Korea’s Major Corporations Turning into Diversified Businesses

Hyundai Steel recently declared that it would develop advanced textile materials used in automobiles. The Samsung Advanced Institute of Technology, in the meantime, is working on non-electronic future technologies such as biotechnology, medical equipment and LED lighting fixtures as well. 

It is difficult to figure out the business fields of SK Innovation only with the company’s name. Although many people are thinking that it is an oil company, it is also running business units developing and manufacturing automobile batteries, petrochemical goods, etc. Cheil Industries, which started as a textile company, is doing business in the electronic materials and water treatment industries, too. GS Caltex, one of the largest oil refinery operators in the country, is seeking to enter the textile industry. In short, an increasing number of companies are expanding their business into the fields they were not engaged in before, turning themselves into conglomerate companies in an effort to ensure future growth. 

The term of Conglomerate Company can be defined as an enterprise running multiple business units in different fields through the penetration of new sectors, M&A and the like. 

One of the examples is GE. It is doing business in a variety of sectors, including water treatment, energy management, aviation, transport logistics, healthcare and financial service. Conglomerate Company is a different concept from business lineexpansion in that the former’s purpose is to develop new business items and diversify business portfolios by entering new sectors. 

These days, global leading enterprises are transforming themselves into conglomerate companies at a rapid pace. Johnson & Johnson is expanding itself into non-pharmaceutical industries and Walmart has entered the manufacturing sector. The same trend is found in Japan, too. In particular, automobile and electronics manufacturers in the country are moving into completely different industries nowadays in a bid to cope with the growth limit. 

Under the circumstances, Korean enterprises are also busy seeking new business opportunities. For instance, LG Electronics is working on water treatment, solar cell and LED lighting technologies while POSCO, a leading steelmaker, has recently kicked off material development projects. Some heavy industry companies are developing wind turbines and engines and general trading companies are working on oil fields. 

“The trend is accelerating in Korea as more and more companies are going into new sectors for their future,” said the Samsung Economic Research Institute (SERI),continuing, “It is something different than the reckless business diversification of the past, which was solely to increase their size.”The Federation of Korean Industries (FKI) added,“Fields such as steelmaking, shipbuilding and automobile are approaching their growth limit with time, which means the necessity of the transformation into conglomerate companies is on the rise.”

The tendency is likely to create a whole new concept of competition down the road, that is, competitors being found in different industries. As an example, pharmaceutical companies may find themselves vying with not the other companies in the industry but Samsung Electronics that produces medical equipment and biopharmaceuticals. In the water treatment industry, construction and electronics companies may be in rivalry with each other. “The present trend will change the definition of competition as we know it,” said an industry insider, explaining, “For example, GE can compete with Korean companies in various fields over time.”