Hanjin founder focuses on core businesses

Hanjin Shipping’s container ship Hanjin New York sails the Pacific Ocean in 1995. Hanjin Group founder Cho Choong-hoon focused on core businesses — transportation and logistics — saying “a true fisherman can catch many fish with only one fishing rod.” / Courtesy of Hanjin Group

By Kim Jae-won

American investment guru Warren Buffett is well known for his simple policy: “Buy what you know.” The chairman of Berkshire Hathaway has seen big returns by investing in corporations that he is familiar with, such as Coca-Cola and Gillette, but shows no interest in tech companies that he cannot understand.

So too did Hanjin Group founder Cho Choong-hoon. The late entrepreneur had specialized in transportation and logistics businesses. He often said “a true fisherman can catch many fish with only one fishing rod.”

Hanjin was an exception among Korea’s family-run business conglomerates that have mostly expanded their operations into literally all industries, from electronics and automotives to finance and cosmetics. But Cho concentrated on his group’s core business, establishing it as the nation’s ninth-largest conglomerate with its main focus on transportation.

“Cho developed this business philosophy into his well-known ‘fishing-line theory,’ which says that in order to reel in more fish, it is much more effective to cast a single line in the right place than to cast many lines at random spots,” wrote Lee Im-gwang, author of Cho’s biography, “Business as an Art.”

Lee likened the theory to the “selectivity and concentration” strategy adopted by the nation’s family-run conglomerates, better known as chaebol here, during the 1997 Asian financial crisis.

In the late ‘90s, the Kim Dae-jung administration pushed for so-called big deals, forcing chaebol to restructure their business portfolios through mergers and acquisitions. Daewoo and Hanbo collapsed during the restructuring process while Samsung, Hyundai and LG suffered losses in their auto-making and semiconductor affiliates, among others.

But Hanjin was relatively spared by the storm thanks to the founder’s principle ― concentrating on core business. Hanjin controls Korean Air, the nation’s largest carrier, and Hanjin Shipping, its leading shipping company.

But it does not mean that Cho was passive in doing business. Rather, he aggressively invested in businesses that he knew well and made them grow quickly.

One example is his acquisition of Korea Shipbuilding & Engineering Corp. in 1989. He renamed the company Hanjin Heavy Industries and advanced into the shipbuilding business because he knew about ships from his early days.

“He had always insisted on staying within the transportation industry on the principle that he would never enter a business he didn’t understand, but shipbuilding was different,” said Lee in the book published in October. “Having spent part of his youth at a maritime academy in Jinhae and a shipyard in Kobe, Japan, Cho was exceptionally knowledgeable and passionate about ships.”

He also protected the group’s small-business suppliers. In 1978, a Hanjin executive suggested Cho buy a commercial oven to reduce costs for breads offered to employees. But he declined, saying “bakers have to make a living, too.”