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No Promising Company in Sight

Posted January. 04, 2005 22:13,   


Top consulting companies such as McKinsey and Bain & Company emphasized, “Korea must possess 10 global companies to become a nation with a $20,000 per capita income.”

Korea’s Business Environment Lacks Promising Companies-

According to the Korea Listed Companies Association on January 4, the number of companies with revenues of over one trillion won excluding financial companies has increased every year from 18 in 1990, 47 in 1995, 68 in 2000, and 84 in 2003.

However, while the number has grown, in reality, things do not look too bright. Among companies that have more than one trillion won in revenue based on 2003 performances, with the exception of four “global companies” such as Samsung Electronics, most of the companies are those in the construction, distribution, food, and communications industry that have grown naturally with the domestic market expansion. The dominant opinion regarding these companies is that it will be difficult for them to grow further, as these companies do not target foreign markets. Senior Researcher Kim Jong-nyun of the Business Strategy Office at Samsung Economic Research Institute says, “Only Amore Pacific, Mobis, LG Chem, and Samsung SDI are companies likely to increase their revenue and profit every year in both the domestic and foreign markets.”

Why Have Things Come to This?-

Experts have different opinions on why there is a lack of promising companies that have the potential to become a global company.

Professor Lee Chang-yang of the KAIST Graduate School of Management and a former economy official explains, “The system of innovation has crumbled as the three pillars of growth—family-owned Korean conglomerates (chaebol), the government, and the financial sector—were dismantled after the Asian financial crisis. It has become difficult for any chaebol to make its way into a new field with the entrepreneurship it had in the past. The ‘formula for success,’ in which all affiliates contributed to the conglomerate’s challenge to enter a new field, along with the government and the people sharing the risk, has been broken.”

Those working for foreign consulting firms or investment institutions with foreign perspectives have a different view. Executive Director Lee Won-ki of Merrill Lynch says, “The excessive diversification of enormously large chaebols such as Samsung and LG left no room for latecomers to enter the market. New companies are actively emerging in the gaming or internet industry where chaebols do not yield such great influence.”

A Breakthrough Must Be Found in the Knowledge-based Society-

Opinions differ on how Korea can nurture a competitive company that will represent the nation in foreign markets such as Samsung Electronics and Hyundai Motors.

Deputy Executive Director Lee Seung-il of LG Economic Research Institute stresses, “There is slight possibility of a second Samsung Electronics emerging in the existing industries. If the government, financial sector, and society all make an environment where entrepreneurship can bloom, a ‘global company’ could emerge in new industries such as the bio- or nano-technology industries.”

Deputy Minister Park Byoung-won of Finance and Economy explains, “In an open, international era, domestic markets can no longer foster promising companies as in the past, and it is difficult for ‘mammoth companies’ such as Samsung Electronics to emerge. Many companies with high value-added assets should arise as the Korean society as a whole rapidly transforms into a knowledge-based society.”