Ihlwan writes in business week that “Korea's chaebol relied on accounting maneuvers to plump up profits, diminish liabilities, and generally make the business look good. But the scale at Daewoo was breathtaking” (p. 4). Means, apparently the dealings were looking fine but the hidden situation was the false making of profit by corruption and bribery. In order to understand the failure of Daewoo, scholars suggested different theories and behaviors, for example, number one is Organizational Behavior.
According to Robbin and Judge, organizational behavior or attitude is, “A field of study that investigates the impact that individuals, groups, and structure has on behavior within organizations, for the purpose of applying such knowledge toward improving an organization’s effectiveness” (p. 9). This theory suggests that how individuals, groups, and structures work together and helps each other to improve the conditions and profits of an organization. It is further sub-divided in change process. By the help of this theory we may understand the failure of Daewoo in international market.
Change Process, which is subtype of organizational behavior, explains how the company copes up with changes. This change may come either with in the government or outside of government. For example, the theory of free market assist Daewoo to open its global branches and take benefits, but international sanction had played disastrous role in company’s growth. The sanctions come, when a certain company starts having monopoly in market. In the case of Daewoo, it faced sanctions from North America Free Trade Agreement and European Economic Community.Another theory prescribed by Yukl is, “The attitude of followers toward the leader is common indicator of leader effectiveness” (p.
10). According to this theory, the relationship between the employees and employer played huge role in success of any business. In this regard, the employees should be satisfied of their income, timings, and social security from company. There should be deep coordination and cooperation among them; inspirational titles or privileges should give for excellent performance, and strong human resource department.By tracing out the causes of failure, Daewoo’s dilemma was that it lacked the all above mentioned amenities for its workers. Compliance plays active role to maintain the reputation of company in front of government.
Daewoo failed in this ground too. It was unable to show the government the honest financial reports and list of beneficiaries because it was already became the victim of corrupt employees. The second theory is “Management of Organization” presented by Robbins and Judge (2007).According to this theory, the smooth internal administration of company had macro element of company’s achievements. Robbins ; Judge (2007) outlined ten managerial roles that define management (p.
6). •One of the managerial roles is assortment of resources. In this perspective, every kind of resources has vital importance, be it human resource in the form of labor, material require for manufacturing, positive assurance and favorable atmosphere at home and international market. If any one of them lacks, the wheel of growth may stop.The reason behind it is that every resource helps to strengthen the company’s internal structure and support to generate more profit.
This thing was favorable for Daewoo but, •It lacked the confidence of workers. They were bitter of their long hours and small pay role. •Another managing factor discussed by Mintzberg is company should aware and prepare for any unpredictable disaster and management. It is another claim on Daewoo’s policy that it had not maintains and allocates any reserves to cope with the unpredictable issues.Therefore, when the crises came the company suffered $30 billion loss. Third theory, which necessary to keep the corporation, business, company or organization compact is Synchronizing Instruments.
They are kind of system which run in company to keep its working even and smooth. They are as follows 1. common regulation 2. straight control 3. homogeny of action procedure 4.
regularity of productivity 5. equivalence of expertise 6. equality of rule These are six basic standards of company’s cohesiveness.All the employees should feel adherence and attachment to company (company’s loss is theirs loss and company’s benefit is theirs benefit), they must be control directly from big boss under his guidance and experience rather then assistants having minimal experience, all the employee has equal workload according to post (none should have extra work load), the out put in terms of profit should be divided equally among all staff according to their efforts and hard work, every employee should have equal expertise in their particular field, and rules should apply on whole staff, from boss to peon.If anyone of these instruments failed to synchronize with other, company starts degenerating slowly. In the case of Daewoo, the malfunctioning started by overlying of 1st and 4th instruments.
The directors of company failed to regulate and supervise the company directly and efficiently, “a leader who, by virtue of instructions, coordinates…work, much as a football team requires a quarterback to call the plays. ” (Mintzberg, Lempel, et al. , 2003). Second, the production managers were asked to increase their production more and more and take the sells at highest peak according to annual target, and it happened accordingly.But the numbers of profit and benefits were perverted and coiled on files by finance managers, due to which employees were not able to get the profit, which, consequently, caused the dissatisfaction and annoy among employees.
According to critiques, the over all structure of Daewoo looks as large entrepreneur which carries small businesses in it.This thought developed due to lacking in the unity of whole organization. Every department seemed working as independently but they were some how linked with each other. There was no such distinction and application between centralization and decentralization among departments. If departments had little autonomy or they were directly linked to centre with strong force, the chances of success were evitable. But the loose connection among departments, and centre degenerated the situation.
