Samsung's Success in TFT-LCDs

When Samsung entered the TFT-LCD industry in 1989, the Japanese screen makers reigned over the global market with more than 90 percent of the market share. Samsung was in a follower position in the early 1990s, and Sharp had the basic proprietary technology. Samsung could not generate any revenue for the next five years, but continuously invested since it foresaw the emerging opportunity with the flat panel displays.

Again, as was the case in the semiconductor business, Samsung pioneered among the Korean screen makers; other Korean firms followed Samsung’s lead after observing Samsung’s success. LG Phillips LCD also enjoyed almost equivalent levels of success.

Samsung TFT-LCD became a worldwide leader by gaining the top global market share within a short timeframe. How has it achieved its success?

Samsung climbed up to the leadership position by employing several undertakings…

For instance, Samsung has successfully found new applications for its panels, thereby opening up new markets…

Samsung has improved both production and product technology through…

Samsung reduced production cost through…

Samsung was nimble to invest heavily on the next substrate generations..

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Similarities and Differences between Semiconductors and TFT-LCDs

Similarities

The TFT-LCD business was built upon process capacity gained from semiconductor technology.

Fab capacity was a critical success factor in both the TFT-LCD sector and the semiconductor field...

The fabrication process of TFT-LCD is similar to that of semiconductor...

As was the case in the semiconductor business, although Korean firms did not own the basic proprietary technology, they were able to reach the top position in the TFT-LCD business by employing the fast-follower strategy...

Differences

The TFT-LCD business is different from the semiconductor business in that it has longer production cycles and a different cost structure...

Korean screen makers entered the TFT-LCD industry at its growing stage, while the Korean chip makers entered the semiconductor business in the middle of its mature stage...

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Success Factors in the Korean TFT-LCD Industry

∙ Successful Fast Follower Strategy

Samsung has pursued the “fast follower” strategy in the flat panel industry as has been the case in the semiconductor sector...

∙ Strategizing around the Industry Dynamics and Trajectories

For instance, they had successfully searched for alternative technologies such as PDP with confidence in growing market possibility. To do so, they had to read technological trajectories and estimate their likely market impact...

∙ The Market Sensing Capability and Timely Investment

For example, while the market leader, Sharp decided to invest in 11.3 inch TFT-LCD, Samsung invested in 12.1 inch panel to be competitive in terms of price, consumption power, and resolution. This strategy turned out to be a huge success.

∙ Advanced Countercyclical Investment

The Koreans screen makers’ countercyclical investment to build capacity in next-generation fab lines also paid off...

∙ Technological Advancement in both Process and Product Technology

The Korean screen makers have continuously achieved their technological advancements in TFT-LCDs in terms of production and product technology...

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Exploiting Opportunities during the Flat Panel Display Downturns

Fabricating flat panel displays requires high level technology and capitals to build and equip a fab. Thus this young flat panel business had not been easy for new entrants to enter...

The TFT-LCD business has shown the cyclical industry pattern. Along with the cycle of upturn and downturn, profits have risen and fell. The cycle of the flat panel display industry is called the “crystal cycle.” Although the industry was relatively young, it had demonstrated the cyclical character with distinct upturns and downturns. These fluctuations presented a unique opportunity for new entrants to penetrate the entry barriers during a downturn, which was extremely hard to get in, otherwise.

The Korean screen makers entered the TFT-LCD business during downturns and took advantage of resource availability in this period.

The two Korean firms, Samsung and LG effected the entry during the second downturn in 1995-1996 although Samsung started the TFT-LCD business in the early 1990, generating no revenue for the next 5 years; other Taiwanese firms entered during the third and fourth downturns...

Both Samsung and LG enabled to acquire the needed technology to build panels in the first downturn in the FPD industry in 1993-94 without licensing...

As was the case in the semiconductor sector, timing in terms of entering business or investing was very critical in the flat panel industry. Accordingly the screen makers had to make strategic bets regarding timing and investment scale for fab capacity. Samsung did it successfully...

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Korea's Success in the Flat Panel Display Industry

The flat panel display industry has presented another opportunity for Korean high tech firms to become the world leaders within a short timeframe. They have done so by seizing the disruptive opportunity in the growing stage of the industry. Although they were the latecomers without proprietary technology when they entered the display business, they quickly became top contenders. The flat panel display industry shares many similar features with the chip sector, which has worked to their advantages, while facing similar challenges. It has differences as well. The success factors in the flat panel display industry and comparisons with the semiconductor business would be addressed in the next posts.

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Samsung's Challenge in Semiconductors

There are many factors involved in the success of a private enterprise. It is intertwined with internal capacity as well as external conditions. Samsung has done a tremendous job of being a formidable chip producer in short time period... Samsung’s huge success in DRAMs has also been linked to Korea’s unique industrial structure and export-led growth strategy...

The semiconductor industry constitutes a large portion in the Korean economy than it does in the United States or Japan – about 15 percent of exports. The Korean economy has been very exposed to fluctuations in semiconductor prices due to its boom and bust industry cycles... Samsung Semiconductor has been also exposed to changes in semiconductor prices. The semiconductor business accounts for a larger share of its entire business portfolio...

Despite its phenomenal success in the semiconductor business, Samsung faces daunting challenges. As Samsung enters the upper stage of value chain with enhanced technological capabilities, it needs to tackle many formidable issues. One of the key challenges Samsung faces in the chip business is...

Given the short history of Korea’s semiconductor industry and poorly developed NIS, Samsung may not tackle its entire challenge on its own. Policies and initiatives at the national level may be needed to intervene. Although this has been discussed for some time, the things have not changed much.

A question may be raised as to whether its semiconductor development model and trajectory were done at the expense of other economic development opportunities. Samsung’s semiconductor business generated the development model that has far reaching consequences in the Korean economic scene...

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The Development Trajectory of Samsung Semiconductor after the 1997 Crisis

The chip business followed the overall strategic direction of Samsung. Samsung’s efforts to diversify chip products intensified in the wake of the 1997 Asian financial crisis. As Samsung has broadened its product range from simple consumer electronics and home appliances to sophisticated information and communications equipment, computers and peripherals, it has diversified its memory chip product range accordingly. In order to ward off the profit loss whenever overcapacity problems arose due to DRAM chip makers’ fierce competition, Samsung had to come up with other types of memory as part of its product portfolio. Furthermore, Samsung purposefully endeavored to enhance chip product development in the non-memory sector...

In diversifying chip products, Samsung’s strategic marketing skills grew immensely...

This success represents Samsung’s multiple innovation capabilities based on the fast product investment decision and the anticipation of new product applications...

Samsung has been well known for its proactive approach in understanding customers’ needs and coming up with product as well as production strategies to meet those needs...

Samsung has pioneered a new business model with its world-class high tech manufacturing capacity...

Samsung has aimed to become the Number One in the entire chip market, but it has not been easy...

Samsung declared to move beyond DRAMs at the Tokyo conference in the early 1997. In order to expand into the non-memory areas, Samsung undertook several initiatives...

It is true that it is harder to catch up with the design capacity of non-memory chips compared to that of memory chips, and some has argued that Samsung doesn’t need to waste its investment money on the System IC where it doesn’t have strength. However...

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Developing Multiple Capabilities at Samsung Semiconductor

In enhancing its market power, Samsung has developed multiple capabilities. Its success in semiconductors stems from multiple factors including manufacturing competence, R&D activities, strategic decision making skill, and organizational processes...

In discussing Samsung’s success in semiconductors, especially in the memory business, the technological aspect has often been stressed. However, in the course of becoming the top player in the memory market, it has accumulated not only technological capabilities but also marketing capabilities in targeting its most profitable segments...

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Exploiting Opportunities during the Semiconductor Downturns at Samsung

The semiconductor industry has gone through its notorious boom and bust cycles since the early 1970s. It is interesting to note that the new entrants were able to enter the semiconductor business during the downturns. Securing the needed technologies and acquiring technological capabilities become easily available during the downturns since specialized human capital becomes available. Samsung exploited the disruptive market opportunities during the semiconductor downturns. Samsung was able to acquire the needed technology and made strategic bets with massive investments and next generation chips...

The case of Samsung Semiconductor demonstrates that understanding and utilizing the cyclical patterns of the industry and organizing activities accordingly were effective ways for the new comers to breach the entry barriers...

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Reducing the Time Gap at Samsung Semiconductor

In the course of technology development, Samsung narrowed the time gap with advanced chip makers in terms of product development and mass production...

For example, Samsung completed the circuit design of the 1M DRAM in March 1986 and produced a working good die in July 1986. This accomplishment narrowed the gap with the Japanese pioneer from two years for the 256K DRAM to one year for the 1M DRAM. In 1988 Samsung developed the 4M DRAM and narrowed the technological gap in 6 month difference...

Samsung developed the 256M DRAM ahead of Japan in 1994, becoming the leader in DRAM design. Samsung developed the world’s first 1G DRAM in 1996. Samsung was the first company in the world to market all three, the 64M DRAM, the 256M DRAM, and the 1G DRAM.

Throughout this process, technological development at one stage laid an invaluable platform for the subsequent technology development. Samsung’s experience in consumer electronics provided a platform for entering the production of discrete semiconductor devices. This laid a platform for assimilating LSI technology, subsequently for assimilating VLSI technology...

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Various Modes of Technology Transfer at Samsung Semiconductor

Lacking any technological base, Samsung initially had to rely on foreign sources, employing the various modes of technology transfer. Samsung’s path of technological capability accumulation in semiconductors has centered both on production and design technologies, developing the solid in-house R&D capacity. Samsung has accumulated tacit and explicit technology knowledge, and the temporal pace of technology catch-up was shortened...

Samsung has successfully employed various mechanisms of capability accumulation: reverse-engineering, reverse brain drain, licensing agreements, M&A and strategic alliances with competitors...

The informal mechanism seemed to be more important than the formal mechanism in gaining tacit knowledge which played an important role in assimilating and improving transferred knowledge...

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Samsung’s Success in Semiconductors

Despite many criticism and skepticism when entering the semiconductor sector, Samsung has surprised the world in the memory chip business. It only took a decade for Samsung with no prior experience in semiconductors to become the top contender in the worldwide memory chip sector.

Samsung’s semiconductor business represents a microcosm of the growth process of Korea’s high tech industry. Samsung’s entry into the semiconductor business indicates a significant shift toward high-tech development in Korea’s overall industry landscape.

When Samsung had to compete on the base of cost advantage and weak technological competence, Samsung had to enter a mature chip business, or, DRAM. Facing reluctance to transfer technology to Samsung, Samsung had to find a way around securing the technology. It identified the U.S.-based financially troubled companies. At the same time, it intensified its R&D efforts both in process and product technologies...

Korea’s semiconductor business took its first steps in the 1960s...

Samsung’s entry into the semiconductor business was heavily influenced by the determination of the late B.C. Lee, founder of the Samsung Group, despite unfavorable external conditions and lack of internal technological competence. The late chairman B.C. Lee thought Samsung needed to secure semiconductor if it wished to further electronics products after experiencing shortage...

Samsung’s choice of developing memory chips, especially DRAMs was strategic, considering its competitive position and technological competence...

The memory business required lumpy investment scale. Since Samsung could not accumulate funds on its own in its early days, it had to borrow for investment...

Samsung has pursued technological accumulation successfully in the memory area.Its technology development trajectories in DRAMs show the reverse pattern of innovation process from...

Samsung’s technological progress took place during the 1980s. Samsung had to acquire production technology first. Samsung became the world leaders in the DRAM market by the early 1990s by following the footsteps of Japanese semiconductor firms...

Samsung sequenced the assimilation of transferred technology from the easiest to the progressively more sophisticated: from assembly processes to process development, then to wafer fabrication and inspection...

When Samsung successfully developed the 64K DRAM chip, making Korea only the third country in the world to produce DRAM chips after the U.S. and Japan, it triggered the entry of other Korean chaebols into the semiconductor industry. Samsung Semiconductor spearheaded a path for other Korean companies to follow...

During the 1990s, Samsung became confident in major technological categories: fabrication, design, assemble, and testing technology...

Since the DRAM business is characterized by its competitiveness based on scale of economy with limited product lines, cost was the key competitive factor. Samsung hence religiously pursued cost competitiveness by increasing yield...

Samsung not only produced a variety of improved versions of DRAM but also continuously developed next generation DRAMs, producing 64M in 1992, 256M in 1994 and 1G DRAM in 1996. Since Samsung developed and mass produced the world’s first 64M DRAM in 1992, it has secured its top position in the memory market...

Although memory chips in the early days of chip development were strategically chosen, Samsung was well aware of the high market risks of memory products in the semiconductor industry. After all, the non-memory chip business constitutes more than three quarters of the worldwide chip market. Samsung with significantly enhanced capabilities and success in the memory product field endeavored to expand into the non-memory chips, but its efforts did not result in fruitful outcomes in the 1990s...

In the case of semiconductor industry, the role of the Korean government remained minimal. Even when the Korean government stepped in, its role was limited...

Samsung purposefully created a crisis to expedite technological learning...

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The Case of Samsung in Semiconductors

When discussing the semiconductor business of Korea, Samsung, a Korean conglomerate, occupies center stage. Samsung has been the pioneer and front runner among the chip companies in Korea. When Samsung entered the semiconductor business in 1970s, its name was hardly known in the global market. It had no prior experience in semiconductors and had only limited experience in electronics as OEM maker. Now Samsung has emerged as a global leader in the memory chip business. However, Samsung has faced formidable challenges as it advances in this field.

The case of Samsung is interesting in that Samsung not only achieved phenomenal success in the chip industry but also made it in the context of the unique political leadership and financial system. The case of Samsung in semiconductors reflects the development mode of Korea, and its business model is quite different from that of Taiwanese chip companies.

I’ll post summaries of a series of case analyses on Samsung in semiconductors in the following order:

∙ Samsung's Success in Semiconductors

∙ Various Modes of Technology Transfer at Samsung Semiconductor

∙ Reducing the Time Gap at Samsung Semiconductor

∙ Effective Entry of Samsung Semiconductor during the Downturns

∙ Developing Multiple Capabilities at Samsung Semiconductor

∙ The Development Trajectory of Samsung Semiconductor after the 1997 crisis

∙ Samsung’s Challenge in Semiconductors

The Role of Government in the Korean Semiconductor Industry

Overall, the Korean government has supported the development of the semiconductor industry. And yet it has played a somewhat limited role even though it seems to have had intention to play a proactive role. The case of the semiconductor industry is interesting in that private firms seem to have led the industry development and the government has followed their lead. Unlike other industry development such as steel and mobile phone in which the Korean government took the initiative, the semiconductor industry was initiated by private firms in the early stage of entry into the semiconductor business requiring lumpy capital investment and high technology.

During the mid 1960s and mid 1970s...

With the launch of the 4th 5 year plan (1977-1981) in the late 1970s the government began to seriously pay attention to the semiconductor industry and continuously did so throughout the 1980s in an effort to diversify its industry portfolio, previously focused on the HCI...

In the early 1980s, the government policy shifted its policy direction from...

From the mid-1980 through the mid-1990...

In the wake of the Asian financial crisis in 1997, the Korean government pursued the so-called “Big-Deal” policy...

...Although the government has made some effort to amend the situation, its piecemeal approach and inconsistent policy measures have not spur the advanced development of much-needed technology...

Note: A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.

Challenges in the Korean Semiconductor Industry

Although Korean has achieved considerable success in developing the semiconductor industry, it faces a number of difficult challenges:

1. Korean semiconductor firms have a poor track record with diversification into non-memory. Korean semiconductor firms need to move beyond memory into other chip markets such as specialty logic chips...

2. Lacking design expertise, Korean semiconductor firms have paid lumpy royalties...

3. The major semiconductor equipments have been imported from the United States or Japan. Moreover, Korea remains weak in materials technology...

4. The Korean semiconductor industry has been dominated by chaebol semiconductor firms that have utilized their capital, economies of scale and production facilities...

5. The locus of strategic direction and R&D orientation for the future of the Korean semiconductor industry seem to reside in Korean semiconductor firms, not in the Korean government...

Note: A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.

Success Factors in the Korean Semiconductor Industry

The following key success factors in the Korean semiconductor industry can be identified:

1. Despite these obstacles and grim prospect for the semiconductor industry, Korean chaebol semiconductor firms decided to make big bet on semiconductors and entered the semiconductor business. This was possible due to Korean style corporate governance and investment decision making...

2. In a way, the prosperity of DRAM reflects the Korean development model characterized by the chaebol system...

3. Korean semiconductor firms have successfully pursued catch-up strategy by turning disadvantages of latecomers into advantages...

4. Since DRAMs with commodity-like features do not require sophisticated design technology like non-memory chips, it was proper decision for Korean semiconductor firms to enter the semiconductor business with DRAMs...

5. Transferring the technology and developing the production skills in the early entry into the semiconductor business was not easy. However, during the relatively short history, the Korean semiconductor firms achieved rapid technological development in high-tech manufacturing and design technology, especially in the memory product field...

6. Korean firms have employed appropriate modes of technology transfer ranging from licensing and OEM partnership to reverse brain drain and strategic alliance...

7. Korean semiconductor firms have pioneered new approaches to the memory products...

8. Korean semiconductor firms have built diversity into product lines...

9. The Korean government played somewhat limited but supportive roles in the development of the semiconductor industry...

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The Development of the Korean Semiconductor Industry

The semiconductor industry has occupied a big portion of the Korean economy. Semiconductors, particularly DRAM, have been one of the major export items for more than ten years...Korean semiconductor firms have become the leading chip makers in memory, especially in the DRAM market.

The Korean semiconductor industry began in 1960s. During the mid-1960s to the mid-1970s, foreign investment was the driving force in the development of the Korean semiconductor industry...

During the 1970s, the HCI drive and an unstable semiconductor supply from Japan propelled the localization of technology...

The rapid development of the Korean semiconductor industry started in the early1980s when chaebols took the semiconductor business seriously...

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Capitalizing on Digital Technology in Korean High-Tech Firms

Korea as a late developer strived to make high-quality products at a low cost in the past. Even after Korean firms accumulated a technological competence to a certain extent, they followed the technological leaders’ footsteps in the established market which had few significant growing opportunities because this approach involves less risk and cost.

With digital technology, Korean firms found a way to leap into the new growth market. They were able to exploit the growth opportunities with innovative digital products in new growth markets. That is, since Korean firms could foresee the technology transition from analog to digital, they were able to bring leading edge products to markets...

While Japanese have been rather passive in investments for digital technology, Korean firms such as Samsung and LG continuously invested on it...It has been able to transfer from following Japan’s lead at the low end of the market to leading of digital products by the high end in some product areas...

Note: Only a glimpse of the analysis is posted.

Progress of Marketing Capacity: The Case Study of Samsung

The case of Samsung symbolizes the progress of marketing skills in the process of company growth. When Samsung concentrated on OEM business, its international marketing capabilities remained weak. During the early 1980s in which Samsung maintained close relationships with OEM buyers such as GTE, Toshiba, IBM, Hewlett-Packard, RCA, and Crown Corporation, its clients did not provide Samsung with leading-edge product design. Hence Samsung could not upgrade its internal product design capabilities, confining itself to low-end market segments. In 1980s, major innovation activities were centralized, leaving product design and development activities for organizations in Korea, and this trend continued even in 1990s. As a result, the foreign affiliate failed to upgrade overall marketing capabilities. To decentralize some of its innovation activities and upgrade its product development capacity, Samsung established foreign design centers abroad. In the late 1990s, Samsung decentralized product development activities to specific region (e.g., Indonesian refrigerator affiliate) in order to carry out the product designs closer to individual markets.

In the IMF crisis, Samsung realized that it could not compete by price any longer due to rising labor cost and competition from lagging countries like China. Accordingly, Samsung transformed from a maker of low-end “me too” consumer electronics into high-value products. In the wake of the Asian financial crisis, Samsung began a major restructuring effort by changing the focus of its products. Cost was slashed by 30 percent, and low-performing divisions were sold off. Importantly, Samsung decided to take a bet on high-end products with aggressive marketing strategy.

Samsung launched one of the world’s most intensive rebranding campaigns. Samsung came to realize that brand was one of the most important assets and was determined to establish its brand to grow. Samsung developed and marketed breakthrough high-end products such as the most advanced television receivers including flat-panel sets, rear-projection sets, and mobile phones. Samsung succeeded in enhancing its premium brand image by using these products as marketing tools.

Note: Only a glimpse of the analysis is posted.

Coupling Marketing with Technology in Korea

In the case of Korea, the technological capability and marketing competence have been intertwined in the process of industry development. As Korean high-tech firms gained technological and marketing capabilities, their innovation capacity to convert market signals into innovative new products has been enhanced. This coupling process was a critical factor for their remarkable leap into the high-tech electronics industry of the digital age. Armed with marketing and technology skills, they have been able to take a bet on the new growth products such as multi-media styled phones and MP3 players.

Although leading Korean electronics firms such as Samsung and LG have depended on foreign chipset and operating software system, they have succeeded in satisfying the customers’ needs for smaller, lighter, and higher-quality cell phones by developing fashionable products with multiple functions such as handsets with MP3 players and camera phones. In other words, they bridged the technical and consumer experiences by successfully bringing them to the global marketplace.

Note: Only a glimpse of the analysis is posted.

Marketing Learning in Korean High-Tech Firms

As much as technology followers go through a series of technology learning transitions, they might need to internalize marketing skills progressively. In the process of technology development, Korean high-tech firms have enhanced marketing skills progressively. That is, their marketing strategy ladders from simple marketing of selling low or mid-end products in the established markets transformed to holistic marketing of high value-added product planning, branding, and channel marketing in new growth or niche markets.

Note: Only a glimpse of the analysis is posted.

Exploiting Industrial Design Advantage in Korea

A key role for R&D in technology-followers can be used to build independent industrial design capability. That is, with aesthetic design superiority, technology-followers can capture the higher value-added market segment. This is exactly what the Korean electronics firms have succeeded to move up the economic food chain.

LG electronics established an in-house design institute for the first time in the domestic industry. European design center was set up in Dublin, Ireland in 1991 and expanded its global design network by opening more centers in New Jersey and Tokyo in 1993, Beijing in 1998 and California in 1999. Samsung electronics also doubled its number of designers to 300, opened four design bureaus in U.S., Europe and Japan, and began picking up the international design awards. This move has reflected Samsung’s belief that products should be designed and developed in a way to reflect local customers’ tastes and preferences.

Note: The rest of the analysis won’t be shared due to the proprietary nature of the content.

Korean SMEs: The Case Study of Humax

The most successful case among Korean venture firms up to this point is Humax. Humax is one of the world’s leading digital set-top box makers and manufactures various digital consumer electronics products including LCD TVs. It was founded in 1989 by seven college graduates from Seoul National University and listed on KOSDAQ in 1997. It has established subsidiaries or R&D centers abroad. Humax has focused on the global market since its start because it thought it had no chance of becoming a competitive player in the domestic market competing against chaebols. Humax has 90% of sales in overseas market.

Note: A part of case analysis on Humax is shared due to the proprietary nature of the content.

Korean SMEs: The Case Study of Medison

Medison specialized in ultrasonic equipment was one of the most famous start-up SMEs. Lee Min-Hwa founded this company in 1985 with six other doctoral candidates from KAIST. With determination and entrepreneurial spirit, it made Korea’s first ultrasound medical equipment and became a symbol of the most successful venture firm. Medison focused on R&D driven, niche market specialization by developing low-priced, small and portable ultrasound products. It expanded its global sales network over 50 countries with 150 dealers worldwide.

Note: A part of case analysis on Medison is shared due to the proprietary nature of the content.

Characteristics and Challenges of Korean SMEs

In order for Korea to move on to the next level of economic value chain, Korean firms should build on the acquired strengths and momentum. SMEs as well as chaebols should take part in this transformation process. Korea has done well in such high-tech industries as memory chip, display, mobile handsets, and high-tech consumer electronics. Korea, however, needs to upgrade its industrial structure and venture into the higher-value added high-tech fields. The role of SMEs in the economic landscape of Korea and the issue of how to nurture them may need to be discussed in this context.

New start-up companies are called venture firms in Korea. This is rather ironic in that it sounds like venture capital suppliers in the Western sense, but the venture capital system is not well developed in Korea. Venture capitalism has been mostly regarded as a means for money making within the short time framework.

Note: The rest of the analysis won’t be shared due to the proprietary nature of the content.

The Growth Trajectory of Korean SMEs

Although chaebols dominated the Korean business landscape in the past four decades, Korean SMEs have played a vital role as adaptable actors in the Korean economy. Even if the number of SMEs increased rapidly in the aftermath of the Asian financial crisis, they were not born overnight in the middle of the crisis. The first generation SMEs began after Korea experienced Japanese colonization. Most chaebol founders started their businesses as entrepreneurs at the time of liberation. They were tough and resilient, although on a small scale. They have survived by creating value-added in the course of growth.

Korean financial policy was biased in the favor of chaebols during the 1960s and 1970s and did not support SMEs. Financial policy bias started to change in the early 1980s under the president Chun Doo Hwan. The government pursued policies favorable to SMEs including better access to bank credits and started to pay attention to well-being of SMEs. The government even mandated all banking institutions to reserve a certain amount of credit for SMEs. The second generation SMEs began to spring up in the wake of the 1997 financial crisis, largely due to the government support. What differentiate the second generation of SMEs from the first one is their easy access to capital market and the educational background of start-up owners.

Note: The rest of the analysis won’t be shared due to the proprietary nature of the content.

Chaebols in the Korean Economy

Chaebols have been driving forces of the Korean economy by aggressively diversifying businesses and developing technological capabilities. They have retained the best-qualified people, absorbed the majority of national R&D resources and most of technology transferred from abroad and diffused it across subsidiaries, and globalized their R&D activities.

The Korean chaebol system is the direct outcome of the industrial policy of the Korean government. Chaebols with sufficient manpower and capital had expanded rapidly. The rapid expansion of chaebols was closely linked with the centralized financing mechanism supported by the government. The nature of the relationship between the state and chaebols was reciprocal...

Note: The rest of the analysis won’t be shared due to the proprietary nature of the content.

Technology Trajectories in Korean High-Tech Firms

The way Korean high-tech firms have accumulated their technological competence can be depicted in two fashions: technology imports and in-house R&D. The process of technology accumulation by Korean firms is also closely connected with their own business strategy and government policies.

Korean high-tech firms have employed a wide variety of methods of foreign technology transfer, ranging from foreign licensing to strategic alliances. As they go through the stages of development and growth, the mode of technology transfer has changed along with their business strategy. This technological capacity building process in Korean firms had also been intertwined with the direction and initiatives led by the Korean government...

Note: The rest of the analysis won’t be shared due to the proprietary nature of the content.

Indigenous Innovation Capacity and the Development Trajectories of Individual Firms

Innovation and learning have played a crucial role in Korea’s rapid economic growth. Individual firms’ innovation orientation varies along the continuum of growth and development. Korea was no exception.

Lacking technological competence, Korean firms had to pursue innovation strategies different from technology leaders. Korean firms have laddered from OEM to ODM, then OBM. As they moved along this continuum, they had to build indigenous innovation capacity. Indigenous innovation capacity is multifaceted, involving the blending of technology, marketing and management. Indigenous innovation capacity of a firm is a foundation for its competitive edge.

One of the biggest problems Korea has in terms of technological development is its heavy dependence on foreign supplied core components for electronic goods. Korean firms have been paying high license or patent royalty fees to foreign firms. To overcome this weakness, Korean firms have been trying to catch up on core components.

The Korean high-tech firms’ R&D efforts focused on improving upon foreign technology. When exercising this strategy, searching customers thoroughly for developing specific innovative products works as a core competence. As Korean firms gained technological and marketing capabilities, their innovation capacity to convert market signals into innovative new products has been enhanced. This coupling process was a critical factor for Korean firms’ leap into the high-tech electronics industry of the digital age.

A wide array of policy instruments can be used to nurture innovation and learning of high-tech firms. However, it is under debate that various policies of Korea such as technology policy and industrial policy have been appropriate for doing so. The Korean government may need to take a hard look at what kind of government intervention is necessary for individual firms’ growth in high-tech industries. The Korean government may need to play a more proactive role in promoting indigenous innovation capacity of high-tech firms if it wants to take a market-friendly approach to development instead of guiding the market towards planned structural change.

How have the Korean high-tech firms enhanced indigenous innovation capacity and can further strengthen it after the initial building process? Specifically, how have they accumulated technological competence? How has this process been driven by the government policies? How has the accumulation process of technological competence been connected with their own business strategy? How have high-tech firms employed a wide variety of methods of technology transfer? How have they transferred technological capability gained in one high-tech industry (e.g., semiconductor industry) to another high-tech industry (e.g., display industry)? How have they developed marketing competence and adopted more efficient management practice? How has technological capability been intertwined with marketing skills in the process of a firm’s growth? In a word, what are their growth patterns and development trajectories?

Transition from OEM to ODM, then to OBM

The traditional way of approaching innovation for developing countries was to strive to make high-quality products at a low cost. In this case technology-followers tend to attack the established market since they did not have their own technological foundation. Hence, Koreans firms had to start as OEM providers. The Korean high tech firms made a transition from being OEM to becoming ODM, then becoming OBM. The move from OEM, to ODM, then OBM by Korean firms shows the transformation of strategic focus through technological learning and building of marketing competence. Some of the leading Korean electronics firms have reached the OBM stage. How have they done it?

Note: Only a glimpse of the analysis is shared due to the proprietary nature of the content.

High-Tech Firms and Economic Growth of Korea

Korea came a long way from the poverty-stricken agrarian economy after Korean War into a newly industrialized one for the past 50 years. As a result of exerting great efforts in furthering technological development, Korea has achieved remarkable technological advances in the high-tech industry. In doing so, the Korean high-tech firms have adapted strategies which sustained remarkable patterns of growth and innovation to turbulent global markets.

The Korean economy has thrived on high-tech firms. Although the Korean government regarded technological development as an engine for economic growth and its role was significant in technological innovation, high-tech firms led efforts to push high tech products such as semiconductor as the major items of exports in their business.

Chaebols were the major forces behind Korean industrialization. They hired top-notch college graduates, advanced technological capacities across subsidiaries, and globalized R&D activities. However, the concentration of economic power in the hands of a few chosen chaebols by the government stifled the healthy growth of SMEs. The Asian crisis seems to have catalyzed industrial restructuring in Korea to a certain extent. Well-trained scientists and engineers who had been either laid off by chaebols or decided to spin-off started technology-based firms.

Korea has seized the opportunity by anticipating and profiting since the early digital age. The Korean high tech firms foresaw the big swing from analog to digital and invested heavily on digital technology. Previously, the Korean high-tech firms tended to focus on near-term applications. However, they now produce new generations of digital products and are strong in the main sectors of the digital revolution such as semiconductors, telecommunications equipments and leading-edge consumer electronics.

The Korean high tech firms still face tremendous challenges ahead to stay competitive in the global marketplace. Although Korea has made remarkable technical progress, a level of basic technology and operating software still lags behind technology leaders. The applied technology strategy Korean firms have employed requires great degree of tactical flexibility when exploiting new market. Can Korean firms stay competitive by overcoming their weaknesses and meeting new challenges? Now that their exports are dwindling due to a worldwide economic down, how can they sustain their growth?

The Trajectory of Innovation and Entrepreneurship in Korea

Innovation and entrepreneurship have been central to high-tech growth in advanced countries. Are these drivers of economic and technological development as well in developing countries like Korea?

The competitiveness of a nation stems from innovation. Entrepreneurship should also be a crucial part of an economy since it can create jobs, provide competitive discipline for firms, and build growth momentum. What policies has the Korean government pursued (and does it need to come up with) to foster innovation and entrepreneurship?

Since Korea has achieved economic development via technological progress, one might assume that innovation and entrepreneurship would have been integral part of corporate activities. Slightly different concepts of innovation and entrepreneurship seem to have been developed in Korea which had to build its infrastructure from scratch and adopted the state-led economy.

The trajectory of innovation tends to be path-dependent and incremental in nature. In pursuing innovation, the dynamic nature of innovation should be recognized and carefully managed.

The innovation trajectory in technology followers can be better analyzed in terms of the evolutionary dynamics of the innovation strategy. By understanding the dynamics of the innovation strategy, Korean firms can be better equipped for new opportunities.

In the state-led economy in which the government provided preferential subsidization to a chosen few large firms, coerced exports, strictly controlled financial market and even forced mergers of specific corporations, innovation represents…

Note: The rest of the analysis won’t be shared due to the proprietary nature of the content

Technology Trajectory Models

Technology-followers tend to begin with acquiring mature technology from advanced countries, and then make incremental improvements to manufacturing processes. Once they have accumulated manufacturing capabilities, they can move on to the next level of technology value chain. Process technology leads on to minor product innovations. As they accumulate product design skills, they become more confident in new product development. This technology development path reverses the direction of technology trajectory in developed countries where radical product innovations are followed by a series of incremental innovations to add new values.

Utterback provided a technology trajectory framework that explains innovation processes in developed countries. According to him, industries and firms in advanced countries develop along three stages: fluid, transition and specific. During the early stage of new technology development, competition among product designs becomes intense in fluid fashion. As product changes are frequent, so operational processes remains fluid. After going through trial and error in the market, a dominant product design emerges. Competition then shifts from product design to cost. Production capability and scale economies become more important. The production system gets more automated and specific, producing standardized product, and incremental process improvements become important. At the later stage of the state, technology followers in developing countries can come into play since they can compete in price with their low cost production system.

This model may change significantly with a shift in the techno-economic paradigm. This framework seems better suited for explaining technology trajectory in mass markets as opposed to small niche markets in which the issue of scale does not matter. A dominant design watershed in this model seems to explain innovation strategies of technology followers in transition periods when exercising a fast-follower strategy. Since technology followers can’t try out new business model due to costs and risks involved, they can follow technology leaders’ strategy by modifying the product designs in significant ways when imitation is possible.

Kim proposed a three-stage model – acquisition, assimilation and improvement – to extend the Utterback model. He developed this model to explain the process of technology accumulation in developing countries. Developing countries move along from acquisition of mature foreign technology including packaged assembly processes to assimilation of foreign technology to make differentiated products, then to improvement of mature technology. As such, the pattern of technology accumulation in developing countries (focusing on Korea) is fundamentally different from that of developed countries.

Lee et al. also propose the reversal process of innovation moving from mature to early phases. They argue that the three-stage technology model proposed by Kim takes place not only in the specific stage, but also in the transition and fluid stages as Korea progresses in their technology capabilities.

Although these models are useful to some degree in understanding and analyzing the process of technology accumulation and technology policy in Korea, this model doesn’t seem to consider the dynamics of technology trajectory in technology followers as they progress toward reaching an advanced stage.

Note: The rest of the analysis won’t be shared due to the proprietary nature of the content.

The Asian Financial Crisis and Korea's Transformation Efforts

The financial crisis that started in Thailand in July 1997 hit the Korean economy at the end of 1997. Although the causes of the financial crisis might be manifold, it has been generally agreed that the crisis derived from structural weaknesses, which included mismanaged financial sector and over-leveraged chaebols. On November 21, 1997, the Korean government requested IMF for an emergency rescue loan of 55 billion dollars to address the nation’s liquidity problem. As a condition for the IMF bailout loan, Korea had to adhere to the IMF-mandated programs, including tight fiscal and monetary policies, financial and corporate sector reforms, and further liberalization of trade and capital flows.

The crisis of 1997-1998 was considered by the Koreans the worst crisis since the Korean War. Since Korea just entered the OECD in the previous year, the outbreak of the crisis came as a shock to the Koreans. Throughout 1998, the Korean economy experienced a sharp economic contraction. Actual GDP fell by 5.8 percent and the consumption dropped 8 percent. The crisis has painfully affected the economic life of the Koreans. It caused the bankruptcy of banks and chaebols, the drastic downsizing of surviving companies, consequent high unemployment. Although the Korean firms had practiced Japanese style life-long employment management, they laid off many workers including engineers in high-tech industries in the wake of the crisis.

Despite the negative effects of the crisis, Korea has made some strides in altering various critical elements in its system since the crisis. The IMF crisis made Korea question the foundation of the Korean economy and reshape development strategy. The 1997 financial crisis triggered the government to undertake policy reforms as part of a broader movement toward a more open market-oriented system. The crisis prompted the government to restructure its administrative apparatus for improving the productivity of the government sector (e.g., coordinating public science and technology efforts). The government intensified chaebol reforms, which included the reduction of debt to equity ratios to below 200 percent and the dismantling of cross-credit guarantees among subsidiaries. Chaebols were also pressed to improve their corporate governance system. Moreover, the government accelerated financial liberalization to attract foreign investment and participation. The Asian crisis resulted in a noticeable increase in FDI.

The reform efforts are still unfolding. The Korean economy including export growth had steadily improved till the current global economic contraction. The Asian financial crisis catalyzed industrial restructuring in Korea. For one thing, owing to downsizing in chaebols and the promotion of venture companies by the government Korea saw a major surge of high tech start-ups. Nonetheless, even if some progress was made in reforming the financial and corporate sector, Korea still has a long way to go to transform Korea’s outmoded economic and innovation systems. Socio-economic factors that have impeded the balanced social and economic development and the well-being of the Korean society remain unchanged to some extent. Periods of crisis could have been the best time to implement serious reforms. Korea could have emerged with stronger fundamentals than before in post-crisis years.

Is China Decoupling from the U.S. Downturn?

Michael Pettis who is a professor at Peking University's Guanghua School of Management explains why China is not decoupling from the U.S.(As many of you know, the Chinese stock market is up sharply this year.) He has good, lengthy articles on why.

"New trade and reserve numbers from China"

"Chinese pro-cyclicality makes predictions so difficult "

http://mpettis.com/

Is America Being Looted?

A good read.

"America is Being Looted"

By Chris Martenson

My cynicism stems from the fact that, as I string together the dots comprising this entire bailout fiasco, I can come to only one conclusion: Our “public policy” is not being conducted in the interests of the people, by the people, and for the people.

Public policy appears to be in the grip of a very powerful and self-interested cabal that seemingly has no concern for the future or the health of this country and does not even see the need to be cautious enough to mask its efforts.

The fact that the bailout trajectory did not waver in the slightest while passing from the Bush to the Obama administration indicates that the bailout is not a function of who’s in political power, it is a function of something else, of some other power.

I fear that Simon Johnson has nailed it: “[The] recovery will fail unless we break the financial oligarchy that is blocking essential reform.”

http://www.chrismartenson.com/blog/america-being-looted/16444

Johnson's View on Crisis

A must read article by Simon Johnson, a professor of MIT’s Sloan School of Management and a former chief economist of the IMF. He compares the way the financial industry in the U.S. has “captured the government” similar to emerging markets debt crises.

The Quiet Coup by Simon Johnson

From the Atlantic

www.theatlantic.com/doc/200905/imf-advice

축복을 함께 나누어야

다음의 글은 고 김인수교수님께서 젊은이들에게 "새 시대의 젊은이는 어떻게 살아야 할 것인가"란 제목으로 말씀하신 내용의 일부이다. (오늘은 Easter Sunday이다. 고 김인수 교수님은 가정형편 때문에 나이 서른이 넘어 대학에 진학하셨고 학문에 최선을 다하시면서(하버드 경영대학원에서 책을 내신 유일한 한국교수로 알고 있다) 가족 모두 너무나 검소한 삶을 사시면서(전철타고 학교 가시고, 옷도 남이 입었던 옷 입으시면서 교수이신 부인의 월급도 모두 남을 위해 쓰시고 용돈 타서 쓰셨다. 부인께서 미국의 박사과정 진학을 상고출신의 직장인이었던 김교수님을 위해 포기하셨던 것을 많이 고마워하셨고 다른 부부들의 사랑회복에도 많이 애쓰셨다) 남을 위한 일에 아무도 모르게 헌신하셨다. 그런데 김교수님께서 남몰래 후원하셨던 장애인학교 교회에서 예배보고 나오시다 눈길에 넘어지셔서 2개월간 뇌사상태에 계시다가 소천하셨다. 두달여 동안 사이버상에 몇군데의 기도회가 진행되었는데 한 목사님의 기도내용을 지금도 생생히 기억하고 있다. 아직 한국사회를 위해 하실 일이 많으신 분이니 대신 저를 거두어 가 주십사고...)

잠언 10장4절에는 “손을 게으르게 놀리는 자는 가난하게 되고 손이 부지런한 자는 부하게 되느니라”고 말씀하고 있습니다. 그러나 우리가 열심히 얻은 것이라고 우리 마음대로 자기만을 위하여 사용하는 것은 그리스도인이 지켜야할 사랑의 생활이 아닙니다. 우리 주위에는 구조적 모순 때문에 가난에서 벗어나지 못하고 고생하는 사람들도 있고, 심신의 장애로 말미암아 노력을 제대로 할 수도 없는 사람들이 많습니다. 하나님의 사랑을 받은 그리스도인은 받은 바 축복을 이 사람들과 함께 나누는 삶을 살아야 합니다. 성경은 우리에게 고아와 과부를 불쌍히 여기라고 계속 강조하고 있고, 부익부 빈익빈에서 발생하는 영구적 빈곤을 퇴치하기 위해 희년 제도를 두어 모든 빗을 무조건 탕감해주고, 노예로부터 해방될 수 있는 길을 만들어 주었습니다. 또한 마태복음 25장에는 “여기 네 형제 중에 지극히 작은 자 하나에게 한 것이 내게 한 것이라”고 말씀하고 있습니다. 그리스도 예수가 평생 남을 위하여 살았듯이 우리도 그리스도 예수를 닮아 남을 위하여 살아야 하며 그렇게 할 때 가장 행복한 삶을 살게 됩니다.

찰스 웨슬리는 그리스도인이 지켜야할 경제생활 원칙을 다음과 같이 세 가지로 정리하고 있습니다. 첫째, 열심히 일하라, 둘째, 열심히 일하여 생긴 재물을 열심히 아껴 써라. 셋째, 열심히 아껴서 남는 것은 열심히 남과 나누어라. 참으로 좋은 원칙이라고 생각합니다. 저는 이 글에서 정직하게 최선을 다하여 사는 것을 강조하였습니다. 그러나 그렇게 살아서 우리에게 주어지는 축복을 우리가 독점한다면 그것은 하나님의 뜻이 아닙니다. 우리에게 주어지는 모든 것은 우리의 것이 아니라 하나님의 것이며, 단지 우리가 잠시 관리하는 청지기에 불과합니다. 그것을 소외된 이웃과 나누는 것은 하나님의 뜻입니다.

하나님은 이렇게 나누는 사람을 축복하십니다. 잠언11장24절에 보면 “흩어 구제하여도 더욱 부하게 되는 일이 있나니, 과도히 아껴도 가난하게 될 뿐이니라” 라는 말씀이 있습니다. 흩어 구제하면 하나님이 기쁘게 여기시고, 스스로의 마음이 풍족해지며, 주위사람들도 존경하게 되고, 그런 가정에서 자라는 자녀들이 사랑을 배우며 자라게 되어 좋은 신앙인격을 갖게 됩니다. 이런 것들이 바로 축복이 될 뿐 아니라 다른 사람들이 도와주고 싶어하는 사람이 되기 때문에 열심히 하는 일이 더 잘 되게 마련입니다. 또한 혹 어려움을 당하는 경우 많은 사람들이 기꺼이 도와주기 때문에 잘 될 수밖에 없습니다. 그러나 자기만을 위하여 제물을 쌓아두는 사람은 하나님이 기뻐하지 않으시며, 마음이 인색하여 평안을 잃게 되며, 자녀들도 이기적인 사람으로 성장하게 되고, 다른 사람들이 좋아하지 않는 사람이 되고 맙니다. 이런 사람이 어려움을 당하면 아무도 도와주려 하지 않을 것입니다.

우리가 받은 축복은 경제적인 것만은 아닙니다. 더 중요한 것은 영적 새 생명의 축복입니다. 우리가 하나님의 복음을 깨닫고 예수를 영접하여 새 사람이 된 이 기쁨을 다른 사람과 나누어야 합니다. 마가복음 1장을 보면 예수께서 가버나움에서 종일 병든 자와 귀신 들린자들을 치료하시다가 나중에는 그 일을 다 그만두고 전도를 하려 갈릴리로 몰래 도망가시는 것을 볼 수 있습니다. 38절에 보면 “이르시되 우리가 다른 가까운 마을들로 가자 거기서도 전도하리니 내가 이를 위하여 왔노라 하시고” 라고 말씀하고 있습니다. 겉 사람을 고치는 사랑의 생활을 하시던 예수께서 속 사람을 고치는 것이 더 중요하다고 말씀하시면서 많은 병자들을 뒤에 두고 갈릴리로 가십니다. 39절 말씀을 보면 “이에 온 갈릴리에 다니시며 저희 여러 회당에서 전도하시고 또 귀신들을 내어쫓으시더라”고 쓰여 있습니다. 속 사람을 고쳐주려고 가시다가 귀신들린 자들을 만나자 또 겉 사람을 고쳐주시는 것을 볼 수 있습니다. 예수께서는 사랑의 삶과 전도의 삶을 동시에 하시며 살아가셨습니다.

우리의 삶도 모두가 전도입니다. 정직하게 최선을 다 하여 사는 성실한 삶도 믿는 사람이 가진 온전한 모습을 다른 사람들에게 보이는 것이어서 하나님께 영광을 돌리게 됩니다. 또한 우리의 재물과 재능과 시간을 들여 불우한 이웃을 돕는 사랑의 생활도 바로 사랑이신 하나님을 보이는 삶입니다. 그러나 구체적으로 말씀을 준비하여 복음의 멧세지를 전하는 것도 반드시 있어야 합니다. 베드로전서3장15절에 보면 “너의 마음에 그리스도를 주로 삼아 거룩하게 하고, 너희 속에 있는 소망에 관한 이유를 묻는 자에게는 대답할 것을 항상 예비하되 온유와 두려움으로 하고” 라고 적혀있습니다. 우리의 삶을 거룩하게 하면 사람들이 그 비결을 물을 것입니다. 그 때 대답할 준비를 잘 해 두어야 합니다. 그 뿐 아니라 “때를 얻든지 못 얻든지 복음을 전하라”는 명령이 있습니다. 복음이 우리에게 큰 축복이 되듯이 그것이 우리의 이웃에게도 큰 축복이 되도록 나누어야 하겠습니다.

그 동안 많은 그리스도인들의 삶이 로마서 2장24절에서 보는 “하나님의 이름이 너희로 인하여 이방인 중에서 모독을 받게 되었도다” 라는 말씀에 해당하는 삶을 살았습니다. 그러나 앞으로는 로마서12정2절의 말씀 같이 “너희는 이 세대를 본 받지 말고 오직 마음을 새롭게 함으로 변화를 받아 하나님의 선하시고 기뻐하시고 온전하신 뜻이 무엇인지 분별하여” 마태복음5장16절 말씀 같이 “이 같이 너희 빛을 사람 앞에 비추게 하여 저희로 너희 착한 행실을 보고 하늘에 계신 너희 아버지께 영광을 돌리게 하는” 우리가 되어야 하겠습니다.

Innovation Dynamics in Transition in Korea

Korean firms seem to be in the middle between follower and leadership status in terms of product portfolio. A few leading Korean firms have obtained the world-class leadership position in some product areas such as mobile phones and LCD TVs. And yet, leadership capacities seem to be partially embodied even in these firms. The majority of Korean firms have not reached the innovation frontier stage. Based on their strengths in their accumulated high tech production capability and enhanced design capacity, Korean firms are gradually increasing the proportion of more value added products in a leadership status.

Korean firms tend to pursue hybrid innovation strategies, encompassing leadership, followership, or a mix...

This was possible due to their accumulation of multiple innovation capabilities, or, technological innovation, marketing innovation, and managerial innovation to a significant extent...

As Korean firms incrementally make the transition from follower to leader, they face difficulties and challenges as well as opportunities different from those in a catch up mode...

During the transition process, Korean firms may need to capitalize on the broader range of strategic options...

As Korean firms elevate from fast followers to leaders, they may need to move beyond scale-intensive manufacturing-centered, hardware-focused innovation...

An integrated, holistic approach is needed by various innovation actors in pursuing transition strategies...

기술집약적 벤처기업의 경쟁전략 V: 제품전략과 R&D 포트폴리오

한 기업의 지속적인 성장을 위해서는 무엇보다도 수익구조가 탄탄해야 하고 어떠한 제품라인을 구축해 시장에 팔고 이를 위해 어떠한 R&D 포트폴리오를 짤 것인가가 한국의 기술집약적 벤처기업이 고민하는 가장 중요한 전략적 의사결정 중의 하나일 것이다.

무엇보다도 이러한 의사결정을 내리는데 현재의 상황은 usual recession이 아니고 이 상황에서 경영전략을 세운다는 것은 a new game이라는 사실을 명확히 인식해야 할 것이다. 따라서 priorities를 정하고 investment 결정을 내리는데 이점을 염두에 두고 다양한 시나리오를 짜서 이에 대응하는 방법을 강구해야 할 것이다.

제품 포트폴리오 분석을 할 때 보통 6개월 정도가 걸리는데 대기업이야 자본과 인적자원을 가지고 있기 때문에 상세한 분석을 통해 의사결정을 내릴 수 있지만 벤처기업들은 주로 탑이 단독으로 결정을 내리거나 임원회의를 열어 몇 가지 사안을 고려한 후 의사결정을 내리는 경우를 보곤 한다. 철저한 분석을 통해 의사결정을 내리는 서구의 기업들과는 달리 우리 벤처기업들은 너무나 직관에 의해 의사결정을 하는 경우를 많이 보는데 어느 정도 나름대로의 패턴 분석을 하고 여러 가지 사안을 고려해서 최종적으로 intuition과 hunch도 보태 의사결정을 해야 하리라 본다.

전략적 의사결정을 내릴 때 그 회사 나름대로의 자체 분석 틀을 개발해서 보완하여 발전 시키려는 노력도 중요한 혁신역량 중의 하나라고 보여진다. 전략적 의사결정을 내릴 때 여러 가지 시장 상황, 경쟁자의 움직임 등등 외부적인 요소도 고려해야 하고 내부 자원에 대한 정확한 분석을 통해 제품 포트폴리오와 이와 연계된 R&D 포트폴리오를 짜야 할 것이다. 우선 기본적으로 당분간은 우리의 중소기업들은 survival mode로 나아가면서 R&D에 대한 투자를 현명하게 단행해야 할 것이다. 대부분은 대기업에 비해 현금보유력도 떨어지고 (현재의 상황에서 cash flow를 maintain하는 것은 지극히 중요) 인재수급 측면에서도 열세이기 때문에 보유하고 있는 자원에 대한 심각한 분석과 통찰을 통해 어떤 제품을 개발하고 이를 위해 필요한 인력을 어떻게 구성할 것인가를 결정해야 할 것이다. 원론적인 얘기를 한다면 diversified portfolio를 구성해서 product나 지역적인 측면에서 recession-resistant 할 수 있다면 이상적이겠으나 우리 중소기업들은 그렇지 못한 실정이므로 그 어느 때보다 전략적 의사결정이 중요하다 하겠다.

우리의 기업들은 여태까지 fast follower strategy를 구사해 왔고 여기에서 벗어나질 못해 왔는데 개인적으로 대기업보다는 벤처기업이 이를 넘어설 수 있는 여건이 어떤 면에서는 오히려 낫다고 보기 때문에 이번 기회를 좋은 기회로 삼아 proprietary 기술력을 바탕으로 한 경쟁전략도 이 기회에 과감하게 도전해 봤으면 하는 게 개인적인 바램이다. 다른 포스트에서도 언급했지만 이번 위기는 잘 활용만 한다면 1세기에 한 번 오는 기회로 필요한 기술인력과 기술을 가진 financially distressed한 기업을 인수해서 도약할 수 있는 절호의 chance이다. 물론 이를 위해 비축해 둔 현금과 필요한 인력을 데려올 수 있는 역량이 필요하지만 말이다. 우리처럼 IT 쪽에 end products을 많이 갖고 있는 산업구조에서 기술력의 부족으로 그 비싼 로열티를 계속 지불해 온 것은 국가적인 차원에서 참 안타까운 일이다.

또한 end product 측면에서 이제까지는 가격경쟁면, 디자인 측면에서 우수한 제품을 개발해 껍데기 만드는 기술을 우위 삼아 수출시장에서 활로를 찾았다면 눈을 돌려 국내 시장에서 수입에 의존하는 많은 전자제품을 우리기업들이 자체 생산할 수 있는 방안을 모색해야 한다고도 보여진다. 이제 우리는 어느 정도 기술력과 마케팅역량을 가졌기 때문에 가능하다고 보는데 가장 먼저 떠오르는 게 medical equipment 분야이다. 경제가 tanking하더라도 이 분야의 수요는 계속 될 것인데 (food, health care, energy 분야는 필수적이므로) 우리가 축적한 전자 쪽 기술력을 바탕으로 도전해 볼만 하지 않은가 싶다.

R&D 포트폴리오를 어떻게 짤 것이냐의 이슈도 중요한데 회사마다 사정이 다르겠지만 요즘과 같은 디플레이션 모드에서는 positive cash flow가 중요하기 때문에 당장 이익을 낼 제품라인과 결합된 기술개발이 중요하겠지만 미래를 대비한 기술개발 비율도 조절을 해야 할 것이다. 앞으로의 경영환경은 R&D에 투자할 현금을 확보하고 promising한 R&D pipelines을 가지고 있으며 시장점유율을 확대할 능력이 있는 기업들과 그렇지 못한 기업들간에 양극화 현상이 두드러지게 될 것이라는 냉엄한 현실을 직시해야 한다.

또한 모든 기술을 반드시 자체 개발할 필요는 없다고 본다. 필요하면 R&D를 buy할 수 있는데 (로열티를 지불하는 것이 아닌) 우리 기업들은 대기업의 경우도 이를 잘 못 해 온 것이 사실이다. 그리고 필요하면 기업끼리 collaboration 뿐만 아니라 벤처기업간의 consolidation도 단행해야 하리라 본다.(주로 대기업에 consolidated 되는 형태를 지양하고) 사실 개인적으로 중소기업이 대기업으로 흡수되는 형태보다는 (지금까지 반도체의 경우를 보더라도 이런 식이었지만) 앞으로의 경제상황에서 벤처끼리 뭉쳐서 sustain되기를 진심으로 소망한다.

지금의 사업 환경은 연구개발 역량과 앞을 내다보는 foresight을 가지고 탁월한 인재를 선별해 영입할 수만 있다면 선도기업으로 도약할 수 있는 절호의 기회임을 다시 한 번 강조하고 싶다.

기술집약적 벤처기업의 경쟁전략 IV: 보수적 자금 운용과 현명한 투자

디플레이션 환경에서는 무엇보다 cash가 중요해 지기 때문에 보수적인 자금운용으로 부채비율을 줄일 필요가 있다. 우리 기업들, 특히 중소기업들은 부채비율이 높은 편이다. Asset deflation, monetary deflation including credit squeeze를 겪게 될 가능성을 전문가들은 경고하고 있기 때문에 보수적인 자금 운용이 필요하다 하겠다. 물론 이렇게 비축한 현금을 가지고 필요한 인재를 영입하고 미래사업을 위해 투자를 하는 것도 중요하므로 이에 대해서는 다음 포스트에서 다루기로 한다.

또한 앞으로의 경제동향에 여러 가지 변수가 개입되고 각기 다른 consequences를 가져올 수 있기 때문에 투자 시 여러 가지 시나리오를 가지고 헤지(hedge) 방안을 마련하는 것도 중요하다.

기술집약적 벤처기업의 경쟁전략 III: 현실에 대한 인식과 대비

주위에 기업 하시는 분들로부터 받는 인상은 지금의 경제 상황과 앞으로 전개될 시나리오에 대해 상당히 정확한 통찰력을 가지고 계시는 분이 있는 반면 단순한 불경기로 생각하시고 곧 회복이 되리라고 생각하시는 분도 계시다. 물론 전문가들도 미래 예측에 대해 의견이 분분하기 때문에 bullish한 의견과 bearish 한 의견을 다 들을 필요가 있겠는데 어쨌든 각종 트렌드와 정책이 갖는 consequences를 잘 살펴서 educated guess를 할 수 밖에 없다고 본다.

다만 지금의 경제 상황이 일반적인 불경기와는 그 성격이 다르다는 것, 미국 금융산업의 위기가 전세계 실물경제까지 강타하고 있다는 점 등을 고려할 때 현 상황을 바르게 이해하고 여러 사안을 고려해 미래에 대해 준비를 하는 것이 중요하다 하겠다.

이를 위해서 다음과 같은 질문에 대답을 하는 것이 도움이 되리라(특히 macroeconomic outlook에) 생각한다:

(한가지 첨언하고 싶은 것은 한국 벤처기업의 경우 직원 한 사람이 매우 중요한 자산이기 때문에 top management 뿐만 아니라 말단 직원까지 현재의 경제 상황과 추이를 어느 정도 이해하고 이에 대응하여 필요한 제안과 아이디어를 내 놓을 수 있고, 항상 다음에 일어날 일에 대해 호기심을 갖는 문화를 구축하는 것이 중요하다고 생각한다.)

∙세계 경제 위기, 특히 금융위기가 야기된 root causes는 무엇인가? 즉, 현재 세계경제가 왜 이런 상황을 맞게 되었는지에 대한 기본적인 이해가 선행되어야 함, 그래야지 왜 금융위기가 실물경제에 영향을 주고 있고 어떤 식으로 해결이 되어야지 실물경제가 살아날 수 있는 지를 알 수 있기 때문이다.

∙세계 각국의 경제 동향 추이는 어떻게 전개되고 있는가? 세계 경제 패러다임, 경제 시스템이 어떻게 변하고 있는가? Wealth, 즉 capital flows가 어떻게 움직이고 있는가? 특히 소비가 많이 위축되고 있고 overcapacity의 문제가 심각하기 때문에 unemployment rate과 earnings가 어떻게 변하고 있는지 지역별로 관심을 가져야 함. 각국이 economic contraction이 심해짐에 따라 trade barriers를 증가시킬 가능성이 높기 때문에 이것이 시사하는 바도 염두에 두어야 할 것이다. 미국처럼 한 국가의 budget deficit이 증가하는 것이 경제에 어떠한 영향을 미칠 것인가? 또한 현재의 경제 상황이 geopolitical landscape에 어떠한 영향을 미칠 것인가?

∙각국 정부의 정책이 갖는 시사점은 무엇인가? Free-market system을 지향하는 많은 국가들도 현재의 상황에서 정부의 역할이 커지고 여러 가지 개입방안을 내놓고 있는데 이는 소비 패턴에 직접적인 영향을 미치므로 이들 정책이 왜 실행되고 있고 이것이 경제에 미치는 영향을 이해해야 된다고 봄. 예를 들어 금리인하, 경기부양책, 화폐가치의 하락 등이 실물경제에 어떠한 영향을 미칠 것인가?

∙한국 경제가 세계 경제환경 변화와 경쟁환경의 변화로 인해 앞으로 산업구조적인 측면이나 수출 위주의 경제 체제 등이 어떻게 변할 가능성이 있는가? (한편으로 우리는 financial engineering industry 중심의 산업구조가 아니어서 다행이라고 생각하지만)

∙이러한 경제 동향으로 인해 향후 몇 년간 각광을 받을 산업과 침체기를 맞을 수 밖에 없는 산업 등은 무엇일까? (물론 한 산업 내에서도 각 기업의 적절한 경쟁전략으로 인해 여전히 이익을 낼 수 있는 여지가 많지만 emerging industries와 declining industries에 대한 통찰력은 중요하다고 생각함)

기술집약적 벤처기업의 경쟁전략 II: 벤처기업의 역할과 목적

개인적으로 기술집약적 벤처기업에 대한 애착이 남다르다. 부존자원이 부족한 우리나라는 인적자원이 그 어느 나라보다 중요하고 하이테크 산업을 중추산업으로 산업 발전을 이루어 왔기 때문에 혁신과 기업가정신을 바탕으로 한 벤처기업의 중요성을 절감해 온 탓이리라. 미국 실리콘 밸리에서 일하면서 우리의 시스템과 비교해 가장 부러웠던 점 중의 하나도 entrepreneurial spirit이 살아있는 곳이라는 것이다. 혁신을 기본으로 한 신생벤처들이 대기업과 맞서 꽃을 피울 수 있고 (나는 대기업에 다녔지만) 이를 뒷받침할 우수한 인재를 배출하는 최고의 공대가 바로 옆에 있다는 것이었다. 아마도 미국이 가진 장점 중의 하나라는 생각을 했었다. (이 공간에는 실리콘 밸리에 계신 분들도 들려주고 계신데 나에게는 그리움이 남아있는 곳입니다. 특히 아름다운 자연 경관 보는 것을 매우 좋아하는 나는 그곳의 풍광이 아직도 눈에 선하답니다. 거의 매일같이 중독에 걸렸던 것처럼 Mountain View의 옥외 수영장에서 수영했던 기억도요.)

현재의 사태에 대해 개인적으로 가장 안타까운 일 중의 하나가 이러한 미국의 장점이 사라져 갈 듯 하다는 것이다. 실리콘 밸리도 많은 영향을 받고 있다고 한다. 예상했던 바이지만 인텔을 비롯한 주요 하이테크 회사들의 실적 악화 소식과 함께 layoffs가 증가하고 있다. 그러나 무엇보다도 venture capital이 dried up 되고 있다는 소식과, 실물 경제가 악화되면서 SMEs가 생존하기가 힘들고 자본과 로비 능력을 가진 대기업 위주로 산업구조가 공고히 되고 있다는 지적에 안타까운 마음이다.

한국은 급속한 산업화를 추구하는 과정에서 일본을 모방하는 산업구조를 지향해 왔기 때문에 재벌위주의 구조를 가지고 있고 뒤늦게 이를 correct하려는 여러 시도가 있어 왔지만 (이는 일본도 마찬가지이다.) 여전히 중소기업이 대기업과 맞서 경쟁하기가 매우 어려운 구조이다. 그래서 전자 분야는 국내 시장보다 해외 수출 위주로 벤처기업들이 선전해 왔고, 특화된 고부가치의 기술로 경쟁을 하려고 노력은 하지만 한국 공대의 열악으로 인해 국내에서 우수한 인재가 수급이 안되고 외국에서 영입하려 하다 보니 자본이 부족해 어려움을 겪곤 하는 것을 무수히 봐 왔다. 학벌이 좀 떨어지나 우수한 인재를 영입해 기술 전수해서 좀 키워 놓으면 대기업에서 스카우트해 가기 일쑤고 본인들도 가기를 원해서 속상해 하시는 경우를 많이 봐 왔다.

free-market system을 채택한 한나라의 경제를 drive하는 원동력은 production과 innovation일 것이다. 이를 실제적으로 실행하는 주체는 개별 기업들이기 때문에 경쟁력 있는 기업들이 많이 존재하는 것은 그 나라의 경제가 강건함을 얘기해 주는 척도라 하겠다. 또한 entrepreneurial spirit이 우리처럼 하이테크 산업을 주요 산업으로 삼고 있는 경제 체제에서 매우 중요하다고 생각한다. Genuine free market system을 구현하기 위해서는 creativity, entrepreneurial spirit가 장려되는 기업 시스템을 갖추어야 하고 중소기업들이 이러한 측면에서 많은 장점을 갖고 있기 때문에 이들의 번성이 한 국가의 경제 부흥을 위해서 매우 중요하다고 생각한다.

이와 더불어 우리 중소기업의 운영행태를 관찰하면서 느끼는 점 중의 하나가 기업의 목적이 무엇인가에 대한 성찰이 있어야 하지 않나 싶다. 건전한 기업이 추구하는 양질의 일자리 창출을 통한 사회 환원이란 대명제도 결국 any goods of value를 produce 해서 balance sheet에서 이윤을 창출 할 수 있어야 가능하다고 본다. 이번 기회에 top management는 기업의 목적에 대해 되돌아보고 이에 부합하는 적절한 전략과 조치를 취해 나가야 한다고 본다. 개인적으로 personal gain 보다 social good을 지향하는 큰 틀에서 production과 innovation을 통한 이윤 추구를 지향했으면 하는 바램이다.

여하튼 우리의 벤처기업들이 이 위기에 대한 대응방안을 잘 강구해서 어떻게든 sustain하고 prosper하기를 진심으로 소망한다.

기술집약적 벤처기업의 경쟁전략 I: 시작하며

다음의 일련의 포스트들은 지난 1월과 2월에 걸쳐 다른 블로그에 올렸던 글들인데 거시적인 안목에서 현재의 상황이 크게 달라지지 않았기 때문에 옮겨 게시한다.

지금의 위기 상황에서 우리 기업들은 회사의 생존여부를 걱정해야 할 만큼 그 어느 때 보다 전략적/전술적 의사결정이 중요하다 하겠다. 한편 위기에는 기회도 존재하기 때문에 이번 위기를 발판 삼아 도약할 수 있는 절호의 시기인 만큼 개인적으로 특히 애정을 갖고 있는 기술집약적 벤처기업들이 유념하고 참고가 될 주제들을 시리즈로 포스팅 하려 한다. 어려운 여건에서 그래도 선전해 온 우리의 기술집약적 벤처기업들이 이번 경제 쓰나미를 잘 견디어 내고 더욱 도약하는 계기를 마련하기를 소망하는 마음에서 포스트들을 올린다.

Rethinking Export-Driven Economy

Korea has pursued export-driven economy since the early days of industrialization, utilizing its low priced labor. For instance, the Korean high tech firms entered the high tech business by exporting what’s left of the economic food chain in the scale-intensive high tech industry. The typical example was semiconductor. As they accumulate technological competence, they have moved up to the next level of the economic food chain to some degree. And yet, the export-led economic orientation and promotion of large-scale industry as major industry has remained relatively the same: steel industry since 1970s, electronics industry since 1980s, and IT industry since 1990s.

The export-led economy has sustained since the volume of consumption in the Western large economies has held up. In exchange for exports to the States, Korea like other Asian Rim countries has purchased U.S. treasuries. Now that the Western large economies are faltering, the export-driven Asian Rim economies have contracted as well.

Korea’s drive toward export-driven policy for economic growth has been predicated on the Japanese model Korea has adopted. And yet, the Japanese has experienced a lost decade economy-wise in the recent history. Why can Korea and the rest of the world learn from the Japanese experience? The answer to this question involves many complex issues including the political economy, the expansion of the middle class, the close-knit relationship between government and business, changes in policy ideas and development strategy, and so on.

Exports are a huge percentage of their sales among the major Korean high tech firms. Since they are facing dwindling purchasing power in larger economies, what would be the alternative strategy they need to employ?

Rethinking Globalization in the Korean Context

What has been the motive behind globalization? Has globalization served the industrialized nations better or the powerful and rich in the world, regardless nationality? Who has taken advantage of globalization the most? Has globalization heightened or eroded the standard of living? How has the China factor influenced the globalization drive across the border?

There has been a continuous contention for control over resources worldwide. The MNCs have globalized their operations mainly in the pursuit of lower wages. Capital has also been moving worldwide. How has the wealth been transferred worldwide in favor of whom over the last few decades?

What has been the meaning and purpose of globalization in the Korean context? How has Korea benefited or hurt by globalization? What effects have global wage arbitrage had on the Korean economy?

As Korea opened its economy to external capital flows, there was the massive increase in FDI in the 1990s. How has increased foreign capital and participation changed the landscape of the Korean economy? What can be the proper role of a government in developing countries in external capital flows?

How can Korea cope with global forces such as the actions of the WTO and FTA? How has Korea dealt with conflicted forces at work: nationalism and globalization? How solid are Korea’s industrial structures in weathering the volatile global circumstances?

Harnessing these forces and reflecting the reality of them in government policies have been neither straightforward nor easy.

Korea's Approach to Economic Development

In order to analyze and understand Korea’s approach to economic development, some questions may need to be raised and answered: What has been regarded as the most important fundamental quality of an economy and how has the Korea’s economic development strategy nurtured it?; How has Korea’s economic development strategy been intertwined with other development approaches such as social and political development?; How could Korea have achieved rapid economic development?; How did it face the 1997 financial crisis?; How have shifts in the development approach occurred after the financial crisis?: How is the current global recession affecting the Korean economy?

For starters, one may need to understand the overriding theme of the Korean economy system: the statist economy. The statist economy has been the basis of the economic system as in other Asian Rim countries such as Japan and Singapore; private enterprises and individuals can flourish as long as they toe the line. Korea had to rebuild its economy from the devastated loss of Korean War. In the course of rapid economic development, Korea has adopted their development model and followed the Japan’s path since the early stages of economic development. The Korean government had adopted not just the concepts of development goal -- rich nation and strong army -- but also legal and institutional measures from Japan. The Korean government at the early days of industrialization seemed to admire and emulate the Japanese model which made the rapid economic recovery from the defeat of WWII.

Many questions can be raised regarding this approach. Given there are many ways to rebuild the economy, could Korea’s approach to economic development have taken a different path? If so, how?

The Park Chung-hee regime seemed to regard the building of solid manufacturing base as a political as well as an economic imperative. However, they did not seem to consider the building of finance and service as part of industrial base.

Later on, the Korean government has emulated the U.S. model, pursuing globalization and higher value-added activities.

Although Korea has adopted the market-friendly approach and a more liberalized stance at the later stage of industrialization, dissonance between the state-led economy and market-friendly approach has persisted.

There are some lingering questions: What have been the necessary fundamentals to grow and sustain the Korean economy?; How could policies have been nuanced and differentiated according to the needs and stages of economic development in Korea?; How could the efficacy of policy be assessed?

If Korea’s economic development strategy that once worked effectively in developing export-driven, hardware-centered, scale-intensive businesses may no longer work effectively in the future, which alternative strategy does Korea need to pursue? The fact that Korea has not come up with post-IT businesses may prove this concern.

Rethinking Development in the Korean Context

In the process of rebuilding the economy from the devastated loss of the Korean War, development drive has permeated every corner of the Korea society for the last few decades.

Reflecting on the trajectory of development, some fundamental questions remain to be answered or revisited.

What have been the goals of development in general and characteristics of growth strategy in the Korean context?; Has there been any major shift in Korea’s development strategy after the Asian financial crisis?; What would be the yardsticks to measure genuine development and progress in a developing country including Korea?

Has economic development been pursued to a degree at the expense of political and social development?; If economic transformation involves social and political transformation, how can this be accomplished in a balanced way? I would posit that a nation needs to build not only financial capital base but also social capital foundation.

Can a society be better off if social growth and infrastructure building is more geared toward the well-being of the large public although this approach may grow the economy at a slower pace?; Is this development approach sustainable in the midst of rampant forces of globalization and geopolitical interests?; Has this line of development approach been embodied in the trajectory of development in Korea?

The Role of the Intellectual

다음의 링크는 Ivy League professors인 Bernanke (현재는 FRB Chairman, 그만두면 다시 아이비 리그로 돌아갈 것이라는 예측이 무성함) and Krugman(잘 아시다시피 경제학 분야의 노벨상 수상자)의 주장에 대한 비판적 포스트이다. 이 글을 쓴 블로거의 의견에 동의하든 안하든 the intellectual의 역할과 사명에 대해 생각해 보게 된다. 이글을 읽은 한 분의 코멘트를 덧붙인다. 개인적으로 한 사회를 이끌고 갈 올바른 리더의 육성이 매우 중요함을 다시금 느끼게 된다.

물론 academics 중에서 현재의 위기 상황을 정확히 인식하고 do their part를 하고 계시는 분들도 있다. 개인적으로 Harvard의 Elizabeth Warren 교수의 활약도 고무적이고, 영국 LSE의 Willem Buiter 교수의 팬이다.(그의 블로그는 오른쪽 상단에 링크돼 있다.) 뉴욕대의 누리엘 루비니 교수는 최근 waffle하는 경향이 있어 다소 실망스럽지만 그의 경고와 포인트들은 경청할 만한게 많다.(역시 링크돼 있다.)

An intellectual has freedom of thought and practices critical thinking, none of which can be found in our current banking industry or in our government. EVERYTHING is dictated by policy and protocol, no longer by independant intellectual critical thought.

www.globaleconomicanalysis.blogspot.com/2009/04/neither-krugman-nor-bernanke-can.html

Black emphasizes morals/ethics on current predicament

Excellent! It's a must see video.

The financial industry brought the economy to its knees, but how did they get away with it? With the nation wondering how to hold the bankers accountable, Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout.

BILL MOYERS: Yeah, and this week in New York, at this conference, you described this as more than a financial crisis. You called it a moral crisis.

WILLIAM K. BLACK: Yes.

BILL MOYERS: Why?

WILLIAM K. BLACK: Because it is a fundamental lack of integrity...

"Our current predicament really does boil down to a failure of morals/ethics in the highest echelons of those charged with the stewardship of our financial well-being."

http://www.pbs.org/moyers/journal/04032009/watch.html

Indulging in Competitive Devaluation?

지난 대공황때도 그러했듯이 각국 정부는 자국 화폐를 devalue하려는 (이미 해 왔거나) 움직임을 보이고 있다. Quantitative easing도 실행하고 있다. 이에 따른 consequences를 잘 숙고해야 할 것이고 이미 일본이 지난 10년간 이 조치들을 단행했고 디플레이션을 겪어왔기 때문에 Japan의 경험으로부터 배울 필요가 있으리라 본다.

다음 기사는 bearish한 의견이지만 읽어 볼 가치가 있다고 보여진다.

"We don't fully realise in the West what a catastrophic collapse Japan has suffered," says Albert Edwards, global strategist at Société Générale. "The West has dumped a large part of its economic downturn onto Japan by devaluing against the yen." This is about to go into reverse as Tokyo hits the ping-pong ball back across the net. "As the unfolding collapse in the yen gathers pace, the West will see its green shoots incinerated to dust," he said.


www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5110578/Swiss-slide-into-deflation-signals-the-next-chapter-of-this-global-crisis.html

Warren calls for bank executives to be sacked

미국 중산층의 몰락에 대한 연구로 유명한 하버드 법대 교수인 Warren은 Congressional TARP oversight committe의 chairman으로 활약하고 있는데 sanity를 발견할 수 있어 신선하다. She is recommending more executive replacements and avoiding a "lost decade" like Japan.

--

US watchdog calls for bank executives to be sacked

The Guardian Sunday 5 April 2009

Elizabeth Warren, chief watchdog of America's $700bn (£472bn) bank bailout plan, will this week call for the removal of top executives from Citigroup, AIG and other institutions that have received government funds in a damning report that will question the administration's approach to saving the financial system from collapse.


www.guardian.co.uk/business/2009/apr/05/useconomy-regulators

Samsung LED Art

Interesting!

영국 웨일즈 지방에서 촬영되었다고 하는데 미국의 한 경제 블로그에 소개되어 많은 사람들이 재미있게 본 듯하다.

www.viralvideochart.com/dailymotion/samsung_extreme_sheep_led_art?id=x8pdw9

Trajectories of Economic Development and Policy

The Korean economy has demonstrated phenomenal economic growth rates over the past four decades with the exception of the financial crisis in the late 1990s. Average overall economic growth between 1963 and 1996 exceeded 8.5%, among the highest worldwide. GNP increased from less than US $100 in 1960 to more than US $14,000 in 2004.

Since the Korean War during 1950-53 destroyed the industrial base of the Korean economy, the Korean government had to build its economy from scratch. The Korean government has pushed for rapid economic development.

The Korean government which took sufficient power via military coup in 1961 launched its first five year economic development plan in 1962. In the 1960s, the government had pursued export-led industrialization strategy... Lacking capital and industrial infrastructure, Korea firms heavily depended on foreign debt; this was tightly controlled by the state...

During the 1970s, the government promoted the HIC sectors - steel, shipbuilding, machinery, electronics, non-steel metal, petroleum, and chemical industries - as the main industries...

One of the key features in industrial policy during the first two decades of economic development is the government’s almost complete control of financial resources and credit...

In the 1980s, the government seemed to realize the importance of strengthening the market mechanism and began to reduce excessive government intervention, although the government continuously controlled financial resources held by the banking industry...

In the early 1990s, Korea faced similar problems as most developing countries passed through them in the industrialization process...

When a financial crisis hit Korea in 1997, the Korean government asked the IMF(International Monetary Fund) to provide emergency loans to fix the liquidity problems and had to follow the IMF mandatory program in return...

ICT industries and display industries took off after the IMF crisis. The birth of new ventures was purposefully promoted as a means to correct the skewed industrial structure and boost the economy...

The Korean Mobile Phone Industry: The Case of Pantech

Pantech started as a pager maker in 1991, and then entered into the mobile phone market in 1994. It was considered as an upstart in Korean mobile handset market where chaebols like Samsung Electronics and LG Electronics had dominated. It had grown into a globally renowned cell phone producer in a record short time. Although it was number three mobile phone maker in the home market, most of the company’s sales came from overseas through ODM relationship with global companies such as Motorola. It became the eighth largest cell phone maker in the global market in 2003. Pantech was one of the first in Korea to introduce its mobile phone with built-in camera, which helped the company in building its brand. Pantech offered a role model for SMEs to follow for competition against chaebols in its heydays.

However, Pantech’s performance decreased in the market and faced hardship owing to poor managerial decision making. It has been rescued with debt workout program, and it is trying hard to turn things around. The Pantech case shows how SMEs could disrupt the established leaders with fresh product features and sophisticated design quality. It also displays how hard it is for Korean SMEs to compete against chaebols and MNCs armed with strong technological confidence and marketing power in the major industries.

Note: A part of case analysis on Pantech is shared due to the proprietary nature of the content.

The Korean Mobile Phone Industry: The Case of LG

Unlike Samsung which catapulted into a global leader in the mobile phone industry, LG experienced the hardship in getting into the mobile phone business, lacking a brand positioning. And yet, LG succeeded in building its premium brand power as well. For instance, it targeted its high-end handsets as means to create fashion by forging partnership with fashion brands including Prada. LG led the market trend by promptly launching its technology-laden handsets such as the camera phone and MP3 phone in the U.S. market.

Note: A part of case analysis on LG is shared due to the proprietary nature of the content.

The Korean Mobile Phone Industry: The Case of Samsung

Samsung’s success in mobile phone business has been phenomenal.

When Samsung entered the mobile phone business, it had to compete on global competitors like Nokia and Motorola. Samsung took a bet on high-end handsets. Samsung developed and marketed high-end mobile phones characterized by quality, design, and cutting-edge features. Samsung launched a greater variety of end products faster than foreign competitors such as Nokia and Motorola. For instance, while Nokia relied on two or three platforms, basic design, Samsung was based on 78 platforms to introduce 130 models globally. Moreover, whereas Motorola changed its product line every 12 to 18 months, Samsung upgraded its lineup every 9 months.

Samsung’s aggressive marketing strategy with its handsets was unprecedented. Samsung’s premium brand strategy has paid off, and it has become a leading handsets maker.

Note: A part of case analysis on Samsung is shared due to the proprietary nature of the content.

The Korean Mobile Phone Industry: The Government’s Role

It has been widely agreed that the Korean government played a critical role in the successful development of the CDMA-based mobile handset business. The Korean government had been often criticized for being several steps behind the private sector in high tech industries. In the case of the CDMA-based mobile phone business, the Korean government led the development and commercialization of the CDMA-based mobile handset. And yet, its role may need to be carefully examined to see if its initiatives have generated fruitful outcomes over the long haul and its interventions were rather excessive.

After the Asian financial crisis, the Korean government considered information communication technology products to be a new growth engine. In line with this view, the Korean government deliberately supported the growth of the mobile phone industry. The Korean government had developed policies and provided institutional infrastructure for the CDMA-based mobile phone business. The Korean government even played the market shaping role by providing not only financial contribution but also legal and political measures to ensure a huge domestic market.

The case of the Korean mobile phone industry development demonstrates that governments may need to consider there is a limit to what governments can do in nurturing a new industry development. Despite good intentions, excessive government’s interventions can hamper a free market system over the long haul. Most importantly, dissonance between market-friendly approach and state-driven economic development strategy may need to be recognized at the later stages of industrialization. Then, a significant question can be raised as to what role should the Korean government have played in the mobile handset industry?

Note: A complete analysis on this topic is available upon request if you are willing to review and comment on my draft (depending on your background and interests).

The Korean Mobile Phone Industry: SMEs’ Strategy (Part III)

The timing and positioning of product innovation in the market have also been critical factors in the mobile communication industry. Whether firms would take the fast mover advantage would depend on the companies’ overall strategy and their capabilities. When some Korean mobile phone SMEs served only as ODM providers, they had taken the “follower the leader” strategy. The life cycle of mobile handset products had been brutally short, thus when an ODM provider moved on to become an OBM maker, it exploited the fast mover advantage. Becoming fast movers in the growth market proved to be a good way for some Korean mobile phone SMEs to break the barriers to enter the high-margin market and make their brand grow.

Note: The rest of the analysis won’t be shared due to the proprietary nature of the content.

The Korean Mobile Phone Industry: SMEs’ Strategy (Part II)

Many Korean mobile phone SMEs had employed the “follow-the-leader” strategy, or, the late mover strategy. As SMEs without brand power, they figured they could not take a risk of launching new products with new features in the market, lacking brand recognition and resources to educate customers. Hence, they waited and saw how the major companies got responses from the market after launching new products. Once they found out that a specific line of product seemed to be promising in the market, they then quickly imitated that model with differentiated industrial design. This was possible since they had retained technical know-how. Most of Korean mobile phone SMEs which pursue the “follow-the-leader” strategy had strong industrial design capacity, both functional and aesthetic levels.

Note: The rest of the analysis won’t be shared due to the proprietary nature of the content.

The Korean Mobile Phone Industry: SMEs’ Strategy (Part I)

When Korean SMEs did not have any technical foundation, they started as an OEM company, taking the order from MNCs in technology leaders. As they accumulated the product design skill, they became ODM company since they did not have the brand identity and distribution channels. Once they established the base of the competition with the innovative product design capability and marketing skill, they could migrate from that base toward more sophisticated customers and applications in global markets, becoming OBM maker.

Korean mobile phone cases show that although SMEs do not own the proprietary technology, they can still disrupt the established leaders with fresh product features and sophisticated design quality. They need to build on the acquired strengths and momentum and move on to the next level of economic value chain.

When serving as ODM providers, the Korean mobile phone SMEs needed the simpler marketing strategy since they depended on the buyer company for marketing activities using their brand recognition and distribution networks. When they moved on to become an OBM maker, branding became a determining factor since building brand recognition was absolutely critical for business success at this stage. A Korean mobile phone SME was able to beef up the brand identity by acquiring the financially troubled firm that had been known to the market.

Note: The rest of the analysis won’t be shared due to the proprietary nature of the content.

The Korean Mobile Phone Industry: Market Pull Strategy Utilizing Applied Technology

The Korean mobile phone companies have employed a market-pull strategy based on applied technology. They have competed with the end products with advanced product features and aesthetic design excellence by utilizing imported basic technology and its accumulated production technology base.

The Korean mobile phone companies have anticipated customer demands and reflected them in its product design. The Korean mobile phone makers have succeeded in satisfying the customers’ needs for smaller, lighter, and higher-quality cell phones by developing fashionable products with multiple functions such as handsets with MP3 players and camera phones.

Korea has been an important ideal laboratory for developing new product lines since Koreans are one of the world’s most enthusiastic users of mobile phones and wireless data services. The life cycle of a mobile phone is shorter in Korea than any other country in the world, and global giants like Motorola and Nokia have had a tough time competing. The leading Korean mobile phone makers have experienced a huge success with mobile phones in the home market and expanded this success to global market.

The case of the Korean mobile phone business demonstrates that technology followers can still be highly competitive by bridging the market need and the technological need, as well as bringing them successfully to the market in a shorter time than any other competitor although they do not own core technology. In this sense, a market pull strategy utilizing applied technology can be effective for technology-followers who foresaw opportunities the emerging technology provides.

Note: A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.

The Korean Mobile Phone Industry: High-End Product Strategy

The leading Korean mobile phone companies entered the high-end market with cutting-edge products in the mobile phone industry while taking on the market leaders in the developed countries, instead of attacking low or mid-end saturated market. This high-end product strategy has been possible by anticipating industry trends and responding to customer needs quickly owing to technology-equipped early adopters and well-established IT infrastructure in Korea.

The high-end product strategy has contributed to boost the brand power of the Korean mobile phone makers. Since the Korean mobile phone companies such as Samsung and LG produce other high tech products as well, the brand recognition gained by the mobile phones has had positive ripple effects on other electronics goods.

Note: A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.

The Korean Mobile Phone Industry: Mid-Entry Strategy

Korea has adopted the mid-entry strategy in developing the CDMA-based mobile phones. The mid-entry strategy chooses the entry point of R&D projects in the mid-stage of technological development. This strategy uses research results already produced by someone else, but not commercially exploited.

ETRI, Korea’s government-sponsored research institute utilized the basic technology, the baseband chip, owned by U.S.-based Qualcomm and cooperated with local companies for the development of the CDMA-based digital handsets. Three chaebols, Samsung, Hyundai, and LG, and one medium-sized company, Maxon cooperated with ETRI to conduct the development project. In 1996 the first CDMA digital cellular phone service in the world was successfully commercialized. Lacking the basic research capacities, this mid-entry technology strategy seemed to be well suited for the Korean mobile phone makers.

Note: A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.

The Four Stages of the Korean Mobile Phone Industry Development

The development of the Korean mobile industry can be divided into four stages. These stages are distinguished by critical events, significant policy initiatives and market performance by individual firms.

Note: A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.

The Korean Mobile Phone Industry Development: Is It Really a Success Story?

Korea has transformed from an importing country relying on foreign firms and their technologies in its telecommunication industry up to the early 1990s to a formidable mobile phone exporting country in the recent years. As a result of intense efforts to advance the digital mobile phone system, the mobile phone business has been one of Korea’s backbone industries. The Korean mobile phone makers including Samsung and LG have enjoyed their world leader status in the highly competitive mobile handset market.

The successful CDMA-based mobile handset project has been considered to be one of the most exemplary cases for Korea’s high tech business development. The CDMA cellular phone service was successfully commercialized in 1996, ahead of all other countries. The Korean government successfully carried out the national R&D project for the CDMA-based handset. Of course, the private firms did their part in developing and commercializing the CDAM-based mobile phones.

The development of the CDMA-based technology is meaningful in two aspects. First, whereas the Korean high tech firms usually took the fast follower approach in the global electronic markets, they successfully exploited the first mover advantages in developing and commercializing the CDMA-based mobile phone system. Second, the successful development of the CDMA technology marked the rare public-private cooperation in the history of the high technology development in Korea.

However, one might raise a question as to whether the government’s role in the aggressive market development was appropriate. If the Korean government’s R&D policy in the mobile phone industry was so successful, as many have claimed, why can it be applied in another sector? It seems to be widely agreed that Korea has not come up with post-IT growth engine for economic development. Why can the Korean government’s insights and interventions used in the mobile phone business be applied in the next growth engine? Who has benefited the most from the Korean government policies? What are the drawbacks of the government’s excessive interventions?


Note: I have written an analysis of the Korean mobile phone industry development. Only a glimpse of it will be shared on this blog. If any of you might be willing to review and comment on my drafts (depending on your background and interests), please ping me.

Welcome You!

It has been almost a year since I started blogging on my another blog. As a global economic contraction has deepened, my line of thinking has expanded and considered a specific topic from broader and deeper perspectives. Some more fundamental questions to be answered have emerged, which I’ve been enjoying. I’d like to share some of the topics I’m writing. Please keep in mind that my writing on these topics is at the various stages and I’d share some on this blog.

I have shared some thoughts and analysis in the hope that we can all learn from the Korean experience in the recent history. As a citizen of the world, I am concerned about how we can all prosper together pursuing economic and social well-being around the world. I am hoping my writing can provide something to think about and consider to all kinds of people such as corporate people, entrepreneurs, policy makers, government officials, small business owners, educators, and parents who care about social growth and well-being. I am also hoping to sharpen and enrich my thought and ideas.

I started to write innovation strategies of high tech firms in Korea. In doing so, I have realized that political patterns and various kinds of government policies (including technology policy, industrial policy, human resource development policy) have far-reaching consequences in shaping the way in which Korea generates economic growth. In this context, I’d like to address innovation strategies both at the national level and individual firm level.

I have also written comparative analysis on distinct paths which other Asian Rim countries have taken in the high tech areas.

The followings are the sample issues I have been writing.

-Why has Korea chosen the high-tech industry as a major strategic industry as a late developer without technological infrastructure?; Was it a deliberate act by government officials or did firms initiate this high-tech initiative?

-What does innovation mean to Korean firms and society as a whole?

-How has the strategic positioning of Korean firms changed after the Asian financial crisis?

-How have Korean high tech firms accumulated technological competence; what about marketing and managerial capacity?

-How has the chaebol-centered industrial structure shaped the pattern of economic growth?

-How has Korean National Innovation System (NIS) evolved?

-Why have entrepreneurship and venture creation not been vitalized in Korea despite some intended efforts to boost them under a previous administration.

-Why is collaboration among Korean high tech firms so rare?

-How can innovation and entrepreneurship be fostered?; What can corporations do to strengthen indigenous innovation capabilities; Are government interventions necessary for promoting innovation and entrepreneurship? If so, how and to what extent?

-What has caused dissonance between weak financial system and strong manufacturing base?

-How has the issue of political economy been intertwined with industrial growth and technological development?

-What are the fundamental flaws in government policies in the course of rapid economic growth?

-What kind of role can the Korean government play in nurturing emerging technologies and industries?

-How has Korea gained competitive edge in high tech industries such as semiconductor, display and mobile phone in relatively short time frame?

-How can Korea reduce heavy dependence on technology imports (including capital goods, material technology and software)?

-Does economic transformation involve social transformation?

-How can we deal with the twin forces of nationalism and globalization?

-Why do Korean colleges lag behind other globally-competitive foreign colleges even though there is high demand for well-trained top-notch graduates from corporations?

-Why don’t smart Korean kids choose engineering school over programs in medical school and law school?

-How can we as a world (developed, developing, and underdeveloped countries all together) coexist and prosper in cooperative ways for economic and social well-being?

I will be posting some drafts which I’ve been working on. Some can be in detail or sketchy due to the proprietary nature of the content.