33% of Manufacturers Engage in Multiple Businesses
By Lee Hyo-sik
Staff Reporter
A growing number of manufacturers here are moving into other areas of business in a bid to find new sources of income and create positive synergy effects with existing units, according to Statistics Korea Sunday.
But this diversification strategy could backfire as companies have to stretch out scarce corporate resources over many divisions, weakening their core competence and financial soundness.
In the past, the nation's conglomerates blindly diversified their business portfolios through excessive leverage, but in the aftermath of the 1997-98 Asian financial crisis, Daewoo and many other large groups went bankrupt under a pile of huge debts.
The statistical office said that 33.1 percent of manufacturers here were involved in more than two business sectors in 2008, up from 31.5 percent a year earlier, adding that the trend has continued over the past few years.
Nearly 71 percent of oil refiners whose main business is to import and filter crude oil were engaged in other commerce, while 42 percent of chemical product makers operated units in different industries. About 46.4 percent of pharmaceutical firms generated earnings from operations other than medicine production.
In the services industry, 21.6 percent of various service providers were involved in businesses other than their key industry last year, up from 19.8 percent in 2007.
Meanwhile, a number of companies employing more than 50 workers and being capitalized at over 300 million won totaled 10,933 in 2008, up 1.7 percent from the previous year. They employed an average of 284.5 employees, up from 281.8 over the same period.
Power generation and related services companies substantially expanded their workforce, but restaurants and loading businesses laid off their employees amid the sluggish private consumption.
Their combined corporate earnings jumped 19.2 percent to 1,605 trillion won in 2008 from 2007 on the back of strong transportation, agricultural and fisheries, and power generation sectors. But the total net profit fell 43.6 percent to 53 trillion won.
An average corporation operated 2.4 subsidiaries here and 2.3 abroad. Nearly 73 percent of their overseas units were located in Asia, followed by North America and Europe.
The statistical office also said 73.2 percent of companies, or 8,001, adopted an annual salary system last year, up 3.2 percent from a year ago. Those who introduced profit sharing and other performance-based compensation packages reached 6,661, up 5.3 percent over the one-year period.
In a bid to cut costs, 8,372 companies, or 76.6 percent of the total, outsourced part of their businesses to outsiders, with 3,229, or 29.5 percent, establishing a presence in foreign countries.
More than half of 10,933 companies invested in a range of research and development activities, totaling 27.8 trillion won, in 2008, up 13.6 percent, from the previous year. The earnings of these firms rose 18.7 percent.
A total of 4,025 businesses held at least one patent, adding up to 299,499 cases ― up 5.9 percent and 10.3 percent, respectively.