Large Korean corporations have gained too much control over their small cooperative firms over the last few years, resulting in SMEs’ high dependency on big companies. (image: Kobiz Media / Korea Bizwire)
SEOUL, March 31 (Korea Bizwire) — Small to medium manufacturers’ management conditions are getting worse in Korea, even though some of the major firms they cooperate with are seeing sales increases.
According to a report published by the Korea Federation of SMEs and the Korea Institute for Industrial Economics & Trade published on March 29, the ratios of operating profit to sales for Samsung Electronics and Hyundai Motor affiliates steadily increased from 9.3 percent to 13.8 percent between 2008 and 2013.
However, the average ratio of operating profit to sales for SMEs cooperating with Samsung Electronics has been decreasing since 2008, reaching a low of 4.2 percent in 2013. The ratio for Hyundai Motor’ non-affiliate suppliers decreased from 3.6 percent in 2008 to 3.3 percent in 2013.
This imbalance will slow down employment and shrink R&D investments among SMEs, said the report. The employment rates and the average wages at Hyundai Motor’ affiliate companies have increased 7.3 percent and 7.8 percent respectively over the last five years, while the employment rates and the average wages for Hyundai’s non-affiliate firms have increased 2.7 percent and 6.0 percent.
The report also said that these kinds of imbalances between major companies and their cooperative SMEs occur frequently in other manufacturing fields. Dr. Lee Hang-Gu, one of the report’s authors, said that large Korean corporations have gained too much control over their small cooperative firms over the last few years, resulting in SMEs’ high dependency on big companies.
By John Choi (johnchoi@koreabizwire.com)
