The Chaebols of South Korea

 
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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : ECON013 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Business Environment
Case Length : 15 Pages
Period : 1961-2004
Pub Date : 2004
Teaching Note : Available
Organization : -
Industry : -
Countries : South Korea

Abstract:

Chaebols were large South Korean private business groups that consisted of several smaller members or units; they maintained close connections with the government. They were generally under the control of a single powerful family and most of the management of the Chaebols rested with different members of the family. The Chaebols were involved in a variety of commercial activities ranging from farming to ship building.

Chaebols formed the core of South Korean economy and the success of the economy was largely dependent on the stability and the success of Chaebols. The Chaebols continued to grow and gain considerable power until the mid 1990s, when the Asian financial crisis struck.

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The crisis exposed the weaknesses in South Korea's economy and the mismanagement within the Chaebols. When South Korea found that it had insufficient foreign exchange, it approached the IMF in 1998 for a relief package. The IMF offered to bail out South Korea's economy with a package worth $58 billion. But it also imposed several conditions.

One major condition was that the Chaebols would restructure and reorganize themselves and would employ professional mangers to manage their various businesses. The IMF insisted that the Chaebols give up their unprofitable businesses, concentrate on their core competences and reduce their debt burdens. Under the leadership of President Kim Dae Jung, South Korea took up the reforms and within a short span of two years recovered from the crisis. In fact, it was one of the first Asian countries to recover from the crisis. And in this process of recovery, it also managed to reform the Chaebols.

Issues:

The development of Chaebols in South Korea

The differences in the management of Chaebols from that of professionally managed companies

The advantages of having a professionally managed business in today's competitive scenario

The impact of global changes on a country's economy and on its business environment in particular

The impact that effective leadership brings about and the role that a country's political structure plays in building its economy

The recovery of Chaebols and South Korea from the economic slowdown

The need for an organization to focus on its core competencies and to carefully plan out its expansion strategies

Contents:

  Page No.
Introduction 1
A Note on the Chaebol System 2
Background Note 3
The Late 1980s and Early 1990s 4
Chaebols in Trouble 6
The Restructuring 7
The Recovery 9
Exhibits 12

Keywords:

Chaebols, South Korea, Hyundai Motors, Samsung, LG, International Monetary Fund, Restructuring, Keiretsus, World War II, Daewoo, Ssangyong, Kim Dae Jung, Foreign Exchange Currency Reserve, Business environment and Economic reforms

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