[OUTLOOK]Turn Korean firms loose to grow

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[OUTLOOK]Turn Korean firms loose to grow

A few days ago, I asked a woman whose husband works for Samsung Electronics whether she knew her husband's company was the No. 1 information technology company in the world. She sounded surprised. I told her that a prominent U.S. business magazine, Businessweek, had recently listed the world's top 100 information technology businesses according to sales, growth rate and return on capital; Samsung Electronics headed the list. She said she had no idea that her husband worked for such a good company, and asked whether I could get her a copy of the article so she could show it to her husband and others. I have given copies of the article to several people and every one expressed surprise and pride that a Korean company was No. 1.

A economics professor from a Chinese university who was in Seoul to study the Korean economy asked me a while ago how Korean companies stood in comparison to Japanese companies. I also showed him this article, and he was astounded that three of the world's top 10 information technology businesses were Korean. He said he was proud that seven of the 10 were Korean, Taiwanese and Chinese. What seemed to surprise him even more was that Dell Computer was fifth, IBM 21st, Canon 24th, Microsoft 27th, Nintendo 47th, Nokia 54th and Intel 56th. A journalist from a famous current affairs magazine in Japan visited my office for an interview and asked me about the level of Korean companies in the world. I again showed the article to him.

Peter Drucker, who could be called the father and sage of business management studies, was once asked by a famous American newsman whether U.S. businesses were the most competent. Mr. Drucker said no, citing Korea as the leader. When I met Mr. Drucker recently, he reminded me that Korea had absolutely no industry a mere 40 years ago. The Japanese had allowed none during their colonial rule, he said, and yet Korea was now leading the world in several industrial fields. Mr. Drucker does an impressive job of explaining this phenomenon in his book, "Management Challenges for the 21st Century," published this year. He said that the world's second most competent businesses were in Taiwan, noting that the No. 2 and No. 3 firms in information technology companies are Taiwanese. Nevertheless, those two companies put together are only one-fifth the size of Samsung Electronics.

The successful World Cup this year also played a role in showing the world what a stronghold of information technology Korea is. The active participation of world-renowned Korean information technology company managers in hosting the soccer competition gets a good part of the credit.

According to Mr. Drucker, organizations similar to today's companies were started at almost the same time in the late 19th century in the United States, Japan and Germany. Developed since then, American, Japanese and German companies have distinct characteristics. All three have advantages and disadvantages; none are perfect. Many persons claimed right after the financial crisis of the late 1990s that Korean companies should learn from American firms; Mr. Drucker disagrees. This is a world in which no one type of management structure, ownership-management relationship, diversification strategy or specialization can be called the answer to all questions.

The reason Samsung Electronics is the world's No. 1 information technology company is not because it copied American, Japanese or German companies but because it used its advantages well and developed an advanced organization, management and strategy. For example, many information technology companies in the United States and Japan have focused their assets on one or two core products. In contrast, Samsung Electronics chose to diversify. As Mr. Drucker pointed out, there are several other leaders among Korean companies, including the world's biggest shipbuilder, Hyundai Heavy Industries Co., Ltd, the world's biggest steel producer, Posco, and the world's biggest electric home appliance supplier, LG Electronics. Korean companies are now well over their copycat phase. We should no longer try to confine these Korean companies to the standards of other advanced countries. If Korean managers and entrepreneurs are allowed to conduct their businesses freely, we could become the world's No. 1 in other industrial fields, like biological engineering.

* The writer is a professor of economics at Seoul National University.

by Song Byung-nak

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