Examining a Business Failure: Daewoo

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Examining a Business Failure: Daewoo Daewoo was founded in by Kim Woo Choong. (Cho, Minho, and Patton, 2000). Kim started out with a small textile-trading house and turned the company into a multi-billion dollar industry and was later found guilty of masterminding the company into colossal debt due to corruption and mismanagement, creating Asia’s largest financial fraud scandal, inflating the company’s equity by $32 billion (Ihlwan, 2001). Kim, along with the company’s top executives, was prosecuted on multiple charges of fraud and embezzlement (Ihlwan, 2001). According to Ihlwan (2001), “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” (¶ 4). Robbins & Judge (2007) defined organizational behavior as, “A field of study that investigates the impact that individuals, groups, and structure have on behavior within organizations, for the purpose of applying such knowledge toward improving an organization’s effectiveness” (p. 9). There are therefore multiple theories that could have predicted or can explain the failure of Daewoo. One of the core topics of organizational behavior is the change processes that are involved within a company (Robbins & Judge, 2007). Daewoo expanded rapidly into multiple industries because the global demand for free trade made Korea open up its market (Ihlwan, 2001). The protection provided of the Korean government was overridden by sanctions from the North American Free Trade Agreement and the European Economic Community (Cho, Minho, et al., 2000). Opening up to the international market due to such a change process may have contributed to Daewoo’s failure. According to Yukl (2006), “The attitude of followers toward the leader is (a) common indicator of leader effectiveness” (p. 10). Ihlwan (2001) documented that

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