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Jewels in the crown of Korea’s business history

[ANNIVERSARY SPECIAL] Local companies that epitomize drive to push beyond crises and achieve global success

Oct 16,2015
While major industries that drove Korea’s growth over the past four decades have been losing momentum, other companies that have sustained their businesses through years of mounting difficulties have grown in prominence and profitability.

As the nation celebrates the 70th anniversary of its liberation from Japanese colonial rule, several companies that have taken the same path to achieve the “Miracle on the Han

River” continue to gather worldwide attention.

As the key shipbuilding, automobile and consumer electronic industries struggle, the success of these few business “jewels” is even more notable, considering the average life expectancy of companies listed on the main Kospi is only 33, according to the Korea Chamber of Commerce & Industry, a business lobby group.

Some of the “jewel” companies founded in 1945 include AmorePacific, Hanjin and SPC, all of which have managed to remain top in their respective industrial sectors ? cosmetics, marine transport and bakeries.

They are all presently run by the sons of the founders who have since passed away, and have thrived by following their founders’ initial principle that made “concentrating on one field” their top priority.

The principle has helped them work through moments of crisis. “The ‘survival DNA’ in those 70-year-old companies that overcame crisis with entrepreneurship is the hidden driving force behind Korea’s miracle economy,” said Yang Geum-seung, director of the industrial research division at the Korea Economic Research Institute, a private think tank. “Their incessant challenge and pioneering spirit could serve as a breakthrough for the Korean economy that is currently affected by far-from-favorable internal and external factors.”

When AmorePacific, formerly known as Taepyeongyang, was hit with the biggest credit crunch in 1991 resulting from excessive business expansion, even into the financial sector, founder Suh Sung-whan, the father of current Chairman Suh Kyung-bae, questioned himself.

“I reached the conclusion that I would continue doing the cosmetics business, and even if I am reborn, I would choose cosmetics,” the late founder is quoted as saying in his biography, which was published in September to celebrate the company’s 70th birthday.

The late founder’s resolution was followed by a large-scale corporate overhaul. He sold off a securities firm, one of the firm’s subsidiaries, to SK in 1991 and changed the name to AmorePacific in 1993.

Between 1991 and 1997, the company slashed the number of its subsidiaries from 24 to 15, which helped the cosmetics giant weather the 1997-98 global financial turmoil.

After rebounding from the painful restructuring, the company invested heavily in research and development, which led to a number of innovative products that have made AmorePacific the success story it is today.

The international cosmetics bellwether now earns 20 percent of its revenue from international markets and aims to improve the percentage to as much as 50 percent in five years.

Hanjin, which owns Korean Air, the nation’s top airline, is the epitome of the country’s transport industry.
With a company name meaning “Koreans moving forward” in Chinese, the leading logistics service provider was hatched in the port area of Incheon.

Its founder, Cho Jung-hun, the father of current chairman Cho Yang-ho, began in the business by hauling daily necessities such as clothes, flour and shoes from Shanghai to buyers across the nation.

The business grew rapidly after Cho sealed a landmark contract to ship U.S. munitions within Vietnam from 1966 to 1971 during the Vietnam War. The deal was based on the solid business relations he had established with the American army over the post-Korean War period.

The foreign currency Hanjin earned from the deal over the five-year period amounted to $150 million, while in comparison, the Bank of Korea kept a reserve of merely $50 million and Korea’s gross domestic product per capita was just $200.
Cho recalled later that he saw a “huge opportunity” ahead of him after visiting the Southeast Asian country as part of a business delegation with then-President Park Chung Hee.

Utilizing the accumulated capital and his experience, Cho established marine transportation subsidiaries.

He went so far as to acquire the then-public Korean Air Corporation after President Park made a desperate bid to commercialize the loss-making public company and try to turn it around.

In opposition to a number of executives within the company, he said, “There are businesses that fall into losses when we expect they would earn profit out of them, whereas there are some businesses that you should continue doing even if they post serial losses.” Thanks to his bold decision that placed top priority on “national interest,” Korean Air has now become a major global carrier, operating in 127 cities across 44 countries as of October. It has 157 airplanes, including 129 passenger planes and 28 freight planes.

SPC, which runs a myriad of familiar bakery and confectionery brands ranging from Paris Baguette to Baskin-Robbins and Dunkin’ Donuts, began its road to global appeal as a modest confectionery named Sangmidang in Ongjin county, Hwanghae province, in present-day North Korea in 1945.

Founder Hur Chang-sung relocated to Seoul for better logistics and manufacturing facilities and changed the name to Samlip in 1959.
Inspired by the advanced baking technologies and widespread pastry culture in Japan, which he visited during the 1964 Tokyo Olympics, he invited baking technicians from Japan and installed automated facilities
to concentrate on developing new products.

The efforts resulted in megahit products such as Samlip cream bread. It was the first of its kind to hit war-torn Korean market shelves and has posted accumulated sales of 1.8 billion units from 1964 until now.

To compete with rivals that sprouted up in the late 1960s, such as Koryo Dang Bakery, Tae Geuk Dang and New York Bakery, Samlip, in 1972, added then-rare, high-end bakery products such as cake to its lineup. The strategy contributed to upgrading Korea’s bakery industry, experts say.

Taking over the management in the late 1980s, Hur’s second son, Young-in, launched franchises to diversify the types of snacks on offer to the Korean public, who at the time had very little exposure to foreign cultures. Koreans were restricted from freely traveling abroad until 1988.

He introduced Baskin-Robbins in 1985, three years ahead of the Seoul Olympics, foreseeing the international event would bring a wind of change to Koreans’ culinary expectations.

He opened Paris Croissant the same year in Gangnam District, southern Seoul, as a test bed and Paris Baguette in 1988 in Gwanghwamun, central Seoul, to differentiate his “European-style” bakery brands from competitors that mostly pursued “American-style” foods. SPC brought Dunkin’ Donuts to Seoul in 1994.

Revealing his vision to more than double the annual revenue from 4.2 trillion won ($3.7 billion) last year to 10 trillion won by 2020, Hur said globalization, substantial growth and fostering quality human resources were the key recipes to achieving the goal.

So far, his globalization drive has turned out to be highly successful. Starting with China in 2004, the company has advanced to the United States, Vietnam and Singapore, and finally to Paris in July last year.

“The idea is to go beyond the chain’s Korean roots, to show it is truly French, to match the most sophisticated, subtlest tastes of any French restaurant,” Forbes reported last year about the Paris operation of SPC.
Paris Baguette outlets now number 180 across the globe and 6,000 within Korea.


BY SEO JI-EUN [seo.jieun@joongang.co.kr]


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