1. Business strategy of Korean corp. 1 week 6

2. 2 Comparative business management: EGSOP  clarify the relationship between business structure and their environments  explain the external environments & ownership - governance structure, strategy, and organization of corp.  external environments; social system(macro economics· political system), culture environments( languages, religions, customs), performance environments(business markets)  analyze the environments on 4 different axis; ownership & governance structure, strategy, and organization  To understand the change of mgt’ paradigm

3. 3 – Governance: the differences of ownership-governance structure among corps. of different nationalities – Strategy: competitive strategy + business strategy + global strategy – Organization: innovation of human resource management + process innovation O rganization P erformance G overnance S trategy E nvironment Application of EGSOP model on Korean corp.

4. 4 Globalization means that a company implement same strategy throughout whole world regarding a world as a whole market. Internationalization means that a company in a certain country advances to different countries; markets classified by national border mean nothing in globalization any more. Globalization is especially activated by multi-national corps. which have subsidiaries at different nations Definition of globalization

5. Global characteristics are that competitive advantage of industry in a certain country have a great influence on markets in different countries. Global corp. create competitive advantage combining economy of scale, offering services for world-wide customers with world-wide brand reputation. Related key industries are aero-manufacturing, semi- conductor, electronic, automobile, copy machine, and watch. 5 Global Industry

6. Homogeneous consumer needs & internet Appearance of homogeneous consumer needs because of development of communication devices in the world Decrease of trade barriers decrease of trade barriers because of inauguration of GATT, rapid settlement of trade dispute (WTO) Liberal movement of funds movement of funds makes laws, regulations, and cultural customs of each nations become homogeneous by global standard 6 Factors which facilitate globalization

7. 7 Business Strategy of Korean corp. business strategy global strategy competitive strategy 1987~19961997~2006 unrelated diversification external expansion choice & focus from export to global from quantity to quality external expansion focus on Amer. & south east Asia tech. follower hard competitiveness business specialization substantiality increase of global competitiveness emerging market & others tech. leader soft competitiveness

8. 8 classificationalternate valueschange of paradigm business portfolio diversification vs. specialization orientation of business specialization growth strategy growth vs. profitability focus on profitability investment strategy aggressiveness vs. conservativeness tendency of conservative management 1.Business : choice & focus change of business strategy paradigm of Korean corp.

9. classification2000200120022003200420052006 number(#)910179121419 amount(trillion)18.128.94.00.53.40.93.6 from unrelated diversification to business specialization 1 1. Business : choice & focus Status of split-off of listed corps. 0 100 200 300 400 500 600 700 800 900 1987198919911993199519971999200120032005 (개)(개) Change of affiliates number of top 30 largest corp.

10. 10 1999200020012002200320042005 Business activity cash income(A) 11,54410,4758,49312,69811,60513,96711,403 Invest activity cash expense(B) 7,5239,1365,9497,3638,63810,70010,187 Financial activity cash supply(C) -4,392-940-2,127-4,758-1,902-3,148-10 Increase of cash(A-B+C)-3713994175771,0641201,206 Balance cash3,9484,0254,2264,9895,5215,3966,602 from external growth to internal substance – disappearance of legend “Large groups of stones are seldom captured” – more emphasis on the importance of liquidity after financial crisis – introduction of global financial system 1.Business strategy: choice & focus Cash flow of manufacturing corp.

11. 11 From aggressive investment to conservative investment –decrease of profitable investment by increase of uncertainty –decrease of investment psychology by over regulation 1.Business strategy: choice & focus Investment & cash possession of Korean listed Corp. 0 2 4 6 8 10 19878889909192939495969798990001020304052006 -15 -10 -5 0 5 10 15 20 2 Tangible assets increase Cash assets/total assets (%) cash/ assets ( Increase rate of tangible assets

12. 12 2. Global strategy: from export to overseas expansion Initiation of overseas advance to cope with change of environment –Deregulation of foreign fund in 1990 & increase of overseas advances –‘ World business’ of Deawoo corp. Change of business environment & choice of corp. in 1990 yr. liberalization emerging of new markets stagnation of Japanese corp. market liberalization(UR/W TO) OECD affiliation end of cold war open of China BRICs lost 10 yrs. slowdown of digital narrow domestic market increase of manufacturing costs unfavorable situation of labor union overseas advance of corp.

13. 13 2. Global strategy: from export to overseas expansion Deploy aggressive overseas expansion by ‘globalization’ slogan of government in 1993 – Bandwagon effect: major expansion of domestic sewing toy corp. to Central & South America – majority of cost effective overseas investment in 1990 yr. – low profit & no strategies because of inexperience Progress of overseas expansion

14. 14 Japan Korea U.S.A Twain 2. Global strategy: from export to overseas expansion reopening of strategic overseas expansion since financial crisis – creation of global brand – diverse market areas – accumulation of global business know-how Investment scale of leading nations on China

15. 15 3. Competitive strategy: from quantity to quality Mid-1990 intensified global competition because of over production Loss of cost competitive power because of attacking of low cost country like China Overflowing a sense of crisis to be a top of the world to survive From simple strategy which manufacture and sell products at low cost and high quality to competitive strategy which pursuit premium of leaders

16. 16 superiorinferior 19969.046.0 20009.636.0 200411.922.8 3. Competitive strategy: from quantity to quality From tech. follower to tech. leader since 2000 yr. Initiation of design management Design competitiveness of export industry (%) Profitability of leading semi-conductor corp. in 2006 yr. Samsung Hynix InfinionMicron Elfida 26% 25% 1% 7% 10%

17. 17 ranknation 2007 yr. 2001 년 Increase rate Brand valueweightBrand valueweight 1U.S.A751.565.0739.874.81.6 2Japan91.87.967.86.935.5 3Germany91.27.955.75.663.8 4France61.05.313.81.4342.5 5Finland33.72.935.03.5-3.8 6Swiss32.72.818.01.882.1 7U.K.28.22.416.91.766.8 8Korea24.42.16.40.6283.1 9Netherland11.61.07.20.762.2 10Italy11.01.07.90.839.9 11Sweden10.10.914.51.5-30.2 12Spain5.20.40.0 - others3.30.35.60.6-40.9 total1,155.7100.0988.4100.016.9 3. Competitive strategy: from quantity to qualit y Creation of premium brand Upgrade services quality for differentiation National global brand (billion dollar, %)