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Daewoo Group And Financial Business Essay

1580 words - 6 pages

Daewoo Group and Financial Business

Problem Definition

Daewoo group started as a small textile company and in just 20 years
developed into second largest Korean chaebol ( family owned
conglomerate). It had over 250000 employers worldwide, over 30
domestic companies and 300 overseas subsidiaries, generating sales of
more than 100 billion dollars annually. However, in 1999 it seemed that
the ‘golden days’ of Daewoo were over as it was faced with over 50
billion dollars dept and had to decide to sell some of its business to carry
on. Can Daewoo really survive and if yes, how?
The roots of Daewoo’s crisis are in:

a) Korean Economic System’s Structure, Chaebols and Asian Crisis

b) Daewoo corporate structure, Kim Woo-Choong and his policies

The main problem is that Korean economic system is ready for change
and already changing, so does the government and its policies. However,
the chaebols such as Daewoo are living in the past and find it difficult to
adapt to changes. The question is whether there is any place in a changing
Korea for chaebols at all or they will be soon replaced by smaller but more
efficient companies?

Problem Justification

Korean Economic System, Chaebols and Asian crisis:

South Korea’s mad rush economic growth was initiated by late dictator
Park Chung-hee in the early 1970. Park saw export growth as the key for
economic growth. He provided cheap loans and tax benefits to nurture
Daewoo and other Korean business into conglomerates that mass
produced for export markets( http://detnews.com/2001/ autos). Most of
Chaebols were family owned and all of this families were connected to the
government which would give them lots of support and get their loyalty.
As a trouble would appear ,as in example of Daewoo problem in the
1980s when Daewoo shipbuilding made losses that threaten the collapse
of the whole group, the government stepped in to save conglomerate and
to provide emergency loans, chaebols could always count on the
government to help. So they would continue to borrow money from
government owned banks. The bank were forced to continue borrowing
money to “Korean Losers” and never got paid back. It continued until the
old government was in power and economic growth allowed to spend
money on useless but loyal companies. However, the Asian crisis changed
everything. Weakened Korean economy desperately needed money
injections from the IMF. IMF used the financial crisis to insist on an end
to all forms of national economic regulations and the close ties between
government and chaebols that acted as a barrier to foreign investors. In
South Korea, the IMF insisted on extensive economic reforms in return
for its 58 billion dollars package (some information was taken from
www.business week.com;...

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