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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Introduction Contd...

South Korea approached the International Monetary Fund (IMF) in 1998 for a relief package. The IMF package was provided under certain conditions; restructuring and modification of the working of the Chaebols and the introduction of professional management in the Chaebol organizations.

By the early 2000s, South Korea tackled the economic downslide, and not only recuperated from the financial crisis, but in the process also managed to restructure its Chaebols to make them more profitable and more competitive than ever before.

A Note on the Chaebol System

Chaebol is a Korean word that means "a group with a lot of money."³ Chaebols were large South Korean private business groups that consisted of several smaller members or units; they also maintained close connections with the government. They were generally under the control of a single powerful family and most of the management positions in the Chaebols rested with members of that family. The Chaebols were involved in a variety of commercial activities ranging from farming to ship building. In the early 1990s, the five largest Chaebols were Samsung, Hyundai, Lucky-Goldstar (LG), Daewoo, and Ssangyong.⁴ (Refer Table I for characteristics of Chaebols).

Background Note

Chaebols were first introduced in South Korea during the 1920s when the country was under Japanese rule⁸. In fact they were designed on the lines of a Japanese Keiretsu. Japan had designed Chaebols as private companies that were owned and run by a family but were strictly controlled by the central government (at that time, Japan formed the central government in Korea.) Initially Chaebols were designed to meet the requirements of the Japanese government and were encouraged to provide raw materials and supplies to Japanese industry...

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3] "Industrial Society Change - South Korean Cultural Ecology - Part 2," www.paulnoll.com/Korea/History/South-Korean-past-part2.html.

4] "Industrial Society Change - South Korean Cultural Ecology - Part 2," www.paulnoll.com/Korea/History/South-Korean-past-part2.html.

8] Japan annexed Korea in 1910 as a part of its empire after it won the Russo - Japanese War. Korea was under Japanese rule until the end of World War II in 1945.