The Chaebols of South Korea

            
 
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Case Details:

Case Code : ECON013
Case Length : 15 Pages
Period : 1961-2004
Pub Date : 2004
Teaching Note : Available
Organization : -
Industry : -
Countries : 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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Excerpts

The Late 1980s and Early 1990s

The period between 1979, (after President Park's death), and 1988 (the year when South Korea adopted a new constitution and a democratic government was established), was a period of social unrest, labor strikes, student radicalism and political tension. Maj. Gen. Chun Doo Hwan had taken over as President of South Korea and the country was under martial law. In 1988, President Roh Tae-Woo assumed office after winning the general elections and normalcy returned to the country. Beginning in the late 1980s, the Chaebols were again at the center of South Korea's economic development. In order to build a strong industrial economy, South Korea encouraged its Chaebols to invest heavily in highly capital-intensive industries, such as petrochemicals, steel, ship building, cars, semi conductors, etc...

Economics | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies

Chaebols in Trouble

South Korea's economy had enjoyed a strong growth period in the first half of 1990s. South Korea was one of the "Four Dragons" of East Asia - alongside Taiwan, Singapore and Hong Kong. In the 1960s, South Korea's GDP had been on par with the poorer countries of Africa and Asia. But by the mid 1990s, it was seven times that of India and 16 times that of North Korea...

The Restructuring

In early 1998, Kim Dae Jung took over as the President of South Korea. He defined a clear strategy to correct the weaknesses in South Korea's economic setup. In 1998, the South Korean government approached the International Monetary Fund (IMF) for assistance to bail the country out of the crisis. The IMF offered $58 billion as a relief package to South Korea on the condition that the government would take measures to restructure the Chaebols and their functioning...

The Recovery

Although the measures adopted by the government were severe, they were certainly effective. Of the 30 biggest Chaebols, 16 underwent radical transformation. Out of the 2,100 financial institutions before the crisis, 500 had to close down...

Exhibits

Exhibit I: Number of Affiliates of Largest Chaebols in South Korea in 1988
Exhibit II: Debt-Equity Ratios of Major Chaebols: 1995-99


 

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