Like many Korean chaebols. Hyundai was established merely late. in 1947 as a building company. But by the terminal of the fiftiess. Hyundai Construction grew to go one of the major building companies in Korea. Then. Hyundai expanded concerns chiefly in the building. heavy industry and car fabrication sectors during the following two decennaries to go the largest concern group in Korea. During this period. Hyundai was a major concern spouse for the authorities. by pitching its corporate growing schemes to the government’s policies for economic development. During the development epoch ( 1961-1988 ) . the Korean authorities insured or underwrote large business’ hazardous undertakings through its control over fiscal resources every bit good as myriads of discretional licensing and blessing powers. and large concern actively capitalized on this insurance provided by the authorities. The authorities and large concern needed each other. albeit for different grounds. and exchanged different resources to accomplish common ends.
In the sixtiess. Hyundai’s enlargement chiefly took topographic point within the building industry by winning main road building undertakings and puting in large-scale cement workss. The Group besides pioneered abroad building markets during this period. which gave Hyundai a taking border when it decided to come in the building markets in the Middle East in the seventiess. The successful experience of Hyundai in the building sector besides turned out to be highly helpful when the Hyundai Group entered the ship building and related heavy industries in the seventiess. These two sectors were similar in production engineering. employment. or selling. Therefore. the Hyundai’s entry into the heavy industry sectors could be viewed as diversifying into related concerns. an unusual experience in the early enlargement history of Korean large concerns.
Hyundai besides diversified into unrelated concern in the sixtiess and 1970s. This gained a impulse in 1967. with an entry into the car fabrication sector. However. Hyundai Motors had a hard clip until the early 1970s. which was weathered out by the cross subsidies from Hyundai Construction. its parent company. This sort of cross subsidies across affiliates was a important agency in the enlargement history of most Korean large concerns. Soon after get the better ofing the early troubles. Hyundai Motors built up its ain trade name. accumulated technological and direction know-how. and secured parts and constituents through a strategic confederation with Japan’s Mitsubishi. With this experience. Hyundai Motors entered the universe market en masse in the 1980s.
When the Park Chung Hee authorities started the Heavy and Chemical Industrialization ( HCI ) thrust in the seventiess. Hyundai entered the ship building and related concerns under Park’s support in 1973. Hyundai had its ain HCI thrust. analogue to Park’s. and consulted closely with the authorities from the really early phase of be aftering on its investing undertakings. The authorities responded positively. supplying it with assorted fiscal and revenue enhancement benefits. for illustration. by ordaining the Law for Promoting the Shipbuilding Industry specifically to endorse its risky concern undertakings. In add-on. the authorities guaranteed Hyundai’s foreign adoption from Barclay Bank. Having grown into an industrial imperium with the capacity to independently raise resources by the eightiess. Hyundai diversified into even more unrelated concern Fieldss. 7 including electronics or fiscal services.
Interestingly. in these new concern Fieldss. Hyundai could non excel the other rival chaebols and remained a second-tier performing artist. Most of these concerns encountered jobs after the fiscal crisis of 1997. The Hyundai Group entered into electronics sector in 1983. but could non get the better of the disadvantage of 2nd mover ; Samsung Electronics has maintained the advantage of first mover. superior engineering and better direction know-how. The Hyundai Group besides had a similar experience in fiscal sectors like securities house. insurance company. or investing trust company. In general. after the 1980s when there already existed competent officeholders. the variegation of chaebols into unrelated concern sectors did non bring forth as satisfactory results as in the 1970s5.
When many chaebols entered into unrelated concern Fieldss after the 1980s. they had to vie with the superior officeholders in those Fieldss. Another illustration of the 2nd mover’s disadvantage during this period was the entryway of Samsung into the car fabrication industry. In retrospect. the distant first seeds of Hyundai’s trouble after the economic crisis were sown when Hyundai diversified into unrelated concern Fieldss in the 1980s.
Another seeds of Hyundai’s post-1997 afflictions were sown when Hyundai’s laminitis. Chung Ju Yung. ran for the presidential term in 1992. disgruntled with his relationships with the authorities during Roh Tae Woo’s political regulation ( 1988-1993 ) . Chung Ju Yung organized his ain political party. the Unification and National Party. and his electoral platforms emphasized economic development. knocking the inefficiency of the Roh Tae Woo authorities in this respect. He mobilized assorted resources from the Hyundai Group. Key members in his ain party were recruited from the Group. and a big sum of fiscal resources flowed from affiliates to the presidential run. which became the mark of probe by the authorities during and after the run. At the polls in December 1992. Chung Ju Yung was placed 3rd with the 16. 7 % of the entire ballots. about four million people. After his licking in the run. Hyundai’s enlargement was restricted by new President Kim Young Sam ( 1993-1998 ) .
During this period. the authorities restricted the Hyundai Group’s issue of securities domestically and overseas. Note that at the clip. the long-run capital markets were non to the full liberalized. which meant that the authorities had discretional powers over corporations’ issue of long-run securities both domestically and overseas. In add-on. the Korea Development Bank. a state-owned bank for long-run equipment investing loans. froze new loans to Hyundai for two old ages until October 1993. As a consequence. Hyundai Group’s affiliates were restrained in their new investing undertakings. Establishing new affiliates by the Group was besides restricted: merely two new companies were established in 1992-94.
Besides the limitations on the Hyundai Group’s funding. the authorities limited Hyundai Construction’s entree to public building undertakings. which added to Hyundai Construction’s trouble brought on by extra capacity in the building markets during that period. The consequence was that Hyundai retrenched during the Kim Young Sam authorities. while the others expanded: & lt ; table 4 & gt ; shows that the authorities policy against Hyundai contributed to contract down the spread between Hyundai and Samsung’s plus size during Kim Young Sam’s political regulation. Before the presidential run. the plus size of Hyundai Group totaled 19 trilion won in 1991 ; that of samsung Group was 14 trillion won. By 1997. nevertheless. the spread narrowed down to less than 4 % of 8 Hyundai’s entire plus. In 1997. the Hyundai’s entire assets were 54 trilion won ; Samsung’s entire assets increased quickly to 52 trillion won.
I. Statement of Aims
II. Central Problem:
* Lack of communicating with its mediators.
III. Areas of Consideration
IV. Alternative Courses of Action
V. Strategy Formulation
VI. Plan of Action
VII. Potential Problems
VIII. Contingency Plans