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The Steel Industry in South Korea   Term Paper ID:27819 Click to get this paper

Essay Subject: Concludes that South Korea's steel industry is textbook model for developed & developing countries; it is a resource-poor nation that industrialized itself through state support, & thorough training of labor force. History & culture are also discussed.... More...

10 Pages / 2250 Words 5 sources, 18 Citations, TURABIAN Format $40.00 Return to List of Papers

Paper Abstract: Concludes that South Korea's steel industry is textbook model for developed & developing countries; it is a resource-poor nation that industrialized itself through state support, & thorough training of labor force. History & culture are also discussed. Paper Introduction: THE STEEL INDUSTRY IN SOUTH KOREA Introduction Geography Korea is a peninsula located in northeast Asia, bounded by China (Manchuria) and Russia on the north, the Sea of Japan on the east, Yellow Sea on the west, and Korea Strait on the south (Hoare, 1988). Separated by the latter, Japan lies to the southeast, only a short distance away. The climate ranges from cold in the north to temperate in the south. Largely mountainous, the amount of land that is arable is limited, concentrated in the south and farmed mainly for rice. Divided after World War II roughly along the 38th parallel, South Korea occupies the southern half of the peninsula. Seoul is the capital and biggest city, with about eleven million Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. As a capital-intensive industry, the steel industry requires modernplant and equipment in order to be competitive in international markets,which is a primary aim of POSCO. This manifests itself in a greater affinityfor authoritarianism, as opposed to the conflicts and divisiveness ofWestern-style democracies. |$6 . South Korea is known as oneof the "tiger" nations of East Asia (along with Taiwan, Hong Kong, China,Singapore, Thailand, and Malaysia). THE STEEL INDUSTRY IN SOUTH KOREA IntroductionGeography Korea is a peninsula located in northeast Asia, bounded by China(Manchuria) and Russia on the north, the Sea of Japan on the east, YellowSea on the west, and Korea Strait on the south (Hoare, 1988). |$347. Theclimate ranges from cold in the north to temperate in the south. In addition, like big corporations everywhere, they have theeconomic advantages of being able to raise large amounts of capital forinvestment, and of economies of scale in production. Most are trained in-house, but many also attendPOSCO-run technical schools. Despite suchobstacles, the government in Seoul created the Pohang Iron and SteelCompany (POSCO) in 1968 with an Investment of 3.6 billion dollars, thelargest, such investment to date in the country at the time. |$362. Only after World War II did the peninsula gain formal independence,but it was divided into two separate countries, South Korea and NorthKorea, as a result of occupation by US and USSR forces respectively. POSCO has historically emphasized exports, which, as a state-ownedcompany, is in line with national economic policy (Amsden, 1989). The story of South Korea's economic development is atextbook case of how an "underdeveloped country" transforms itself into aneconomic powerhouse (Hanbook of Korea, 1987). in 1986). As in Japan, government playsa key role in the economy as guide, facilitator, occasional financier,enforcer of social and labor peace, and, most importantly, as educator ofthe work force. South Korea (like Japan) exemplifies how atraditional society that previously believed in a maximum of children, nowemphasizes quality of life for smaller quantities of children. Currently, emphasis is on trainingin computer applications, which indicates that P SC is planning for thefuture. |$364. Separated bythe latter, Japan lies to the southeast, only a short distance away. Inthe, Cold War that followed, South Korea has been pro-Western andcapitalistic while the North has been Communist. Thereasons are: 1) to maximize production runs and capacity utilization, whichare key in a capital-intensive industry like steel to attaining highefficiency; 2) to earn hard currency in order to repay the company'sforeign debt; 3) to earn government subsidies for exports; and 4) to gainfootholds in the emerging international markets of the future. London: Kegan Paul."Korea-South." (1993). With respect to the latter, SouthKorea has shown how a resource-poor nation can industrialize itself andprosper through appropriate state support and the education and trainingits labor force. Highly diversified, they tend to be family-runand have a close relationship with government. Seoul, South Korea: Korean Overseas Information Service.Hoare, James (1988). when the South Korean economy beganto industrialize and expand, at the same time the North's economy began tostagnate. ||per ton | | | | | || | | | | | ||Input | | | | | ||Prices | | | | | || | | | | | ||Labor cost |$22.5 |$11.9 |$11.7 |$2.85 |$2.9 ||per | | | | | ||man-hour | | | | | || | | | | | ||Iron ore |$4 . Thus, SouthKorea's official government promotion of family planning provides anotherkey paradigm for the Third World -- without it, economic development isimpossible. POSCO now produces a diversified mix of steel products, like othermodern producers in the world steel industry (Amsden, 1989). But then China pouredin a million troops on the side of the North, which resulted in a stalematein 1953 near the 38th parallel; that is where the boundary between the twohostile camps remains to this day. Today, the situation is the reverse of what it was in the 194 'sand 195 's; the South is rich and industrialized, and the North is poverty-stricken and isolated, no longer subsidized by the ex-USSR. From its inception, POSCO has been profitable, which runs counter tothe experience of most such enterprises in the world (Amsden, 1989). |$59.5 |$59. And while the latter renders the term "Profitable"ambiguous, nevertheless POSC has remained cost-competitive with Japan, theworld's premier steel producer. Inaddition Confucianism inculcates reverence for education in general andteachers in particular. ||ton | | | | | | Source: Asia's Next Giant. NY: St. Thus, South Korea'seconomic policies provide a textbook case for the Third World on how toachieve economic "takeoff" out of the poverty and misery ofunderdevelopment. Thus, South Korea's steel industry employs both the most modernof plant, equipment, and methods in its operations, as well as a relativelyinexpensive but well-trained work force. International Comparison of Steel Producers (1985)| | | | | | || |US |Germany |Japan |S.Korea |Brazil || | | | | | ||Man-Hours |5.75 |5.85 |5.35 |8.2 |9. This is attributable mainly to SouthKorea's low wages because, on an employee-hour-per-ton basis, both Japanand the US steel industries have lower figures than South Korea. In 1986, the firm established its own collegemodeled after MIT (Massachusetts Institute of Technology). The company trains all grades of its workers at levels far abovethe average in the US. The philosophy promotes the idea of consensus,both group and national, as opposed to the emphasis on individualism in theWest, and particularly the US. Divided after World War II roughly along the 38th parallel, SouthKorea occupies the southern half of the peninsula. Curiously, at the start of the company'soperations, it intentionally refrained from employing such automatedtechnology because it wanted its workers to learn the industry's technology"hands-on." But now, of course, POSCO's facilities are highly automated,including the use of personal computers in offices for administrativepurposes. Martin's. While the North has been run by a rigid totalitarian government, wherethe standard of living is low, even in comparison to other countries inAsian, the South has industrialized and prospered vastly since the 196 's,under a series of relatively authoritarian regimes (Hoare, 1988).Culture Confucianism is the core philosophical belief of South Korea, though alarge percentage of the population is nominally Christian or non-religious(Handbook of Korea, 1987). Largelymountainous, the amount of land that is arable is limited, concentrated inthe south and farmed mainly for rice. |$25. Examples includeSamsung (e.g., electronics) and Hyundai (e.g., cars and shipbuilding). Increasingly, however, factories and machinery are being builtfrom domestic sources, which reflects the overall growth of South Korea'seconomy. In 1895,however, after the Sino-Japanese War, Japan became the dominant influencein the country, resulting in formal annexation in 191 (Handbook of Korea,1987). Themain reasons cited are that: its plant and equipment have always been state-of-the-art; labor costs that are the lowest of any international steelproducer; plant construction that has always kept on, or ahead of,schedule, thereby minimizing this costly expenditure; and considerablesubsidization by the government (like financing, roads, harbors,electricity). By avidpromotion of manufactured exports (mainly to the US) and simultaneouslyminimizing imports (except for raw materials that are scarce in thecountry), South Korea has aimed at maximizing a positive balance of tradeand accumulating a huge cache of foreign reserves (i.e." hard" currencylike dollars, yen, and D-marks, plus gold). pp.15 -154.World Almanac 1993.(1993). |$384. Thus, the training and education of its employeescontinued to be the cornerstone of POSCO's planning for the future and ofits long-term strategy to meet the challenges of global competition. Also, a strong work ethic and self-discipline aretenets of the philosophy, which encourages South Koreans to work hard andexcel.Politics The government of South Korea from the 195 's to the 198 's wasmoderately authoritarian, which is understandable given the constantmilitary threat posed by a hostile regime in North Korea ("Korea-South,"1993). This is further, enhanced by theexcellent public education that all South Koreans receive in their schoolyears, which provides the basis for their productivity and skills when theybecome working adults. |$7 |63 |25 |26 ||per ton | | | | | || | | | | | ||Total cost |$446. At anyrate, in the early years, such equipment was largely imported, particularlyfrom Japan. Korea. It also helps explain the "company unions"where strikes, until the 198 's at least, were relatively rare. As of 1985, about 4 percent of POSCO's saleswere "high grade" product, including wire rope, high-carbon steel, railroadrails, and silicon steel. Like Great Britain and Japan, who also were devastatedby, and recovered from, the turmoil of war, Korea also provides proof thathuman, not natural, resources are the key to present and future success inthe world economy. 298,3 . Indeed, such relationshipshave facilitated the government's control and guidance of the nationaleconomy. Quality steel products simply cannot be produced by cheap labor alone,even if the latter is well-trained, which the South Koreans are. Another crucial factor in South Korea's economic development is thestabilization of population growth (Hoare, 1988). In 195 Nunder Kim Il Sung, Moscow's chosen leader, North Koreaattacked South Korea, launching the Korean War (Hanbook of Korea, 1987).Initially, his army occupied most of the South, but when US forces landedin sizable numbers, the North was routed, and the American and South Koreanmilitary swept into the North, occupying most of it. Much of thatmoney came from war reparations from Japan, and considerable technicalassistance came from Nippon Steel, so Japan's role in the South Koreansteel industry was instrumental in the beginning. BibliographyAmsden, Alice.(1989). pp. Far Eastern Economic Review Yearbook. Intensive worker training has been crucial to POSCO's success (Amsden,1989). The country has ironically modeleditself largely after Japan, its previous colonizer, with respect to thelatter's autarkic, neo-mercantilistic, and protectionist policies. The population of thecountry is 43 million (versus 22 million in the North)(World Almanac,1993).History Known as the "hermit kingdom" historically, it was nominallyindependent but heavily influenced by China in more modern times. However, mostimportantly, the birth rate has declined precipitously since 1962, when thegovernment started officially promoting family planning and contraception(e.g., from an average of 6.1 children per child-bearing woman in 196 toless than 2. Onthe other hand, such "chaebols" tend to retard the growth and creation ofsmall and medium-sized businesses, which the South Korean government nowfavors in light of a more pluralistic society and democracy. Mostlikely this is because it has produced a highly productive, relativelycheap force of workers that is highly competitive in the global economythat has emerged in recent times. Hotrolledstrips, wire rods, plates, billets, electrical items, and cold-rolled andgalvanized sheets account for a rising share of the firm's production as itspecializes more and more. Seoul is the capitaland biggest city, with about eleven million people. Asia's Next Giant. |$12.5 ||per ton | | | | | || | | | | | ||Coal per |$55. The two major overseas markets are the US and Japan. |$24. Indeed, the company has invested heavily in its "human capital"which illustrates it belief that well-trained, productive employeesconstitute a vital corporate asset. At .9 percent, the rateis low and comparable to most developed countries, like Japan and WesternEurope (but not the US where immigration is a major factor). The benefits accruing from this factorinclude the attraction of foreign investment, which the country sorelyneeded in the 196 's when it lacked domestic capital and savings. Another 7 percent, were "specialty steels,"which require a higher level of manufacturing and quality control thanbasic steels. In recent years, however, democracy has taken root, especially asprosperity and a strong middle class have emerged as socioeconomicrealities.Economy After World War II, South Korea was largely agricultural and poor,while the North had most of the industry and mineral wealth, developedlargely by Japan in the colonial era (Handbook of Korea, 1987). NY: Oxford University Press.Handbook of Korea. The latter has been perhaps the most crucial reason forSouth Korea's economic transformation in the past three decades. |$26. Another major characteristic of the South Korean economy is thepresents of "chaebols," which are giant conglomerates analogous to Japan's"zaibatsus" (Hoare, 1988). Markets for such high-grade and specialty steels tend to befor export, because local demand for them is limited.Conclusion South Korea's steel industry provides a textbook model for bothdeveloped and developing countries. Such employee preparation, combined with industriousness anda good work ethic, makes for a productive nation--and steel industry. Reasonsthat caused such pessimism included: 1) the inefficient protected steelindustry that had been developed by the Japanese during World War II; 2)South Korea's limited domestic market, which would retard the economies ofscale needed for such a capital-intensive industry; 3) insufficientdomestic investment funds; 4) competition from the most efficient steelindustry in the world, right next door in Japan; 5) lack of nearby iron oresources; and (6) lack of steel-making skills and expertise. Thisdisparity continued until the 196 's. In addition, POSCO's plants are now computerized, using process-monitoring control systems. Its exporttarget is 3 percent of total sales, though it has gone as high as 4 percent at times. |$58. (1987). Also,such an efficient work force helps make exports attractive, which enabledSouth Korea to exploit foreign markets like the US, because the SouthKorean domestic one was still poor three decades ago. In addition, inthe early years, many workers were sent abroad for training, particularlyto Japan, whose assistance in the initial financing, design, and provisionthe plant and equipment were crucial. Thus, asKorea's economy and society mature, the dominant role of such conglomeratesmay well diminish.South Korea's Steel Industry The modern steel industry in South Korea dates back to only the196 's, when the World Bank, among others in the international financialcommunity expressed skepticism about such a venture (Amsden, 1989).Similar ventures had failed in India and Turkey, two other "less-developedcountries" (LDC's) trying to make the leap into industrialization. ||per ton | | | | | || | | | | | ||Labor cost |$4 3. South Korea has shown that rigorous employee trainingand education is a highly effective way to keep old, basic industries likesteel viable. Consequently, the company has always usedstate-of-the-art facilities and machinery, despite its low-wage work force. Inaddition, it must be noted that the steel industry of South Korea is"protected" by a 25 percent tariff on imports (except, the steel is usedfor products that are exported, in which case there is a partial rebate). 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