Chaebol Falling
According to market capitalization data on the top 500 global companies for the last 10 years, the number of Korean companies in the rankings has decreased dramatically from eight to two, while the amount of Chinese companies has quadrupled from 15 to 60.
During a press conference held at the PyeongChang Forum on July 24, Kwon Tae-shin, president and CEO of the Korea Economic Research Institute (KERI), said, “GE of the U.S. and Hitachi of Japan are not the same companies we knew. Rather than keeping up with these companies, which seek change by diversifying their business portfolios, our industry is 'on a cliff edge' right now.”
According to the latest Bloomberg analysis for the last decade from 2005, only two Korean companies ― Samsung Electronics and Korea Electric Power Corporation (KEPCO) ― were "top 500" global firms in terms of total asset value as at July 22 this year, compared to eight in 2005. In contrast, 60 Chinese companies, including those headquartered in Hong Kong, were put in the list, compared to 15 during the same period.
The number of Japanese companies has decreased from 57 in 2005 to 33 this year. However, the figure has remained steady after 2010 and rather slightly increased after 2012. In addition, Korean companies are representing a rapidly-decreasing share of total market capitalization of the top 500 companies, accounting for as low as 0.5 percent.
Also, the country showed a decline in the number of global 500 firms, considering the economic size by each country, and the nation’s leading companies’ business portfolios are also too plain compared to rival nations.
Kwon said that we should overcome such an industrial crisis through aggressive business reorganization and innovation. He also cited GE as an example, saying, “GE, whose mission is general electric, is not the same company we knew. It has changed to such an extent as to change its name from General Electric to Advanced Electric.” In fact, GE has completely changed its existing business, including home electronic appliances, to advanced industries, including industrial Internet, and new industries that realize dreams, including a brilliant new factory.
Kwon also added, “In order to succeed in diversifying business portfolios just like the leading companies, Korean companies need to carry out long-term investments. For this, a stable business environment should be created.”
In particular, he said that the advantages of the ownership structure that had long been kept by local chaebols, or conglomerates, should be credited and highlighted. This was because Korean style ownership structure could help companies start new businesses with long-term and risky investment. Kwon said, “It is hard to find advanced products, which can lead the global market, in our industry, except for Samsung Electronics’ semiconductors. Samsung’s semiconductors are also a successful case of the owner’s long-term strategy and investment.