Samsung and Hyundai: The Frontier of Korean Entrepreneurship (Part 1)

 

Hello, guys. How have you been? The weather is repeating cold and sunny. Take care of yourself and stay warm! Today, I would like to start an article with small quizzes. You should answer the names of the two figures.

Number one! Who is he?

If it is too easy, let’s move to the next one.

Number two!

Hard? Or easy?

The answers are… the first character is Lee Byung Chul (이병철), the founder of Samsung Corporation (삼성) and the second character is Chung Ju Yung (정주영), the founder of Hyundai (현대).

I have seen many foreigners using Samsung Galaxy (삼성 갤럭시) series or driving Hyundai automobiles (현대차). But many of foreign students do not know about the CEO of the two companies and their history. In Korea, Samsung and Hyundai are more than just electronics or car manufacturing businesses. They are operating in a much larger scale and have had significant impact on the nation’s economy. Therefore, I would like to have time for introducing the founding history of the two companies. Today, I will be starting off with Samsung’s Lee Byung Chul. The next article will be about Chung Ju Yung of Hyundai, then I will close up the series by suggesting the present evaluation of the two entrepreneurs.

 

<Lee Byung Chul 이병철>

Joseon (조선), the monarchic dynasty before the present Republic of Korea (대한민국), lost is sovereignty to Japan in 1910. Lee Byung Chul was born amid the chaos of this colonial era. He was married when 16, then moved to Japan for study. He studied politics and economics in Waseda University in Tokyo, but did not finish his degree because of the lack of academic interest and illness.  After he came back to Korea, Lee started a Rice Mill Cooperation in Masan (마산). In the beginning it was successful, so he started to receive bank loans and invested on real estate. but short after, the Japanese government put restrictions on bank loans because of Sino-Chinese war.

After the Sino-Chinese War, Lee moved to Daegu (대구) and started a trucking business named Samsung Trading Company. It was the historical moment when the forerunner of Samsung today had been established. In 1939, he also had done a brewing business for a while and accumulated capital.

Then Korea was liberated in 1945; he moved back to Seoul. In 1953 and 54, he started  Cheil Jedang (제일제당) (sugar and flour production) and Cheil Textile (제일모직). Cheil Jedang respectively, which paved the way to today’s CJ Group.

While Lee Byung Chul started the new businesses, he encountered two big questions.

The first question was “How to install the machinery?” When Lee Byung Chul researched for factory and machine construction, he brought machines from Japan. but, because of Anti-Japanese Policy, Japanese technicians who had all the knowledge was not allowed to enter the country, so he had hard time operating the factories in the beginning.

The second question was “How to target domestic market?” Right after the war, Korea economy depended on imported goods. Cheil Jedang and Cheil Textile products were priced much cheaper than the British or American imports, but they are not sold well because the citizens distrusted the quality of the domestic products. But fortunately, Rhee Syngman government (이승만 정부)put import restriction on textiles a few years later, then the citizens began to use Lee’s products, and that was the turning point for his business.

In 1960s, Park Jung Hee’s (박정희) military forces ruled the country, and in this position change process, many chaebols (재벌) (Korean conglomerates) including Samsung was accused of illegally accumulating company wealth. Park’s government thought that these companies became rich because of the unlawful support of the former government.

However, Lee was an excellent negotiator, so persuaded Park Jung Hee, saying, instead of imposing fines to the companies, let them invest on new business, and return profits to the government. That was the point where Samsung started to grow in size dramatically. Samsung had M&A with banks, insurance, department store (current Shinsegae (신세계)) and real estate (present Everland (에버랜드) in Yongin (용인)). The famous Samsung Electronics (삼성전자) was established in this era as well. But there was a downside; because of the social pressure and the authoritarian regime, Lee had to offer parts of his businesses to the government.

After entering 1970s, Lee started to invest on petrochemical, shipbuilding, and during the 1980s, Samsung expanded into digital industries, such as semiconductor and computers.

Also, it started to invest in education and social sectors. The baseball team organized in this period is Samsung Lions (삼성 라이온즈). Ho-Am Art Museum (호암미술관) in Yongin, Samsung economic research institute were founded in this period as well.

Lee Byung chul died in November of 1987. A month later, Lee Gun Hee (이건희) was inaugurated as his successor. Receiving his father’s heritage, Lee Gun Hee invested more on electronics and exporting. Also, he focused on building research centers and affiliates separations among the Lee family also occurred 90s and 2000s.

Lee Gun Hee emphasized quality improvement through the declaration of New Management. In this conference, he insisted “change everything except wife and children.” Samsung survived the IMF crisis in the late 1990s, and so far has increased its brand value globally.

Then since 2014, Lee Byung Chul’s grandson, Lee Jae Yong (이재용) has been running as a vice chairman of Samsung Electronics. Most people assume that Lee Jae Yong will be the next CEO since his father, Lee Gun Hee has not shown up to the public for a long time. Thanks to the Korea’s traditional family ownership, Lee’s other family members are taking part of other Samsung affiliates.

To summarize, besides being an excellent negotiator, Lee Byung Chul was a perfectionist. He was sharp but prudent in decision making, and tried to look for the future possibilities. He always appeared in formal suits to the public and tried to keep distance from politics, which is contrasting to Chung Ju Yung, who will be introduced later.

Hope this post gave you some insights on understanding the Korean culture and economy. See you next time!

 

Article by Sangeun from Korea, a Junior in Business Administration

 

Sources:

http://about.samsung.co.kr/about/history.do

http://www.samsung.com

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