An Introduction to South Korea’s Chaebols

Posted on October 15, 2015

If you’ve looked for business partners in South Korea, you’ve likely encountered one of the powerful chaebols that dominate South Korean business.  A Chaebol is a term that combines the Korean words chae (wealth) and bol (clan). They’re highly powerful holding groups in South Korea that have interests in a myriad of industries.

Chaebols rule over much of the country’s principal industries of steel, chemicals, telecommunication, automobile production, shipbuilding, and electronics. There are about 45 chaebols in South Korea, though “The Big Four,” as nicknamed in the South Korean press, are Hyundai Motor Company, SK Group, Samsung and LG. Chaebols are family owned, with numerous divisions in completely unrelated industries. For example, did you know that LG – known for its cell phones and electronics here in the U.S. – also sells diapers?

The growth of chaebols is credited to the dictatorship of Park Chung-hee. In 1961 Park Chung-hee’s military government seized control and quickly transformed South Korea into an industrial power. Through much assistance by Park’s government, Chaebols grew into large behemoths with branches in nearly every sector. LG, formerly known as Lucky GoldStar, has a Household and Healthcare line selling everything from fabric softener to toothpaste to diapers.

As a North Dakota exporter, chaebols benefit you in several ways. Due to the number of divisions one company may own, chaebols can be a “one stop shop” for all of your products. Lotte and CJ Group are two giant chaebols in South Korea that purchase and manufacture a large amount of food. Making the right contacts within these chaebols can gain you access to food ingredient buyers, food distribution channels, restaurant suppliers, and animal feed manufacturers. One company may be in control of your product from purchase, shipping, and distribution, to sales at both wholesale and retail stores.

Some argue that the time of chaebols should come to an end. They’re viewed as greedy monopolies lacking transparency and run by the next generation of over privileged heirs and heiresses. (An example being Korean Air heiress and vice president Cho Hyun-ah and her recent macadamia nut fiasco.) Chaebols are accused of moving production offshore, hoarding profits, and preventing the growth of the small and medium-sized businesses that employ 90% of South Koreans.

But the Korean economy still depends on chaebols for growth and investment. The South Korean government is helping to increase the number of small businesses, though some feel that chaebols are still needed in case of a repeat of the financial crisis of 1997. Regardless, the controversial chaebols will not be going anywhere anytime soon. For the North Dakota exporter, it’s simply a business structure to be aware of.