Transcript 슬라이드 1 - Ohmydocs

Korean Chaebol :
Global or Globalized?
By Jasper Kim, JD
Associate Professor and
Department Chair, Ewha GSIS
Which One Is More Global?
Company B
Company A
• 85% of revenues
outside home country
• Subsidiary offices in
100 + countries
• 80,000 + employees,
most outside home
country
• 95%+ management
are expats

70-75% revenues outside
HQ country
(30 NA, 40 EU, 20 Asia, 10 ROW)
or

Offices in 85+ cities,
in 50+ countries

~10,000 employees
worldwide

20-30% expats
2
What Makes a Company Global?
Decision distributed
to those who are in
best position to make
them
Standard process/
System to facilitate
decision making
Common
Language,
Culture
Seamless exchange
of information
One global talent pool
3
Let’s Look at Company A&B Again
Company A
Decision
Making
•
•
System/
Processes
Information
Flow
Talent
Pool
Common
Language
Most major decision made
at HQ and then “ orders
sent” to subsidies
•
Company B
• HQ provides direction and
guidelines; individual locations
make pertinent decisions
One system and policies
(e.g., HR) for home country
; rest of the world done as
needed
“One way” narrow-casting
from HQ individuals to their
fellow countrymen
•
•
Trying to grow “local”
talent but management
pool is all in home country
No common language;
English used when needed
•
Common systems
(HR, Finance, IT)
•
Networked info flow;
key data, information
available to all
•
Global talent review
•
English as common
language
4
Korean Companies Should Care

Commoditization of manufactured
products (e.g., electronics)

Web 2.0 creating informed
consumers, as well as potential
detractors and evangelists; local
consumer insights critical

War for talent never ended, and
more complicated than before, e.g.,
 Global mobility
 Changing value systems and needs
 Local supply/demand imbalances

Risk of being “squeezed in the
middle”
Paradigm that
brought rapid
growth through
’90’s
no longer valid
– Fast follower
– Mfg led
– Valueoriented
proposition
– Export sales
orientation
– Lack of trust
with
“outsiders”
5
What Can You Do to Prepare and
Do Your Part?

Cultural “Chameleon”
Cultural preservationist

Team leader
Team member

Initiative taker“make mistakes and
ask for forgiveness”
NOT
Good soldier

Use logic and
commons sense
Blind appeal to emotion

Obligation to dissent
Avoid confrontation
6
Largest Companies in the World
(Annual Revenue, 2008)
Rank
Company
Revenue
($ millions)
1
2
3
4
5
6
7
8
9
10
40
Royal Dutch Shell
Exxon Mobil
Wal-Mart Stores
BP
Chevron
Total
ConocoPhilips
ING Group
Sinopec
Toyota Motor
Samsung Elec. Co.
458,361
442,851
405,607
367,053
263,159
234,674
230,764
226,577
207,814
204,352
110,350
Rel. to
Samsung
Elec. Co.
4.2
4.0
3.7
3.3
2.4
2.1
2.1
2.1
1.9
1.9
1.0
Source: "Forbes Global 2000", Forbes.com, 8 Apr. 2009.
<http://www.forbes.com/lists/2009/18/global-09_The-Global-2000_Sales.html>.
Largest Companies in the World
(Market Value, 2009)
Rank
Company
Mkt Value
($ billions)
1
2
3
4
5
6
7
8
9
10
71
Exxon Mobil
PetroChina
Wal-Mart Stores
China Mobile
ICBC
Microsoft
Procter & Gamble
AT&T
Johnson&Johnson
Royal Dutch Shell
Samsung Elec. Co.
335.5
270.6
193.2
175.9
170.8
143.6
141.2
140.1
138.3
135.1
45.8
Rel. to
Samsung
Elec. Co.
7.3
5.9
4.2
3.8
3.7
3.1
3.1
3.1
3.0
2.9
1.0
Source: "Forbes Global 2000", Forbes.com, 8 Apr. 2009.
<http://www.forbes.com/lists/2009/18/global-09_The-Global-2000_MktVal.html>.
Largest Companies in the World
(Profit, 2008)
Rank
Company
Profits ($bil)
Rel. to
Samsung
Elec.
1
2
3
4
5
6
7
8
9
10
ExxonMobil
Gazprom
Royal Dutch Shell
Chevron
BP
PetroChina
General Electric
Microsoft
Toyota Motor
Nestlé
45.2
26.8
26.3
23.9
21.2
19.9
17.4
17.2
17.2
16.9
5.7
3.4
3.3
3.0
2.7
2.5
2.2
2.2
2.2
2.1
41
Samsung Elec. Co.
7.9
1.0
Source: "Forbes Global 2000", Forbes.com, 8 Apr. 2009.
<http://www.forbes.com/lists/2009/18/global-09_The-Global-2000_Prof.html>.
South Korea: Overview
Official Name
The Republic of Korea (ROK)
Population (CIA, 2009)
48.5 million #25
Area (CIA, 2009)
99,313 sq km #108
Monetary Unit
(July 19, 2010)
Won
1,214.5 KRW/USD
GDP (IMF)
$929.1 billion USD (2008, nominal, 15th)
$1,342.3 billion USD (2008, PPP, 13th)
GDP Growth Rate (IMF)
2008: 2.2%
2009: -1.0%
GDP per capita (IMF)
$19,136 (2008, nominal, 42th)
$27,692 (2008, PPP, 33th)
GDP by sector (2007)
agriculture (3.0%),
industry (39.5%)
services (57.6%)
Inflation (%, 2008)
4.7
U. Rate (%, 2008)
3.2
Source: BBC, CIA, World Bank, CBC, BOK
Korea’s Automobile Companies
Hyundai Motors


World’s fifth largest
automaker in terms of units
sold per year.
In 1998, after a shake-up in
the Korean auto industry
caused by overambitious
expansion and the Asian
financial crisis, Hyundai
acquired rival Kia Motors.
Kia Motors

Korea’s oldest and 2nd largest
auto manufacturer

Kia's bankruptcy in 1997 resulted
in the company being acquired in
1998 by South Korean rival
Hyundai Motor Company
Korea’s Semiconductor Companies
Samsung Electronics


focuses on 4 areas: Digital Media,
Semiconductors,
Telecommunication Networks, and
LCD Digital Appliances.
World's largest memory chip and
second largest semiconductor
manufacturer
Hynix (formerly Hyundai
Electronics)

The world's sixth largest
semiconductor company

The world's second-largest maker
of memory chips

Holds the largest share in the
Chinese market
Korea’s Shipbuilding Companies
Hyundai Heavy
Industries

World's largest
shipbuilder, producing
10% of the world's
ships
Daewoo Shipbuilding
& Marine Engineering

One of the largest
shipbuilders in the world and
one of the "Big Three" of
Korea
Chaebol in Korea
1.
2.
3.
4.
5.
Definition
List of Chaebols
Characteristics
Pros & Cons
Conclusion
Etymology
 Chaebol (* Zaibatsu)
chae(財, wealth)
+
bol(閥, clique)
=
wealthy clan
Definition
Chaebol:
• a business group
• consisting of companies
• in many diversified (often unrelated)
business areas
• which are owned and
• managed by family members or
relatives
List of Chaebols (KFTC, 2010)
(Korea Fair Trade Commission, 2010.4.1)
Combined
Assets
(Tril. Won)
Rank
Chaebol
Owner
No. of
Subsidiaries
1
Samsung
Lee, Kun-Hee
67
192.9
4
Hyundai Automotive
Chung, Mong-Goo
42
100.8
5
SK
Choi, Tae-Won
75
87.5
6
LG
Koo, Bon-Moo
53
78.9
7
Lotte
Shin, Gyeok-Ho
60
67.3
8
POSCO
POSCO Inc.
48
52.9
10
GS
Huh, Chang-Soo
69
43.1
11
Hyundai Heavy Industries
Chung, Mong-Joon
16
40.2
12
Kumho Asiana
Park, Sam-Goo
45
34.9
13
Hanjin
Cho, Yang-Ho
37
30.4
14
KT
KT Inc.
30
27.1
15
Doosan
Park, Yong-Gon
29
26.8
List of Chaebols (KFTC, 2010)
(Korea Fair Trade Commission, 2010.4.1)
No. of
Subsidi
aries
Combined
Assets
(Tril. Won)
Rank
Chaebol
Owner
16
Hanhwa
Kim, Seung-Yun
48
26.4
19
STX
Kang, Duk-Soo
16
20.9
20
LS
Koo, Tae-Hyae
31
16.2
21
Daewoo Shipbuilding &
Marine Engineering
Daewoo S & M Eng.
Inc.
13
16.0
22
Hynix
Hynix Semiconductor
Inc.
9
13.6
23
CJ
Lee, Jae-Hyun
54
13.0
24
Daelim
Lee, Jun-Yong
16
13.0
25
Dongbu
Kim, Jun-Ki
31
12.5
26
Hyundai
Hyun, Jeoung-Eun
12
12.5





53
Korea Investment Finance
Kim, Nam-Goo
2(2)
5.2 (5.1)
1,264
1,472
Total
Ex. Samsung Group
LEE Kun-Hee and His Family
Electronics
SAMSUNG Electronics
SAMSUNG Electro-Mechanics
SAMSUNG SDI
SAMSUNG Corning Precision
Glass
SAMSUNG SDS
SAMSUNG Networks
SAMSUNG Techwin
SAMSUNG Mobile Display
SAMSUNG Digital Imaging
Machinary & Heavy Industry
SAMSUNG Heavy Industries
Chemical
SAMSUNG Total Petrochemicals
SAMSUNG Petrochemicals
SAMSUNG Fine Chemicals
SAMSUNG BP Chemicals
Financial
SAMSUNG Life Insurance
SAMSUNG Fire & Marine
Insurance
SAMSUNG Card
SAMSUNG Securities
SAMSUNG Investment Trust
Management
SAMSUNG Venture Investment
Others
SAMSUNG C&T Corporation
SAMSUNG Engineering
Cheil Industries
SAMSUNG Everland
The Shilla Hotels & Resorts
Cheil Worldwide
Others (cont.)
S1 Corporation
SAMSUNG Medical Center
SAMSUNG Human Resources
Development Center
SAMSUNG Economics Research
Institute
SAMSUNG Lions
The Ho-Am Foundation
SAMSUNG Foundation of Culture
SAMSUNG Welfare Foundation
SAMSUNG Life Public Welfare
Foundation
Differences Between Korean Chaebol
and Japanese Zaibatsu/Keiretsu

Chaebol:


Ownership and management are not
separated; majority of top managers are
family members
Zaibatsu/Keiretsu:

Include major commercial banks
Characteristics
of Chaebols
Characteristics of Chaebol
1.
Ownership Structure /
Governance Structure

Abnormal ownership structure:



Control and management by founder families:



Founder families as the largest shareholders
Cross-shareholding/Circular equity investments
No separation of ownership and management
Dual role as controlling shareholder and manager
Inheritance of management
Ownership Structure
* Direct Ownership
* Holding Company
Owner
family
Owner
family
Holding
Company
Subsidiaries or
Affiliated Companies
Subsidiaries or
Affiliated Companies
* Mutual Ownership
Intermediary
Institution
Holding
Company
Subsidiaries or
Affiliated Companies
Ownership Structure
(ex. Samsung: 2009)
(Source: Economist, 2009)
Pyramidal Equity Ownership:
Samsung Group (2003)
Samsung
Life Ins
Samsung
Electronics
Samsung
Mech. Elec
S-one
Samsung
Corp
Cheil
Comm.
Samsung
SDI
Samsung
Heavy Ind.
Samsung
Everland
Hotel
Shilla
Samsung
Prec.Chem
Samsung
Foundations
Samsung
Security
Samsung
Card
Samsung
F&M Ins
Samsung
Techwin
Cheil
Textile
Samsung
Engineering
Samsung
Capital
Lee Family’s Shareholding
(Unit : Billion KRW)
Capital
Lee Family
Ratio(%)
Concentration ratio(%)
(A)
Top 3 (B)
Total (C)
C/A
B/C
2000
38,326
1,244
1,410
3.68
88.25
2001
47,115
1,664
1,824
3.87
91.20
2002
54,922
1,980
2,185
3.98
90.61
* Top 3 Affiliates: Samsung Elec., Samsung Life Insurance, Samsung Everland
Circular Equity Ownership:
Hyundai Group (2001)
Kia Motors
H Securities
H. Precision
Hyundai Co.
H Elevator
H. Motors
H. Heavy Ind
H Shipping
Mipo Shipyard
H Financing
Ulsan Merchant Bank
H Construction
H. Steel Pipe
Inchon Steel
H Electronics
Characteristics of Korean Chaebol
2. Management Style:
 Paternalistic leadership
 Autocratic/dictatorial management
3. Business Practice
 Diversification
 Resource-sharing among the affiliates (internal labor &
capital market)/intra-group trading
 Symbiotic relationship with gov’t/politicians
4. Size
 Dominant in the national economy
 Monopolistic or oligopolistic in individual markets
Pros & Cons
1. Family control and management
Rapid consensus/execution
Pros
Decision-making on long-term basis
and consistent management
Cons
Serious Principal-Agent problem
Rights and benefits of minority
shareholders ignored
Pros & Cons
2. Paternalistic leadership,
Autocratic/dictatorial management

Pros
Cons
Quick decision-making and implementation 
Maximized outcome in case of right decisions
 Hampers innovations, creativity, etc.
 Heightened risk of bad judgments:
Negative effects on the whole
business group and
on the Korean economy in case of
wrong decisions
(eg. Samsung Motors case)
Pros & Cons
3. Diversification
Pros
Cons
 Reduces risks through diverse industrial
portfolio
 Provides an opportunity for employees to
transfer to other affiliates
 Lack of core competence/Inefficiency due to
the dispersion of resources
 Discourages small-medium enterprises
Pros & Cons
4. Resource-Sharing/Intra-Group
Trading
 Efficiency/Reducing production costs
Pros
Cons
 Indirect benefits from
advertising/brand recognition
 Illicit subsidization among the
affiliates (capital transfer, interaffiliate transactions)
 Involuntary transfer of employees
 Hampers economy-wide efficiency
 Possible chain-bankruptcies
 Obstructs fair competition
Pros & Cons
5. Nexus with Government
Pros
 Close coordination possible
in carrying out strategic
policies
Cons
♦ Corruption, Social injustice
♦ Moral hazard of Chaebols
Pros & Cons
6. Size
Pros
♦ Economies of scale, economies of scope
♦ Massive investment possible
 Market monopoly: Monopoly in an
individual market
Cons
 General monopoly: Monopoly in the
whole Korean economy
 Can influence economic and political
issues or policies
Chaebol Reform
(The 5+3 Principle: Under President DJ Kim)

1.
2.
3.
4.
5.

1.
2.
3.
The 5 Principles (Feb. 1998)
Improvement of business transparency
Reduction of debt-to-equity ratios
Eradication of cross debt payment guarantees
Focus on core competencies
Heightening the accountability and responsibility of major
shareholders and management
The 3 Supplementary Principles (Aug. 1999)
Improvement of the governance structure of the (nonbanking) financial subsidiaries
Restraint from circular equity investments and undue intragroup transactions
Restraint from anomalous inheritance and gifts
Case Study: Samsung
Samsung’s Beginning
• Founding chairman ByungChull Lee started a business in
Daegu, Korea in 1938.
• Business primarily in trade,
selling dried Korean fish,
vegetables, and fruit to
Manchuria and Beijing.
• Through the 1970s, Samsung
started heavy, chemical and
petrochemical industries.
• Now, Samsung is the biggest
chaebol in Korea.
Samsung Family
First
Second Generation
Meang-Hee (Former Jaeli Fertilizer Chr.)
Wife, Bok Nam Son
Wife’s brother, Kyung Sik Son - CJ Joint
Chairman
Third Generation
Meekyung (CJ Ent. Vice Chairman)
Jaehyun (CJ Group Chairman)
JaeHuan (CJ General Manager)
Jaeguan (Former Saehan media Vice Chairman)
Byung-Chull Lee
Chang-Hee (Former Seahan Media Chair.)
Young Ja Lee, Wife (Former Saehan
Group Chairman)
Jaechan (Former Saehan media President)
Jaewon (Former Saehan Inf. Executive director)
Heajin – Life Group
Donghyuk (Hansol Group Honorary Pre.)
In-Hee (Hansol Group Advisor)
Husband Cho Eun-Hea (Korea Hospital)
Dongman (Hansol Group Vice President)
Suk-Hee, Koo Cha Hak, Husband (LG)
Myungjin, Cho Junghoo (Meritz Security)
Donggil (Hansol Group Chairman)
Soon-Hee married to a professor
Myung-Hee (Shinsegae Group Chairman)
Youngjin (Shinsegae Vice President)
Yoogyung (Chosun Hotel executive director)
Gun-Hee Lee Family
Case Study: LG, GS, LS
Chairmen of LG,LS,GS
LG
LS
GS
Family Tree of Koo: LG Group
Koo In-Hoi
Koo Chul-Hoi
Ja-Kyung
Bon-Mu
Chairman of Heesung Group
Bon-Joon
Vice Chairman of LG Philips LCD
Bon-Sik
Koo Doo-Hoi
Vice President of Heesung Precision
Ja-Hoon
Chairman of LG Insurance
Ja-Joon
President of LG Insurance
Ja-Hong
Ja-Yul
Ja-Yong
Ja-Eun
LIG Group
President of LG MMA
Chairman of LG Cable/ Industrial Systems
Ja-Myung
Koo Pyung-Hoi
LG Group
Honorary Chairman of LG Insurance
Ja-Sub
Koo Tae-Hoi
Chairman of LG group
Bon-Neung
Ja-Won
Koo Jung-Hoi
Honorary Chairman of LG Group
Vice Chairman of Kukdong City Gas
Vice Chairman of LG Cable
Vice President of E1
Director of LG Cable
LS Group
Subsidiaries of LG Group
LG Corporation
Chemicals
LG Chem
LG Household &
Health Care
LG Life Sciences
LG MMA
Electronics
LG Electronics
LG Philips LCD
LG Micron etc.
LG Slitron
Lusem
Telecommunications &
Services
DACOM
LG TeleCom
LG CNS
LG N-Sys
LG MRO
Konjiam Leisure
LG Sports
LG Management
Development
Institute
Family Tree of Huh: GS Group
Huh Man-Jung
Huh Jung-Koo
Dong-Soo
Chairman of GS Caltex
Huh Jun-Koo
Chang-Soo
Chairman of GS Group/GS E&C
Jung-Soo
President of GS Neotek
Jin-Soo
President of GS Energy
Huh Shin-Koo
Huh Seung-Jo
Myung-Soo
Vice President of GS E&C
Tae-Soo
Vice President of GS Home shopping
Subsidiaries of GS Group
GS Holdings Corporation
GS Caltex Oil
GS Power
Seorabul City Gas
Haeyang City Gas
etc.
GS Mart
GS Homeshopping
THANK YOU
감사합니다!!
