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. 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.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• The development of Chaebols in South Korea
• The differences in the management of Chaebols from that of professionally managed companies
• The impact of global changes on a country’s economy and on its business environment in particular
• and The recovery of Chaebols and South Korea from the economic slowdown.

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