Opposite Recommendations

McKinsey aroused a controversy over the opposite recommendations to those made three years ago on the business direction of Daewoo Shipbuilding and Marine Engineering (DSME).
McKinsey aroused a controversy over the opposite recommendations to those made three years ago on the business direction of Daewoo Shipbuilding and Marine Engineering (DSME).

 

It has been found that global consulting firm McKinsey which recommended Daewoo Shipbuilding and Marine Engineering (DSME) had concluded that the company should focus on offshore plants three years ago, giving rise to a controversy.

According to the shipbuilding industry on October 18, DSME received management consulting from McKinsey in the first half of 2013 in order to make mid- to long-term management strategies. At that time, McKinsey advised DSME to dial up the proportion of its offshore plant business as the business was expected to continuously grow by 2020.  

“DSME has to differentiate the commercial ship sector via choices and focuses and concentrate on offshore plants,” McKinsey suggested to DSME, pointing out its lack of the capability to design offshore plants.      

Such consulting results led DSME to sign a contract to open an office for the nurture of offshore plant designers in the Magok Industrial Complex in the second half of 2013. 

But one year after the release of the report, a drop in international oil prices ceased new offshore plant orders, aggravating offshore business conditions. McKinsey’s prediction turned out to be completely wrong. In the offshore plant sector, DSME chalked up US$ 10.5 billion in orders in 2012, US$ 8.1 billion in 2013 and US$ 2.7 billion in 2014 and none in 2015. Offshore plant orders received during this period have been marked as one of the major causes of DSME’s insolvent operation.

It is said that, three years later, this year, McKinsey which carried out consulting on Korea’s three largest shipbuilders at the request of the Korea Offshore & Shipbuilding Association recommended DSME to completely withdraw from the offshore plant business, saying that DSME could hardly make money in the offshore plant business. The consulting firm recommended DSME to shut down the offshore plant business after completing already won contracts and leave the commercial ship and special ship business divisions only.

“McKinsey did not predict situations only two to three years later. They may be good at providing consulting on internal management. But we are not sure if McKinsey can predict future market situations well as they are not a specialized analysis organization,” complained those working in the shipbuilding industry. Earlier, DSME clarified its position not to accept the report, openly criticized it, saying, “The report was wrong about basic supposition and defied rationality.” 
 
McKinsey aroused a controversy by demanding that the Big 3 structure in the shipbuilding industry be changed into a Big 2 one, arriving at a conclusion in a draft of its shipbuilding industry restructuring consulting report that DSME will hardly survive. 

 

 

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