Coporate Governance & Globalisation Essay Example | Topics and Well Written Essays - 2250 words

Coporate Governance & Globalisation - Essay Example The troubles in the entire conglomerate culminated in the sale of this subsidiary. This report analyzes problems leading to the collapse and recommends relevant corporate governance measures, which would have prevented such managerial malpractices. Introduction Daewoo is a South Korean company founded in the late 1960s. It represented pioneering entities in the automobile sector in not only South Korea but also Asia. Kim Woo Choong played a vital role throughout the early years of the corporation. The entity benefited massively from the government’s goodwill. The government enacted policies, which ensured that the entity did not face major competition. Additionally, it offered credit to the entity at friendly rates. This reduced the overall cost the entity incurred. The reduction of cost gave the entity a massive competitive edge over rivals. This shows the impact of government’s goodwill on the entity’s fortunes. The success of the entity did not last long since it encountered major managerial problems. This write-up will analyze problems which this entity encountered culminating in its sale. Furthermore, it will propose corporate governance measures that would have impeded the chaos that emanated and led to its collapse. Daewoo’s history and managerial problems Daewoo is a conglomerate with numerous subsidiaries, which included Daewoo Motors, Daewoo Bus Company, Daewoo Electronics, Daewoo Heavy Industries and Daewoo Securities. This was a huge corporation with several subsidiaries and joint ventures. The sheer size and complexity of this entity made its management challenging. Managers in such an entity encounter countless constrains. The multinational had diversified its operations into several industries. Diversification enabled the entity to sustain its financial stability (Lopez 2000). The collapse of this entity resulted from some diverse factors. The government’s policies were key to the collapse of the entity. The gov ernment enacted protectionist policies. Such policies ensured that the entity got cheap raw materials. This reduced the entity cost allowing the entity to make phenomenal profits. Additionally, the entity got cheap financing from the government. Similarly, this reduced its costs availing more funds for further investment. The government also focused on policies, which favoured one entity. Therefore, the government failed to support emergence of other smaller entities. Therefore, such policies shielded Daewoo from competition, costly raw materials and high cost of credit. This provided a perfect market for the entity to succeed. The government seemed not to have a clear policy to ensure fair trade in its economy either. These policies were friendly to the entity since the entity gave political support in exchange for such skewed governmental strategies, which favoured the entity (Lopez 2000). The expansion of the entity entailed several five-year plans. These plans would outline what the entity should accomplish within the period. Daewoo Motors commenced operations in the early 1980s. Daewoo Group acquired an entity that was failing in the automobile sector owing to competition from Hyundai. Using its massive resources, Daewoo Group turned around the fortunes of this entity and renamed it Daewoo Motors. This acquisition added another subsidiary to the already expanding corporation. The Daewoo conglomerate seemed to be undertaking an expansion strategy. However, such a strategy