Economy Business Trips and Golf Coupons... Even Leading Large Corporations Tighten Their Belts

Samsung Electronics, LS Group, SK On, etc.
Use Economy Class for Executives' Overseas Business Trips

Tightened management by major domestic groups is spreading throughout the business community. Following some group affiliates reinstating a six-day workweek for executives, there is a noticeable trend of aggressively pursuing cost reductions despite strong performance.

The biggest target for cost-cutting is overseas business trips. According to the business community on the 27th, Samsung Electronics has instructed executives in certain divisions such as networks to use economy class instead of business class for overseas trips and to stay in accommodations of the same grade as regular employees. SK On, a battery affiliate of SK Group, has also set a policy to book economy class for executive trips. LS Group has recommended that from the first half of this year, presidents and above downgrade from first class to business class, and executives from business to economy class.

Except for SK On, which is affected by the electric vehicle chasm (temporary demand stagnation in a growth industry), Samsung Electronics and LS are showing strong performance. Samsung Electronics suffered semiconductor losses last year but showed a clear recovery in the first half of this year with operating profit reaching 10.4439 trillion won. LS is also recording strong results centered on power cables and electric sectors due to a surge in electricity-related demand this year. LS’s sales in the first half of this year were 13.3593 trillion won, with operating profit of 618 billion won. However, Samsung Electronics’ network division has seen sales decline since last year as major global telecom companies completed their 5G equipment investments, raising the need for workforce and cost reductions.

The IT industry is also joining the cost-cutting efforts. Naver recommends applying at least one month in advance for airline tickets and hotel reservations for overseas business trips. A company official explained, "This is to improve efficiency as it can be difficult to secure tickets and accommodations when the overseas trip date is tight." It is also said that the rising prices as the departure date approaches influenced the establishment of this rule.

Kakao also has an internal regulation that employees must use economy class when boarding flights for overseas business trips. Support for hotel accommodations varies depending on the grade. However, if the business trip is to a region with very high living costs, exceptions are made upon providing a reason.

Not only business trips but also golf reservations have become more restricted. Some LS affiliates reportedly withdrew golf memberships and instead issued coupons that can be used to book when necessary. Kakao has also mostly collected executive golf memberships. SK Group reduced the limits on executive corporate cards by 50-70% and reclaimed many golf memberships, proceeding with sales.

SK Hynix, which is enjoying record-high performance this year thanks to high-bandwidth memory (HBM), has not restored its business promotion expenses since cutting them last year. In 2022, SK Hynix cut welfare, activity, and business promotion expenses for executives and team leaders by 30-50% of the budget.

The reason for calling for cost reductions despite strong performance is increased uncertainty. External factors accelerating industrial changes such as artificial intelligence (AI) and the climate crisis are scattered, and geopolitical risks are growing worldwide, making future predictions difficult.

Professor Lee Jeong-hee of the Department of Economics at Chung-Ang University said, "The speed of global industrial transformation is so fast that even companies with good performance feel a sense of crisis. Especially this year, geopolitical risks and the global industrial landscape could change depending on the US presidential election results, so companies are trimming ‘excess fat’ in advance and preparing for rapid responses."