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Kleptocratic Conglomerates and Paranoid Governments

Korea is getting quite a bit of attention from the British press as of late.  In addition to the “correct understanding” that the Financial Times has exhibited recently, we have a few decently lengthed articles from the Economist.

In the Economist the first article is about Korea’s Chaebols or Zaibatsu-like industrial conglomerates.  The article mentions some good things about the chaebols and some not so good things.

South Korea’s remarkable resilience [during the global recession] is partly down to… [the] export prowess of those peculiar corporate beasts, called the chaebol.

… But from South Korea’s point of view, they are a narrow base on which to build a country’s economic future. First, they face competition in new forms for which their hierarchical management structures and complicated, dynastic ownership are ill suited. Apple’s iPhone and the ubiquitous BlackBerry crept up on Samsung Electronics, exposing its shortcoming in smart-phones.

The next Economist article is on Samsung and Lee Kun-hee’s return as chairman.  The magazine is openly skeptical of Lee’s main justification for returning, which is claiming that the company is in some sort of imminent crisis.  The Economist says, “what crisis?”  Samsung is seemingly kicking ass everywhere.  The article speculates that the whole episode probably tells us more about Korean society and the chaebol’s continuing close relationship with government than anything else.

This brings us to our Financial Times article which outlines the sometimes inconsistently paranoid and skitzophrenic behavior of the Korean government:

When South Koreans flocked to see The Host – the 2006 hit film, ostensibly about a killer monster terrorising the banks of the river Han in Seoul, – part of the appeal came from a more tangible fear.

The story’s real villain is the heavy-handed South Korean state itself…

[...]

The sinister state in the film is a pastiche and real South Korea has made huge strides since military dictatorship ended. However, its 22-year-old democracy still struggles to build trust between the government and the people. The past few days have been a perfect example.

  • http://www.xanga.com/wangkon936 WangKon936

    … or… “Kleptocratic and Paranoid Conglomerates and Government.”

    ;)

  • NetizenKim

    First, they face competition in new forms for which their hierarchical management structures and complicated, dynastic ownership are ill suited.

    OK, please tell me what corporate management structure in the world ISN’T a “hierarchical management structure”????

    But from South Korea’s point of view, they are a narrow base on which to build a country’s economic future. First, they face competition in new forms for which their hierarchical management structures and complicated, dynastic ownership are ill suited. Apple’s iPhone and the ubiquitous BlackBerry crept up on Samsung Electronics, exposing its shortcoming in smart-phones.

    The reason why Samsung did not create the iPhone or the Blackberry is not because Samsung is a chaebol with a “hierarchial management structure with a complicated dynastic ownership”. It’s because the iPhone is not consistent with Samsung’s core identity as a business. Apple’s strength is aesthetic design philosophy. Samsung’s strength is massive economy of scale and manufacturing prowess. Phrases like “hierarchical” imply that Samsung is a lumbering dinosaur unable to respond quickly to market challenges. Anyone who thinks that clearly doesn’t understand the highly cyclical nature of the semiconductor industry. A semiconductor plant can cost several billion dollars to setup and not anyone can do this just as not anyone can easily duplicate Apple’s design strength, which took decades to cultivate. Maybe Samsung’s inability to produce an iPhone is lamentable but one can just as easily lament Apple’s inability to produce cutting edge flash memory chips or LCD panels and blame it on some inherent characteristic of Apple.

    Furthermore, Lee Kun Hee is what makes Samsung what it is and that’s why he is indispensible. Just as Steve Jobs is what makes Apple what it is. Without Steve Jobs, Apple would simply not be the same company and the same thing for Samsung and Lee Kun Hee.

  • NetizenKim

    If Samsung wants to win in the smartphone wars it’s gonna have to do something radically different from the competition, especially Apple. First of all, it’s gonna have to stop trying to copy Apple. That’s the problem right there already. Samsung is trying to duplicate the iPhone business model, including the apps and the iTunes store. Seriously, the Bada software platform is not going anywhere because developers already have too much on their plates with iPhone SDK and Android and the last thing they need is YET ANOTHER platform from a wannabee. Does Apple try to build semiconductor plants and mass-produce chips like Samsung does? No!

    Samsung needs to come up with a new model that plays to its own strengths as a hardware manufacturer and a conglomerate. Something that seems crazy. One of the biggest Achilles heel of the iPhone in the US is that AT&T is the sole provider and that is a highly unfortunate thing. Basically AT&T sucks. You have a great smartphone but a shitty service provider.

    What if Samsung were the smartphone manufacturer AND the service provider competing against AT&T? That means Samsung would be getting into the wireless telecom business, possibly by acquiring an existing one. Sounds crazy but why not? Samsung is already a conglomerate involved in wildly disparate industries. With this kind of model, which NO ONE else has, you don’t need to produce an iPhone. You just need to make a smartphone that’s almost as good enough and if you also provide a superior wireless network AND avoid some of the most annoying practices of existing carriers such as charging for texting and subscription plans that seemed designed to rip-off consumers – THAT would be an awesome winning combination.

  • Angusmack

    NK,

    So…you’re advocating transplanting the very worst aspects of Korean business culture to the US to make up for Samsung’s lack of agility and creativity? And just what has been the success rate of imposing this rigid corporate culture on an American workforce and consumers?

  • NetizenKim

    Angus,

    I go by RESULTS not some vague mumbo-jumbo’s generated by basket-weaving sociology majors waxing pejorative about “Korean business practices”. Samsung Electronics is an entity that generates $10 billion in pure profits annually. Under Lee Kun Hee’s watch, Samsung Electronics went from being a second rate firm to becoming kingpin of the semiconductor industry, unseating not just anybody but the freaking Japanese. All this happened while Samsung was operating according to your “worst aspects of Korean business culture”.

    So you explain to me what exactly are these aspects and why they are bad.

  • Angusmack

    NK,

    Sorry to inform you but I’ve never taken a sociology class in my life. You’ll have to make other wild and uninformed assumptions about me. And, by the way, I think its up to you to prove that Samsung can make the switch from being an offshore manufacturer merely selling into the American economy to a full fledged service provider, that employees Americans from the boardroom to the shop floor. Which it would have to do to be successful, even if, in your breathless and jingoistic screed, they are selling a second rate product. After all, it took Hyundai twenty years to figure out that what worked on the Han wouldn’t work on the Mississippi. How long do you suppose Samsung’s learning curve would be?

  • R. Elgin

    Talking of state-managed paranoia, the Joongang Ilbo and other government news outlets talk like so:

    For a safe G-20 Summit, foreigners who are suspected to have criminal backgrounds will need to go through fingerprint identification,” said an official at the Justice Ministry. The news (fingerprinting foreigners early) also comes as the nation is on full alert over foreigner identification following reports last week that two Pakistani men suspected of being members of the Taliban snuck past the port authority in Gunsan, North Jeolla.

    further justified by a fallacious comment

    . . . There has been an increase in the number of terrorist and insurgency activities in various parts of the world. Coordinated bomb attacks killed 48 in Iraq last weekend and suicide bomb blasts in a metro station in Moscow on Monday claimed 39 lives. . . . Recent trends in terrorism suggest that attacks senselessly strike a target without specific purpose.

    Comments like this are not really valid: there may be more bomb attacks in the world but not in Korea because South Korea does not brutally occupy a territory — as the Russian Federation does in Chechnya — or start wars in Iraq. The two alleged Taliban members were not actually “members” of the Taliban organization” though they were reportedly force to undergo Taliban training for a little while1. Neither did they “sneak past the port authority”, they simply came into South Korea as many other foreigners might. This sort of reporting is more like a kind of government-sponsored “mad cow” campaign, where half-truths are as good as whole.

    Perhaps the real problem is counterfeit Korean passports can not always be detected by the government and fingerprinting is their answer to detecting counterfeit passports so as to verify the passport and holder match. Naturally, this is useless for foreigners who hold foreign passports (not Korean) but might be useful for an eventual global passport/fingerprint database that could be used by member countries.

  • http://www.xanga.com/wangkon936 WangKon936

    This guy tries to rebut the Economist article:

    http://www.koreatimes.co.kr/www/news/opinon/2010/04/137_64310.html

    He is wrong… Chaebols still do exist in Korea, albeit in a much milder form than in 1997. It’s just like Japan after WWII. The end of the war didn’t destroy the zaibatsu, it changed them into the keiretsu.

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  • flybeye

    Apple is the kleptocratic- get real