Chaebols are the cornerstone of the economical, political, and social landscapes of Korea. They were established as a mechanism to share technology, human resources, brand name, and managerial know-how among member firms. After the Korean War, chaebols were instrumental in helping Korea out of the turmoil. They were able to create a lot of jobs which helped stable the economy. In order to catch up with the developed countries, chaebols were big on funding R&D and looking for new technological advancements. Chaebols were able to stay prosperous for so long because of their size, leadership, and market presence, along with other attributes. Throughout the years, the growth and the advantages of chaebols have played a key role on the economic, political, and social development in South Korea.
Chaebols were able to come to power after the Korean War in the early 1950s. Government officials allocated relief funds and loans to businessmen who promised to rebuild the country. Back then, chaebols provided lifetime employment policies to its employees which then brought economic stability to many workers and to the country. With this policy, chaebol were able to train highly skilled workers and share the benefits of the increased productivity of labor with workers. Now in present day, Samsung, the largest chaebol, employs more than 300,000 employees globally. To this day there are a large number of chaebol employees not only here in Korea, but worldwide.
After chaebol was able to help stabilize the manufacturing sector of the Korean economy, they turned to help develop the technological sector of the economy. Chaebol began to find ways to improve research and development efforts as they recognized that outside countries were less willing to provide technology as Korea was becoming more stable.
One thing that led to the success of chaebol businesses was their diversity and willingness to expand into different sectors. This always assured that if one branch of their business failed, they had other branches to hang onto. From wigs and textiles in the 1950s-1960s to heavy, defense, and chemical industries in the 1970s-1980s, chaebols have been able to adapt to society’s needs, wants, and demands. While these industries were important, nothing was bigger than the technological advances that were made in the 1990s. For chaebol moving into another sector of business was easy; they had the established reputation and the brand name to prove that they are going to put out a reliable product. This creates economies of scope which lead to low pricing in all products in their inventory. Although this made it tough for smaller businesses to grow, people were always guaranteed to get reliable products, competitive prices, and a big brand name. Having a respectable brand name is an intangible asset that doesn’t deplete the more it is used. So putting a brand name on every item will help and not hurt the brand. Also, if there are multiple chaebol families in a competing market, it creates competitive prices helping the consumers more with low pricing and dependable products. Having a competitive market creates synergy which helps stimulate the economy into growth. Chaebols are aggressive in launching new product, new product lines, and buying and merging with other existing corporations in both domestic and foreign markets. Diversity and the ability to expand into different sectors was one thing that led to the success and growth of chaebols in Korea.
Having a family-born leader to run the company comes with some advantages. A family member who serves as the head and final decision maker is referred to as chongsu. Chongsus usually lead meetings with CEOs of affiliated firms and have the final say in any matters. Because of this type of meetings headed by a single person, it makes meetings and the decision process fast and easy. Once the chongu makes the final decision, the CEOs are supposed to follow their orders. Like Mr. Lee, chongsu of the Samsung chaebol, holds no formal power or title, but yet still has the final say in any decision solely based on his family title. Keeping family in control of the chaebol may give better long-term perspective compared to a professional CEO.