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chaebols

chaebols

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Published by Prachi Mundra
the chaebols of south korea
the chaebols of south korea

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Categories:Types, Business/Law
Published by: Prachi Mundra on Jan 24, 2013
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10/22/2015

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THE CHAEBOLS OF SOUTH KOREA

Presented byDarshan Bhatt Deepa Khanna Neena Aneja

• The major contributors to the Country‟s economy. . • The separate companies within Chaebol held shares in each other. • It was a large South Korean private business groups. • Chaebols were involved in activities ranging from farming to ship building.INTRODUCTION Chaebols • Chaebol is a Korean name meaning “a group with a lot of money”.

INTRODUCTION • All the financial transactions were subject to Government scrutiny. . • Decision-making was top-down with top management exerting strict control. • Chaebols had a support of banks to bail them out of financial crises. • Most Chaebols had close ties with the government and were involved in policy making.

http://www.sjsu.htm .edu/faculty/watkins/chaebol.

• It was designed on the lines of Japanese Keiretsu. • The companies were controlled by Central Government. • South Korea became independent in 1945.BACKGROUND • Chaebols was first introduced in 1920s under Japanese rule. . • Initially designed to meet the requirements of Japanese Government.

• Many leading businessmen were arrested. • All banks were nationalized. • The economy dependence was converted from agrarian economy to industrial one. • Five-year economic plans was implemented related to export and import.BACKGROUND • In 1961 Park Chung became the President. • To encourage growth of economy a Law was passed “Dealing with Illicit Wealth Accumulation”. • Idea was to make South Korea independent in all manufacturing fields. .

Increase wealth and strengthen Political stability.  1st.1972-1976 The Five year Plan . • Three 5 year plan were induced under Economic Planning board since 1962.• Goal.1962-1966  2nd.1967-1971  3rd.

.Economic Plan(1960-1966)  Korea was a poor country with inadequate savings.  It focused on developing textile and light manufacturing industries to make South Korea selfsufficient.

 1972. US-China opened for import gave them more marketplace. to make South Korea competitive in world market. shipping etc.Economic Plan(1967-1971)  It focused on heavy industries such as iron and steel. automobiles. .

Economic Plan(1972-1976) • The 3rd five year plan was referred as Heavy Chemical Industrialization Plan(HCI). • To fund the plan Government borrowed heavily from foreign countries. .

84 billion$ in 2008. • The export-import trade increased from 230 million$ from 1948 to 857.Result of the Economic Plan • Korea is the 11th largest economy in the world. .

3 billion$ to 1.239 billion$.Result of Economic Plan • The GDP of Korea increased from 1. • The average income of the workers increased from 5990 won to 3. . • The per capita income increased from 60 $ to 20.895 million won.000$.

Chaebols post President “Park” • Civil unrest. South Korea adopted democracy and things started falling into places. labour strikes post assassination of President „Park‟ led to Military rule(1979-1988). • Chaebols started expanding into new industries and markets • No fears of risks as they had government and banks backing them . • By 1988. • The Chaebols got the new democratic government‟s full backing.

Total Government backing totally misused • Chaebols explored new markets and new industries and didn‟t care about the possible monetary losses • Chaebols started new firms instead of new division under the same company. • Many ventures of Chaebols started yielding low returns and government had to divert all available funds with the banks to finance these ventures and this led to huge decrease in foreign investments into South Korea. • Even fiscal and monetary Policies were frequently modified as per the needs of the Chaebols • Avoidance of foreign companies in favour of Chaebols .

• Further with the rise in wages. by this south Korea lost its competitive edge in international markets.Initially the slowdown in international semiconductor. metals and petrochemical businesses.CHAEBOLS IN TROUBLE • Trouble started in late 1990s. • Asian financial crisis played a important role in the downturn of Chaebols. .

PROBLEMS • HUGE DEBTS • LACK OF TRANCPARENCY IN CHAEBOL CORPORATE GOVERNANCE • PROLIFERATION OF UNPROFITABLE SUBSIDAIRIES THROUGHOUT THE ECONOMY • INADEQUATE FINANCIAL REPORTING AND CONTROLLING WITHIN THE CHAEBOLS • ABSENCE OF A FREE MARKET SYSTEM .

. • Cross-Debt gurantees within Chaebols were banned. • Debt to equity ratio to be 2:1) • Advised to get rid of unprofitable subsidiaries. • Management instructed to appoint outside director.Restructuring • Improve transparency in management of Chaebols.

1% and foreign exchange currency reserve $107 billion. • Early 2000 unemployment rate was 3. 16 underwent radical transformation. .Result of Sever Measures • Out of 50 Chaebols.

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