[Shin Kyuk-ho's Passing] The Challenge Facing Shin Dong-bin, Chairman Who Led Lotte's 'Second Act'

Recovery of the Two Major Pillars of the Group: Sluggish Shopping and Chemicals

[Image source=Yonhap News]

[Asia Economy Reporter Cha Min-young] Shin Kyuk-ho (photo), Honorary Chairman of Lotte, passed away from an illness around 4:30 p.m. on the 19th. Shin, aged 99, experienced a rapid deterioration in his health early on the 19th and was admitted to Seoul Asan Medical Center, where he peacefully passed away surrounded by family members, including Shin Dong-bin, Chairman of Lotte Group.

Born in 1921 as the eldest son among five sons and five daughters in a poor farming family in Dungiri, Samnam-myeon, Ulsan, Gyeongsangnam-do, Honorary Chairman Shin was an entrepreneur who laid the foundation of Korea's distribution industry and developed it to a global level. In 1941, with 80 yen provided by his cousin, he went to study in Japan. After studying chemistry at Waseda University, he established Lotte Co., Ltd., a gum manufacturer, in Tokyo in 1948. He expanded the business into distribution, confectionery, hotels, food, and petrochemicals, growing Lotte into the fifth-largest conglomerate in Korea.

The task left to Shin Dong-bin, the second son of Honorary Chairman Shin and the current chairman managing Lotte in both Korea and Japan, is heavy. With the rapid deterioration of Korea-Japan relations, it is urgent to normalize Lotte Group, which had grown as a bridge between the two countries, and to recover the poor performance of the group's two pillars: shopping and chemicals. The large-scale personnel reshuffle in December last year, which was close to a generational change, reflects this urgency. If Honorary Chairman Shin built Lotte, Chairman Shin has been entrusted with the important role of 'Lotte Act 2.'

Chairman Shin Dong-bin and 50s CEOs Bearing the 'Lotte Act 2'

In the 2020 regular executive appointments, Chairman Shin positioned CEOs in their 50s at the forefront. Lee Young-jun, Vice President and CEO-designate of Lotte Chemical Advanced Materials Business (55), Choi Kyung-ho, Executive Director and CEO of Korea Seven (52), Jeon Hyung-sik, Executive Director and CEO-designate of Lotte Members (57), and Choi Se-hwan, Executive Director and CEO-designate of Canon Korea Business Solutions (51) are all in their early to mid-50s.

Actively appointing new executives who can support these young CEOs in their early to mid-50s is interpreted as a measure on the same level. Reflecting Chairman Shin Dong-bin's determination that, in a rapidly changing business environment, survival requires not merely following trends but becoming a 'game changer' who changes the market framework.

In the core distribution sector of the group, a major overhaul was carried out. Lotte Shopping was established as a one-top integrated corporation, reorganizing the department stores, marts, supermarkets, e-commerce, and LOBs business units, which were previously operated under separate CEOs, into an integrated corporation under a one-top CEO system. Existing affiliates were converted into business units, and each business unit head is responsible for the actual business operations. As a plan for a global Lotte beyond Korea and Japan, promotions of key overseas talents were also made.

Chairman Shin Dong-bin Determined to Change the Rules of the Game

Chairman Shin emphasizes that to create a new Lotte, it is time to change the rules of the game. Recently, at a presidents' meeting, he ordered a review of the new organizational culture, a thorough inspection of traditional businesses, and exploration of new business ventures, drawing attention. These remarks reflect the fact that the group's main sectors, including distribution and chemicals, have experienced a downward trend in performance for several years.

Chairman Shin said, "To survive, we must not be frogs in a well," urging, "Break the existing framework yourself and become a game changer who changes the market rules." He added, "To bring about change, it is essential to establish a flexible organizational culture where communication among employees is free and to instill a strong will for change in employees, but there are still shortcomings. A winning culture, where all employees have a strong will to achieve change and goals, and challenge with passion and perseverance, must take root within the organization."

At the presidents' meeting, Chairman Shin said, "We must not cling to past success methods or be complacent with the current state," and pointed out, "Our group has grown to hold the number one position in many business areas, but I doubt whether we still possess such competitiveness today." He also added that the group must not fall into complacency.

The management dispute, which had been considered a potential risk for years, has ended, and through bold personnel changes, the shadow of Honorary Chairman Shin has been erased. Chairman Shin's call to abandon the existing Lotte's success stories, crisis management cases, and habitual work is also a message to himself.