Question

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Chaebol and family ownership in Korea The word chaebol is a unique combination of the Korean words chas (wealth) and bol (clan clique). South Korea's chaebol are family-owned businesses that typically have subsidiaries or across diverse industries. The top five chaebol, taken together, represent approximately half of the South Korean stock market's value. Chaebol drive the majority of South Korea's S investment in research and development and employ people around the world. On average, th 3rd and 4th generations of the families of major shareholder in the top 30 Chaebolds become executive at the age of 31.5, only 3.5 years after they join the company (some start their career executive). While some ne people argue that family leadership is the most suitable and even as an efficient ownerships strategy to manage those huge business group Discuss 1. Is this ownership strategy functional for 2019 or it is obsolete explain? 2. What problems does this ownership strategy generate? 3. how this ownership strategy is inefficient? HYUNDAI (LG SAMSUNG KUMHO ASIANA BD SK KIA HYUNDAI INJIN (KIA

Answer 1

Ans 1

Chaebols have been an important constituent of the South Korean economy ever since the early 1960s. They've had a huge role in transforming the country's humble agrarian economy into one of the world’s biggest and have been supported by the government very generously too, until of late - where following a series of high-profile corruption scandals the government is distancing itself and imposing reforms (by way of antitrust laws, banning subsidiary cross-shareholding, allowing a greater voice to minority shareholders etc.). Even so, chaebols continue to be South Korea's most powerful driving force. They still account, quite heavily, for its investments towards research and development, and are still the top hirers. So practically speaking, yes - they're still functional in a huge way [although as you'll see in the following answers, this ownership style comes with a lot of problems and governance inefficiencies]

Ans 2

Chaebol families often use their monopolistic clouts to trample small and medium enterprises, and copy their innovations instead of developing their own. They're also involved in large scale corruption scandals - including bribery, embezzlement and tax evasion.

The problems with Chaebols are:

1. Lack of business transparency
2. Autocratic, risky, untimely decision making
3. Inefficient resource allocation
4. Inefficient Management and leadership
5. Lack of innovation and technological modernisation
6. Conflict ridden work culture
7. Lack of cooperation between labour and management
8. Lack of development of core capabilities
9. Unskilled labour - Lack of appropriate training and development
10. Lack of product competitiveness globally

Ans 3

The inefficiency of Chaebols lies in their distorted governance system that's designed to follow only the private interests of the founding families. They need to look beyond selfish pursuits and enhance human capital management to facilitate creativity and innovation. In other words, agility and creative innovation - which are the need of the present - the very basis of success in national and international business - do not gel well with an authoritarian style.