KDI SCHOOL WORKING PAPER SERIESCase Study of POSCO:Analysis of its Growth Strategy and Key Success FactorsSeung-Joo Lee & Eun-Hyung LeeNovember 2009Working Paper 09-13This paper can be downloaded without charge at:KDI School of Public Policy and Management Working Paper Series Index:http://www.kdischool.ac.kr/faculty/paper.aspThe Social Science Network Electronic Paper Collection:http://ssrn.com/abstract=1505288
Case Study of POSCO:Analysis of its Growth Strategy and Key Success FactorsAbstractPOSCO has played a major role in Korea’s economic development by supplying domesticmanufacturers with high-quality, low-cost steel products. Despite its initial disadvantage andlack of resources such as capital, technology, and raw materials, it has emerged as a world-class steel maker in a short span of time. This case study aims to explore and analyze the keysuccess factors of POSCO through examination of the company’s growth and developmentprocess. In particular, it examines the role of government policy, top management leadership,technology learning and innovation, cost competitiveness and other factors as importantdrivers of success. The case also identifies its strategic challenges and key issues for growthin the future.JEL Classifications: L61, M10, N80Key words: Growth strategy, key success factors, steel industry, Korea
1. IntroductionIn 2009, at the height of the global financial crisis, Korean steel maker POSCO reported the highest earningseverinthecompany’shistory.Its2008revenueincreasedby38percentoverthepreviousyeartoKRW30.6trillion,operating profit rose by 21 percent to KRW 6.5 trillion, and net profit increased by 15 percent to KRW 4.4 trillion<See Exhibit 1>. While other global steel giants including Arcelor Mittal, Bao Steel and Nippon Steel Corporationhavesufferednetlossesinthefirst-halfof2009,POSCOrecordedaKRW760billioninnetprofitsdespitetheglobaleconomicrecession.POSCO has posted a continual surplus since it first started manufacturing steel in 1973<See Exhibit 2-3>.Today, it is ranked fourth in terms of steel production <See Exhibit 4>, and it outperformed other global steelproducers in operating margins <See Exhibit 5> and operating rate<See Exhibit 6>. According to World SteelDynamics (WSD), POSCO ranked first (2002-2005) and second (2006-2008) in the global competitiveness index<See Exhibit 8>. The company won perfect scores in seven out of twelve categories of the competitivenessevaluation<See Exhibit 9>. The company’s market capitalization as of August 2009 was second only to ArcelorMittal<SeeExhibit10>.POSCOhasplayedamajorroleinKorea’seconomicdevelopment.Bysupplyingdomesticmanufacturerswithhigh-qualitysteelproductsatprices10to20percentlowerthanimports,ithascontributedtothegrowthandexportcompetitiveness of Korea’s major industries such as shipbuilding, automobile, electronics, machinery andconstruction.POSCOhasbeenwidelyrecognizedbyvariousinternationalinstitutions.ThecompanywaschosenasthemostadmiredsteelcompanybyFortune(2006-2009),thebestcompanyinthemetalsandminingsector(2003)andoneoftheForbesGlobal200companies(2008-2009).Itwasalsolistedamongtheworld’s50mostinnovativecompanies(2003)andthemostadmiredAsiancompany(2007)byBusinessWeek,andintheSAM-DowJonesSustainabilityIndex,POSCOwasrecognizedasasustainabilityleaderintheindustry(2006-2009)<SeeExhibit11>.This case study aims to explore and analyze the key success factors of POSCO through examination of thecompany’sgrowthanddevelopmentprocess.Inparticular,itattemptstodrawlessonsfromthesuccessstoryofthe
steelmaker,whichovercameitsinitialdisadvantageoflimitedresourcessuchascapital,technologyandrawmaterials,andemergedasagloballycompetitivecorporationinashortspanoftime.2. Start-upandGrowthStage(1968-1992)POSCO’skeysuccessfactorsvarydependingonthetimeperiod.Thispaperdividestheperiodintotwostagestoanalyzethekeysuccessfactors. Inthestart-upandgrowthstage(1968-1992),governmentpolicyandsupport,theleadership of CEO TJ Park, technology acquisition/learning, and cost competitiveness were important drivers ofsuccess.Inthematuritystage(1993-2009),transformationalleadership,technologydevelopment,processinnovation,andglobalmanagementwereimportantfactorsinthecompany’scontinuousgrowthandsuccess<SeeExhibit12>.(1) GovernmentPolicyandSupportSince1948,theKoreangovernmenttriedtoestablishanintegratedsteelmillinKoreatomeettherisingdemandforsteelandsubstituteforimports.However,Koreafacedextremelytoughconditionstobuildsuchfactories,givenitslimited resources and experience. This reality was reinforced by a 1968 World Bank reportwhichheldanegativeview, saying that the steel mill construction plan Korea had been pushing for was premature. Integrated steelmanufacturingmustsatisfyasetofrequirementstobegloballycompetitive,suchashavingadvancedtechnologies,massive amount of capital, a domestic market large enough to enable economies of scale, and access to naturalresourcessuchasironoreandcoal.However,noneoftheseexistedinKoreabackinthe1960s.Infact,Koreahadtoborrowcapitalandtechnologyfromoverseas,itsdomesticmarketwassmall,andithadtorelyentirelyonimportsfornatural resources. From the perspective of advanced steel producing countries, Korea was just a poor nation thatexperienced Japanese colonial rule (1910-1945) and the Korean War (1950-1953). It was not surprising that theybelittledKoreaasdreamingtheimpossibledreamofbuildinganintegratedsteelmill.ThePresidentofKoreaPark,Chung-Hee,however,hadastrongbeliefintheimportanceofthesteelindustryasthefoundationforthenation’sindustrialdevelopmentandnationalsecurity.Hepersonallymadevariousdiplomaticeffortsattheinternationalleveltosecurecapitalandtechnologyrequiredforsteelmillconstruction.HavingfailedtoobtainloansfromtheU.S.andGermany,PresidentParkmadeabolddecisiontodivertcompensationclaimsfromJapan(about$100million)asseedmoneyforthesteelmillconstruction.Astheconstructionplanbegantomaterialize,the Park administration enacted the Steel Industry Promotion Act in 1970, which enabled various forms of
government support for the steel industry, such as provision of low-interest long-term loans, tax breaks, andinfrastructure subsidies such as low-cost supply of factory construction sites, ports, roads, railroads, and water <SeeExhibit13>.Duetosuchgovernmentsupport,POSCOcouldsaveonthecostofrailwayuseby40percent,portuseby50percent,waterby30percent,andgasby20percent.Itwasalsoabletogenerate80percentofitselectricityusebybuildinganin-housepowergenerationfacilitiesDespite the financial support from the government, POSCO was established as a corporation under theCommercialLaw.Theobjectivewastoavoidtheburdenofapublicenterprisesubjecttogovernmentinterventionbyrelevant agencies such as the National Assembly and the Board of Audit and Inspection. Considered a privatecorporationbylaw,POSCOwasabletoenjoytheautonomyandefficiencyofaprivatecompany.Atthesametime,by having government ownership of the majority of its shares, the company could have a sound capital base andsecurefinancialsupportfromthegovernment.Government support was extended to the construction of the company’s second steel mill at Gwangyang.When construction of this second mill was on the government agenda, other potential steel producers such asHyundai were more than willing to enter the steel industry. However, the government entrusted the projectmanagement authority to POSCO, in expectation of its superior execution based on the company’s extensiveknowledgeandexperienceinsteelmillconstructionandoperation.The government started to keep its distance as the steelmaker began to grow rapidly. In fact, the governmentmade its final investment in 1986, and ended all support upon the abolition of the Steel Industry Promotion Act.POSCO was first listed in the Korean stock exchange in 1988. From 1998 to 2000, the government graduallyprivatized the company by selling its shares in the stock market. Today, POSCO’s shareholders consist mostly offoreigninvestorsanddomesticinstitutionalinvestors<SeeExhibit14>.Duringtheperiodfrom1968and1986,thegovernmentinvestedintoPOSCOatotalofKRW220.5billion,andreceivedbackatotalofKRW3,889.9billionincludingKRW274.4billionincashdividends,andKRW3,615.5billioninstocksalesandtransfercombined.Toputthesefiguresintoperspective,underthenetpresentvaluemethod,the government gained a net profit worth KRW 2 trillion ― total revenues of KRW 6 trillion minus the initialinvestmentworthKRW4trillion―by2000whenprivatizationwascompleted.
(2) LeadershipofCEOTJParkPOSCO’s founder and legendary CEO Park, Tae-Jun played a pivotal role in building the foundation andcorporatecultureofPOSCO.TJPark,beforetakingthehelmatPOSCO,provedhismanagerialacumenbyturningadeficit-ridden public corporation (Daihan Tungsten) into the black in his first year in 1965. Impressed by TJ Park’strackrecordandleadershippotential,PresidentParkChung-Heesawhimastheidealmanagerfortheintegratedsteelmillproject.TJParkaccomplishedremarkableachievementsthroughoutthecompany’scourseofdevelopment.Undeterredby the failure to get international loans in 1968, he requested Japan to provide capital and technology support, andclosed the deal by using his personal network. His vision and faith in patriotic service through steel, his attention todetailsandperfectionism,andhispeople-centeredleadershipencouragedallemployeestounitewithastrongsenseofcommitmentandloyalty.Some of the key words to describe the leadership of CEO Park Tae-Jun could be “commitment toexcellence based on patriotic mission”. Park stressed a strong commitment to steel mill construction as it borrowedcapitalandtechnologyfromJapanascompensationforitscolonialrule,oftensaying,“Let’sturnrightandjumpintotheEastSea,incasewefailintheconstructionofthesteelmill.” Thishastakenholdaswhatiscalled“Right-TurnSpirit” of POSCO, which created a unique corporate culture emphasizing a sense of mission, dedication to goalachievement,grouployaltyandpersonalsacrifice.Parkspent mostofhistime workingtogether withPOSCOemployees attheconstructionsite,whichenabledthecompanytocompleteconstructionofPohangWorksPhase1,2,3and4ina veryshortspanoftime.Evenonthanksgivingholidays,ChairmanParkwasonthesiteandmadedecisionsrightonthespotifanyproblemsoccurred.WhentheconstructionofPhase1wasdelayedforthreemonths,thecompanycameupwithemergencyplansandcompletedtheprojectonemonthaheadofschedulebyworking24hoursaday.Nonetheless,henevercompromisedonqualityandneverallowedshoddyconstructiontoreducetheconstructionleadtime.WheninstallingfacilitiesforPohangWorksPhase3,Parkdiscoveredmajorflawsinaventilationsystemthatwasalready80percentcompleted.Muchtoeveryone’ssurprise,heorderedtheemployeestoblowupthesystemandexpeltheconstructioncompanyandtheforeignprojectmanagerincharge.
Althoughhemayhavepressedhispeopletoworkwithoutholidays,Parkvaluedtalentmorethananyoneelse.In1968evenbeforehestartedbuildingthesteelplant,heborrowedKRW2billionfromabankandbuiltresidencesfor employees. The residences located near the construction site were clean and comfortable, which helped attractmany talents to Pohang. Another program he emphasized prior to factory construction was employee training.Many international organizations including KISA said that Korea had few workers with sufficient experience andknowledge and that the factory operation should be left in the hands of foreign managers. However, Park thoughtdifferently.HewasconvincedthatPOSCOpeopleshouldtaketheinitiativeinoperatingandmanagingthefactories.Basedonthisfirmconviction,hehadsentPOSCOemployeestoJapan,Australia,Germany,andotherleadingsteel-producingcountriesaroundtheworldfortechnologytraining,andtheydisseminatedwhattheyhavelearnedoverseasthroughcompanywidetrainingprograms.(3)TechnologyAcquisitionandLearningIn the initial construction phase, POSCO had to rely on technology experts from Japan Group for the entireinstallation process of the first blast furnace in the Pohang steel mill. The Japan Group presented the design andprocurement plan to establish a steel mill capable of producing one million tons of steel. POSCO, lacking theknowledge and experience to evaluate the business proposal submitted by Japan Group, prepared a double-checksystem under which Broken Hills Proprietary Corporation (BHP) from Australia was asked to review the designdrafts and terms of purchase set forth by Japan Group, while Korean experts based in Japan re-evaluated JapanGroup‘sreportswithBHP’s.POSCOalsodependedonJapanfortheproductionandoperationstechnologieswhenPohangWorksPhase1got up and running in 1973. Technicians from Japan Group transferred technologies and skills such as inventorymanagement,productionscheduling,andmaintenancetoPOSCOemployees. Atfirst,POSCOworkersteamedupwith the Japanese experts to learn necessary skills and discussed every single detail about the project until theconstruction of Pohang Works Phase 3. Later, however, POSCO workers increasingly built up expertise andassumedagreaterroleoverJapaneseengineers.During its facility expansion from 1970 to 1992, construction projects continued one after another as thecompanybeganoperatingnewblastfurnaces.Theworkershadtotrainthemselvesfortechnologiestooperateanewblast furnace, while acquiring cutting-edge technologies to constructandinstallanewformoffurnace. Theshapes
andtechnologiesoffurnacesbecamemore sophisticatedandexpandedovertime. UntilthecompletionofPohangWorks Phase 4, POSCO kept learning new technologies by experimenting with new combination of ingredients,controllingthevolumeofingredients,scheduling,managingtheflowofrawmaterials,andreducingbottlenecks.POSCOmadetremendousinvestmentsintrainingtheiremployees.Thenumberoftrainedworkerstotaledabout 61,400 from 1968 to 1979, of which 4,200 were trained outside the company, while 1,513 joined overseastraining programs. The investment in employee training is partly reflected in the rapid improvement of laborproductivity. POSCO reduced the number of hours worked per ton of steel shipped from 32.65 in 1975 to 9.62 in1984,inarelativelyshortamountoftimecomparedtoJapan,whichsawadropfrom10.8hoursin1975to6.5hoursin1984.POSCOencouragedindividualemployeestoshareknowledgelearnedfromoverseastrainingprogramswithotherworkersandconductrehearsalstocarryoutgiventasksbeforeactualproduction.Theywereadvisedtorepeattheirtasksoutloudandputthemintoexecutiontogetabetterpictureofeachother’sworkaspartofanopentrainingprogram.TheystayedlateatnighttoshareknowledgeandbrushuponwhattheylearnedfromJapanesetechniciansduringtheday.POSCO workers did not simply follow the rules and instructions, but were encouraged to actively engage inproductivityandqualityimprovement.ThousandsofvoluntarygroupswithinPOSCOwereformedtoidentifyandsolveproblemsrelatedtoqualityandsafety. Employeeswillinglyparticipatedinthe“proposalsystem”wheretheymadeproposalstoenhancequalityattheworksite.Tominimizedowntime,theyadoptedapreventivemaintenancesystem. To stabilize facility management, they implemented a process monitoring system toidentify problems andresolve them through a thorough review of detailed information. It was not until Phase 3 construction that thecomputer-based process monitoring system was adopted, as the manual monitoring system was considered handyfor the workers to absorb technologies and know-how. It was at that time that POSCO went through processinnovationbyadoptingSixSigma,andreducingdefectstothelowestlevelintheworld.Thanks to such efforts, POSCO was asked by Taiwan-based CSC to teach their workers and transfertechnologies in 1975. In 1986, 13 years after it started production, POSCO took part in a renovation project ofAmericanUSXsteelmillandtaughttheirmanagersandworkersaboutfacilitymanagement,repairandmaintenance.Today,POSCOisratedasthegloballeaderinsteelmilldesign,constructionandfacilitymanagement.
(4) CostCompetitivenessPOSCOsoldproductsatprices10to20percentlowerthanimportsinthedomesticmarket.Thecompanyhadto keep its domestic prices low to help improve the competitiveness of its customers such as shipbuilding,automobiles, electronics, construction etc. This is evidenced by the fact that steel prices have risen 3.5 percent onaverage vis-à-vis the 4.2 percent growth in producer price index since the 1980s. Therefore, achieving costleadershipwascriticalforPOSCO’ssurvivalandcompetitiveness.WhenPOSCOfirstbeganproductionin1973,itslaborcostwasfarlowerthanitsglobalcompetitors.In1973,POSCO’slaborcostpertonofsteelshippedwas$7.06,whichwasfarlowerthan$23.83inJapan,$27.06intheU.K.,$32.86 in Germany, and $37.83 in the U.S. However, with Korea’s economic development, the gap in labor costnarrowed. during the period from 2002-2006, POSCO’s labor cost averaged US$38.40, higher than China’s BaoSteel(US$9.38),yetlowerthanArcelorMittal(US$79.70),NSC(US$47.60),andJFE(US$62.20)<SeeExhibit7>.POSCO’s labor-management relations is considered to be quite amicable compared to other largemanufacturingcompaniesinKorea.In1987,aunionwasorganizedwithinPOSCO.However,itwassoondissolved,and currently, POSCO runs the Management Consultation Committee that stresses mutual cooperation betweenlaborandmanagement.Thecompanyiswell-knowninKoreaforitsadvancedemployeewelfaresystem.Massiveinvestmentinemployeeeducationandtraininghelpedemployeesenhancetheircapabilitiesandbuildloyaltyfortheircompany.POSCO fully leveraged its status of a late comer and raised efficiency in inventory management of rawmaterials and finished goods by designing a U-shaped lay-out that locates processing lines for raw materials andassembly lines for finished goods close to the port. In particular, POSCO plants are much more efficient than steelmillsinother countriesinthat theyarrangetheentireproductionprocessinonebuildingratherthansegmentingtheprocess into separate buildings. Furthermore, the concept of functional connection was already conceived from thedesignstageofthefourPohangplants,whichoptimizedtheentiresteelmanufacturingprocessfromtransportationofrawmaterialstosteelproduction.Thedistancebetweentheblastfurnaceandthepierfromwhichrawmaterialsaretransported was reduced, and Plant 2 and 3 were set up to be closely connected and functionally compatible withPlant1.Furthermore,itslocationnexttoaportcapableofhandling100,000tonsofsteelfreightwasinstrumentalin
reducing the logistics costs in comparison with locations of other steel makers situated inland. In particular, theGwangyang Works was modeled on the Pohang Works and built even better with enhanced technology andaccumulatedknow-how.Ashortenedsteelmillconstructionperiodhelpedsavedirectcostssuchaswagesandindirectcosts.Atthesametime, this leads to production ahead of schedule, which in turn reduces the cost of production. While setting up theplants of Pohang Works, POSCO completed 23 facilities out of 26 in total ahead of schedule by as long as overeleven months. POSCO’s construction cost was about $400 per ton, which was significantly lower than $1,750 inBrazil, $820 in the U.S., $700 in Europe, and $590 in Japan. Moreover, POSCO was able to reduce costs bystrategically purchasing state-of-the-art equipment through competitive bidding procedures during global economicrecessions.Inparticular,theglobaleconomywashithardbythefirstandsecondoilshocks,whenthecompanybuiltproduction lines in Pohang and Gwangyang. However, the hard times benefitedPOSCOasequipmentsuppliers’bidding prices went down. The company also reduced construction costs by increasingly using local suppliers ofequipmentandmaterials.Localizationrate,whichwasonly12percentintheconstructionofPohangWorksPhase1and2,shotupto63percentintheconstructionofGwangyangWorksPhase4<SeeExhibit16>.Smooth operation since the very first year of production and has also been important. POSCO increased itsoutput-to-inputratefrom0.57inthefirstmonthto1.05inthesecondmonth,1.33inthethirdmonth,and1.45inthefourthmonth.Itsoperatingratejumpedfrom44.5percentin1973to114percentin1974.Itsaverageoperatingratenowstandsat111percent,thebestamongitsglobalcompetitors.According to World Steel Dynamics, POSCO’s cold-rolled sheet production cost was 20 percent lower thanJapaneseproducts,21percentlowerthanBritishproducts,26percentlowerthanAmericanproductsand28percentlower than German products (2002). Another global steel industry research institute, Commodity Research Unit(CRU)assessedPOSCO’smanufacturingcostofhot-rolledandcold-rolledsheetstobe9percentlowerthanBritishproducts,27to31percentlowerthanJapaneseproducts,and28percentlowerthanAmericanproducts.
3.ContinuousInnovationduringtheMaturityPeriod(1992-2009)(1) TransformationalLeadershipAfter achieving both quantitative and qualitative growth for 25 years, POSCO experienced a change in topmanagement leadership with the resignation of Chairman TJ Park in 1992. Efforts were made to fill the leadershipgap. Chairman Chung, Myung-Sik took office in 1993 and started to reform the organization under the ‘NewPOSCO Vision.’ In an attempt to streamline the organization that had grown huge in line with its rapid growth,reform measures were taken to reduce the number of departments from 85 to 76, teams from 349 to 335, andexecutives from 49 to 40. There were changes in POSCO’s traditional domestic market-oriented strategy and thecompany pursued diversification into telecommunications and expanded its export markets through a‘ComprehensiveExportStrategy’.In1994,ChairmanKim,Mahn-JebecamethefirstCEOofPOSCOcomingoutsidethecompany.Inresponseto the rapid changes in the global steel industry environment, Chairman Kim initiated ‘Green Management’ whichaimedat‘flexibleorganization’,‘democraticmanagement’and‘transparentmanagement’.Thecompanyestablisheda new vision for 2005, redefined its business domain with three key pillars- steel, engineering & construction, andtelecommunications.ThecompanyintroducedtheResponsibilityManagementSystemtoenhancetheaccountabilityof line managers, and established the Committee System for senior executives to streamline its decision-makingprocessandimprovehorizontalcoordinationamongthedepartments.Changesincorporategovernanceweremadeby bringing in outside directors and auditors on the board to enhance corporate transparency and strengthen theResponsibilityManagementSystem.In1998,ChairmanYoo,Sang-Boo,aformerPOSCOexecutive,tookofficewhentheKoreaneconomywasinadeeprecessionduetotheAsianfinancialcrisis.Toovercomethesluggishdomesticmarket,ChairmanYooinitiatedan aggressive ‘export-drive’ program, and restructured the company’s business portfolio by divesting itstelecommunications business and refocusing on the core business of steel. In response to the privatization anddigitalization trends, he introduced ‘Process Innovation’ to streamline the company’s key processes and develop amoreflexible,customer-orientedculturethroughoutthecompany.
ChairmanLee,Ku-TaekbecamethenewCEOofPOSCOin2003.TodevelopPOSCOasasociallyrespectedand trusted global company, he emphasized the following five management priorities: 1)transparent operationthrough management by principles, 2)sustainable growth, 3)competitive advantage through innovation,4)management valuing human resources, 5)trust-building with stakeholders. As POSCO had already achievedworld-class level in terms of cost and operational performance, the company put more emphasis on developing itsowntechnologiesandhighvalue-addedstrategicproducts.Inaddition,thecompanyactivelypursuedglobalbusinessopportunities in emerging markets such as China, India, Vietnam, Brazil and Mexico to develop production basesandsecurerawmaterials.(2) TechnologyDevelopmentPOSCO reinforced its own R&D activities as leading steel companies concerned with “boomerang effect”refused to transfer advanced technologies to POSCO. The company set up a collaborative R&D network amongindustry,academiaandresearchcentersbyestablishingPohangUniversityofScienceandTechnology(POSTECH)in 1986, the Research Institute of Industrial Science and Technology (RIST) in 1987, and reorganized its R&Dorganization in 1996 to accelerate the development of new technologies. In particular, as customers’ needs becamemoresophisticatedandmoredemanding,thecompanyhadtochangeitsexistingstrategywhichmainlyfocusedonproducinglow-cost,commoditysteel,anddevelopmore highvalue-addedspecialtyproducts.As a result,sincethe1990s, production of low value-added hot-rolled products decreased, while the production of high value-addedproducts such as cold-rolled sheet, steel plates, stainless steel and electrical steel plate continuously increased. <SeeExhibit17>In order to upgrade its product mix and develop cutting-edge innovative technologies, POSCO selectedautomotivesteelsheet,high-endAPIsteelmaterials,400seriesstainlesstechnologyandhigh-endelectricalsteelsheetas the ‘Four Major Strategic Products’ in 2002. The company also selected the commercialization of FINEXtechnologyandStripCastingmethodasthe ‘TwoMajorInnovationProjects.’In2004,high-endhigh-carbonsteel,TMCPsteelforshipbuilding,high-endtirecordsteel,andCr-Freesurfaceprocessedsteel werenewlyaddedasthe‘Eight Major Strategic Products’. In 2005 and 2006, high-end stainless, premium wire rod, premium hot and cold-rolledproductswerenewlyadded.Theshareofstrategicproductsintermsoftotalsalesasof2008was5.9percent,butitsproductionhascontinuouslyincreasedoverthelastfiveyears<SeeExhibit18>. R&DinvestmentgrewfromKRW161.1billionin1995toKRW203.2billionin2007.
Inordertosuccessfullyimplementtheselectedstrategicgoals,POSCOgrantedownershiptotheexecutivesincharge and ran a cross-functional Mega Y Organization composed of sales, operations and research departments.POSCO developed a corporate monitoring system to check the progress on technology and product development,evaluatethecommercialviabilityofpilotprojects,andanalyzeprofitabilitythroughoutthedevelopmentcycle.ThedevelopmentofFINEXisagoodexampleofPOSCO’srecenttechnologydevelopmentefforts.Comparedto the blast furnace process, the FINEX method enables cost reduction in facility investment as it does not requirecokeorsinterplantsthatpre-processironoreandbituminouscoal.Thismethodcansaverawmaterialcostsasitusespowdered iron ores that are cheaper and more abundant and general coal that is also cheaper. POSCO worked onnew methods that could improve the existing blast furnace technology since 1992. It constructed the FINEX pilotplant in 1998, and started to develop base technologies ofthe FINEXmethod by test-producing 150 tons a day. InNovember1999,POSCOsignedaMutualAgreementontheDevelopmentoftheFINEXTechnologywithVoestAlpineofAustria.InJanuary2001,itconstructedaFINEXdemoplantthatcouldproduce600,000tonsperannumand started to successfully operate the plant from May 2003. In May 2007, POSCO built the world’s first FINEXcommercializationfacilitythatcouldproduce1.5milliontonsayear.Strip Casting is a technology that makes hot coils of 2-6mm by solidifying the hot metal over 1,500 degreesCelsiusthroughcastingrollsinjust0.2seconds.Withmostofthehotrollingprocessbeingeliminated,thistechnologyreducesfacilityinvestmentandenergycosts,andithasahugeadvantageinmakingsteelwitharelativelyhigherloadonhot-rollingeventhinner.InDecember1991,throughtechnicalcooperationwithDavyDistingtonoftheUKandthrough industry-academia cooperation with POSTECH, POSCO developed a 350mm wide strip caster andconductedover150testcasting.In1994,POSCOsucceededindevelopingastripcasterwithawidthof1,300mmonits own. By the end of 2000, POSCO conducted more than 500 tests on casting, eventually accumulating atechnologytoproducezero-defect304stainlesssteelsheetcoils.InJune2004,thecompanyconstructedastripcastingdemoplantwithanannualproductioncapacityof600,000tons,andforthefirsttimeintheworld,itprovedthesafetyofitsprocessbysucceedingincontinuouslycasting500tonsofstainlesssteel.
(3) ProcessInnovationProcess Innovation (PI) that started in 1999 was aimed at streamlining the company’s core processes fromrawmaterialpurchasing,productiontocustomerdelivery,andtransformingthecompany’ssystemsandcultureintoone that is more customer and profit-oriented. POSCO implemented the whole process in a comprehensive anddisciplinedmannerandachievedsignificantcostsavingsandoperationalimprovement<SeeExhibit19>PI Phase 1: The ISPP (Integrated Sales & Production Planning) that was developed during PI had the followingcharacteristics.First,SCM(SupplyChainManagement)andERP(EnterpriseResourcePlanning)wereintegratedbyitemsandthisenabledmanagerstoobtainbasicdataonbudgetmanagementofallareas.Second,thebudgetinglead-time that was shortened to 15 days enabled the conversion of the existing annual budget planning into a quarterlyplanning. Third, the system calculated not only the profitability of steel mills and unit plants but also that of eachproduct line, enabling a more profitability-centered planning. Fourth, more accurate and timely delivery was madepossiblebyimprovingcommunicationwithcustomers.InordertopromoteERP,POSCOsetupItem,BOM(BillofMaterial)andRoutingdatabases.Itemreferstoallthe materials managed throughout the company. It can be classified into internally produced items and externallyprocured items. All materials were codified and task criteria were integrated and standardized. Bill of Materialspecifiesallthecomponentsusedintheproductionofacertainitemsuchasrawmaterials,semi-manufacturedgoods,aswellaserrorratesandusageunits.Routingdefinesstandardmanufacturingprocessandprocessingtimerequiredtoproduce certain item, as well as the types and the usage of relevant facilities, labor, electricity, etc. Throughout thisprocess,alltasksatPOSCOweresavedintostandardizedandquantifiabledatawhicheventuallyservedasabasisforthecompany’sintegratedmanagementsystem.PIPhase1targetedtochangetheavailabletopromise(ATP)lead-timeforhot-rolledcoilsfrom30daysto14days,thedeliveryfulfillmentratefrom82.7percentto95percent,anddaysofproductinventory10daysto8days.MostofthetargetsweresuccessfullyachievedandPOSCOmovedontoProcessInnovationPhase2.PI Phase 2: Since May 2002, all innovation activities started to center around Six Sigma. POSCO’s ISPP wascompleted by refreshing the obsolete operation system of steel mills, and the system expanded into other areas thatwere excluded during PI Phase 1 such as CRM and SRM. During the three years of Six Sigma implementation,
employees learned scientific methods, developed problem-solving abilities and acquired a more customer-orientedview.Cross-functionalprojectswerelaunchedinordertoeliminateinvisiblebarriersandbuildtrustamongdifferentfunctions.InNovember2004,afaster‘Real-timeEnterprise’wasrealizedthroughMES(ManufacturingExecutionSystem).TheITsystemsof81plantsand47yardsatPohangandGwangyangWorkswereintegrated,aswell.PI Phase 3: Phase 3 focused on building a corporate culture and way of working that meets global standard ofexcellence.Italsofocusedoninnovationactivitiesthatcouldengageeveryone.Therolesandresponsibilitiesofeachemployee were made clear, and an RAI chart was made to check whether those responsibilities were fulfilled.Measuresweretakentomakeordering,reportingandmeetingsmoreefficient.Inparticular,ordering,reportingandmeetingsbycompanyexecutivesanddepartmentheadswerediagnosedmoreoftentoprovidethemwithfeedbackandtips.In2008,smallteamswereconsolidatedintogroups,andoverlappingfunctionswereintegrated.Inaddition,cost reduction was further achieved by upgrading and integrating the SCM and the ERP that had been completedduringPhase2.(4) GlobalManagementDuetomarketmaturityandsluggishdomesticmarketgrowth,POSCOhadtolookforinternationalmarketsforitscontinuousgrowth.Thepercentageofexporthasbeenincreasingandreached39percentasof2008,withregionalexportstoAsiancountriessuchasChina,IndiaandJapanaccountingformorethan60percent.AssteeldemandfromChina and Southeast Asian countries was relatively robust, POSCO established production bases in those regions.POSCOcurrentlyhas4plantsinChinaand4plantsinSoutheastAsia<SeeExhibit20>.POSCO targeted China’s huge market since the 1990s, and is currently producing products from DalianPOSCO-CFMCoatedSteelCo.,Ltd.(100,000tonsofcolorsteelsheets)andZhangjiagangPohangStainlessSteel(500,000tonsofzinccoatedsteelsheetsand500,000tonsofstainlesscold-rolledcoils).VietnamisanotherstrategicmarketinwhichPOSCOhasthreeproductionfacilities-POSVINA(30,000tonsofcolorsteelsheets),acold-rolledproduct plant (1.2 million tons of cold-rolled products), and ASC (30,000 tons of stainless cold-rolled steel sheets).Thecompanyplanstofurtherincreaseitsinvestmentinthisregion<SeeExhibit21-22>.
The CGL (Continuous Galvanizing Line) plant that was completed in Altamira, Mexico in August 2009galvanizeszinconthecold-rolledcoilsimportedfromKorea.ThecarmanufacturersinMexicoarethemajorclientsofCGLforautomobilesproducedfromthisplant.Bysupplyingproductsthatcanmanufactureupto400,000carsperannum,POSCOaimstotargetnotonlytheMexicanmarket,butalsotheUSmarketinthenearfuture.POSCOhasbeenworkingontheconstructionofanintegratedsteelmillinIndia,buthasrecentlyfacedmanydifficultiesingettingitlaunched.In order to secure a stable supply of raw materials, POSCO participated in the iron ore and coal minedevelopmentofPOSMECinthewesternregionofAustralia,acquiringa20-percentshare.Sincethen,POSCOhasbeen actively engaged in acquiring equity stakes in mines around the world such as NAMISA’s iron ore mine inBrazil,MacArthur’scoalmineinAustralia,andamanganesemineinSouthAfrica.Thecompanyplanstoenhanceitsrawmaterialself-sufficiencyrateto30percentby2012.In order to increase export to areas with growing demand, POSCO established 8 more SCM (Supply ChainManagement)bases-processingandsalescenters-inChina,SlovakiaandMexico,tobringthetotalnumberofthecompany’sbasesto35.LeveragingthoseSCMbases,POSCOwillstrengthenitscustomerservice,promotethesalesofitsproductsandmaximizethesynergyeffectofoverseasproductionandsales.Asof2007,POSCOhasinvestedgloballyin46companies.Ithasmanagementcontrolrightsin28companiesandhasminorityequityinvestmentsin18companies.4. StrategicChallengesDue to the global financial crisis, growth in global steel demand fell for the first time since 1998. Internationalsteel prices in July 2008 stood at US$1,170 per ton, but dropped to US$606 per ton by December, forcing majorglobal steelmakers to reduce production. Inline with the global economic stagnation, the domestic steel market hasalso witnessed a significant drop. Furthermore, competition is heating up in the domestic market with the entry ofHyundaiSteel.By2010,whenHyundaiSteel’sintegratedsteelmilliscompleted,demandforsteelfromPOSCO’smajor customers such as Hyundai/Kia Motors, Hyundai Heavy Industries, and Hyundai Construction will mostlikelydecrease.
Globalindustryconsolidationisexpectedtocontinueasglobalsteelcompaniesmergetoachieveeconomiesofscaleandscope.Itispredictedthatcompetitionamongthe5to6companiesproducingmorethan50milliontonswillaccelerate. Competition for raw materials will also heat up, and regulations regarding climate change and carbondioxideemissionswillbecomestronger,creatingmoreuncertaintiesinthemanagementenvironment.As of March 2009, Chairman Chung, Joon-Yang became the new CEO of POSCO. Despite the globaleconomicrecessionanduncertaintybothathomeandabroad,ChairmanChunghasannouncedanambitiousvisionforPOSCOofbecomingtheGlobalBig3&GlobalTop3.Heisnowponderinghowtobestachievethegoalandleadtheworld’stopsteelproducerintothefuture.AlthoughPOSCO’sprofitabilityremainshigh,brightdaysarenotnecessarilyaheadfortheglobalsteelindustry.Inlightofstagnantgrowthinsteeldemand,thepriceofsteelproductsandrawmaterialscannotbeexpectedtoremainstable.Furthermore,large-scaleChineseplayerswithlowlaborcostsarerapidlycatchingupwithPOSCO.InJuly2009,Arcelor-MittalproposedtoPOSCOtheestablishmentofajointventureinthestainlesssector.Inthedomesticmarket,potentialM&Aopportunities,such asDaewooConstructionandDaewooShipbuildingareappearingonthescene.The new CEO had to reflect on some fundamental strategic questions. What are POSCO’s future growthstrategiesandoptions? Shoulditfocussolelyonsteel,pursueinternationalexpansionorshoulditdiversifyintonewbusiness areas? If international expansion is the preferred path, where should it build its main production base andhow should it enter the market? Is greenfield investment better than acquisitions or alliances? What are the keyorganizationalcapabilitiesthatneedtobedevelopedtoeffectivelycompeteintheglobalmarketplace?
ReferencesAmsden, A. 1989. “Asia’s Next Giant: South Korea and Late Industrialization” Oxford UniversityPress.IBRD. “Korean Economic Review” 1968Lee & Whang. 1997. “Steel Making at POSCO” Graduate School of Business StanfordNH Research Center. 2009. POSCO. NH Investments & Securities.POSCO. 2003. POSCO 35-Year History.POSRI. 2008. POSCO 40 Years Performance Report.POSCO. Annual Report. 2001-2008.POSCO. Fact Book. 2003-2006.Regani, S. 2004. “POSCO’s Competitive Advantage in the Global Steel Industry” ICFAI BusinessSchool Cases.Seo, K.K. 1997. “The Steel King” Simon & Schuster. U.S.World Steel Dynamics. 2008. Core Report D. Financial Dynamics of International Steelmakers.Yoon, S M. 2000. “A Study on the Institution Building Strategies of POSCO” Doctoral Dissertation.Department of Public Administration. Graduate School. Chung-Ang University.
Working Paper SeriesCategory Serial # Author TitleWorkingPaper99-01 Se-Il Park Labor Market Policy and The Social Safety Net in Korea: After 1997 CrisisWorkingPaper99-02 Sang-Woo Nam Koreas Economic Crisis and Corporate GovernanceWorkingPaper99-03 Sangmoon Hahm Monetary Bands and Monetary NeutralityWorkingPaper99-04 Jong-Il YouJu-Ho LeeEconomic and Social Consequences of globalization: The Case of South KoreaWorkingPaper99-05 Sang-Woo Nam Reform of the Financial Sector in East AsiaWorkingPaper99-06 Hun-Joo Park Dirigiste Modernization, Coalition Politics, and Financial Policy Towards SmallBusiness: Korea, Japan, and Taiwan ComparedWorkingPaper99-07 Kong-Kyun Ro Mothers Education and Childs Health: Economic Anlaysis of Korean DataWorkingPaper99-08 Euysung Kim Trade Liberalization and Productivity Growth in Korean ManufacturingIndustries: Price Protection, Market Power, and Scale EfficiencyWorkingPaper99-09 Gill-Chin Lim Global Political-Economic System and Financial Crisis: Korea, Brazil and theIMFWorkingPaper99-10(C99-01)Seung-Joo Lee LG Household & Health Care: Building a High-Performing OrganizationWorkingPaper00-01 Sangmoon HahmKyung-Soo KimHo-Mou WuGains from Currency Convertibility: A Case of Incomplete MarketsWorkingPaper00-02 Jong-Il You The Bretton Woods Institutions: Evolution, Reform and ChangeWorkingPaper00-03 Dukgeun Ahn Linkages between International Financial and Trade Institutions: IMF, WorldBank and WTOWorkingPaper00-04 Woochan Kim Does Capital Account Liberalization Discipline Budget Deficit?WorkingPaper00-05 Sunwoong KimShale HorowitzPublic Interest "blackballing" in South Koreas Elections: One-Trick Pony, orWave of the Future?WorkingPaper00-06 Woochan Kim Do Foreign Investors Perform Better than Locals?Information Asymmetry versus Investor SophisticationWorkingPaper00-07 Gill-Chin LimJoon HanNorth-South Cooperation for Food Supply:Demographic Analysis and Policy DirectionsWorkingPaper00-08(C00-01)Seung-Joo Lee Strategic Newspaper Management: Case Study of Maeil BusinessWorkingPaper01-01 Seung-Joo Lee Nokia: Strategic Transformation and GrowthWorkingPaper01-02 Woochan KimShang-Jin WeiOffshore Investment Funds:Monsters in Emerging Markets?WorkingPaper01-03 Dukgeun Ahn Comparative Analysisof the SPS and the TBT AgreementsWorkingPaper01-04 Sunwoong KimJu-Ho LeeDemand for Education and Developmental State:Private Tutoring in South KoreaWorkingPaper01-05 Ju-Ho LeeYoung-Kyu MohDo Unions Inhibit Labor Flexibility?Lessons from KoreaWorkingPaper01-06 Woochan KimYangho ByeonRestructuring Korean Banks Short-Term Debts in 1998- Detailed Accounts and Their Implications -WorkingPaper01-07 Yoon-Ha YOO Private Tutoring as Rent Seeking Activity Under Tuition Control* The above papers are available at KDI School Website <http://www.kdischool.ac.kr/new/eng/faculty/working.jsp>.You may get additional copy of the documents by downloading it using the Acrobat Reader.
Working Paper SeriesCategory Serial # Author TitleWorkingPaper01-08 Kong-Kyun Ro 경제활동인구 변동의 요인분석: 선진국과의 비교분석WorkingPaper02-01 Sangmoon Hahm Restructuring of the Public Enterprise after the Crisis: The Case of Deposit Insurance FundWorkingPaper02-02 Kyong-Dong KIM The Culture of Industrial Relations in Korea: An alternative Sociological ApproachWorkingPaper02-03 Dukgeun Ahn Korean Experience of the Dispute Settlement in the world Trading SystemWorkingPaper02-04 BERNARD S. BLACKHasung JangWoochan KimDoes Corporate Governance Matter?(Evidence from the Korean Market)WorkingPaper02-05 Sunwoong KimJu-Ho LeeSecondary School Equalization Policies in South KoreaWorkingPaper02-06 Yoon-Ha YOO Penalty for Mismatch Between Ability and Quality, and School ChoiceWorkingPaper02-07 Dukgeun AhnHan-Young LieLegal Issues of Privatization in Government Procurement Agreements:Experience of Korea from Bilateral and WTO AgreementsWorkingPaper02-08 David J. BehlingKyong Shik EomU.S. Mortgage Markets and Institutions and Their Relevance for KoreaWorkingPaper03-01 Sang-Moon Hahm Transmission of Stock Returns and Volatility: the Case of KoreaWorkingPaper03-02 Yoon Ha Yoo Does Evidentiary Uncertainty Induce Excessive Injurer Care?WorkingPaper03-03 Yoon Ha Yoo Competition to Enter a Better School and Private TutoringWorkingPaper03-04 Sunwoong KimJu-Ho LeeHierarchy and Market Competition in South Koreas Higher Education SectorWorkingPaper03-05 Chul Chung Factor Content of Trade: Nonhomothetic Preferences and "Missing Trade"WorkingPaper03-06 Hun Joo Park RECASTING KOREAN DIRIGISMEWorkingPaper03-07 Taejong KimJu-Ho LeeMixing versus Sorting in Schooling:Evidence from the Equalization Policy in South KoreaWorkingPaper03-08 Naohito Abe Managerial Incentive Mechanisms and Turnover of Company Presidents andDirectors in JapanWorkingPaper03-09 Naohito AbeNoel GastonKatsuyuki KuboEXECUTIVE PAY IN JAPAN: THE ROLE OF BANK-APPOINTEDMONITORS AND THE MAIN BANK RELATIONSHIPWorkingPaper03-10 Chai-On Lee Foreign Exchange Rates Determination in the light of Marxs Labor-ValueTheoryWorkingPaper03-11 Taejong Kim Political Economy and Population Growth in Early Modern JapanWorkingPaper03-12 Il-Horn HannKai-Lung HuiTom S. LeeI.P.L. PngDirect Marketing: Privacy and CompetitionWorkingPaper03-13 Marcus Noland RELIGION, CULTURE, AND ECONOMIC PERFORMANCEWorkingPaper04-01 Takao KatoWoochan KimJu Ho LeeEXECUTIVE COMPENSATION AND FIRM PERFORMANCE IN KOREAWorkingPaper04-02 Kyoung-Dong Kim Korean Modernization Revisited: An Alternative View from the Other Side ofHistory* The above papers are available at KDI School Website <http://www.kdischool.ac.kr/new/eng/faculty/working.jsp>.You may get additional copy of the documents by downloading it using the Acrobat Reader.
Working Paper SeriesCategory Serial # Author TitleWorkingPaper04-03 Lee Seok Hwang Ultimate Ownership, Income Management, and Legal and Extra-LegalInstitutionsWorkingPaper04-04 Dongsoo Kang Key Success Factors in the Revitalization of Distressed Firms : A Case of theKorean Corporate WorkoutsWorkingPaper04-05 Il Chong NamWoochan KimCorporate Governance of Newly Privatized Firms:The Remaining Issues in KoreaWorkingPaper04-06 Hee Soo ChungJeong Ho KimHyuk Il KwonHousing Speculation and Housing Price Bubble in KoreaWorkingPaper04-07 Yoon-Ha Yoo Uncertainty and Negligence RulesWorkingPaper04-08 Young Ki Lee Pension and Retirement Fund ManagementWorkingPaper04-09 Wooheon RheeTack YunImplications of Quasi-Geometric Discountingon the Observable Sharp e RatioWorkingPaper04-10 Seung-Joo Lee Growth Strategy: A Conceptual FrameworkWorkingPaper04-11 Boon-Young LeeSeung-Joo LeeCase Study of Samsung’s Mobile Phone BusinessWorkingPaper04-12 Sung Yeung KwackYoung Sun LeeWhat Determines Saving Rate in Korea?: the Role of DemographyWorkingPaper04-13 Ki-Eun Rhee Collusion in Repeated Auctions with ExternalitiesWorkingPaper04-14 Jaeun ShinSangho MoonIMPACT OF DUAL ELIGIBILITY ON HEALTHCARE USE BYMEDICARE BENEFICIARIESWorkingPaper04-15 Hun Joo ParkYeun-Sook ParkRiding into the Sunset: The Political Economy of Bicycles as a DecliningIndustry in KoreaWorkingPaper04-16 Woochan KimHasung JangBernard S. BlackPredicting Firms Corporate Governance Choices: Evidence from KoreaWorkingPaper04-17 Tae Hee Choi Characteristics of Firms that Persistently Meet or Beat Analysts ForecastsWorkingPaper04-18 Taejong KimYoichi OkitaIs There a Premium for Elite College Education: Evidence from a NaturalExperiment in JapanWorkingPaper04-19 Leonard K. ChengJae NahmProduct Boundary, Vertical Competition, and the Double Mark-up ProblemWorkingPaper04-20 Woochan KimYoung-Jae LimTaeyoon SungWhat Determines the Ownership Structure of Business Conglomerates?: On the Cash Flow Rights of Korea’s ChaebolWorkingPaper04-21 Taejong Kim Shadow Education: School Quality and Demand for Private Tutoring in KoreaWorkingPaper04-22 Ki-Eun RheeRaphael ThomadsenCostly Collusion in Differentiated IndustriesWorkingPaper04-23 Jaeun ShinSangho MoonHMO plans, Self-selection, and Utilization of Health Care ServicesWorkingPaper04-24 Yoon-Ha Yoo Risk Aversion and Incentive to Abide By Legal RulesWorkingPaper04-25 Ji Hong Kim Speculative Attack and Korean Exchange Rate RegimeWorkingPaper05-01 Woochan KimTaeyoon SungWhat Makes Firms Manage FX Risk? : Evidence from an Emerging MarketWorkingPaper05-02 Janghyuk LeeLaoucine KerbacheInternet Media Planning: An Optimization Model* The above papers are available at KDI School Website <http://www.kdischool.ac.kr/new/eng/faculty/working.jsp>.You may get additional copy of the documents by downloading it using the Acrobat Reader.
Working Paper SeriesCategory Serial # Author TitleWorkingPaper05-03 Kun-Ho Lee Risk in the Credit Card Industry When Consumer Types are Not ObservableWorkingPaper05-04 Kyong-Dong KIM Why Korea Is So Prone To Conflict: An Alternative Sociological AnalysisWorkingPaper05-05 Dukgeun AHN Why Should Non-actionable Subsidy Be Non-actionable?WorkingPaper05-06 Seung-Joo LEE Case Study of L’Oréal: Innovation and Growth StrategyWorkingPaper05-07 Seung-Joo LEE Case Study of BMW: The Ultimate Driving MachineWorkingPaper05-08 Taejong KIM Do School Ties Matter? Evidence from the Promotion of Public Prosecutors inKoreaWorkingPaper05-09 Hun Joo PARK Paradigms and Fallacies:Rethinking Northeast Asian SecurityWorkingPaper05-10 WOOCHAN KIMTAEYOON SUNGWhat Makes Group-Affiliated Firms Go Public?WorkingPaper05-11 BERNARD S.BLACKWOOCHAN KIMHASUNG JANGKYUNG-SUHDoes Corporate Governance Predict Firms Market Values?Time Series Evidence from KoreaWorkingPaper05-12 Kun-Ho Lee Estimating Probability of Default For the Foundation IRB Approach InCountries That Had Experienced Extreme Credit CrisesWorkingPaper05-13 Ji-Hong KIM Optimal Policy Response To Speculative AttackWorkingPaper05-14 Kwon JungBoon Young LeeCoupon Redemption Behaviors among Korean Consumers: Effects ofDistribution Method, Face Value, and Benefits on Coupon Redemption Rates inService SectorWorkingPaper06-01 Kee-Hong BaeSeung-Bo KimWoochan KimFamily Control and Expropriation of Not-for-Profit Organizations:Evidence from Korean Private UniversitiesWorkingPaper06-02 Jaeun Shin How Good is Korean Health Care?An International Comparison of Health Care SystemsWorkingPaper06-03 Tae Hee Choi Timeliness of Asset Write-offsWorkingPaper06-04 Jin PARK Conflict Resolution Case Study:The National Education Information System (NEIS)WorkingPaper06-05 YuSang CHANG DYNAMIC COMPETITIVE PARADIGM OF MANAGING MOVINGTARGETS;WorkingPaper06-06 Jin PARK A Tale of Two Government Reforms in KoreaWorkingPaper06-07 Ilho YOO Fiscal Balance Forecast of Cambodia 2007-2011WorkingPaper06-08 Ilho YOO PAYG pension in a small open economyWorkingPaper06-09 Kwon JUNGClement LIMIMPULSE BUYING BEHAVIORS ON THE INTERNETWorkingPaper06-10 Joong H. HAN Liquidation Value and Debt Availability: An Empirical InvestigationWorkingPaper06-11 Brandon Julio,Woojin KimMichael S. WeisbachUses of Funds and the Sources of Financing:Corporate Investment and Debt Contract Design* The above papers are available at KDI School Website <http://www.kdischool.ac.kr/new/eng/faculty/working.jsp>.You may get additional copy of the documents by downloading it using the Acrobat Reader.
Working Paper SeriesCategory Serial # Author TitleWorkingPaper06-12 Hun Joo Park Toward People-centered Development:A Reflection on the Korean ExperienceWorkingPaper06-13 Hun Joo Park The Perspective of Small Business in South KoreaWorkingPaper06-14 Younguck KANG Collective Experience and Civil Society in GovernanceWorkingPaper06-15 Dong-Young KIM The Roles of Government Officials as Policy Entrepreneursin Consensus Building ProcessWorkingPaper06-16 Ji Hong KIM Military Service : draft or recruitWorkingPaper06-17 Ji Hong KIM Korea-US FTAWorkingPaper06-18 Ki-Eun RHEE Reevaluating Merger Guidelines for the New EconomyWorkingPaper06-19 Taejong KIMJi-Hong KIMInsook LEEEconomic Assimilation of North Korean Refugees in South Korea: SurveyEvidenceWorkingPaper06-20 Seong Ho CHO ON THE STOCK RETURN METHOD TO DETERMINING INDUSTRYSUBSTRUCTURE: AIRLINE, BANKING, AND OIL INDUSTRIESWorkingPaper06-21 Seong Ho CHO DETECTING INDUSTRY SUBSTRUCTURE: - Case of Banking, Steel andPharmaceutical Industries-WorkingPaper06-22 Tae Hee Choi Ethical Commitment, Corporate Financial Factors: A Survey Study of KoreanCompaniesWorkingPaper06-23 Tae Hee Choi Aggregation, Uncertainty, and Discriminant AnalysisWorkingPaper07-01 Jin PARKSeung-Ho JUNGTen Years of Economic Knowledge Cooperationwith North Korea: Trends and StrategiesWorkingPaper07-02 BERNARD S.BLACKWOOCHAN KIMThe Effect of Board Structure on Firm Value in an Emerging Market: IV, DiD,and Time Series Evidence from KoreaWorkingPaper07-03 Jong Bum KIM FTA Trade in Goods Agreements: ‘Entrenching’ the benefits of reciprocal tariffconcessionsWorkingPaper07-04 Ki-Eun Rhee Price Effects of EntriesWorkingPaper07-05 Tae H. Choi Economic Crises and the Evolution of Business Ethics in Japan and KoreaWorkingPaper07-06 Kwon JUNGLeslie TEYExtending the Fit Hypothesis in Brand Extensions:Effects of Situational Involvement, Consumer Innovativeness and ExtensionIncongruity on Evaluation of Brand ExtensionsWorkingPaper07-07 Younguck KANG Identifying the Potential Influences on Income Inequality Changes in Korea –Income Factor Source AnalysisWorkingPaper07-08 WOOCHAN KIMTAEYOON SUNGSHANG-JIN WEIHome-country Ownership Structure of Foreign Institutional Investors andControl-Ownership Disparity in Emerging MarketsWorkingPaper07-09 Ilho YOO The Marginal Effective Tax Rates in Korea for 45 Years : 1960-2004WorkingPaper07-10 Jin PARK Crisis Management for Emergency in North KoreaWorkingPaper07-11 Ji Hong KIM Three Cases of Foreign Investment in Korean BanksWorkingPaper07-12 Jong Bum Kim Territoriality Principle under Preferential Rules of Origin* The above papers are available at KDI School Website <http://www.kdischool.ac.kr/new/eng/faculty/working.jsp>.You may get additional copy of the documents by downloading it using the Acrobat Reader.
Working Paper SeriesCategory Serial # Author TitleWorkingPaper07-13 Seong Ho CHO THE EFFECT OF TARGET OWNERSHIP STRUCTURE ON THETAKEOVER PREMIUM IN OWNER-MANAGER DOMINANTACQUISITIONS: EVIDENCE FROM KOREAN CASESWorkingPaper07-14 Seong Ho CHOBill McKelveyDetermining Industry Substructure: A Stock Return ApproachWorkingPaper07-15 Dong-Young KIM Enhancing BATNA Analysis in Korean Public DisputesWorkingPaper07-16 Dong-Young KIM The Use of Integrated Assessment to Support Multi-Stakeholder negotiationsfor Complex Environmental Decision-MakingWorkingPaper07-17 Yuri Mansury Measuring the Impact of a Catastrophic Event: Integrating GeographicInformation System with Social Accounting MatrixWorkingPaper07-18 Yuri Mansury Promoting Inter-Regional Cooperation between Israel and Palestine: AStructural Path Analysis ApproachWorkingPaper07-19 Ilho YOO Public Finance in Korea since Economic CrisisWorkingPaper07-20 Li GANJaeun SHINQi LIInitial Wage, Human Capital and Post Wage DifferentialsWorkingPaper07-21 Jin PARK Public Entity Reform during the Roh Administration:Analysis through Best PracticesWorkingPaper07-22 Tae Hee Choi The Equity Premium Puzzle: An Empirical Investigation of Korean StockMarketWorkingPaper07-23 Joong H. HAN The Dynamic Structure of CEO Compensation: An Empirical StudyWorkingPaper07-24 Ki-Eun RHEE Endogenous Switching Costs in the Face of PoachingWorkingPaper08-01 Sun LEEKwon JUNGEffects of Price Comparison Site on Price and Value Perceptions in OnlinePurchaseWorkingPaper08-02 Ilho YOO Is Korea Moving Toward the Welfare State?: An IECI ApproachWorkingPaper08-03 Ilho YOOInhyouk KOODO CHILDREN SUPPORT THEIR PARENTS APPLICATION FOR THEREVERSE MORTGAGE?: A KOREAN CASEWorkingPaper08-04 Seong-Ho CHO Raising Seoul’s Global Competitiveness: Developing Key PerformanceIndicatorsWorkingPaper08-05 Jin PARK A Critical Review for Best Practices of Public Entities in KoreaWorkingPaper08-06 Seong-Ho CHO How to Value a Private Company? -Case of Miele Korea-WorkingPaper08-07 Yoon Ha Yoo The East Asian Miracle: Export-led or Investment-led?WorkingPaper08-08 Man Cho Subprime Mortgage Market: Rise, Fall, and Lessons for KoreaWorkingPaper08-09 Woochang KIMWoojin KIMKap-sok KWONValue of shareholder activism: evidence from the switchersWorkingPaper08-10 Kun-Ho Lee Risk Management in Korean Financial Institutions: Ten Years after theFinancial CrisisWorkingPaper08-11 Jong Bum KIM Korea’s Institutional Framework for FTA Negotiations and Administration:Tariffs and Rules of OriginWorkingPaper08-12 Yu Sang CHANG Strategy, Structure, and Channel of Industrial Service Leaders:A Flow Chart Analysis of the Expanded Value ChainWorkingPaper08-13 Younguck KANG Sensitivity Analysis of Equivalency Scale in Income Inequality Studies* The above papers are available at KDI School Website <http://www.kdischool.ac.kr/new/eng/faculty/working.jsp>.You may get additional copy of the documents by downloading it using the Acrobat Reader.
Working Paper SeriesCategory Serial # Author TitleWorkingPaper08-14 Younguck KANG Case Study: Adaptive Implementation of the Five-Year Economic DevelopmentPlansWorkingPaper08-15 Joong H. HAN Is Lending by Banks and Non-banks Different? Evidence from Small BusinessFinancingWorkingPaper08-16 Joong H. HAN Checking Accounts and Bank LendingWorkingPaper08-17 Seongwuk MOON How Does the Management of Research Impact the Disclosure of Knowledge?Evidence from Scientific Publications and Patenting BehaviorWorkingPaper08-18 Jungho YOO How Korea’s Rapid Export Expansion Began in the 1960s: The Role of ForeignExchange RateWorkingPaper08-19 BERNARD S.BLACKWOOCHAN KIMHASUNG JANGKYUNG SUHHow Corporate Governance Affects Firm Value: Evidence on Channels fromKoreaWorkingPaper08-20 Tae Hee CHOI Meeting or Beating Analysts Forecasts: Empirical Evidence of FirmsCharacteristics, Persistence Patterns and Post-scandal ChangesWorkingPaper08-21 Jaeun SHIN Understanding the Role of Private Health Insurance in the Universal CoverageSystem: Macro and Micro EvidenceWorkingPaper08-22 Jin PARK Indonesian Bureaucracy Reform: Lessons from KoreaWorkingPaper08-23 Joon-Kyung KIM Recent Changes in Korean Households Indebtedness and Debt ServiceCapacityWorkingPaper08-24 Yuri Mansury What Do We Know about the Geographic Pattern of Growth across Cities andRegions in South Korea?WorkingPaper08-25 Yuri Mansury &Jae Kyun ShinWhy Do Megacities Coexist with Small Towns? Historical Dependence in theEvolution of Urban SystemsWorkingPaper08-26 Jinsoo LEE When Business Groups Employ Analysts: Are They Biased?WorkingPaper08-27 Cheol S. EUNJinsoo LEEMean-Variance Convergence Around the WorldWorkingPaper08-28 Seongwuk MOON How Does Job Design Affect Productivity and Earnings?Implications of the Organization of ProductionWorkingPaper08-29 Jaeun SHIN Smoking, Time Preference and Educational OutcomesWorkingPaper08-30 Dong Young KIM Reap the Benefits of the Latecomer:From the story of a political, cultural, and social movement of ADR in USWorkingPaper08-31 Ji Hong KIM Economic Crisis Management in Korea: 1998 & 2008WorkingPaper08-32 Dong-Young KIM Civility or Creativity?: Application of Dispute Systems Design (DSD) to KoreanPublic Controversies on Waste IncineratorsWorkingPaper08-33 Ki-Eun RHEE Welfare Effects of Behavior-Based Price DiscriminationWorkingPaper08-34 Ji Hong KIM State Owned Enterprise ReformWorkingPaper09-01 Yu Sang CHANG Making Strategic Short-term Cost Estimation by Annualized Experience CurveWorkingPaper09-02 Dong Young KIM When Conflict Management is Institutionalized:A Review of the Executive Order 19886 and government practiceWorkingPaper09-03 Man Cho Managing Mortgage Credit Risk:What went wrong with the subprime and Alt-A markets?* The above papers are available at KDI School Website <http://www.kdischool.ac.kr/new/eng/faculty/working.jsp>.You may get additional copy of the documents by downloading it using the Acrobat Reader.
Working Paper SeriesCategory Serial # Author TitleWorkingPaper09-04 Tae H. Choi Business Ethics, Cost of Capital, and ValuationWorkingPaper09-05 Woochan KIMWoojin KIMHyung-Seok KIMWhat makes firms issue death spirals? A control enhancing storyWorkingPaper09-06 Yu Sang CHANGSeung Jin BAEKLimit to Improvement: Myth or Reality? Empirical Analysis of HistoricalImprovement on Three Technologies Influential in the Evolution of CivilizationWorkingPaper09-07 Ji Hong KIM G20: Global Imbalance and Financial CrisisWorkingPaper09-08 Ji Hong KIM National Competitiveness in the Globalized EraWorkingPaper09-09 Hao Jiang ,Woochan Kim ,Ramesh K. S. RaoContract Heterogeneity, Operating Shortfalls, and Corporate Cash HoldingsWorkingPaper09-10 Man Cho Home Price Cycles: A Tale of Two CountriesWorkingPaper09-11 Dongcul CHO The Republic of Korea’s Economy in the Swirl of Global CrisisWorkingPaper09-12 Dongcul CHO House Prices in ASEAN+3: Recent Trends and Inter-DependenceWorkingPaper09-13 Seung-Joo LEEEun-Hyung LEECase Study of POSCO -Analysis of its Growth Strategy and Key Success Factors* The above papers are available at KDI School Website <http://www.kdischool.ac.kr/new/eng/faculty/working.jsp>.You may get additional copy of the documents by downloading it using the Acrobat Reader.