HR Problems in Hyundai Motor Co.
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ICMR HOME | Case Studies Collection
Case Details:
Case Code : HROB058
Case Length : 12 Pages
Period : 1960-2004
Pub Date : 2004
Teaching Note :Not Available
Organization : Hyundai Motor Co.
Industry : Auto and Ancillaries
Countries : India
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Introduction Contd...
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There was also mounting pressure from the IMF on the South Korean government to
undertake strict economic reforms and restructuring measures. The labor unions,
which have traditionally been very strong and influential in South Korea, felt
threatened.
Since jobs were being cut, social unrest and a feeling of insecurity among the
labor class was rising. The unions resorted to extreme measures in an effort to
establish their authority. Although, all over South Korea, companies were facing
labor unrest, Hyundai was among those that were hit the most.
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An Overview of the South Korean Economy
Until 1960, South Korea focused on agricultural development. But a series of
five-year plans, the first of which was implemented in 1962, greatly altered
the economic structure of South Korea. Starting from 1962, economic policies
were geared towards industrial growth. Export promotion and import
substitution were the key elements in South Korea's growth plans. The
industries of electronics, telecommunication, automobile production,
chemicals, ship building and steel were the major thrust areas.
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Business in South Korea was predominantly controlled by a few large
conglomerates or chaebols. Chaebols were industrial groups that were
established after the Korean War in early 1950s. They differed from
other corporate organizations in the sense that they were still
largely controlled by their founding families and were not managed
by professional corporate managers.
All decisions, expansion plans and company policies were made by the
members of the founding families, who occupied the top positions in
the chaebols. In 1995, the top 30 chaebols alone accounted for
nearly 16% of South Korea's GDP. |
The top four chaebols at that time - Samsung, Hyundai, Daewoo
and LG contributed 9% of GDP. South Korea has shown an incredible growth
pattern. Between mid 1960s and mid 1990s, the annual GDP expanded by more than
nine percent annually.
From being at par with some of the poorer countries of Asia and Africa in 1960,
its GDP per capita in 2003 was seven times that of India7,
eighteen times that of North Korea8 and at
par with some of the less prosperous economies of the European Union.
This remarkable success has been a result of close cooperation between the
government and the chaebols. Government policies were framed keeping the
industrialists' demands - availability of credit, import restriction,
sponsorship of specific industries, import of raw material and technology,
encouragement of savings and investment over consumption - in mind. To encourage
domestic industry, the markets were heavily protected by quotas and tariffs...
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