Can chaebol emulate European family businesses?
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/ Korea Times photo by Shim Hyun-chul
BI Korea CEO Dirk van Niekerk says both share long-term commitment
By Kim Tae-gyu
Which is more significant for companies between short-term bottom lines and long-term profitability? That is a subject of debate as time-honored as whether it is preferable for pitchers to have better ball accuracy or delivery speed.
U.S.-style companies tend to prefer the former while Asian and European ones usually opt for the latter and a foreign pharmaceutical firm executive stresses the significance of longer-term approaches.
In a recent interview with Business Focus, his first meeting with the press after his appointment in May, Boehringer Ingelheim (BI) Korea Chief Executive Dirk van Niekerk likened his firm to Korean conglomerates, dubbed chaebol, in putting long-term agendas ahead of short-term gains.
He noted that the long-term perspective of “seeing the big picture” is the secret behind the sustainability of BI, which was founded in 1885 by Albert Boehringer and maintained as a family-owned company, as well as the key to the success of Korean players.
``There are a lot of similarities (between BI and chaebol). One, we are a very proud company. One of our ambitions is to remain a family-owned self-sustained company. I believe that many of the big Korean family-owned companies have a similar pride, and have shown that they can sustain into the future,’’ he said.
``There is always pressure on family-owned companies to generate their own money to reinvest into research and development. … The upside is that it affords you the opportunity to prioritize decisions that will have a long term effect on the business relative to short term gains.’’
BI’s mergers and acquisition (M&A) strategy is also closely associated with the long-term approach according to Niekerk.
``(A)s a family-owned company, we have to take the view on a long term. It is not that BI will never acquire a business or a company. But the decision to make that acquisition should be well thought through and has to have a long-term impact on business,’’ he said.
``In the past we have seen some acquisitions of research and development firms, and certain technology companies which will increase our ability to do long-term research. From that point of view, the company has shown its willingness to acquire technologies or business that can have long-term sustainable impact on the company.’’
Long-serving CEOs
Guenter Reinke headed BI Korea for one and a half decades between 1997 and 2012 and his successor Niekerk also has a long-term perspective ― the time line of his first plan is eight years.
The South African strives to double the company’s market share during the second decade of a new millennium, a goal dubbed “two by 2020,” which was announced as soon as he started his term.
That means its sales would approach 500 billion won by then from just shy of 200 billion won last year. The figure is highly likely to top the 200 billion won mark in 2012 for the first time.
``What I have agreed with my senior executives is that we want to double our market share by the year 2020. Our vision for BI Korea is two by 2020,’’ the 44-year-old said.
``We had many strategic meetings to decide how we are going to achieve it, and I am happy to report that everyone in our company is aware of our long-term vision of two by 2020.’’
The BI lifer said that from the firm’s executives to junior staff, everybody is behind the vision and strategy, which convinces him that the firm will achieve the ambitious task in eight years.
Asked whether he wants to emulate his predecessor in terms of a lengthy stay in Asia’s fourth-largest economy, his response was absolutely positive.
“Everybody asks me, how long are you going to stay? I said ‘as long as I possibly can.’ And I think that is important. It would only be fair to the Korean staff and our company to know that their CEO has a long-term vision,’’ he said.
``I think it is very important not only for our staff but also for our customers to know that there is somebody here who is serious about the business in Korea and serious about long-term sustainable business in Korea.’’
Good start
And Niekerk has got off to a very solid start because it racked up growth of 16.2 percent in turnover during the first half of 2012 from a year before.
This compares to most BI Korea’s competitors, which struggle to find their feet in the aftermath of the price cut on drugs earlier this year, which was mandated by the government.
Starting this April, the country’s drug prices plunged by double-digit rates as the Ministry of Health and Welfare slashed the prices of more than 6,500 medicines, around half of the total covered by medical insurance.
The policy, designed to eliminate the deep-rooted practice of illegal kickbacks passed from local pharmaceutical firms to doctors and pharmacists, has greatly trimmed sales of most of drug makers with a few exceptions.
Niekerk said that the strong pipeline enabled by the continual research efforts have made the difference in favor of BI Korea.
``With clever and smart planning done by our headquarters and adequate investment in research development as a base, we have established a very strong pipeline,’’ he said.
``For BI Korea, the timing has been absolutely fantastic as well. Wonderful and unique products that are innovatively different are being launched in our therapeutic areas at a good time.’’
Indeed, the high-rising growth was underpinned by strong sales of its cash cows such as hypertension treatment Twynsta and chronic obstructive pulmonary disease (COPD) drug Spiriva. Plus, newly-launched diabetes treatment Trajenta has also shown outstanding results.
For the next five years, BI Korea is poised to introduce as many new drugs including Pradaxa, an unprecedented anticoagulant medicine geared toward preventing strokes in patients with atrial fibrillation.
Boehringer Ingelheim Korea’s long-term goal of doubling its market share over the next eight years, dubbed “two by 2020,” is etched on the glass of the firm’s head office in downtown Seoul. / Courtesy of Boehringer Ingelheim Korea
Wunsch Award
With regard to the corporate social responsibility (CSR) programs, Niekerk said that it is one of the firm’s top priorities.
``Companies are aware that they need to keep CSR on top of their mind. I think for Koreans, and in line with Korean culture, it is important to make CSR efforts. But more than that, it makes me feel good to be able to say that we are investing in these programs,’’ the CEO said.
``Our biggest corporate social responsibility program is the Wunsch Medical Award. It underlines the seriousness with which we take good research and academic achievement. This award has been around for over 20 years, and I am very proud of what BI Korea has done with Wunsch Award.’’
Phased in 22 years ago by BI Korea, the Wunsch Award is arguably the most prestigious prize in the country’s medical sector.
The highly coveted annual award was named after Richard Wunsch, a Germany who was the first foreign physician to practice here more than a century ago.
Richard Wunsch worked as a personal doctor of King Gojong, the second last emperor of the Joseon Kingdom (1392-1910), from 1901 to 1905. The Wunsch Award was launched in 1990 by BI Korea along with the Korea Academy of Medical Sciences.
Every year, a peer-review panel composed of medical experts considers a set of criteria such as the candidates’ papers, along with the overall quality and influence of their work to decide the recipient.
At the onset of the new millennium, BI Korea also began the Young Scientist recognition.
In just a short period of time, the new award has become a highly sought after prize among the country’s young scientists and researchers.