Daewoo

From Academic Kids

Template:Koreanname Daewoo (meaning "Great Universe") is a major South Korean chaebol (conglomerate). It was founded in March 22, 1967 as Daewoo Industrial.

Contents

History

Kim Woo Choong founded the Daewoo Group in 1967. It became one of the Big Four chaebol in South Korea. An industrial and multi-faceted service conglomerate, Daewoo was prominent in expanding its global market through joint ventures all over the world. During the 1960s, after the downfall of the Syngman Rhee government, the new government intervened to promote growth and development in the country. They increased access to resources, promoted exports, financed industrialization, and provided protection from competition. In exchange for a company’s loyalty, the government granted favorable treatment to the chaebol. In the beginning, the Korean government instigated a series of five-year plans where chaebol were forced to achieve a number of basic objectives. Daewoo did not become a major player until the second five-year plan. Daewoo began trading and benefited from government-sponsored cheap loans by borrowing based on potential export profits. The company initially concentrated on labor- intensive clothing and textile industries that provided high profit margins. The most significant resource in this plan was the South Koreans large workforce. The third and fourth phase of the five-year plan occurred from 1973 to 1981. During this period, the country’s labor force was in high demand. Competitions from other countries begin eroding Korea’s competitive edge. The government responded to this change by concentrating its effort on mechanical and electrical engineering, shipbuilding, petrochemicals, construction, and home base defense initiatives. During this period, Daewoo achieved its general trading company status and anger aroused from competing nations due to strict controls. At the end of this period, Government policy forced Daewoo into shipbuilding. Kim was reluctant to enter this type of industry because he felt that there were other chaebol better suited to handle the heavy engineering project. Nevertheless, Kim soon saw Daewoo earn a reputation for producing competitively priced ships and oilrigs. During the next decade, the Korean government became more liberal in their economic efforts. Small private companies were encouraged, protectionist imports were loosened, and the government stopped practicing positive discrimination. These moves were designed to encourage free market trade and to force the chaebol to be more aggressive abroad. Daewoo responded to the challenge by establishing a number of joint ventures with U.S. and European companies. They expanded exports of machine tools, defense products, aerospace interests, and semiconductor design and manufacturing. After a gradual learning curve, they begin to build civilian helicopters and airplanes, which were priced considerably cheaper than those produced by their U.S. counterparts. They expanded their efforts in the motor industry and was ranked as the seventh highest car exporter and the sixth largest car manufacturer in the world. Daewoo had excellent experience at turning around faltering companies in Korea.

Daewoo's Growth Incentives

1. Government Interventions: Government policy served as a double edge sword, it protected the chaebol, providing them with massive subsidies, unlimited cheap credit, and protection against foreign competition. However, the price for these services was total loyalty to the government. Chaebol were forced to take over industries against their will. The government was constantly involved in their businesses and stifled their creativity.

2. Labor Market: Traditional work ethics that helped Korea reach economic prosperity has been threatened as workers have begun increasingly violent protest against years of long hours and low pay. Daewoo shipbuilding suffered heavy loses due to workers demand for pay raises.

3. Operating in a Global Economy: International demands for free trade is forcing the Korean government to open its market. The chaebol will lose its protectionist import controls. Most recently, the North American Free Trade Agreement and the European Economic Community imposed trade limitations.

4. Product Quality from Korea: Korean products were considered cheap quality. Companies are trying to improve that image.

5. By the 1990s, Daewoo Group was heavily leveraged, major markets were stagnant, expenditures on R&D were increasing, labor unrest continued, and government policy adds to their worries.

6. Kim was most recently charged with allegedly paying campaign contributions to former president Roh Tae Woo government in exchange for a large government contract to build a submarine base.

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Daewoocenter.jpg
The imposing "Daewoo Center" situated in front of Seoul Station, Seoul, once the Head-quarters of Daewoo Group

Kim's Vision

Kim Woo Choong was an excellent entrepreneur. He led the company’s growth from an 18,000 initial capital value to $25 billion in annual sales. Some of the solutions he employed to counter problems identified in his company are as follows: 1. He used organizational politics to work with the government. He understood that to gain power, resources, and growth, he needed the protection of the government. 2. Daewoo Group was excellent at turning around faltering companies due to a well-managed, highly centralized organizational structure. Under Kim’s vision, he developed a unique culture in his chaebol known as the Daewoo Spirit. This spirit consists of a commitment to creativity, challenge, and sacrifice. Kim believed in co-prosperity whereby the company provides value to employees, customers, suppliers, partners, and the country as a whole. 3. Daewoo enlarged its capital supply sources by diversifying its method of securing funds, including leasing and deferred payments. They raise funds successfully overseas for large foreign investment projects. 4. Daewoo established a number of joint ventures with U.S. and European companies. Under the vision 2000 campaign, Daewoo established joint-venture production facilities, invested in foreign facilities, established sales and local subsidiaries, and localized component production and other operations. This campaign is aimed at strengthening Daewoo ‘s international competitiveness. 5. After two workers committed suicide, Kim developed a unique program to mend management-labor relations. Manager and company presidents were required to work on the assembly line, and assembly line workers could be promoted to management level. This policy is aimed at improving the management-labor relations as well as help managers understand the difficulties and problems on the assembly line. 6. Daewoo increased their R&D expenditure to be more internationally competitive. To boost this effort, Daewoo established a technology R&D team called the Institute for Advanced Engineering. This team used three strategies in technical development: competitiveness, managerial system development, and the use of technology network.

He also wrote a book on how he brought Daewoo from a 20-man company to an international group in his "The Streets Are Paved With Gold" or in Korean, "The World Is Big And There's Lots To Do, 세계는 넓고 할 일은 많다"

It is known that he was once a street vendor selling newspapers, gum and sweets when he was a youngster in Daegu.

Corporations

Daewoo Group, as was the official name, had under its umbrella several major corporations - Daewoo Electronics, a strong force both internationally and in Korea, Daewoo Heavy Industries, excelling in creating heavy duty machinery, and Daewoo Ship Building, under Heavy Industries boasted and still boasts one of the highest level of production of containers and oil tankers in the world today. Daewoo Securities, a financial securities company, Daewoo Telecom, concentrating on the telecommunication aspect of the electronics, Daewoo Construction, an international company, famous for building highways, dams and skyscrapers for countries especially in the mid-east and Africa. Daewoo International, a successful trading organisation, now still in operation. There were about 20 divisions under Daewoo Group, which now no longer exists. Daewoo Group was once the second largest conglomerate after Hyundai and followed by LG and Samsung in Korea before the crisis.

Crisis History

Daewoo Group ran into deep financial trouble in 1998 due to the Asian financial crisis and the defunct Korean government under President Kim Dae Jung. The Korean government could not keep its own deficits down to a respectable level, so had to push companies like Daewoo off the chart. This ended with the ultimate destruction and dismantling of the Daewoo Group without much opposition. Chairman Kim Woo Choong was exiled in silent force overseas and was named a fugitive after he did not return. President Kim Dae Jung had apparently promised Kim that Daewoo would be restored if he left the country under the auspices of the government. Much to Chairman Kim's dismay, the creditors and the government did not carry out their promise, and managed to disintegrate the second largest conglomerate in South Korea, a hugely international company based around near 100 countries to an appalling halt.

The main argument for as to why Daewoo was completely liquidated was to the fact that at the time, President Kim Dae Jung was appeasing the North Korean government with financial aid and other materials. He expected the leaders of the Top 5 conglomerates to cooperate in his government's "Sunshine Policy", when Chaiman Kim Woo Choong did not agree with the massive "no return on investment seen ahead" investment, he refused to cooperate with the President. Chairman Kim was in fact one of the pioneers in setting up new ways of doing business with the North, one of the few who understood the Northern way of business. He insisted on a "give and take" policy which the President did not yield to. To this "audacious" response the Korean government under Kim literally destroyed Daewoo instead of helping the group in a time of financial turmoil. The company who was used and exploited for the "North Expedition" was in fact Hyundai. It was during this time they started to start massive North Korean investments, and the famous "Cow Shipping" that enabled around 1,000 cows to be sent over to the North. Hyundai was considerably weakened financially due to this, but the government due to its policy on loyal companies did not sabotage it.

Missing image
Woochoong.JPG
The Founder and former-Chairman, Kim, engaged in a game of "ba-duk"

Chairman Kim Woo Choong was sent overseas in exile terms at first, then the government released information on how he had in fact "fled" the country from possible prosecution. This of course was completely a backlog of a twisted powerplay going on the Korean government, when in fact, it was the President who advised Kim to stay out of the country for a few months. Ulterior motive: revenge on a company that was not supportive to his policies.

Kim Woo Choong returned to Korea in June 2005, and was promptly arrested.

Daewoo Motors

Daewoo Motors arrived in the UK in 1995, as the only - at the time - manufacturer not using traditional dealerships: it owned and operated its own retail network. It was once considered to be nearing the top 10 motor companies in production.

Daewoo was forced to sell off its automotive arm Daewoo Motors to General Motors by the Kim administration. Since then, GM has been moving to rebadge Daewoo cars as the low-end models for many brands, including Chevrolet. GM was sued by Daewoo's former US dealer network over this practice, since they no longer have new Daewoo cars to sell.

Current Status

Daewoo Electronics survives to this day despite bankruptcy, with a new brand logo "DE", but much of the other many subsidiaries and divisions have all departed and became independent or simply perished under the brutal "reorganisation" of the Korean government under Kim Dae Jung.

The group was reorganized into three big parts: Daewoo International, Daewoo Engineering & Construction and Daewoo Corporation. It is active in many markets; the most important are steel processing, ship building and financial.

Missing image
Daewoochairman.jpg
2001 Daewoo Chairman, product of the Daewoo-Ssangyong merger

In early 2004, Daewoo pulled out of Australia, citing irreparable brand damage, and later that year, from New Zealand. Later the same year, GM announced that Daewoo Motors in Europe would change its name to Chevrolet as of January 1, 2005. In South Africa, Thailand and the Middle East, Daewoo models were already being sold as Chevrolets. Only in South Korea and Vietnam would the Daewoo marque survive.

Back in 1980s and early 1990s, Daewoo brand also produced consumer electronics, computers, telecommunication products, construction equipment, buildings, ships and musical instruments (Daewoo Piano).

See also

External links

References

eo:Daewoo fr:Daewoo id:Daewoo nl:Daewoo pl:Daewoo sv:Daewoo zh:大宇集团

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