Chaebol : The Korean Way of doing Business

Well, guys !! Your weekly dose of enlightenment is long overdue. Those of you who wonder where I had been all this time, just wait for my next post, to be titled "How I missed the Olympics bus" !! For now, let me lecture you on something called "Chaebol". Before you do a wiki on it and send my weekend blogging efforts into oblivion, Chaebol is a Korean word which means "a business group". Since the earlier post was on my Alma Mater, the next honour/disgrace naturally goes to my roji-roti provider, which happens to be a Chaebol.

In a broader context, Chaebol refers to the well-known and family controlled South Korean corporate houses like Samsung,LG,Hyundai,Daewoo etc.The fact that a country as small as South Korea has churned out such internationally reputed brands, naturally calls for a closer look at the way these bigwigs operate.

To understand their meteoric rise in Korean as well as world economy, we must go back to 1940s when Korean economy was in shambles from long Japanese occupation. After the Japs left,many start-ups sprouted independently or by acquiring left-over Japanese businesses. To help them rise,these companies were provided special privileges by the government.In a span of mere 30 years, the chaebol-government cooperation turned around the Korean economy. Capital Seoul,once a city of ruins under the japanese regime, grew rapidly to become the second biggest metropolitan in the world.South Korea was hailed as the new Asian Tiger.

Just as the future was starting to look bright and rosy, the Asian Financial Crisis of late 1990s reared its ugly head. Many of the Chaebols went bankrupt overnight, Daewoo being the most prominent victim. To fuel their explosive growth,these Chaebols had focused heavily on overseas markets and were deep in debt.So when worldwide economies faced a slowdown, they took the hardest hit. Government forced them to adopt more transparent corporate policies and reduced the stakes of the controlling families in their businesses.Lead by Samsung,the world's second largest conglomerate, the chaebols recovered quickly. South Korea is today regarded as one of most technologically advanced countries of 21st century.

However all is not well today. Recently some of these chaebols have been plagued by scandals and tax issues,resulting in implication and resignation of top management. Back home,Indian chaebol like entities like Reliance, Birla are also facing scandals and bitter in-house rivalries. Even in namma Bangalore, Nilgiris, the country's oldest super-market chain was handed over to Actis, a UK based PEI by its controlling family in 2006. A recent survey has claimed that such family controlled businesses rarely remain in control of their owners beyond 3 generations. All these have put a question mark on the futures of these family controlled businesses.Only time will tell whether they will be able to preserve their unique identity and grow in 21st century economy.

So guys,whats your take ? Next time you plan to start a business,think hard as to whether keep it a family affair or promote it as a public business. Unless you are as fortunate as me, who don’t have the money for such a venture and hence need not worry about those trivial issues..:-) !!