborate
each others in the main business, including services business (specifically
in Banking Services) and High Technology.
In Banking Services, South Korea serve good quality in saving
money along with using their technology such as ATM, transfer, financial,
stock exchange, etc. Banking Services for public in South Korea was
delivered many benefits for customer, each individual deserve all the
services facility.
In High Technology along with Japanese invasion, South Korea can
be good rivalry in that business, such as cell phones business, providing
by Samsung or in automotive industry, with all korean’s famous brands
such as KIA, Hyundai, and Daewoo. Don’t forget will chip for computer
providing by Samsung and Hynix.
Elaborate this two sectors can give new perspective in mix
business in South Korea, How to apply the technology in main Banking
Business or How services business use high-technology to maintain and
2
deserve their costomer. Compare this two sector separetely also be
another phase of topics in South Korea main business. How services and
high-tech playing roles in public living.
The last topic, is how to explain quality management with prospect
and potential in Banking Services and High Technology in South Korea. As
Operations Management lesson, quality management has perspective to
value Banking Services and High Technology with ISO 9000, TQM,
Continous Improvement, etc. Then prospect and potential explain about
forecasting its business in the future, it overview, design, process, etc.

Country Overview
South Korea is a developed country. It has the fourth-largest economy in
Asia and a High-income OECD member, classified as an Advanced
economy by CIA and IMF. Today, it is among the world's fastest growing
advanced economies and is leading the Next Eleven nations; its economic
success serves as a role model for many developing countries. South
Korea has a high-tech and futuristic infrastructure, and is a world leader in
technologically advanced goods such as electronics, automobiles, ships,
machinery, petrochemicals and robotics, headed by Samsung, POSCO,
and Hyundai Heavy Industries. Since the 21st century, South Korea's
modern culture has become popular in Asia and beyond in a phenomenon
known as the Korean wave.1

1
Data accessed on http://en.wikipedia.org/wiki/South_korea, March 11. 2009.

3
 Figure 1. South Korea Map 2007.

South Korea has been the world's

second fastest growing economy for over
four decades. For example, in 1957 South
Korea's annual per capita GDP was
comparable to that of Ghana, and by 2008
it was 17 times as high as Ghana's. Its
remarkable transformation to a wealthy
developed country in less than half a
century is often called the Miracle on the
Han River and earned the distinctive
reputation of "Asian Tiger" in the
international community. South Korea's
economic success is now a role model for
many developing countries.
Today, South Korea has a highly
developed trillion dollar economy and is a member of the OECD, classified
as a High-income economy by the World Bank and an Advanced economy
by the IMF and CIA in 2007, 2008. Its capital, Seoul, is consistently placed
among the world's top ten financial and commercial cities.

Figure 2. South Korea Economic Growth (1960 – 2007). Source: www.wikipedia.org

South Korea is regarded as one of the strongest economies in the

world, despite lacking natural resources and having the smallest territory
among the G-20 major economies. The South Korean economy is the
4
fourth largest in Asia and 13th largest in the world. Like West Germany
and Japan, rapid industrialization since the 1960s has made South Korea
one of the world's top ten exporters. It is the seventh largest trading
partner of the United States. South Korea has the second highest savings
rate in the developed world and has the world's sixth biggest foreign
exchange reserves.
An extremely competitive education environment and motivated
workforce are two key factors driving this knowledge economy. the
country files the largest number of patents per GDP and R&D expenditure
in the world.
Many globally well-known South Korean conglomerates such as
Samsung, Hyundai-Kia, Hyundai Heavy Industries, LG, SK, and POSCO
have rapidly grown to become world leaders in their respective industries.
Samsung Group is the world's largest conglomerate and a leading
consumer electronics brand. In 2006, Samsung Group alone would have
been the world's 34th largest economy if ranked. The Hyundai Kia
Automotive Group is the second largest car company in Asia and one of
the top five automakers in the world. Hyundai Heavy Industries is the
world's largest shipbuilder and POSCO is the world's second largest steel
maker. South Korea is the world's largest shipbuilder, and one of the
world's top five automobile manufacturing nations, and the sixth largest
steel producer in the world.

Background
A. Objectives
• To Compare between Services Business and High Technology in
South Korea.
• To explore, how Services Business can contribute to the evolving
field of Service Science, Management (Banking), and Technology.
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 • To define High Technology in South Korea and which technology
that appropriate with banking industry.

B. South Korea Service Business

Why it is better to invest in South Korea rather than Indonesia or
another ASEAN Country? Because South Korea gives investors so
many advantages, including competitive business challange, small
taxes, good living for employee and so many things that makes
South Korea looks better.
In some sources such as wikipedia.org we can see an
overview about South Korea as one of The Four Asian Tigers along
with Singapore, Taiwan and Hong Kong. If we compare with Japan,
with their invasion all over the world, South Korea has putted
themseves in good position, if we want to talks about world of
business. Samsung and LG as leading micro electronics provider has
so many customer all around the world.
In services business (specifically later as Banking Services)
South Korea has improved the country with their main services, such
as transportation, education, banking, financial, health, delicious
cuisine, entertainment, and other things.
Later on specific, we talk about banking services, it is about
maintain good quality services along with customer, invertor and
public. South Korea banking services business try to providing good
facility and service, also with eloborates banking services with high
technology to gives satisfaction to customer and gives safety to
saving money in bank at South Korea.

C. South Korea High-Tech

Korea has a highly developed high-tech infrastructure, with the
world's highest broadband internet access per capita. In 2007, the
Economist Intelligence Unit ranked South Korea's IT industry

6
 competitiveness third in the world. Korea's e-readiness was ranked
15th, and e-Government readiness 6th in 2008.
In consumer electronics, South Korea is the world's largest
OLED and Plasma display maker. Both Samsung and LG are major
makers of LCDs, and mobile phones.
South Korea is also the world's
leading memory chip producer and
Samsung and Hynix are the world's
second and sixth largest
semiconductor companies in the
world. Samsung is also the world's
largest maker of laser printers.
Samsung Techwin is the world's
third largest maker of digital cameras.
Figure 3. Samsung
Cell-Phones Products.

South Korea also exports radioactive isotope production

equipment for medical and industrial use to countries such as
Russia, Japan and Turkey.
The government is also investing in the robotics industry, with
the stated aim of becoming the "world's number 1 robotics nation"
by 2025. There are also plans to develop other sectors, including
financial services, biotechnology, aerospace and entertainment
industries.
South Korea High-Tech Miracle.2 Earlier this year in a drab-
looking building 25 miles from Seoul, the Samsung Corporation
began mass-producing what most of the American electronics
industry has abandoned: one-megabit chips, computer memory
devices storing more than a million pieces of data. For South Korea,
whose economic miracle was built on its cheap labor, the one-

2
Ibid.

7
megabit chip is a foray into ultra-sophisticated technologies that
many thought beyond its reach. Samsung says it is now shipping 1.5
million of the D-RAM (dynamic random access memory) chips a
month. That is enough to make it a full-fledged member of an
exclusive club producing the most advanced type of memory circuits
now made - a club dominated by Japanese companies. Samsung is
aiming for four million to five million chips a month by the end of
next year, when it will also start producing four-megabit chips.
The contrasts with the United States, where only a handful of
companies are willing to bear the huge expense and risks of the
technology, are lost on no one here.
Indeed, Samsung's mastery of the demanding technology is a
source of national pride for South Korea, whose success has been
built around textile factories, shipyards and automobile assembly
lines. Giant pictures of the chip appear on billboards in downtown
Seoul. Government officials tout the accomplishment as an example
of how South Korea will rival Japan, whose occupation of the Korean
Peninsula for the first half of the 20th century and economic success
in the second half embitter many people here.
For all that, South Korea's success in one-megabit chips does
not necessarily herald a new era of technological competitiveness.
Despite tempting comparisons, even the most enthusiastic
executives here freely admit that South Korea is no Japan
One reason is that South Korea is desperately short of
engineering talent. The megabit chip project at Samsung, and
projects like it at Goldstar, Daewoo and Hyundai, Korea's biggest
conglomerates, have absorbed a huge portion of South Korea's
technology resources. More ambitious projects requiring more
sophisticated design and software skills -like microprocessors or
computer systems bigger than a desktop personal computer - are
receiving relatively little attention.

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 Moreover, South Korea still depends highly on Japan for the
equipment it needs to manufacture advanced microelectronics.
Many executives here wonder whether they will be cut off by Japan's
electronics giants, which often seem more worried about South
Korea and its hard-working, low-cost labor force than about the
United States.
For now, however, South Korea's success in one-megabit chips
has brought it an ally: American computer makers. Eager for
alternative sources to avoid overdependence on Japan, they are
beginning to line up for Samsung's chips. I.B.M., which along with
Texas Instruments Inc. and tiny Micron Technology Inc. in Idaho is
the only United States manufacturer of megabit chips, is already a
customer for Samsung's one-megabit chip.

Robotics Technology. Robotics has been included in the list

of main national R&D projects in Korea since 2003. In 2009, the
government announced plans to build robot-themed parks in
Incheon and Masan with a mix of public and private funding.
In 2005, Korea Advanced Institute of Science and Technology
developed the world's second walking humanoid robot, HUBO. A
team in the Korea University of Science and Technology developed
the first Korean android, EveR-1 in May 2006. EveR-1 has been
succeeded by more complex models with improved movement and
vision. Next models are scheduled to be completed by 2010.

9
Figure 4. EveR-3, an android capable of expressing some human emotions.

Biotechnology. Since the 1980s, the Korean government has

actively invested in the development of a domestic biotechnology
industry, and the sector is expected to grow to $6.5 billion by 2010.
Medical sector accounts for a large part of the production, including
production of hepatitis vaccines and antibiotics.
Recently, research and development in genetics and cloning
has received increasing attention, with the first successful cloning of
a dog, Snuppy, and the cloning of two females of an endangered
species of wolves by the Seoul National University in 2007.
The rapid growth of the industry has resulted in significant
voids in regulation and ethics, however, as was highlighted by the
scientific misconduct case involving Hwang Woo-Suk.

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 Terminology and Definition
A. Terminology and Definition of Services
In this paper, before we go through the centre point, it is better to
know about terminology that we used in this paper, such as Services,
Information, Communication and Technology. South Korea as a country
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they have meantion the terminology globally same as many develop
country, so here we can see about terminology to elaborate, compare and
make analysis later on.
Service is the diametrically opposed non-material counterpiece of a
physical good. A service provision comprises a sequence of activities that
does not result in ownership of the outcome, and this is what
fundamentally differentiates it from furnishing someone with physical
goods. Service provision is a process that creates predetermined benefits
by effectuating either a change of service consumers, a change in their
physical possessions or a change in their (in)tangible assets.3

Services can be paraphrased in terms of their generic key characteristics.

1. Intangiblity
Services are intangible and insubstantial: they cannot be touched,
gripped, handled, looked at, smelled, tasted or heard. Thus, there
is neither potential nor need for transport, storage or stocking of
services. Furthermore, a service cannot be (re)sold or owned by
somebody, neither can it be turned over from the service provider
to the service consumer nor returned from the service consumer
to the service provider. Solely, the service delivery can be
commissioned to a service provider who must generate and
render the service at the distinct request of an authorized service
consumer.

2. Perishability
Services are perishable in two regards
 The service relevant resources, processes and systems are
assigned for service delivery during a definite period in time. If
the designated or scheduled service consumer does not
request and consume the service during this period, the
service cannot be performed for him. From the perspective of

3
Data accessed on http://en.wikipedia.org/wiki/Service_(economics), April 11. 2009.

12
 the service provider, this is a lost business opportunity as he
cannot charge any service delivery; potentially, he can assign
the resources, processes and systems to another service
consumer who requests a service. Examples: The hair dresser
serves another client when the scheduled starting time or time
slot is over. An empty seat on a plane never can be utilized and
charged after departure.
 When the service has been completely rendered to the
requesting service consumer, this particular service irreversibly
vanishes as it has been consumed by the service consumer.
Example: the passenger has been transported to the
destination and cannot be transported again to this location at
this point in time.

3. Inseparability
The service provider is indispensable for service delivery as he
must promptly generate and render the service to the requesting
service consumer. In many cases the service delivery is executed
automatically but the service provider must preparatorily assign
resources and systems and actively keep up appropriate service
delivery readiness and capabilities. Additionally, the service
consumer is inseparable from service delivery because he is
involved in it from requesting it up to consuming the rendered
benefits. Examples: The service consumser must sit in the hair
dresser's shop & chair or in the plane & seat; correspondingly, the
hair dresser or the pilot must be in the same shop or plane,
respectively, for delivering the service.

4. Simultaneity
Services are rendered and consumed during the same period of
time. As soon as the service consumer has requested the service
(delivery), the particular service must be generated from scratch

13
 without any delay and friction and the service consumer
instantaneously consumes the rendered benefits for executing his
upcoming activity or task.

5. Variability
Each service is unique. It is one-time generated, rendered and
consumed and can never be exactly repeated as the point in time,
location, circumstances, conditions, current configurations and/or
assigned resources are different for the next delivery, even if the
same service consumer requests the same service. Many services
are regarded as heterogeneous or lacking homogeneity and are
typically modified for each service consumer or each new
situation (consumerised). Example: The taxi service which
transports the service consumer from his home to the opera is
different from the taxi service which transports the same service
consumer from the opera to his home - another point in time, the
other direction, maybe another route, probably another taxi driver
and cab.
Each of these characteristics is retractable per se and their
inevitable coincidence complicates the consistent service
conception and make service delivery a challenge in each and
every case. Proper service marketing requires creative
visualization to effectively evoke a concrete image in the service
consumer's mind. From the service consumer's point of view,
these characteristics make it difficult, or even impossible, to
evaluate or compare services prior to experiencing the service
delivery.
Mass generation and delivery of services is very difficult. This
can be seen as a problem of inconsistent service quality. Both
inputs and outputs to the processes involved providing services
are highly variable, as are the relationships between these
processes, making it difficult to maintain consistent service

14
 quality. For many services there is labor intensity as services
usually involve considerable human activity, rather than a
precisely determined process; exceptions include utilties. Human
resource management is important. The human factor is often the
key success factor in service economies. It is difficult to achieve
economies of scale or gain dominant market share. There are
demand fluctuations and it can be difficult to forecast demand.
Demand can vary by season, time of day, business cycle, etc.
There is consumer involvement as most service provision requires
a high degree of interaction between service consumer and
service provider. There is a customer-based relationship based on
creating long-term business relationships. Accountants, attorneys,
and financial advisers maintain long-term relationships with their
clientes for decades. These repeat consumers refer friends and
family, helping to create a client-based relationship.

Any service can be clearly, completely, consistently and concisely

specified by means of the following 12 standard attributes which conform
to the MECE principle (Mutually Exclusive, Collectively Exhaustive), The
meaning and content of these attributes are:
a. Service Consumer Benefits describe the (set of) benefits
which are callable, receivable and effectively utilizable for any
authorized service consumer and which are provided to him as
soon as he requests the offered service. The description of these
benefits must be phrased in the terms and wording of the
intended service consumers.
b. Service-specific Functional Parameters specify the functional
parameters which are essential and unique to the respective
service and which describe the most important dimension of the
servicescape, the service output or outcome, e.g. maximum e-
mailbox capacity per registered and authorized e-mail service
consumer.

15
c. Service Delivery Point describes the physical location and/or
logical interface where the benefits of the service are made
accessible, callable, receivable and utilzable to the authorized
service consumers. At this point and/or interface, the
preparedness for service delivery can be assessed as well as the
effective delivery of the service itself can be monitored and
controlled.
d. Service Consumer Count specifies the number of intended,
identified, named, registered and authorized service consumers
which shall be and/or are allowed and enabled to call and utilize
the defined service for executing and/or supporting their
business tasks or private activities.
e. Service Readiness Times specify the distinct agreed times of
day when
➢ The described service consumer benefits are
 accessible and callable for the authorized service
consumers at the defined service delivery point
 receivable and utilizable for the authorized service
consumers at the respective agreed service level
➢ All service-relevant processes and resources are operative
and effective
➢ All service-relevant technical systems are up and running
and attended by the operating team
➢ The specified service benefits are comprehensively
delivered to any authorized requesting service consumer
without any delay or friction.
The time data are specified in 24 h format per local
working day and local time, referring to the location of the
intended service consumers.
f. Service Support Times specify the determined and agreed
times of day when the usage and consumption of commissioned
services is supported by the service desk team for all identified,
registered and authorized service consumers within the service
16
 customer's organizational unit or area. The service desk is/shall
be the so called the Single Point of Contact (SPoC) for any service
consumer inquiry regarding the commissioned, requested and/or
delivered services, particularly in the event of service denial, i.e.
an incident.
g. Service Support Languages specifies the national languages
which are spoken by the service desk team(s) to the service
consumers calling them.
h. Service Fulfillment Target specifies the service provider's
promise of effective and seamless delivery of the defined
benefits to any authorized service consumer requesting the
service within the defined service times. It is expressed as the
promised minimum ratio of the counts of successful individual
service deliveries related to the counts of requested service
deliveries. The effective service fulfillment ratio can be measured
and calculated per single service consumer or per consumer
group and may be referred to different time periods (workday,
calenderweek, workmonth, etc.)
i. Maximum Impairment Duration per Incident specifies the
allowable maximum elapsing time [hh:mm] between:
➢ The first occurrence of a service impairment, i.e. service
quality degradation or service delivery disruption, whilst
the service consumer consumes and utilizes the requested
service,
➢ The full resumption and complete execution of the service
delivery to the content of the affected service consumer.
j. Service Delivering Duration specifies the promised and
agreed maximum period of time for effectively delivering all
specified service consumer benefits to the requesting service
consumer at the currently chosen service delivery point.
k. Service Delivery Unit specifies the basic portion for delivering
the defined service consumer benefits. The service delivery unit
is the reference and mapping object for all cost for service
17
 generation and delivery as well as for charging and billing the
consumed service volume to the service customer who has
commissioned the service delivery.
l. Service Delivering Price specifies the amount of money the
service customer has to pay for the distinct service volumes his
authorized service consumers have consumed. Normally, the
service delivering price comprises two portions
 a fixed basic price portion for basic efforts and resources
which provide accessibility and usability of the service
delivery functions, i.e. service access price
 a price portion covering the service consumption based on
✔ fixed flat rate price per authorized service consumer and
delivery period without regard on the consumed service
volumes,
✔ staged prices depending on consumed service volumes,
✔ fixed price per particularly consumed service delivering
unit.

Service systems are value co-creation configurations of people,

technology, internal and external service systems connected by value
propositions, and shared information (such as language, laws, measures,
models, etc.).4

B. Metric for Technology in The Service Sector

➢ Organizational

4
Daim, Tugrul & Fujiwara, Tetsuro. 2007. Symposium on “Technology Management in The
Service Sector”. PICMET 2007.

18
 • Balanced Scorecard (Common Measure)
• Do all the stakeholders buy that?
➢ Technology
• R&D used for serviceshnology in the Service Sector
• Does the existing measures work services as well
• Technology for the services
➢ Economic and Financial
• Cost
• Productivity
• Time Delivery
• Intellectual Property
• Sales, Profit, Market Share
➢ Human Side
• Experience with Service that is personal
• Experience Satisfaction Emotional
• Stakeholders, Emotions Maslow’s Hierarchy
➢ Value Added
• Customers Willingness to Pay
➢ Required Action
A multi stakeholder oriented approach for creating the Metrics for
Technology in the Service Sector :
a. Government
b. Regulatory Entities
c. Industry
d. Universities
e. Firms
f. NGOs for the Development of Service Sector

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 Banking Services In South Korea

Types of Bank Accounts

There are several different types of

bank accounts available to citizens and
foreigners alike. Most accounts do not
require a minimum balance nor do they
charge any fees to maintain one.

Figure 5. M-Banking.

➢ Savings
These accounts work the same in South Korea as in most other
countries. The client deposits money at the rate he/she desires and
the bank offers interest as an incentive to save. Generally, the
longer the term of commitment, the higher the interest rate will be.
For shorter term accounts, the interest rates are fairly low for
savings accounts (about 2%-4%).

➢ Time-Deposit
A time deposit account works more like a checking account. Some
banks do offer interest on time deposits, but they are generally
lower than savings accounts because the interest depends on the
length of time you intend to keep your account.

➢ Instalment
This account requires the client to make monthly
instalments/payments to the bank for interest. At maturity, the
client will have made a profit. This works like a Certificate of

20
 Deposit, except the money does not have to be paid upfront, but in
monthly deposits.

After signing up for an account, you will receive a bankbook to

record your transactions and a bank card within a couple of weeks. The
bank card is strictly an ATM card to withdraw money from any ATM
machine. It cannot be used to charge purchases to your account.

Services, Fees & Interest

The beauty about most Korean bank accounts is the lack of service
fees that they charge. So don’t get sucked into paying extra fees because
it is likely that you won’t have to anywhere else.
If you are looking to make some interest on your account, the best
route to take would be a savings account or an instalment account.
Interest is generally between 2% and 4% and can be paid at varying
periods of time (annually, semi-annually, monthly, etc).
Depending on which bank you sign up with, you may be offered tax
benefits (especially if you are considered a resident of South Korea). Rates
vary between banks and types of accounts. For example, Korean
Exchange Bank charges 10.5% for taxes on a Time Deposit account
(numbers were collected in March 2007 and are subject to change).

South Korea Banking Industry Analysis5

In the market research report on “South Korean Banking Industry
Analysis (2007-2011)” provides extensive research and objective analysis
of the growing banking industry, their product quality, and services
offered in South Korea. Facts and figures given in this report help clients to
analyse the leading-edge opportunities critical to the success of the
banking Industry in South Korea. It also helps investors, financial service

5
Data accessed on http://www.bharatbook.com/Market-Research-Reports/South-Korean-
Banking-Industry-Analysis-2007-2011.html, April 18. 2009.

21
providers, and global banking players navigate the evolving market of
banks in South Korea.
a. Key Products Analysed
Key products namely Deposits, Credit Cards, Debit Cards, loans, and
ATM facility are also analysed supported by the facts like the market
trends.

b. Key Players Analysed

This section provides an overview, key facts, financials and stock
performance of several players like Kookmin Bank, Hana Bank,
Woori Finance Holdings Plc, Shinhan Financial Group and SC First
Bank.

c. Key Issues and Facts Analysed

This report attempts to answer key questions that are critical
for the success of banking sector in South Korea, such as:
a. How competitive is the market landscape of Banking
Industry in South Korea?
b. The nature of the services driving the Banking Sector in
South Korea?
c. What are the various opportunities and challenges in
this industry?
d. What are the prospective areas of investment for the
banks in the near future?
e. Which factors will lead to the growth of bankcards, loans
and deposits in South Korea?

d. Key Findings
a. As per 2004 records, latest available, South Korea is
ranked second after the United States in the number of
credit and debit cards people holders (3.35 card per
individual).

22
 b. Use of ATM only cards declined, largely due to the
growth of debit cards and increasing use of Internet and
home banking.
c. Growing at a CAGR value of 12.29% during last five
years (2001-2006), bank deposits reached US$ 531.7
Billion (Won 491869.3 Billion) at the end of 2006.
d. South Korean Banks’ lending grew at a CAGR of 16.27%
during the last five years. Total lending to the public was
US$ 480.1 Billion in 2006.
e. It is forecasted that Bank loans will grow with the CAGR
of 19.29% during the period spanning 2007-2011 to
reach US$ 1278.3 Billion (Won 1182540 Billion) in 2011.
f. Implementation of Basel II accord will be main challenge
for the South Korea banking industry.

e. Research Methodology Used:

Information Sources
Information has been sourced from namely, books, newspapers,
trade journals, and white papers, industry portals, government
agencies, trade associations, monitoring industry news and
developments, and through access to access to more than 3000
paid databases.

Analysis Methods
The analysis methods include the following: Ratio Analysis,
Historical Trend Analysis, Linear Regression Analysis using software
tools, Judgmental Forecasting and Cause and Effect Analysis.

23
 Figure 6. South Korean Bank, Wooribank at Seoul 2007.

South Korea MicroElectronics Industries

Figure 7. Hynix microchips semi-conductor.

Hynix Semiconductor Inc. is a memory semiconductor supplier of

dynamic random access memory ('DRAM') chips and flash memory chips.
Formerly known as Hyundai Electronics, the company has manufacturing
sites in Korea, the U.S., China and Taiwan. The company's shares are
traded on the Korea Stock Exchange, and the Global Depository shares are
listed on the Luxemburg Stock Exchange. Hynix memory is used by Apple

24
in some MacBook Pro computers and in PC desktops as well as the ASUS
Eee PC.6
Samsung Group. Samsung is the world's largest conglomerate. It
is South Korea's largest chaebol and composed of numerous international
businesses, all united under the Samsung brand, including Samsung
Electronics, the world's largest electronics company, Samsung Heavy
Industries, one of the world's largest shipbuilders and Samsung
Engineering & Construction, a major global construction company. These
three multinationals form the core of Samsung Group and reflect its name
- the meaning of the Korean word Samsung is "tristar" or "three stars".
Currently, Samsung has sixteen products that have dominated the
world’s market share, including: DRAM, color cathode-ray tube TVs (CPT,
CDT), SRAM, TFT-LCD glass substrates, TFT-LCD, STN-LCD, tuner, CDMA
handset, color television (CTV), monitor, flash memory, LCD Driver IC
(LDI), PDP module, PCB for handheld (mobile phone plates), Flame
Retardant ABS, and Dimethyl Formamide (DMF).
Plus in the Television market, Samsung and LG make the only
screens for LCD TFT televisions and then later sell them on to the other
companies.
According to Interbrand and BusinessWeek, Samsung’s brand value
ranked 43rd (USD 5.2billion) in 2000, 42nd (USD 6.4 billion) in 2001, 34th
(USD 8.3 billion) in 2002, 25th (USD 10.8 billion) in 2003, 21st (USD 12.5
billion) in 2004, and 20th (14.9 billion) in 2005 among top global
companies.
In terms of export that directly contributes to the Korean economy,
Samsung took up 18.1% of the all exports with USD 31.2 billion in 2000
and 20.7% with USD 52.7 billion in 2004. In addition, Samsung's tax
payments to the Korean government in 2003 was KRW 6.5 trillion, which is
about 6.3% of total tax revenue.

6
Data accessed on http://en.wikipedia.org/wiki/Hynix, April 18. 2009.

25
 The market value of Samsung in 1997 reached KRW 7.3 trillion in
1997, which amounted to 10.3% of the Korean market but this figure
increased to KRW 90.8 trillion taking up
22.4% in 2004.
Moreover, the annual net profit of
Samsung marked KRW 5.8 trillion in
2001, KRW 11.7 trillion in 2002, KRW 7.4
trillion in 2003, and KRW 15.7 trillion in
2004, showing forth a steady increase.

Figure 8. Samsung Logo.

In order to enhance the working environment and build a strong and

trustworthy foundation, the semiconductor sector of Samsung Electronics
has been conducting a ‘Great Workplace Program’ called GWP since 1998.
Then, in 2003, GWP has spread throughout the entire Samsung Group as
Samsung Fire and Marine Insurance, Samsung SDI, Samsung Everland,
Samsung Corporation, Cheil Industries, Samsung Networks, and others
started to apply its core principles. In 2006, 9 subsidiary companies of
Samsung Electronics, 80 overseas branches, and 130 overseas business
sectors have reported that they are actively applying the GWP.7

7
Data accessed on http://en.wikipedia.org/wiki/Samsung, April 18. 2009.

26
Figure 9. Samsung New Experience Store.

27
 Resume About Comparing Two Sectors

To compare two sectors it is some operation management perspective

that will explain later on. Services business (specifically banking services)
it is not a big business as well if we compare with High Technology, South
Korea really well develop in High Technology such as robotics, micro chips,
micro electronics and aerospace.
Banking services was provided by South Korea Government
regulation that implement by South Korea’s bank. Divide by six parts
(including Central Bank, Nationwide Bank, Government-Owned Bank,
Local Bank, Other Bank Organization such as credit union & Korea Post,
and Foreign Owned Bank.
As international standards, banking services in South Korea serve
in global professionals, serving good quality, good facility, advantages,
etc. Woori Bank as government owned bank, has providing banking
services mix with technology for the facility, such using ATM facility to do
whole of business activity of customer or Just-In-Time technology to
transfer money to another branch or banks.
Then High technogy that showing before, is explain about dignity
and proud about South Korea development. In micro chips and micro
electronics business, South Korea leading the business along with
Japanese invasion in automotive and electronics as well.
This is remembering us how Korean and Japanese competing each
other, Samsung and Sony makes so differences with the other company
such as Phillips from Holland or Hawlett Packard. In the industries, they
(Samsung and Sony) has main roles as good images company with good
and sophisticated brands, in asia and european at least they putted their
name as leading electronics brands, with many products, such as
Samsung digital camera and Samsung Cell Phones or Sony with Sony

28
PlasyStation, television and cell-phones along with their merge with
Ericsson (Sweden) as cell-phones company.
In writer point of view, South Korea really develop in high
technology although South Korean still have consistancy in banking
services as one of services business in over that country, South Korea
serve the best for many sectors and it is feel safety to invest there.

Managing Quality

Quality we defined as the ability of a product or service to meet customer

needs. To analysis the case between South Korea services and high-
technology, we also can elaborate that subjects with Quality Management.
As we know, services business is a sector that not in manufacturing
based, its intangibility, can be define as a solid products as well, but we
believe that quality means conforming to standards and “making it right
the first time”.
In the Quality Management, also in services business, quality
should be improved to increase its profits, by sales gains via; improved
response, flexible pricing, improved reputation. Second, is by reduced cost
via; increased productivity, lower rework and scrap costs, lower warranty
costs.

Implication of Quality8
In addition to being a critical element in operations, quality has
other implications. Here are three others reasons why quality is important:
• Company reputation
• Product liability
• Global implications

8
Heizer & Render. 2008. Operation Management. Ninth Edition. Pearson International
Edition.

29
 South Korea has many big company, for example is Samsung, if we
remember Chelsea Football Club, we can see Samsung was in their main
clothes. Samsung has good reputation, for a company that come from
Asia, they are also famous all around the world, many products they sale,
likes television, cell phones, dvd players, air conditioner and many things.
For the global implication as a critical element in operation,
Samsung is also put themselves in the big global market leaders as cell
phones company, and they join banking services to serve good services
for costomer.

International Quality Standards

ISO 9000. Quality is so important globally that the world is uniting
around a single quality standard, ISO 9000, its the only quality standard
with international recognition.
ISO 14000. The continuing internationalization of quality is
evident with the development of ISO 14000, it is an environment
management standard that contain five core elements : (1) environmental
management, (2) auditing, (3) performance evaluation, (4) labeling, and
(5) life cycle assesment. They new standards could have several
advantages:
• Positive public image and reduced exposure to liability.
• Good systematic approach to pollution prevention through the
minimization of ecological impact of products and activities.
• Compliance with regulatory requirements and opportunities
for competitive advantage.
• Reduction in need for multiple audits.

30
Total Quality Management9
Total Quality Management (TQM). It is refers to a quality emphasis
that encompasses the entire organization, from supplier to customer. TQM
stresses a commitment by management to have a continuing
companywide drive toward excellence in all of products and services that
are important to the customer.
Six Sigma. Is a program to save time, improve quality, and lower
costs. Another Six Sigma definition is a program designed to reduce
defects to help lower costs, save time, and improve customer satisfaction.
Employee Empowerment. Is enlarging employee jobs so that the
added responsibility and authority is moved to the lowest level possible in
the organization.
Bencmarking. Is selecting a demonstrated standard of
performance that represents the very best performance for a process or
an activity. The idea is to develop a target at which to shoot and then to
develop a standard or benchmark against which to compare your
performance. The step for developing benchmarks are:
1. Determine what to benchmark.
2. Form a benchmark team.
3. Identify benchmarking partners.
4. Collect and analyze benchmarking information.
5. Take action to match or exceed the benchmark.

Just-in-Time (JIT). The philosophy behind just-in-time is one of

continuing improvement and enforced problem solving. JIT systems are
designed to produce or deliver good just as they are needed. JIT is related
to quality in three ways:

9
Ibid.

31
 • JIT cuts the cost of quality.
• JIT improve quality.
• Better quality means less
inventory and a better,
easier-to-employ JIT
system.

Figure 10. J-i-T in e-learning concepts.

Taguchi Concepts. Most
quality problems are the result of poor
products and process design. Genichi
Taguchi has provided us with three concepts aimed at improving both
products and quality :
(1) quality robust, (2)
quality loss function, (3)
target- oriented
quality.

Figure 11. Taguchi quality loss function.

The Importance of Service Quality and the Evaluation of

Meeting Customer Expectations.
Customer research literature traditionally agrees that service quality is a
measure of how well the service level delivered matches customer

32
expectations. Delivering quality service means conforming to customer
expectations on a consistent basis.
The delivery of high quality services is one of the most important
and most difficult tasks that any service organisation faces. Because of
their unique characteristics, services are very difficult to evaluate. Hence
customers must look closely at service quality when comparing services.
Service quality can be defined as a customers’ perception of how
well a service meets or exceeds their expectations. In most cases service
quality is judged by customers, and not by organisations. This distinction
is critical because it forces service marketers to examine their quality from
the customers’ viewpoint. For example, a bank may view service quality
as having friendly and knowledgeable employees. However, the
customers of this bank may be more concerned with waiting time, ATM
access and security, as well as statement accuracy. Thus it is important
for service organisations to determine what customers expect and then
develop service products that meet or exceed those expectations.
The Importance of Service Quality.10 The biggest obstacle for
customers in evaluating service quality is the intangible nature of the
service. How can customers evaluate something that they cannot see,
feel, taste, or hear? Most consumers lack the knowledge or the skills to
evaluate the quality of many types of services. Consequently, they must
place a great deal of faith in the integrity and competence of the service
provider. Despite the difficulties in evaluating quality, service quality may
be the only way customers can choose one service over another. For this
reason, services marketers live or die by understanding how consumers
judge service quality. The following table defines five dimensions that
customers use when evaluating the importance of service quality. They
are tangibles, reliability, responsiveness, assurance, and empathy.
Understanding Customer Expectations. Providers need to
understand customer expectations when designing a service to meet or

10
Data accessed on http://www.businessteacher.org.uk/free-management-essays/service-
quality-management-essay/#, April 18. 2009.

33
exceed those expectations. Only then can they deliver good service.
Customers usually have two levels of expectations, which could be said to
be desired and acceptable. The desired level of expectations is what the
customer really wants. If this level of expectations is provided, the
customer would be very satisfied. The acceptable level is viewed as a
reasonable level of performance that the customer considers as being
adequate. The difference between these two levels of expectations is
called the customer’s zone of tolerance.
Service companies sometimes use marketing research, such as
surveys and focus groups, as a means of discovering customer needs and
expectations. Other service managers, especially restaurants, use
comment cards, on which customers can complain or provide suggestions.
Another approach is to ask employees. Because customer contact
employees interact daily with customers, they are in a good position to
know what customers want from the company. Service managers should
regularly interact with their employees by asking their opinions on how to
best serve customers.
Service Quality Specification. Once an organisation understands
its customers’ needs, it must establish goals to help ensure good service
delivery. These goals, or service specifications, are typically set in terms of
employee or machine performance. For example, a bank may require its
employees to conform to a dress code. Likewise, the bank may require
that all incoming phone calls be answered by the third ring. Specifications
like these can be very important in providing quality service as long as
they are tied to the needs expressed by customers.
The most critical aspect of service quality specifications is
managers’ commitment to service quality. Service managers who are
committed to quality become role models for all employees in the
organisation. Such commitment motivates customer contact employees to
comply with service specifications. It is also crucial that all managers
within the organisation embrace this commitment, especially front line
managers, who are much closer to customers than higher level managers.

34
 Employee Performance. Once an organisation sets service quality
standards and managers are committed to them, the organisation must
find ways to ensure that customer contact employees perform their jobs
well. Contact employees in most service industries like bank tellers, flight
cabin crew, waiters, sales assistants, are often the least trained and
lowest paid members of the organisation. What service organisations must
realise is that contact employees are the most important link to the
customer, and thus their performance is critical to customer perceptions
of service quality. The means to ensure that employees perform well is to
recruit and train them well so that they understand how to do their jobs.
Providing information about customers, service specifications and the
organisation itself during the training promotes this understanding.
The evaluation and remuneration system used by the organisation
also plays a part in employee performance. Many service employees are
evaluated and rewarded on the basis of output measures such as sales
volume (car salespeople) or the lack of errors during work (bank tellers).
But systems using output measures over look other major aspects of job
performance: friendliness, teamwork, effort and customer satisfaction.
Thus customer oriented measures of performance may be a better basis
of evaluation and reward.

35
 Figure 12. Part of the employee.

Managing Service Expectations. Because expectations are so

significant in customer evaluations of service quality, service companies
recognise that they must set realistic expectations about the service they
can provide. They can set these expectations through advertising and
good internal communication. In their advertisements, service companies
make promises about the kind of service they will deliver. Infact, a
company that provides a service is forced to make promises since the
intangibility of services prevents it from showing them in the
advertisement. However, the advertiser should not promise more than it
can deliver; doing otherwise may mean disappointed customers.
To deliver on promises made, a company needs to have good
internal communication among its departments, especially management,
advertising, and operations. Assume, for example, that a restaurant’s
radio advertisements guaranteed services within five minutes or the meal
would be free. If top management or the advertising department failed to
inform operations about the five minute guarantee, the restaurant very
likely would not meet its customers’ service expectations. Even though
36
customers might appreciate a free meal, the restaurant would lose some
credibility and revenue.
The Kano Model.11 Dr. Noriaki Kano, a recognised Japanese quality
engineer and customer satisfaction expert, spent several years studying
customer needs and expectations. His ideas regarding attribute
importance of services are embodied in the Kano Model which is well
known in a wide range of different sectors.
The Kano Model classifies product attributes and their importance
based on how they are perceived by customers and their effect on
customer satisfaction.
The model measures the level of satisfaction with a product against
consumer perceptions of attribute performance. Kano argues that the
attributes can be classified into three categories:
• Threshold characteristics provide diminishing returns in terms of
customer satisfaction. These are essential or must attributes or
performance and do not offer any real opportunity for product
differentiation. Providing threshold attributes and meeting customer
expectations for them will do little to enhance overall customer
satisfaction, but removing or performing poorly on them will hurt
customer satisfaction, lead to customer complaints, and may result
in customer defections.
• Performance characteristics exhibit a linear relationship between
perceptions of attribute performance and customer satisfaction.
Strong performance on these need attributes enhances, while weak
performance reduces, satisfaction with the product or service.
Adding more attribute of this type to a product will also raise
customer satisfaction.
• Excitement characteristics are unexpected attributes that, when
provided, generate disproportionately high levels of customer
enthusiasm and satisfaction. When these nice to have attributes are

11
Ibid.

37
 not available in a product, it does not lead to customer
dissatisfaction.

Kano’s model affirms the role attribute importance plays in

understanding how satisfaction evaluations are formed. And making the
model operational can draw neatly from existing approaches to attribute
importance measurement.

Figure 13. The Kano Model.

38
 Prospects & Potential High-Technology

In South Korea, the new wave of small high-tech businesses have

overtaken the old “chaebol” - large firms like LG, Hyundai and Samsung
to become the bedrock of the country's recovery from the Asian economic
crisis.12
Talk about prospects and potential in high technology in South
Korea, actually it is can be savior of the nations because of Asian
economic crisis in 1997 and also in global financial that impact to South
Korea’s ekonomics systems in 2009 and so later on.
High-tech gives some solution to South Korea’s government to
solve the financial problems, the technology should be build in any sectors
likes transportation, aerospace, microelectronics, IT and so on. South
Korea can sale their technology along with their rivalry with the japanese.
With high-tech, South Korea can earn so many profits to re-build their
economics.
In the future, South Korean peoples wish that they can re-unite with
their “old siblings”, North Korea, as we know that their has so many
problems in borders, military, politicals and history. High-tech can be some
solution by supplying good technology for North Korea and have any
agreements in political and social issues.
Then also to have their strong security, South Korea can increased
and providing thier own military systems, by operating good satelite
security, military instruments and also nuclear powers as well as North
Korea.
Writer believes that South Korea still a Asian Tigers although many
country try to develop themselves such as Malaysia, India and Thailand,

12
Data accessed on http://www.altassets.com/casefor/countries/2001/nz2966.php, April
18. 2009.

39
but the domination of “tae-guk” spirits always put South Korea as leading
country in Asia that have great oportunities in High-tech along with the
Japanese.

Commentary

In writer perspective, South Korea is the develop country in Asian

Area and also leads in technology and economics along with the japanese.
South Korea’s Government gives excellent regulation for research and
development, also in services and high-tech.
In this paper, writer tell about services, especially in banking
services. Public need to be feel safety when they are saving their money,
with a sophisticated facilities, easy platform, etc. To serve best quality in
banking services, some bank should learn about managing their quality, it
can be in ISO 9000 or in Total Quality Management (TQM).
Then about high-tech, South Korea has lead the business with
Samsung domination in market. Again writer say that South Korea should
maintain their position along with their rivalry with the japanese, Sony.
After all, we will see about a develop country that will “smack” the
world with their technology combination with services, South Korea will do
that in several years, Indonesia as one of Asian country can learn
something about developing some sectors from South Korea, can be in
agriculture or travelling, so we hope transformation from Indonesia to
enter the global market.

40
 Conclusion

This paper has looked at the importance of service quality with regard to
tangibles, reliability, responsiveness, assurance, and empathy. It also
describes and evaluates the delivery of exceptional service quality in
order to meet customer expectations. This is in relation to understanding
customer expectations; service quality specifications; employee
performance; managing service expectations; moments of truth and the
Kano model, which relates to threshold characteristics, performance
characteristics and excitement characteristics.
Second, this paper has explained about high-tech invasion from
South Korea, as one of asian four tigers, they put themselves in market at
globally, to ensure that technology that they build can help humanity to
living.

41
 Sources

Books

Daim, Tugrul & Fujiwara, Tetsuro. 2007. Symposium on “Technology

Management in The

Service Sector”. PICMET 2007.

Heizer, Jay & Render, Barry. 2008. Operation Management. Ninth Edition.
Pearson

International Edition.

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42