1

Paul Hong, Ph.D. CMAKihyun Park, MA, ABD

Sunhee Youn, Ph.D.MaGa (Mark) Yang, MBA, ABD

Information Operations and Technology ManagementCollege of Business and Innovation

University of Toledo, USA

Asia Forum Luncheon Series

From Land of Morning Calm To Dynamic Korea

Presented11-03-2010

[1] Introduction

[2] Korea: A Historical Perspective

[3] Leading Industries for Global Businesses:

(a) Steel and Shipbuilding Industries

(b) Automobile and Mobile Industries

[4] Challenges and Prospects

Order of Presentation

[1] Introduction

Korea

Major Trading Partners of USA

[2] Korea: A Historical Perspective

After Korean War (1950-1960)

1. Political leadership: President Park Chung-hee

2. Korean people strong work ethic and high-level education

3. Manufacturing and infrastructure

4. Business entrepreneurship

Economic Growth Factors in Korea

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Table 1: Historical trends of Korean industries

1945-1960 1961-1988 1989-present

Period Characteristics

Economic development has not yet started very small manufacturing sector

Export-driven manufacturing sectors have grown.

Korean global firms began to rise (Shipbuilding, Auto, electronics, global logistics)

Strategic Priorities

No particular dominant firms; small numbers of textile and light manufacturing firms

1970s: Construction firms (e.g., Hyundai) through Vietnam and Middle East

1980s: Samsung and LG Electronics firms

1990s: Major restructuring through IMF crises in Korea.

2000s: globalization of Korean manufacturing: relocation of manufacturing facilities in China and overseas and expansion of service products through media and global logistical services.

GDP Growth Annual growth less than 3% Annual growth 8% or more Annual growth of 5%

Global GDP Rank

250th in the world (1996) 40th in the world (1988) 11th in the world (2006)

Population (Korea)

(in US dollars)

Gross Domestic Product (Korea)

The number of Worker in Korean Industries

Manufacturing

Wholesale and Retail Trade

Construction

15

Table 2: Global Fortune 500 Korean manufacturing and service firms

Company GlobalRank

Revenues($ millions) Industry type Major products and markets

Samsung Electronics 46 89,476.20 Electronics, Electrical Equip.

Mobile phones, TV, MP3 & audio/video, Cameras &Camcorders, computers, Printers, Home appliances

LG 73 68,754.10 Electronics, Electrical Equip. TV, Audio, Video, Home Appliance, Mobile and Telephone

Hyundai Motor 76 66,666.00 Motor vehicles and Parts Passenger cars, recreational Vehicles, Commercial vehicles

SK 98 59,001.90 Petroleum Refining Crude oil, petroleum, Lubricants, Chemicals

Korea Electric Power 228 28,708.40 Utilities Electric power supply

Samsung Life Insurance 229 28,639.20 Insurance: Life, Health (stock) insurance, retail finance, investment trust

POSCO 244 27,067.70 Metals Steel

Kookmin Bank 349 20,224.10 Banks: Commercial and Savings Banking services

Hanwha 374 19,085.50 Chemicals explosives, Inflator, Aerospace, firework, Defense, Petroleum, petrochemicals

KT 388 18,598.10 Telecommunications Telephone, internet, Network services, pcs

Hyundai Heavy Industries 422 17,298.00 Industrial and Farm Equipment

shipbuilding, offshore & engineering, Industrial plant, Engine & machinery, Elector electric system, construction equipment

Samsung 436 16,778.80 Trading international trading, construction, housing and retailing

SK Networks 438 16,733.90 Trading Resources &energy, Chemicals, Steel, Mobile phone

SK-Oil 491 15,246.10 Petroleum Refining Oil refining, Lube, Petrochemical

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Table 2: Global Fortune 500 Korean manufacturing and service firms

Rank Country (2010)Number of Global 500

companies

1 US 139

2 Japan 71

3 China 46

4 France 39

5 Germany 37

6 UK 29

7 Switzerland 15

8 Netherlands 15

9 Canada 13

10 Italy 11

10 Korea 11

(A) Steel & Shipbuilding Industries

(B) Automotive & Mobile Industries

- Hyundai Kia

- Samsung & LG

[3] Leading Industries for Global Businesses

• Steel industry is vital in Korea because:1.Foundational basis for Korea ‘s key manufacturing

sectors (e.g., automobile, shipbuilding)

2.Growth engine for economic rapid expansion

3.Global large-scale in terms of production volume: World’s sixth largest steel producer

Korean Steel Industry

• POSCO is #1 steel maker in Korea/ 2nd largest steel maker in the world

1.Cost Competitiveness Global Supply Chain Network Large-scale manufacturing capability

2.Premium Value Product development capability

3.Green Initiatives Invest $700 million for green businesses by 2018

Steel Industry – POSCO (Pohang Iron & Steel Company)

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1. Top Class Productivity Abundant and high-skilled workforce Strong shipbuilding know-how Economies of Scale

Shipbuilding industry : 3 Excellences of Korean

shipbuilders.

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Shipbuilding industry : 3 Excellences of Korean

shipbuilders.

2. Well-Balanced Product Portfolio: Diverse production development &

commercialization (e.g., container ships, tankers, bulk carriers, etc.)

22

Shipbuilding industry : 3 Excellences of Korean

shipbuilders.3. Shipbuilding Cluster Effect:

Extended well-built infrastructure Manufacturing supplier network Supply chain network integration

H3(+)

H9(- )

H7(+)H5(+)

H6(+) H8(- )

H2(+)

H1(+)Strategic

Information System

Planning Capacity

Information Personnel

System Capacity

Customer Responsiveness

Supply Chain Flexibility

Information Quality

Mutual Trust

Cost of goods sold

H4(+)

Information System CapacityMutual Relational

QualitySupply Chain Capacity

Supply Chain Capabilities

Firm level Performance

Performance Outcomes

Research Model: Supply chain Information Capabilities and Performance

Outcomes: Case of Korean Steel Suppliers

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• (1) Automobile is the climax of manufacturing. – 20,000s of auto-parts/ value-added– Requires complex manufacturing capability– Only few countries can make its national/ global brand cars.

• (2) Continuous evolution from “Sibal” (1955) to “Genesis” (2009)

• (3) One of the leading automotive manufacturers in the world – 5th largest (Production volume)– 6th largest (Export volume)

Korean Automotive Industry

25

• (1) Strategic Leadership (Chung Mong-koo)– Strategic leadership– Hands-on leadership

• (2) Excellent QM & SCM – IT Infrastructure capacity– Supply Chain Network excellence

• (3) Aggressive R&D/ Marketing– Brand awareness

– CNN Money: Kia, The Soul Collective (Excellent Marketing Campaign: 10-20-2009)

– Super Bowl Commercials since 2008

Hyundai Kia Success Factors

26

• (1) Two dominant global electronics firms– Korea surpassed world-best firms (e.g., Sony, Parasonic).

– Major business areas: Mobile devices, Electronics, Digital display, Home appliances, etc.

• (2) Brand value: Samsung -68th out of top global 100 firms

• (3) Huge/ Limitless Market potentials– Income (GDP per capita) grows; then, people buy TV, mobile,

home appliances – Untapped markets in Developing countries

Samsung & LG Electronics

Brand value of Samsung, 2010

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Samsung mobile: Market share in the U.S.

Samsung Smartphones’ Strength and Weakness

• Excellent mftg capability (feature & design)• Weak in lasting software capability

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Samsung: TV Market share world-wide

Internet TV Wars: Yahoo and Samsung Step Up to Google and Sony

30

LG Display: World’s largest Plasma panel TV manufacturer

• By 2005, LG became a Top 100 global brand.

• LG Display, is now the world's largest plasma panel manufacturer.

• Quality designs, innovative technology, and its integrated supply chain.

• In 2008, sold > 2.5 mil plasma TVs around the world.

[4] Challenges and Prospects

A sandwiched nation!

Korea

China

Japan

USAEurope

What is Korea?

An opportunity nation!

What is Korea?

China

Japan

USAEurope Korea

Korea as the sandwiched nation

Korea as the opportunity nation.

Restrictive, Defensive and Reactive Motivating, Hopeful, and Proactive

Perspectives & Destiny

Korea

China

Japan

USAEurope

China

Japan

USAEurope Korea

Selection and Focus Manufacturing Industries

Semi-conductor, Automobile, Shipbuilding, TV

2010

Dynamic and Smart High learning ability, Applied Integrative Technology

Green Cars , DVD TV Combination Nuclear, Solar Energy

Bio-pharmaceutical

Global and SustainableSpace industriesDefense products

Waternomics Natural Gas

2020 2030

To

tal

Val

ue

Sco

pe

and

Siz

e

New Growth Engines: National Level

Korea’s Core Products and Services

Dynamic Korea!