SK Essay

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SK is a leading family-owned business conglomerate, called a chaebol, in South Korea. It was transformed into a holding company system in 2007. Its member companies are involved in many businesses including petroleum, chemicals, and telecommunications; SK Energy and SK Telecom are the two main companies. They have increasingly paid attention to foreign markets and, in particular, SK Energy takes the initiative in securing sources of energy.

SK is the third-largest chaebol and has 64 member companies with assets of 72 trillion Korean won (some US$72 billion) as of April 2008. Originated from a textile company in 1953, SK has since been controlled by the Choi family, and recently governed by Tae-Won Choi, a member of the second generation, who became the owner in 1998 and the group chairman in 2004. The number of member companies has rapidly increased from 16 in 1987 to 32 in 1993 and then to 62 in 2002, standing at 64 in 2008, the second largest among the 30 largest chaebols.

SK adopted a holding company system in 2007. The central company in SK had been SK Corporation, which, founded in 1962, manufactured petroleum and chemical products and also acted as the holding company. This company was divided into SK Holdings and SK Energy in July 2007; the former, the holding company, took over the shareholding function with the life science business, while the latter took over all the other manufacturing businesses. In December 2007 SK Holdings had seven “son” companies, including SK Energy, SK Telecom, SK Networks (trading), and SK E&S (natural gas), which had 16 “grandson” companies. Meanwhile, SK E&S, formerly SK-Enron and a holding company from 2000, itself had 10 son and one grandson companies. In all, 35 of 57 member companies were organized into the holding company system, which is to be developed into a fully-fledged one by mid-2009. SK Holdings supervises its subsidiaries and owns the “SK” brand, which replaced “Sunkyoung” in 1998. The company is under full control of Tae-Won Choi: he is a representative board member and the chief executive officer in both SK Holdings and SK Energy, and also the owner of SKC&C, a private company, which is the dominant shareholder in SK Holdings.

As with its predecessor SK Corporation, SK Energy remains a key company in SK. In 2007 it generated sales of some US$27.8 billion, 52 percent of which occurred in overseas markets. Two-thirds (66 percent) of sales was explained by petroleum, such as diesel oil (28 percent), bunker-C oil (12 percent), and gasoline (7 percent), and around a third (27 percent) by chemical products; and 42 percent and 70 percent of respective sales were by export. In the domestic petroleum markets, SK Energy had 32–33 percent shares in 2003–07, competing with GS-Caltex (27–29 percent). The company has recently made great efforts to gain access to sources of energy, and by 2007 secured interests in 27 sources of crude oil and liquefied natural gas (LNG), being involved in exploitation in eight of them; the sources are located in 15 countries including Vietnam, Yemen, Kazakhstan, Egypt, Libya, CYte D’Ivoire, Peru, and Brazil. Also, the company invested in a total of five coalfields in Australia (4) and China (1). For energy development, production, and marketing, SK Energy had founded some 15 subsidiaries in China, Australia, the United States, Brazil, and several other countries by 2007. SK Telecom, another of SK’s main companies, is Korea’s top provider of mobile phone and internet service. The company has maintained 50–54 percent market shares since 2002 (51 percent in 2007), surpassing KTF (32 percent) and LG Telecom (18 percent); its sales for 2007 amounted to some US$11.3 billion, most of which was domestic sales. SK Telecom has attempted to achieve a competitive advantage in new technology, spending 2.6–2.9 percent of sales on R&D in 2002–07 (some US$297 million in 2007). In late 2000, the company provided, for the first time in the world, the third-generation mobile phone service, called 3G, which delivered less than 1 million bits per second. In mid-2006, it created 3.5G, the technology between the third and the potential fourth generation, whose capacity of 3 million bits per second enabled e-mail files to be exchanged efficiently. SK Telecom has increasingly served overseas markets and, by 2007, had established some 20 subsidiaries in China, Vietnam, and the United States, among other countries.

Bibliography:

  1. J. Lee, “Phones: Too Much Data?” Newsweek, October 18, 2007, www.newsweek.com (cited March 2009);
  2. SK, www.sk.com (cited March 2009);
  3. SK Energy, SK Holdings, SK Telecom, The 2007 Annual Report, dart.fss.or.kr (cited March 2009).

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