By Cho Jin-seo
Listening to Chairman Park Yong-maan on his philosophy regarding mergers and acquisitions (M&A), one may think of a private equity fund. He has been not shy of selling less profitable firms in the group’s portfolio even if they were the group’s trademark businesses, such as the OB Beer.
Professor Takashi Nawa of Hitotsubashi University in Tokyo recalls how Doosan did this. In the early 1990s, he used to work at the Seoul office of McKinsey, a consultancy that had Doosan ― and still does ― as one of its major clients.
Their partnership was so close that Park even invited several consultants, including James Bemowski, into the top-rank of the company’s executive board.
“I think that Doosan`s case is one of the most successful cases in Asia,” Nawa said in an email interview last week, adding that he was well aware of McKinsey`s heavy involvement as the regional head of the company’s automotive and assembly sector.
Only a handful of other big Asian business groups have experienced such a complete change of industry. Fujifilm, Hoya, and Olympus are those that have similar transformation cases, but “they were not as drastic as Doosan.” In China, Lenovo, Legend, BYD, Foxconn (Honhai) are such cases, he says.
Nawa also concurs with Park that Asian firms need to decentralize R&D and manufacturing capabilities.
“I cannot agree more with Chairman Park. Actually I have been advocating to major Japanese companies such as Toyota, Toshiba, Panasonic, NTT Group and Mitsubishi Group to change from the Japan-centric model to a more decentralized one, by locating the ‘center of excellence’ outside of Japan,” he said.
But the praise is for people who were lucky enough to survive the restructuring. Like any corporate deal, there are people who feel hurt. One former employee at its liquor unit recalled that Park had written an email to employees stating that he would never sell the unit. A few months later, he did.
Park refutes such claims. He says it was not him but one of his executives who gave them false hope. “I never said so. How could I do that? How could I tell such a lie, when I had this idea of selling the unit in my mind?” he said. “I heard such rumors but did not respond, because if I did then the executive would lose face.”
For people who were forced out of the Doosan family, Park said he feels unhappy but does not feel sorry or regretful because in most cases the decisions were made for the sake of both parties.
“If they stayed with us, then we might all be bankrupt. It was better for them to separate from us and find a new master where they can produce a profit,” he said about the sale of the beer business, which at one point enjoyed 70 percent of the domestic market.
Another example is the packaged kimchi business.
Doosan was the first to develop and sell packaged kimchi under the Jonggajip brand and was the market leader. But Doosan never made a profit from of it because there were no other fresh food businesses in the group that could share refrigerated trucks. This pushed up logistical costs.
“It was a powerful brand and the kimchi was really delicious. I know the people worked hard. But we did not have the goods to fill 90 percent of the refrigerated trucks,” he said.