Session 21
The Management of Asian Firms (B):
The Internationalization Challenge
COMM376
Doing Business in the Asia-Pacific Region
Dr. Nailin Bu
East Asian Firms
Session A
• Get to know the overseas Chinese
(Chinese diaspora) and their roles in:
– Southeast Asia
– Mainland China
• The management succession practices
in:
Session B
• The management succession practices
in:
– Korean Chaebols
• The Internationalization challenges
facing East Asian firms
– Overseas Chinese family businesses
– Japanese family firms
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3
Traditional Pattern of intergenerational Wealth Transfer
(Family Inheritance)
Korean
Chinese
Inclusion “Biological” children
Division
-
Equal
Division among sons (&
daughters in modern
times)
“Biological” children
Biological & adoptive children
-
-
Unequal
Typically favor the eldest
son
In China and Korea
Adoption of babies older
than age 2 is rare
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Japanese
Unequal
Favor the most capable or
loyal son
In Japan
Over 98% of those adopted
are adults 20-30 years of age
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The Family Intrigue: The Case of the Samsung Group
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The Family Intrigue: The Case of the Samsung Group
Complicated Succession
• S Korea top inheritance tax rate is
50%. The Lee family will be on the
hook for $6 billion in inheritance tax
when the elder Lee passes away.
known as Jay Lee
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• To avoid the costly inheritance (and
loss of family control of the chaebol),
founding families often attempt to
make inter-generational wealth
transfer prior to the death.
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Chaebol Corruption Brought Down a President
•
•
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In March 2017, President Park Geun-hye was
removed from the office after her impeachment
on the related matter.
In Feb 2017, Samsung's de-facto chief Jay Y. Lee
was arrested for bribery, embezzlement and
perjury. In Aug 2017, he was sentenced to 5
years in prison
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Samsung's Awkward Setback
• April 2008: Chairman Lee Kun-Hee was Indicted on corruption; resigned
• July 2008: convicted him on tax evasion; fined 110b won; 3 yr suspended jail sentence;
• Dec 2009: Pardoned
• March 2010: Announced his return as Samsung’s chairman
“This [pardon] decision was made so that Lee could take back his place at the IOC
[International Olympic Committee] and form a better situation for the 2018 Olympics
to take place in Pyeongchang.”
-- Lee Kwi-nam, Justice Minister.
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Samsung's Awkward Setback (The New Generation)
• In 2018, the Seoul High Court reduced
Jay Lee’s to 2.5 years, and suspended his
prison sentence, leading to Jay Lee's
release after only one year in detention.
• In 2021, Jay Lee was retried and
sentenced to 2.5 years in prison. Jay Lee
returned to prison.
The Moon
administration argued
that the release was
in the national
interest.
The Yoon
administration cited
• In August 2021, Jay Lee was paroled after Samsung’s
18 months in prison. Lee faced
importance to the
restriction on business activities.
South Korean
economy in
• In August 2022, Jay Lee was pardoned
justifying the
and returned as the leader of Samsung.
pardon.
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The Family Intrigue: The Case of the Samsung Group
Complicated Succession
• S Korea top inheritance tax rate is
50%. The Lee family will be on the
hook for $6 billion in inheritance tax
when the elder Lee passes away.
known as Jay Lee
• To avoid the costly inheritance (and
loss of family control of the chaebol),
founding families often attempt to
make inter-generational wealth
transfer prior to the death.
Many of Chaebols’ illicit behaviors have been associated with some form of “estate
planning” or “succession planning”.
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East Asian Firms
Session A
• Get to know the overseas Chinese
(Chinese diaspora) and their roles in:
– Southeast Asia
– Mainland China
• The management succession practices
in:
Session B
• The management succession practices
in:
– Korean Chaebols
• The Internationalization challenges
facing East Asian firms
– Overseas Chinese family businesses
– Japanese family firms
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Source: Based on information from Fortune. 2020. Global 500. https://fortune.com/global500/2020/search/?sector=Technology. Accessed 10 April 2021.
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The Internationalization challenges facing East Asian firms
Global Mindset
• Japan is in danger of becoming the
Galapagos Islands
• China is globally ambitious
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SE Asia’s Strategic
Importance to China:
•SE Asia’s natural resources & land
•SE Asia as potential production
bases with youthful workforce &
potential tariff advantage
•SE Asia’s emerging consumer
markets
•SE Asia’s infrastructure upgrading
and urbanization process will
generate massive demand for
steel, cement & construction
http://www.economist.com/news/asia/21576721-harbours-eastern-lobe-indian-ocean-could-transform-economic-geography-asia-new
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•Geopolitical significance:
-Passage to Indian Ocean
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• China is building
railways & roads to link
Southern China to SE
Asia.
• China is also building
roads & pipelines in S
Asia & sea ports in the
Indian Ocean.
COMM376
Source: "Kunming-Singapore" by
Classical geographer - Own work.
Licensed under CC BY-SA 3.0 via
Wikimedia Commons http://commons.wikimedia.org/wiki/File
:KunmingSingapore.png#/media/File:KunmingSingapore.png
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SE Asia’s Strategic
Importance to China:
•SE Asia’s natural resources & land
•SE Asia as potential production
bases with youthful workforce &
potential tariff advantage
•SE Asia’s emerging consumer
markets
•SE Asia’s infrastructure upgrading
and urbanization process will
generate massive demand for
steel, cement & construction
http://www.economist.com/news/asia/21576721-harbours-eastern-lobe-indian-ocean-could-transform-economic-geography-asia-new
COMM376
•Geopolitical significance:
-Passage to Indian Ocean
16
• China is building
railways & roads to link
Southern China to SE
Asia.
• China is also building
roads & pipelines in S
Asia & sea ports in the
Indian Ocean.
COMM376
Source: "Kunming-Singapore" by
Classical geographer - Own work.
Licensed under CC BY-SA 3.0 via
Wikimedia Commons http://commons.wikimedia.org/wiki/File
:KunmingSingapore.png#/media/File:KunmingSingapore.png
17
COMM376
https://asia.nikkei.com/Spotlight/Belt-andRoad/China-drops-11bn-anchors-to-expandMaritime-Silk-Road
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The New Silk Road – China’s Belt and Road Initiative
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Global warming has opened a route
between Europe and China that can cut
distance between Shanghai and Rotterdam
by 22%
https://www.economist.com/china/2018/04/14/china-wants-to-be-a-polar-power
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China Ocean Shipping Company (COSCO) is
planning regular trans-arctic sailings
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The Internationalization challenges facing East Asian firms
Global Mindset
Fully Internationalized Businesses
• Japanese firms faces the biggest
challenge
•
Both Japanese and Mainland
Chinese firms fall short
•
Samsung is making an effort in that
direction
• China is ambitious
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Samsung’s Internationalization Effort
2016
https://sgsg.samsung.com/main/index.php
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