Analysis Of Chaebol In Korea

Chaebol

The “Chaebol” is native to Korea and is a unique form of a family-owned business conglomerate. The Chaebol has a centralised ownership structure where founding family members controls the business, where the chairman has power over all operations. Member firms are called Kyeyol and falls under the control of the central planning office, which is controlled by the chairman. Cross-equity holding by family members and complex systems of interlocking ownership of member firms enables control and allows for decisive and prompt decision making. This tight ownership structure allows for active internal market transactions within the groups, where subsidiaries can provide financing, guarantee loans and provide collateral for affiliated firms. The related party transactions that is afforded by the Chaebol, allows for profit sharing, discounted or below market sales to group companies and coverage of losses but related group members(2013, Park and Yuhn 2012).

The Chaebol system however lacks external monitoring and because of this firms have been allowed to expand both vertically and horizontally. Chaebols are ingrained in Korea’s economy, and approximately 30 Chaebols controls 40 percent of
Heavy emphasis is placed on cultivating relationships and these must be maintained and contains reciprocity and elements of obligation. For multinational agencies, the concept of on-going two-way relationships is important. This by many authors can be likened to bribery, as relying on personal favours in a bureaucratic, centralised state with a relatively weak legal system may be the only avenue of getting the job done. This can be a big disadvantage for a company whose business principles prohibits any form or bribery. In addition, choosing the wrong contacts or not being able to form personal relationships with influential Chinese officials, will mean less business