Examining_a_Business_Failure

Examining a Business Failure Oluwaseun Afolayan University of Phoenix LDR/531 Organizational Leadership Group No ONO9MBA07 Kathleen Kemmer January 25, 2010. The Business Failure Daewoo Group The Daewoo group was founded by Kim Woo Choong in March 1967. Daewoo means “Great Universe.” The company came up as a result of South Korea’s rapid transformation from its hostile invasions and lacking essentials resources to an economic miracle after the World War II. The company started with an initial capital of $18,000 and then became South Korea’s fourth largest business organization with operations in trading, or chaebol with operations in trading, motor vehicles, shipbuilding, heavy industry, aerospace, consumer electronics, telecommunications and financial services. The company comprised of 25 subsidiaries linked together in a complicated system of cross holdings. The major company in the group was Daewoo cooperation. Daewoo cooperation became licensed as a general trading company (GTC) by the Korean Government in 1975. Daewoo had a network of over 100 branches worldwide, with some 3,500 different products traded in over 130 countries, in exchange for promoting Korean goods abroad. The company was able to finance its expansion through preferential loan agreements, reduced foreign exchange requirements, and improved government advice on exporting and marketing abroad. However, Kim woo Choong’s global ambitions overextended the company’s resources, sinking the company in so much debt by the late 1990’s Kim was indicted on charges of cooperate misconduct. The South Korean government issued an order to dismantle the company chaebol in 1999, and the majority of the Daewoo group’s holdings were sold to other co operations. Organizational Behavior is the sturdy that finds out the impact that individuals, group, and structure have on behavior within organizations, in other to apply such knowledge toward improving organizations effectiveness. Organizations exist to achieve goals and ways of achieving them are by planning, organizing, leading, controlling. Theories of organizational behavior are micro, macro. “Micro theory deals with the behaviors and nature of individuals and small group in organizations.” (Miner, 2002) “Macro theory focuses on the behavior and nature of organizations, not of individuals and groups. Parts of the organizations maybe concerned as well, and so may the environment surrounding the organization.”(Miner, 2002). Daewoo’s downfall was due to unreasonable promises of acquisitions, excessive investments, passive image building, and ineffective transfer of its company investments. Further discussions show organizational behavior theories that predicted the downfall of the company. Organizations have to cope with the global changes around the world, in the process a manager’s job changes. Mangers are more likely to find themselves in a foreign assignment trying to either expand the company, business or organization. In the case of Daewoo, established joint ventures were made to expand outside South Korea to force the company to be more aggressive in their dealings abroad, basically to help the government economically and not the company. After so much investment with so many foreign companies, the venture was not successful as it appears that the company discovered it underestimated the standards and requirements of producing cars. Managers see the value of increasing success through improving productivity and quality in products and services they offer. Organizational behavior provides knowledge which managers need to work through these changes. Daewoo was trying to increase productivity when it entered into an aggressive expansion of its overseas business facing more problems especially with the shipbuilding and servicing of company loans. The shipbuilding was a way of cementing South Korea’s export business. Daewoo workers began protesting violently against years of long labor hours and low pay after discovering that the economic prosperity was against traditional work ethics. The only solution available to Daewoo’s management was to increase the workers pay with raises of more than 20 percent to avoid coming labor shortage. The Ministry of Trade and industry, however, was no longer willing to bail out its most reliable company Daewoo suffering as a result of the shipbuilding and heavy machinery acquisition forced on it by the government. “Leadership is about articulating visions, embarking values and creating the environment within which things can be accomplished.”(Yulk, 2006). “Leadership also defined as a purpose of giving a meaningful direction to collective effort, and causing willing effort to be achieving purpose.”(Yulk, 2006). According to Yulk, 2006, leadership can be seen in various ways such as type of influence process, purpose of influence attempt, influence based on research or emotions. In the case of Daewoo, Kim’s leaders (South Korean Government) Influenced him in a negative way to investing so much of his companies resources to help the economy. These influences on him made him believe that it is in the best interest of his company though he made the decision which turned out to improve the economy but put him in great debts making him lose his company eventually. Decisions made by leaders often have positive and negative effect on the group or organization. “A leader might not necessarily be a manager, so also a manager might not necessarily be a leader” (yulk, 2002). In the case of Daewoo it was obvious that Kim was being a leader by his actions and not a manager. Things seem like it was turning around for good to the company when the company regained a number of two spots in domestic car market making a slight profit ahead of other competitors. Kim then decides to embark on a very risky strategy of overseas expansion, putting the company in great debt. At this point he realized that he had bitten far more than he could chew. He was convicted of bribery and possible jail sentence; the company also owed its creditors. The company became a target for reforms when a new government came in. The company was faced with bankruptcy and later collapsed. References Daewoo Group- Company History. (2004). International Directory of Company History, Vol. 5(). Retrieved from http://www.fundinguniverse.com/company-histories/Daewoo-Group-Company-History.html Miner, J. (2002). Organizational Behaviors: Foundations, Theories, and Concepts. Retrieved from http://books.google.com/books' Pak, Y., lae, J., & An, Jung. M. (2002). Lessons Learned from Daewoo Motor's Experience in Emerging Markets. Multinational Business Review, (), . Retrieved from http://findarticles.com/p/articles/mi_qa3674/is_200210/ai_n9109620 Robbins, S., & Judge, T. (2007). Organizational Behavior. [University of Phoenix Custom Edition e-Text]. Upper Saddle River, NJ. Prentice Hall, Inc. Retrieved from University of phoenix, LDR/531-Organizational Leadership website. Yulk, G. (2006). The Nature of Leadership. [University of Phoenix Custom Edition e-Text]. Upper Saddle River, NJ: Pearson Hall, Inc. Retrieved from University of Phoenix, LDR/531-Organizational leadership website.