Daewoo was founded in 1967 by its tireless and diligent chairman Kim Woo- Choong.  After its initial success in textile exports, the company expanded into commerce, automobiles, machinery expanded into commerce, automobiles, machinery, household appliances, construction, large ships, computers, telephones and financial services, making it the world's fourth largest financial services, making it the fourth largest corporation in Korea.

It became a textile supplier to Sears, Christian Dior, Calvin Klein and London Fog.  Also, it undertook a joint venture with General Motors (GM) to build the Le Mans car, although some problems with the Le Mans car, although labor and other problems limited shipments of cars. 
shipments of cars. 
President Kim's philosophy of "hard work and valuing people" was an important factor in the company's success. important factor in the company's success.However, in the late 1980s and early 1990s, the company However, in the late 1980s and early 1990s, the company faced several problems. First, Kim was concerned that with the growing prosperity of Koreans, the workforce would lose the spirit of hard work. the spirit of hard work, and among young workers there was a growing dissatisfaction and lack of motivation. and lack of motivation among young workers. 

Because of Kim's non-interventionist management approach, some of the Daewoo Group's companies Daewoo group companies spun out of control.  For example, in the unprofitable unit, for example, there was a lot of wasteful spending. The elimination of company-sponsored hairdressing salons saved the company $8 million a year. eight million dollars a year.  In general, Daewoo's workforce was young and educated.  In In contrast to similar positions in many other Korean companies, senior positions at Daewoo were positions at Daewoo were held by managers with no family ties. 

Even though it was an important company with its 91,000 employees, it did not dominate in any industry. in any industry. The strategy of being a supplier to major foreign companies such as Caterpillar such as Caterpillar, GM and Boeing, may have led it to miss out on opportunities to become a major marketer. opportunities to become a major marketer of its own products. 2  brands. In the 1990s, Kim was also looking for opportunities in Europe, for example, she formed a joint venture For example, it formed a joint venture with a distribution company in France. 

The massive restructuring had already shown some positive effects. Kim sold some steel, financial and real estate units.  He also replaced the management style with a hands-off management style, which led to recentralization; some managers were recentralization; some managers were removed or otherwise liquidated, and thousands of positions were eliminated. thousands of positions were eliminated. 

Things seemed to improve in 1991.  In 1988 and 1989 the company lost money, but made some profits in 1990, partly from the sale of some major assets. important assets. The co-investment with GM showed healthy growth and there was optimism about the future of the new compact car. optimism about the future of the new compact car.  However, Daewoo had to However, Daewoo had to face its labor costs and Japanese competition. 

What looked good in the early 1990s, changed significantly by the end of the decade, and in the late 1990s, Daewoo was 
the end of the 1990s, especially between 2000 and 2002. In 2000, Ford planned to to buy Daewoo Motor for about $7 billion.

 However, the deal fell through deal fell through later that year and the company filed for bankruptcy in November 2000. Chairman Kim mysteriously disappeared, he liked to think big and he also left behind a company with a large He also left behind a company with huge debts and several billion dollars that were also unaccounted for. dollars that were also unaccounted for.  With Ford out of the picture, GM GM began serious negotiations with Daewoo, once Korea's second-largest automaker. second-largest automaker in Korea.  On April 30, 2002, GM agreed to buy the bankrupt company, which was renamed Daewoo.The bankrupt company, which was renamed GM-Daewoo.  But what did GM get out of it? The acquisition is a key component of its global strategy.

On the other hand, restructuring Daewoo On the other hand, restructuring Daewoo would be a monumental task: the brand's image had to be restored and the company's brand image had to be restored and the Korean market share of 10% (which in 1998 was 37%) had to improve. market share (which in 1998 was 37%) had to be improved; the product lineup also had to be overhauled and supplemented with new models. product line also had to be overhauled and complemented with new models. In addition, GM-Daewoo had to expect difficulties with the hostile Korean labor unions.

Guiding Questions: 

1. What are the advantages and disadvantages of a decentralized, hands-off management approach? 

2. How can Daewoo remain competitive with the Japanese? 

3. What were some of the controllable and uncontrollable factors in the case? 

4. How should Mr. Kim have responded to these factors? 

5. What are your views on Daewoo's expansion into Europe? What are the advantages and disadvantages for the company?  disadvantages for the company?

6. Why do you think it was GM that acquired the company and not Ford? 

7. What are the problems for the company?

Answer rating: 100% (QA)

A The advantages of a decentralized handsoff management approach include greater autonomy and flexibility for individual units which can lead to innov... View the full answer