1. 1 Paul Hong, Ph.D. CMA Kihyun Park, MA, ABD Sunhee Youn, Ph.D. MaGa (Mark) Yang, MBA, ABD Information Operations and Technology Management College of Business and Innovation University of Toledo, USA Asia Forum Luncheon Series From Land of Morning Calm To Dynamic Korea Presented 11-03-2010

2. [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

3. [1] Introduction

6. Korea

7. Major Trading Partners of USA

8. [2] Korea: A Historical Perspective

9. After Korean War (1950-1960)

10. 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

11. 11 Table 1: Historical trends of Korean industries 1945-19601961-19881989-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 moreAnnual growth of 5% Global GDP Rank 250 th in the world (1996)40 th in the world (1988)11 th in the world (2006)

12. Population (Korea)

13. (in US dollars) Gross Domestic Product (Korea)

14. The number of Worker in Korean Industries Manufacturing Wholesale and Retail Trade Construction

15. 15 Table 2: Global Fortune 500 Korean manufacturing and service firms Company Global Rank Revenues ($ millions) Industry typeMajor products and markets Samsung Electronics 4689,476.20Electronics, Electrical Equip. Mobile phones, TV, MP3 & audio/video, Cameras &Camcorders, computers, Printers, Home appliances LG7368,754.10Electronics, Electrical Equip. TV, Audio, Video, Home Appliance, Mobile and Telephone Hyundai Motor7666,666.00Motor vehicles and Parts Passenger cars, recreational Vehicles, Commercial vehicles SK9859,001.90Petroleum Refining Crude oil, petroleum, Lubricants, Chemicals Korea Electric Power 22828,708.40UtilitiesElectric power supply Samsung Life Insurance 22928,639.20Insurance: Life, Health (stock)insurance, retail finance, investment trust POSCO24427,067.70MetalsSteel Kookmin Bank34920,224.10Banks: Commercial and SavingsBanking services Hanwha37419,085.50Chemicals explosives, Inflator, Aerospace, firework, Defense, Petroleum, petrochemicals KT38818,598.10TelecommunicationsTelephone, internet, Network services, pcs Hyundai Heavy Industries 42217,298.00Industrial and Farm Equipment shipbuilding, offshore & engineering, Industrial plant, Engine & machinery, Elector electric system, construction equipment Samsung43616,778.80Trading international trading, construction, housing and retailing SK Networks43816,733.90Trading Resources &energy, Chemicals, Steel, Mobile phone SK-Oil49115,246.10Petroleum RefiningOil refining, Lube, Petrochemical

16. 16 Table 2: Global Fortune 500 Korean manufacturing and service firms RankCountry (2010) Number of Global 500 companies 1US139 2Japan71 3China46 4France39 5Germany37 6UK29 7Switzerland15 8Netherlands15 9Canada13 10Italy11 10Korea11

17. (A) Steel & Shipbuilding Industries (B) Automotive & Mobile Industries - Hyundai Kia - Samsung & LG [3] Leading Industries for Global Businesses [3] Leading Industries for Global Businesses

18. 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

19. POSCO is #1 steel maker in Korea/ 2 nd 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)

20. 20 1.Top Class Productivity  Abundant and high-skilled workforce  Strong shipbuilding know-how  Economies of Scale Shipbuilding industry : 3 Excellences of Korean shipbuilders.

21. 21 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. 22 Shipbuilding industry : 3 Excellences of Korean shipbuilders. 3.Shipbuilding Cluster Effect:  Extended well-built infrastructure  Manufacturing supplier network  Supply chain network integration

23. 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 Capacity Mutual Relational Quality Supply Chain Capacity Supply Chain Capabilities Firm level Performance Performance Outcomes Research Model: Supply chain Information Capabilities and Performance Outcomes: Case of Korean Steel Suppliers

24. 24 (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 –5 th largest (Production volume) –6 th largest (Export volume) Korean Automotive Industry

25. 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)Kia, The Soul Collective –Super Bowl Commercials since 2008Super Bowl Commercials Hyundai Kia Success Factors

26. 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 -68 th 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

27. Brand value of Samsung, 2010

28. 28 Samsung mobile: Market share in the U.S. Samsung Smartphones’ Strength and Weakness Excellent mftg capability (feature & design) Weak in lasting software capability

29. 29 Samsung: TV Market share world-wide Internet TV Wars: Yahoo and Samsung Step Up to Google and Sony

30. 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.

31. [4] Challenges and Prospects

32. A sandwiched nation! Korea China Japan USA Europe What is Korea?

33. An opportunity nation! What is Korea? China Japan USA Europe Korea

34. Korea as the sandwiched nation Korea as the opportunity nation. Restrictive, Defensive and Reactive Motivating, Hopeful, and Proactive Perspectives & Destiny Korea China Japan USA Europe China Japan USA Europe Korea

35. 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 Sustainable Space industries Defense products Waternomics Natural Gas 20202030 Total Value Scope and Size New Growth Engines: National Level Korea’s Core Products and Services

36. Dynamic Korea!