Samsung’s influence on South Korea

1. Introduction

Nowadays in South Korea it is possible to live a „Samsung-only“ life: You can use a Samsung credit card to buy a Samsung TV on which to watch a Samsung-owned pro baseball team in your Samsung-made apartment. The Samsung Group is a South Korean multinational conglomerate company headquartered in Seoul and operating worldwide. During the last century Samsung became the largest chaebol – the Korean term for corporate groups that were jump-start with government support and established itself as the main driving economic and political factor in South Korea. That is why the Republic of Korea is also referred to as the Samsung Republic. This paper analyses Samsung’s influence on the South Korean economy and politics (chapter 2) and draws a conclusion whether the term Samsung republic is suitable or not (chapter 3). 2. Samsung’s influence in South Korea

This chapter points out Samsung’s positive and negative impact on the South Koren economy (2.1) and its political system (2.2). 2.1 The influence on South Korean economy Founded in 1938 Samsung began with trading vegetables and dried Korean fish. Forming an alliance with military dictator Park Chung-hee was the foundation of the quick uprising of the company. In the shadow of Samung’s rise many Korean companies followed the road of success. The whole Korean economy benefited from Samsung striving for innovations boosting the technological progress and development of the infrastructure in the country. So the conglomerate helped Korea to grew from a predominately rural, agricultural nation into an urban, newly industrialized country. Today Samsung Electronics – the flagship company of Samsung Group - is South Korea’s greatest economic success.

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Holding about 33 percent of the global smartphone market, Samsung Electronics produces the world’s best-selling smartphone – the Galaxy. However smartphones are just a part of the company’s portfolio. Samsung is pretty much involved everywhere in South Korea – constructing road and oil rigs, operating hotels and amusement parks, selling insurances and operating gas stations. In 2012 the Samsung Group including 80 subsidiaries produced $268.8 billion in sales contributing roughly 20 % to the national GDP. The Samsung conglomerate now accounts for 28 percent of the nation’s exports. This makes Samsung the major driving economic force in Korea.

While the global success of Samsung has pushed South Korea’s standing in the world, at home the company’s dominance in the domestic economy has raised many concerns. Samsung is accused to exacerbate the wealth gap by using its bargaining power and squeezing suppliers to hard. Samsung produces many of its most important components in-house to provide a certain degree of independence but it also sources many parts from a network of smaller Korean companies. The income of those companies has increased along with the success of the conglomerate however those rewards come with risks. So Samsung demands that its contractors do not supply parts to direct competitors like Apple or LG. Since the suppliers cannot diversify their customer base they are heavily dependent on Samsung. Furthermore, the market dominance also harms consumers. So South Korea’s Fair Trade Commission found in 2010 3.500 cases of price-fixing, in which Samsung was involved. Samsung knocked out or acquired smaller businesses limiting choices for Korean consumers to the own products or colluded with fellow giants to fix prices. So Samsung was able to reduce market mechanism and gain a monopolizing position in several business fields in South Korea.

Another aspect is Samsung’s attractiveness to young professionals and high potentials. Several surveys have revealed that Samsung is considered to be the best employer which also pays the highest wages in South Korea. Graduate students hope to benefit from the Samsung network and climb up the social ladder quickly based on their connection to Samsung. Therefore they strive for jobs at the conglomerate in order to start off their career. Since there is a stiff competition for jobs at Samsung those who made it are proud to work for the company and they are willing to give up their social life. It is not unusual that young professionals at Samsung work till deep in the night and after just a few hours of sleep return to their workplace. So recently the term Samsung man was established in the Korean vocabulary describing an ambiguous man striving for a bright future and who is willing to give up almost everything for the success of his company.

This aspect is great for Samsung’s economic success, however it hinders the development of other companies who cannot compete with Samsung for young talents. Lacking the access to fresh talents those Korean companies already fell back in the race for innovative leadership. By grabbing all high potentials Samsung is indirectly destroying the future of its competitors, which have to build up their future with the leftovers at the employee market. So you can conclude that Samsung has not only the pole position in the race for young talents but achieved to have an almost monopoly position for the best graduate students. 2.2 The influence on the Korean politics

Based on its economic power Samsung built up a strong political network to influence Korean politics. Over decades Samsung bribed Korean politicans quietly tolerated by the public. Samsung was even threating Commissioners and persecutors to end their career if they would dare to open a case against the company. Therefore Samsung was untouchable by the legal system until July 16th 2008, when Samsung’s chairman and Korea’s richest man, Lee Kun-Hee was found guilty of financial wrongdoing and tax evasion by Seoul Central District Court. But despite prosecutors demanding a sentence of seven years in prison and a fine of $347 million, he was convicted to 3 years suspended sentence and $ 109 million in fines. He took legal and moral responsibility and resigned from all offices. However in 2009 the South Korean government pardoned him arguing that Lee Kun-Hee was too important for the country’s economy. He joined the International Olympic Committee and helped South Korea to bid successfully to host the 2018 Winter Olympics in Pyeongchang. In March 2010 he returned as Samsung’s Chairman and is now preparing the smooth transfer of power to his only son, Lee Jae-yong who is currently vice chairman of Samsung Electronics.

Until today, Samsung conducts a no labor union policy inside Korea, by closely monitoring workers and establishing ghost labor unions to prevent the creation of real ones. So Samsung succeeded in blocking any attempt of workers to form a political counterpower against its business policy while at the same time increasing its own political influence. In order to sum up the political power of Samsung and its chairman Woo Suk-hoon, a Korean economic expert, expressed that the Samsung chairman is more powerful than the South Korean president. Indeed Forbes’ neutral global ranking of the most powerful people in 2013 ranks South Korean President Park Geung-hye No. 52 while Samsung Chairman
Lee Kun-Hee is ranked No. 41. This illustrates how deeply Samsung infiltrated Korean politics with loyal sympathizers and how Lee Kun-Hee used the economic power of Samsung to establish himself as a political driving force with global impact.

Summary and conclusion

Summing up Samsung has a massive impact on the South Korean economy and politics. Today the company is so important for South Korea that its considered to be too big to fail. Many concerns has been raised over the last year and few politicians have raised their voice against Samsung, however thanks to its established political network the company managed to suppress any political idea to limit its power. Many Koreans do not like the dominant role of Samsung but when it comes to the future of their children they want them to work for Samsung. A job at Samsung is still considered to secure and provide financial security. However it is also necessary to point out that Samsung is just the largest of a few family run conglomerates in South Korea. Other conglomerates like LG, SK and Hyundai that are way smaller than Samsung but still have their own influence on Korea’s economy and politics. Concerning if it is positive or negative that Samsung reached an almost monopoly position in several business fields Samsung has shown that the whole economy profits from its success. Samsung with its products presents South Korea on the global stage increasing the country’s reputation. Until the 90’s Korea was still seen as an agricultural country but thanks to Samsung’s striving for technological process South Korea is today one of the most advanced technological countries in the world. While the positive effects on the economy overtrump the negative ones the negative effects on the political system outmatch the positive ones.

Samsung used bribery and corruption in order to establish a political system supporting the company’s road of success. The system protected Samsung’s executives and made the company untouchable for the legal system. This hindered strongly the development of democracy and legal justice. All in all the hypothesis I (H1) cannot be rejected and the term Samsung republic seems
quite suitable for the country. In the past Samsung’s rash economic uprising was based on its great connections to political elites while today it is the other way around – Samsung’s political power is based on its economic success.

Bibliography

1. Financial Times (2012): Mighty Samsung weighs heavy South Korea
2. Forbes (2013): Ranking of the most powerful people 2013
3. Indepent (2013): Tax evasion, bribery and price-fixing: How Samsung became the giant that ate Korea
4. Japan Times (2012): Republic of Samsung viewed warily at home
5. Samsung.com (2013): Samsung company profile
6. Washington Post (2012): In South Korea, the republic of Samsung, published 2012-12-09

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