What Is the Chaebol Structure?

The chaebol structure is a business conglomerate system that originated in South Korea in the 1960s creating global multinationals with huge international operations. Chaebol is an English transliteration of the Korean word 재벌, which means plutocracy, rich business family, or monopoly. The chaebol structure can encomp🦋ass a single large company or several groups of companies.

Understanding the Chaebol Structure

South Korea's chaebols represent a group of large business entities that are very important to the nation's 澳洲幸运5官方开奖结果体彩网:economic structure. Investment in South Korea's research and development (R&D) is largely driven by chaebols. They represent roughly half the value of the country's stock mar🦹ket and are generally industrial conglomerates made up of different ♐affiliates.

Chaebols are owned, controlled, and/or managed by the same family dynasty, generally that of the group's founder. Family members are usually placed in management positions, giving them more control over the way the businesses operate. Some of the originating families aren't necessarily majority 澳洲幸运5官方开奖结果体彩网:stakeholders in🔥 the chaebols but they may still have some association with them.

Roughly two dozen well-known family-owned chaebols are operating in the South Korean economy. Samsung, Hyundai, SK Group, and LG Group are among the largest and most prominent.

Chaebols have generally enjoyed a great relationship with the South Korean government. Support from the federal government for chaebols began after the Korean War as a way to help rebuild the economy. The federal government has provided and guaranteed special loans, subsidies, and tax incentives to chaebols since the 1960s, especially to those involved in the construction, steel, oil, a♏🐬nd chemical industries.

Chaebols vs. Keiretsus

The chaebol structure is often compared with Japan's keiretsu business groups but there are some fundamental differences between the two. Chaebols are generally controlled by their founding families. Keiretsu businesses are run by professional managers. Chaebol ownership is also centralized but keiretsu businesses are dece🌃ntralized.

Criticisms of the Chaebol Structure

A charge often leveled against the chaebols is that they have impeded the development of small and medium-sized🐠 businesses in South Korea, creating massive imbalances in the economy. The South Korean government has made occasional attempts to curb the power and influence of chaebols over the years but these efforts have met with mixed success.

A🌃no𒊎ther concern about chaebols is that consolidating significant market resources into these conglomerates puts the economic stability of South Korea at risk should they fail.

Chaebols are often accused of hoarding profits and expanding their operations and factories overseas rather than reinvesting in the domestic economy. This is contrasted by about 90% of workers in the country worki🐼ng for small and medium-sized businesses. A small portion of the overall population is employed by conglomerates that hold considerable sway over the country’s economy.

The concentration of market power and reliance on chaebols has made South Korea dependent on these conglomerates to the point where the government has to support these entities during fi🌳nancial crises. ♍This is also problematic as smaller, more nimble businesses from other countries offer more competition.

Chaebols often include a multitude of business units with extensive manufacturing capabilities but the sheer size of the overall organization can be a detriment when swiftness is necessary. Their ability to innovate and grow may not keep pace with the speed and dexterity of smaller companies from otheꦕr nations. The effects can be felt significantly across large segments of South Korea’s economy when chaebols suffer fr𓆏om such slow or stagnating growth.

The Bottom Line

The chaebol structure originated in South Korea after the Korean War. It was a government effort to rebuild the economy and it's become the backbone of the country’s economic system. Chaebol structures are generally controlled by family dynasties. Samsung and Hyundai are two of the best-known chaebols.

The structure has come under some crit♏icism because the effect on the country’s economy can be devastating when and if t👍hey fail.