[Power Korea] Corporate Korea keeping the fires burning

By Korea Herald
  • Published : Jan 1, 2013 - 20:34
  • Updated : Mar 7, 2013 - 16:43
The Korea Herald is publishing a series of articles titled Global Brand as part of the first installment of Power Korea. Korea’s success story is a 60-year-old tale written by not one, but many who worked to build one of the world’s most powerful nations from the ashes of war. This Global Brand series is designed to honor those who made this Korean Dream come true. This is the first part of the Global Brand series. ― Ed.

South Korea’s rags-to-riches tale is an epic spanning some six decades, starting from the end of the Korean War.

With help pouring in from all over the globe, the country was able to extricate itself from the ashes of a painful civil battle to become a world leader in not just a few significant industries.

A standing testimony is the fact that 13 South Korean companies made it to the ranks of Fortune magazine’s Global 500 list last year.

Some of these corporations have been around for as long as Korea’s industrial history, while others were added along the way. But one thing they all have in common ― whether or not they all made it onto the Fortune list ― is that they helped stoke the fire of corporate Korea. 

The government, of course, was a key protagonist in the saga.

During the post-war 1950s, when the country was financially strapped and unable to think about anything other than survival, the government stepped in to lay the foundation for industrialization.

Trial and error was common during this time, particularly in terms of ideology. Consequently, democratization was put on the back burner.

The 60s were a time of further political turbulence, with people slowly but strongly feeling the need for a democratic government.

On the other side of the spectrum, the corporate sector started to grow in earnest. Companies, aided by the burgeoning public demand for more homegrown products, began to churn out industrial products in bulk. At times, their collaboration with the government slid toward corruption, a la Korean-style.

In the 80s and 90s, exports became the new engine of growth as companies began to actively ship their goods out of the country. Korea soon became a household name for textiles, shoes and other manufactured products, which came from the skilled hands of diligent workers who burned the midnight oil.

The Asian financial crisis of the late 90s was a huge blow, but Korea made a rebound, and became a global presence in new industries.

1950s-1960s (textiles, sugar flour industries)

The corporate and product trends of these times reflected the destitute situation of post-war Korea.

According to government and media estimates, the top 10 companies of the country as of January 1960 were those selling the daily essentials, such as flour, textiles and sugar. Samsung Group was at the top of this list, along with cement-maker Gaepoong and Daehan Milling Group. Kukdong Group, which had made its fortune in marine shipping, was also among the top 10 group, along with Geumsung Group, the precursor of Ssangyong Group, also based in cement. Tongyang Group was another powerful company at the time, having built its empire in the baking business.

Such was the orientation in sugar, flour and cement that they were later called the “three whites: textiles, sugar and flour” and the “three powders: sugar, flour and cement” that together spelled out the formula of success.

Even LG ― at the time called Lucky ― was focused mainly on these staple products.

But former president Park Chung-hee changed these dynamics.

Park made it his business to swerve away from flour and sugar to build a new corporate empire oriented in chemicals and exported goods. In this process, many of the traditional food and cement makers disappeared from history.

Toward the end of the 60s, the Korean corporate landscape had changed forever.

1970s-1980s (construction and heavy industries)

Construction, machinery, heavy industries, shipbuilding and oil refinery emerged as the new engines of economic growth, courtesy of the Park administration.

Hyundai Group and Hanjin Group are both products of the 1970s when such turbulent change was occurring. As of January 1976, Hyundai Group had topped Samsung to soar to first place in corporate rankings, with assets of almost 2 trillion won.

Following Hyundai was the now defunct Daewoo, followed by Samsung, Lucky and Hanjin.

Among them, the story of Daewoo is the most tragic. The company started as a textile exporter, then became a sprawling chaebol with stakes in shipbuilding, electronics and construction. Its success was helped by a government eager to bolster companies that had the infrastructure and manpower for exports. In 1976, Samsung Group had slid to third place in the corporate world, while Daewoo stayed ahead. Lucky Group fell to fourth place. 

The 1970s was also a good time for Hanjin Group, which saw its assets build up during the Vietnam War, which became a boon for the airline business.

In 1980s, Korea suffered turmoil both in and out of the country. From the outside, it was hit by the second oil shock. Inwardly, pro-democracy movements were in full swing.

It was at this time that the government decided to keep the corporate sector in check, leading to M&As and closures that once again shook up the company rank and file.

Later, the 1988 Olympic Games was a lifesaver for many, along with the soaring demand in the Middle East for Korean builders. But in the end, it could have been a liability in disguise. Companies, which had been making reckless investment to capitalize on the sudden boom cycle, inevitably had to go bust sometime.

1990s-2000s (electronics, telecom and cars)

The bust came with the 1997 Asian financial crisis. Companies that had already been in heavy debt were forced to close. Making things worst, the bubble burst in the U.S. It soon became clear that the corporate sector could not depend on the government or banks anymore and needed a self-survival kit.

Quickly, the labor-focused industries that Koreans were so proud of began to wane and fade. Daewoo and Kia are some of the familiar names wiped out from corporate history.

In their place, high technology stepped in, and companies slowly started to catch on in the fields of electronics, communications, automobiles and shipbuilding. Leaders in those industries included Samsung, LG, SK Telecom, Hyundai Motor and Hyundai Heavy Industries.

Another phenomenon witnessed during these times was the dominance of so-called large companies, the conglomerates, who had taken over many a smaller firm washed ashore by the financial crisis of the late 1990s. The new industries coming to light also required capital, which the chaebol had plenty of.

In 2006, Samsung was once more at the top of the list of the 10 largest Korean companies, followed by Hyundai Motor, SK and LG.

As of 2011, the ranking of these top four companies was unchanged.

By Kim Ji-hyun (