1. A. South Korea as a Diamond
South Korea’s market is described by multinationals as
“tough” because of the country’s history.
Throughout history, China has been Korea’s biggest influence. (Culture “Confucianism”, Science & Administrative Practices)
Japan has left the biggest scars on Korea.
U.S Korean relations have been ‘ambiguous’
- U.S. approved Japan’s occupation of Korea
- Victim of the Cold War in the 1950’s. Promise of
Korean independence after WWII not kept. Instead Korea
was separated between North Korea and South Korea.

2. 1. A Unique People Koreans have a strong sense of nationalism.
Unique language
Korean-ness is defined by bloodline
Importance of purity in one’s genes
Koreans still have difficulties accepting foreigners or outsiders
Homogeneous population
Hierarchical society
Aggressive warrior spirit

3. 2. Potential to shine Diamonds need to be discovered
The waves of destruction during war made it difficult to discover Korea.
Under the leadership of President Park Chung-hee, Korea shook off destruction and poverty to reveal that Korea could shine.
Within a generation, Korea has become the 11th largest economy.
GDP grew from $82 in 1961 to more than $10,000 by 1995

4. Scenes from the transformation
This 3-minutes film footage was made by Burton Holmes,
An American explorer and writer who visited in Korea in
1901 (and 1912). This is the oldest surviving film footage
This rare 16mm COLOR(Kodachrome) footage of Seoul was filmed in March
1938, by Thor Wiestlandt, a Swedish diplomat who stayed in Japan from
1936 to 1939.
1960s U.S. Army documentary on the Republic of Korea Historical footage of combat
during the Korean War.
1970’s

5. B. The Discovery
South Korea grew from one of the poorest countries in the world to become the 11th largest economy in the world
It started with President Park’s launch of an economic revolution
1) Government bureaucracy
2) Powerful conglomerates (“chaebols”)
3) Korea’s workers and people

6. The Revolution Korea’s rise to a modern nation started in May 1961.
General Park Chung-hee launched a coup d’etat
For General Park Chung-hee, national income and exports became a priority
Exports were a “good thing’’ while imports weren’t
In Park’s plan’s foreigners did have important roles as consumers of Korean goods, financial assistance and providers of advanced technology
During Park’s reign, chaebols remained under tight government control
Less than two decades after, Korea became one of the world’s top ten trading nations

7. Korea’s Transformation Since 1997
Power started to shift towards the Chaebols before the 1990’s
Crisis hit Korea in 1997
- Too much expansion
- Companies struggled to service their debt
- Korea’s key export industries collapsed (Hanbo Steel 14 largest
conglomerate)
- Korea’s economy collapsed
Government made conditions for support more stringent
IMF agreed to impose a ‘shock therapy’ on Korea’s economy
Major restructuring with foreign consulting companies help

8. Korea’s Economic Reforms
Restructuring Korea’s financial sector
- Many banks were put under government ownership
- Foreign capital was sought to dissolve bankrupt chaebols
- Foreign direct investment was welcomed
Labor market restructuring (lifelong employment was no longer guaranteed (Regulatory Restructuration)
- In 1998, more than one million Koreans lost their jobs

9. A. Korea’s 5 Features China Chaebol Challenge
A New Generation of Companies?
Foreign Direct Investment?
Education Gap

10. 1) China Boom
China’s rise is the most significant external change facing Korea today.
Many challenges posed by China on Korea
- Economic challenge: The competitive challenge, Chinese companies’ quest
to catch up to Korean Chaebols
- Political Challenge: Implication of China’s rise as a new superpower
Partnership
- Korea has established itself as the sixth largest foreign investor
in China
- China is Korea’s largest export and investment destination,
ahead of the U.S.

11. The Economic Challenge: Affecting Korea’s Industrial Base
China’s cheap labor has become a big asset for manufacturers from all over the world
Korean companies have taken advantage of the 80-90%
lower labor costs
Korean chaebols have been investing in China pp. 50
Some factories are closing in Korea and are reopening in China
Increasingly, China is becoming the global manufacturing center for Korea’s largest companies
* Overseas sales account for 80% of revenues for Samsung electronics, LG Hyundai motors, however 40-90% is still done domestically

12. The Market Challenge Chinese market complexity
- Different customer segments in terms of regions, income and
social class
- complex government issues vary from province to province
- The author says that most Korean companies are not ready to
compete in such an environment.
Global competition
- Hypercompetitive local competitors willing to beat any company
on price
- China business is a multicultural setting where Korean’s cannot
rely on the Korean government once they open business abroad
- Global multinationals have been bringing new management skills
to China pp. 57 (Procter & Gamble)
- Management is Korea’s biggest weakness because it lacks flexibility
(Rigid Hierarchy- Decisions made in Seoul)

13. Competitive Challenge
China state-owned companies have been going on a global buying spree worrying U.S. lawmakers on the issue of national security and corporate Korea based on the competitive threat.
1990’s China build 30 to 50 state-owned firms-partial resemblance to Korean chaebol

14. The Political Challenge: The Rise of a New Superpower
U.S and Japan Alliance
Korea has found it difficult to align themselves with them. Korea has become closer with China.
Korea’s relationship with U.S. has its ups and downs
South Korea still remains one of U.S strongest ally in Asia

15. Where will China Lead Korea
China offers Korea opportunities, but at the same time Korea is at a danger of being left behind by the country.
Korea needs to transform itself into a knowledge based economy
Korea needs to transform itself into a integrated, dynamic, knowledge and service-driven economy.

16. Questions
What will it take for Korea to become the most advanced country in the world?
What does South Korea need to change to become more competitive on the global stage?
What role have foreigners played in South Korea’s development?

17. Terminology Quiz
1. Chaebol refers to a South Korean form of business conglomerate. They are
government-supported powerful global multinationals owning numerous international companies. Example: Samsung, LG Hyundai Motors etc.
2. Conglomerates refers to the combination of two or more firms engaging
in entirely different businesses. Conglomerates are often large and can be formed
by merging more than four businesses together. Example: Company owns a car
Company and cell phone company.
3.Diversification is a form of growth marketing strategy for a company. It seeks to increase profitability through greater sales volume obtained from new products and new markets.
4. Manufacturing is the use of machines, tools and labor to make things for use or sale.
5. Strategy is a plan of action designed to achieve a particular goal

18. Quiz Terminology
6. Competency: is a requirement for an individual to properly
perform a specific goal. Competencies are characteristics which drive outstanding performance in a given job, role or function.
Example: John is a great engineer because he graduated fro Oxford University and worked three years for NASA designing government shuttles and space stations.
7. Multidivisional enterprise: a geographically scattered company with many
units such as branches, service centers, hotels, restaurants, and stores, that are composed into larger geographic groupings such as districts, regions, and divisions. Every tier has its own set of managers
8. Restructuring is the corporate management term for the act of reorganizing
the legal, ownership, operational, or other structures of a company for the purpose of
making it more profitable. Which companies need to restructure in Korea?
9. Operating System is a way that the company works between service and user
(customer).
10. Structure is how the company is internally organized with regards to its departments.
i.e. President, Vice President, department of Sales etc.

19. Chaebol Challenge Family – controlled conglomerates that
symbolize Korea Inc.
Chaebol meaning (“Family Wealth”)
Challenges Korea Faces with the Chaebol System
1. Korea’s dependence on the chaebol system
- Represents wrong model for Korea’s economic
transformation
2. Korea needs open, flexible companies

20. Chaebol Power From government to Chaebol ‘The Power Shift’
After President Park was assassinated in 1979, the balance of power shifted towards the Chaebol.
The Chaebol became less dependent on government support-Expansion overseas
- Exports quadrupled from $17.5 billion in 1980 to
$60.7 billion by 1988.

21. Reasons Why the Chaebol are the Wrong Model for Korea Inc.
Korea’s economy needs to transform itself away from manufacturing, towards value-added services
Korea needs companies that are more flexible. Away from family owned businesses-toward professionally run, global transparent organizations

22. 3 Reasons Why the Chaebol Are the Wrong Model for Korea Inc.
Hierarchic system in the Chaebol bureaucracy restrict innovative thinking and creativity
Manufacturing businesses are shifting towards China, Korea needs to become a globally competitive by expanding towards globally competitive service businesses
Korea’s Chaebols do not know how to create partnerships. They seek control and domination

23. Growing Up Among Giants – A New Generation of Companies?
Korea needs to grow out of its dependency upon the chaebol
A successful economy needs a vibrant mix of companies which provide opportunities and choice:
-for entrepreneurs to develop their new technologies
and business ideas
- for companies to find opportunities for developing new products,
services or technologies
- for investors to diversify their holdings into a variety of
companies
- for managers and graduates to seek a variety of opportunities
throughout their careers.

24. Media Workers Protest http://www.youtube.com/watch?v=GjiHT2R7JjA
Large conglomerates (chaebols) are also keenly interested in the passage of the bill, which is expected to give rise to sweeping shake-up of the telecommunications and media industry. The most crucial issue is about allowing or restricting the simultaneous ownership of newspapers and broadcasting companies. In particular, the bill stipulates that chaebols and newspapers will be allowed to own up to a 20.0 percent share in terrestrial broadcasters, while newspapers and other firms can possess a maximum 49 percent stake in general and news-only cable TV stations. If the proposed change intended to nurture world-class integrated service providers is realized, chaebols will be the main beneficiaries. However, critics argue that the change will ultimately pave the way for chaebols' monopoly of the media industry.

25. Terminology Quiz
1. Balance of power: Where one nation seeks to maintain an approximate equilibrium of power among many rivals. 2. Foreign direct investment is defined as a company from one country making a physical investment into building a factory in another country. 3. Labor unions is an organization of workers who have banded together to achieve common goals in key areas, such as working conditions.

26. Terminology Quiz
4. Capital refers to labor, machinery or land used to create Goods (clothing, cars etc.) or services. 5. Hierarchy a ruling body (one individual or more) organized into orders or ranks each subordinate (placed in or occupying a lower class, rank, or position to the one above it.

27. Terminology Quiz
7. Dependency: The state of being determined, influenced, or
controlled by something else. (Korea being controlled by chaebols)
8. Entrepreneurs: It is an ambitious leader who combines land,
labor, and capital to often create and market new goods or
services.
9. Investors: Types of people and companies that regularly
purchase stocks or bonds, buy property for financial gain in
exchange for funding a company or expanding their
Personal wealth.
10.Multinational company: is a corporation or enterprise
that manages production or delivers services in more
than one country.