Small and Medium Enterprises in South Korea on Example of Wedding Sector

Chapter 1

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1.0 Introduction

This chapter introduces the background information of SMEs in Korea. It highlights the problem of the statement of the study, aim and objectives. The chapter also provides the hypothesis of the study, the significance and the definition of terms that are applied in the research.

1.1 Background of the dissertation

1.1.1 Definition of Terms

For the purpose of clarity, this section will define key terms that will be frequently used in the dissertation.

Small and Medium-sized Enterprises (SMEs) non-subsidiary firms with employees less than a given number, which varies across countries (OECD, 2016)

Growth this is the mindset and system oriented process (Hess and Liedtka, 2012) that strategically results to increased productivity and service income of a business (Ericson, 2010).

Business growth measurement the assessment of the size of a firm based on various factors such as market share, capital employed, sales turnover and the number of employees (Hess, 2010).

1.1.2 Small and Medium-sized Enterprises (SMEs)

All over the world, SMEs are the backbone of a modern economy. They contribute to the economic growth, job creation and innovation. According to the Organization for Economic Cooperation and Development (OECD) (statistics 2016), SMEs represent over 85% of total enterprises and ensure more than 60% of total jobs worldwide.

Korea is one of the countries with the highest employment rate in the SMEs sector. Table 1-1 illustrates data comparison on the number of SMEs and the number of people employed in the UK, EU and three Asian countries; Philippines, Japan and South Korea. This data, according to the industrial Policy data 2016 by the European Commission the number of SMEs in all five categories ranges from 99.6% to 99.9% of the total enterprises. These figures indicate that small and medium enterprises are the dominant form of global business enterprises. In addition, the table reveals that the number of people employed in South Korea accounts for the highest percentage of the total number in enterprise with the figure of 87.7%. In 1980, since the policy to support SMEs was strengthened, the ratio of SMEs contributing to employment started to expand. Eventually, more jobs were created from SMEs as compared to large companies in Korea.

Table 1: Interactive SME database (% of total number in enterprise)

Source: Ec.europa.eu (2006)

United Kingdom EU average Philippines Japan South Korea

Number of SMEs 99.7 99.8 99.6 99.7 99.9

Number of people employed 53.7 66.9 70 66 87.7

1.2 Significance of the study

This study will be significant to the economy of Korea as it can lead to increased growth and development of SMEs and particularly the firms in the wedding sector. The finding of this research will also benefit the owners and the project managers by suggesting the appropriate PPM tools that can contribute to increased growth and development of SMEs in Korea. The general public will also benefit since the growth of wedding industry will increase the employment. Finally, this paper sets a pace for other scholars to investigate other factors that can promote the development of SMEs in Korea through the application of the appropriate PPM tools.

1.3 Problem Statement

There are many processes of working strategically within the environment of large enterprises. However, there is little research that is being done about a sustainable growth strategy focusing on SMEs. According to Thakor (2011), strategy should be applied depending differently depending on the size of the enterprises. The researcher realized that the newly adopted wedding strategies in Korea require proper management and application of the appropriate growth strategies an area which has not been a subject of focus to many scholars. The investigators opted to analyze the wedding industry in Korea by assessing the appropriate growth strategies that can be adopted through the application of the PPM tools.

1.4 Research Aim

To support the growth of SMEs in Korea- the example of the wedding companies

1.5 Research Objectives

The objectives of this study will be to:

Analyse the trend of the wedding industry with a focus of Korea

Critically review the growth models for SMEs

Critically review PPM tools relevant for SMEs growth management

Explore the good practice of SMEs growth to serving foreign markets

Identify current position of wedding industry SMEs in Korea

Investigate the factors that affect growth of SMEs in Korea

Recommend growth strategies for wedding SMEs supported by PPM tools.

1.6 Dissertation Structure

This dissertation is composed of six main chapters as outlined below.

Chapter one consists of the introduction and the background of this study. It also contains important definitions of some of the terms that have appeared in most instances within the dissertation. Further, it contains the purpose, significance and justification of the thesis alongside which the aim and objectives have been enlisted.

Chapter two is the literature review and contains an exposition of the theory behind the study. The theory has been majorly acquired from previously documented researches: journals and books. In it, the SMEs have been explored in-depth in line with all the factors that affect their growth; the strategies (e.g. the Ansoff Matrix) that are taken to fuel their growth and the challenges that are associated with the growth. Additionally, the growth models for SMEs have been explored and finally a review of the initial condition of the SME wedding industry in Korea has been done.

Chapter three contains the Research methodology employed in this study. In this chapter, the research onions are outlined together with the research philosophy and the strategy. Moreover important data collection tools and terms related to the data collection and classification have been discussed together with their merits and demerits. A brief background of the considered firms for this study has also been given in this chapter.

Chapter four presents the secondary data acquired for the study and a brief description of the same. The data is then analyzed and discussed in details so as to relate the findings with the objectives of the study.

Chapter five contains an in-depth analysis and discussion of the primary data which is also presented in this chapter. In this case, the data has been analyzed and discussed based on the themes of the research each set is meant to explore.

Chapter six contains the ultimate conclusion of this study. In this chapter, the research findings are linked to the researchs objectives and main aim. Ultimately, recommendations based on the findings are given for the improvement of the Korean wedding industry and also for the improvement of future researches that would be related to this.

1.7 Conclusion

The chapter has given the relevant background of this study in a precise manner. Further it has offered the critical definitions of the majorly used words in this study. In line with all this the chapter has introduced all the objectives that this thesis is to accomplish. In this case the hypothesis has also been set out such that the SMEs (wedding SMEs) in Korea are questioned in terms of growth. In what follows therefore, the researcher will seek relevant literature and give a perspective of what is expected in the end of this research.

Chapter 2

2.0 Literature Review

2.1 Overview

The review in this chapter is structured such that it depicts the major themes addressed in this research: SMEs; Wedding Industry in Korea; Growth of SMEs and the factors and strategies associated with growth; and the PPM as applied in SMEs and the role PPM tools play in the management of growth for SMEs. Notably the review has been divided into three main sections: 2.2 SMEs, 2.3 Growth of SMEs, 2.4 PPM in SMEs, and 2.5 conclusion for the chapter. Within these sections, the major themes of the study have been discussed in details to incorporate various subsections which are relevant for this study.

2.2 Small and Medium Enterprises (SMEs)

According to Ghafoor and Iqbal (2007), SMEs have been recognized as key contributors to the economic growth of many countries. They are thus expanding at high rates in the local and global markets. Notably, the growth of SMEs is paramount if they are to survive the growing competitiveness in the market (E. Armstrong, 2013). In this case, Ghafoor and Iqbal, (2007) research on the strategies employed by the SMEs for growth and they come to the realization that the market development and not to forget the product management strategies are the main strategies that SMEs adopt for growth. Importantly the SMEs mainly engage the internet as a major platform to propagate growth. Mustafa and Horan (2010) offers another strategy for the growth of SMEs, they widely expand on the adoption of acquisition as a growth strategy for these firms.

The SMEs as mentioned in the previous have played a great role even in Korea. According to the Korean SMEs statistics (2014) (table 2-1), between 2008 and 2012, the percentage of SMEs accounted for 99.9% of the total number of firms in South Korea. In addition, the number of SMEs increased sharply from 3,044,169 in 2008 to 3,351,404 in 2012 and the number of employees who work for the SMEs soared from 11,467,713 in 2008 to 13,059,372 in 2012. As it was mentioned above, the role of SMEs is vital to South Korea economy in terms of job creation. The ratio of employees working for SMEs was announced to be 87.7% out of the total number of employees, which is a comparatively high figure. Clearly this illustrates how important the growth of SMEs is for a country like Korea.

Table 2-1: Yearly Trend of SMEs in Korea Source: Statistics Korea, 2014

2008 2009 2010 2011 2012

No. of Firms Total 3,046,958 3,069,400 3,125,457 3,234,687 3,354,320

SMEs 3,044,169 3,066,484 3,122,332 3,231,634 3,351,404

Ratio (99.9) (99.9) (99.9) (99.9) (99.9)

No. of Employees Total 13,070,424 13,398,497 14,135,234 14,534,230 14,891,162

SMEs 11,467,713 11,751,022 12,262,535 12,626,746 13,059,372

Ratio (87.7) (87.7) (86.8) (86.9) (87.7)

2.2.1 Classification of SMEs

SMEs are categorized according to the number of employees and the size of firm in question (Hess, 2010). They are categorized as either: medium sized where they have employees ranging between 50- 250 and a turnover of not more than 50M or a balance sheet record not exceeding 43M; small with employees less than 50 but more than10 having a turnover of not more than 10M or an equivalent balance sheet record; micro which are characterized by less than 10 employees not more than 2M turnover or with equivalent balance sheet record. This information is summarized in table 2-2:

Table 2-2: Classifications of SMEs (Ec.europa.eu, 2006)

Category Number Turnover

(Million Euro Pound) Balance sheet total (Million Euro pound)

Medium-sized Less than 250 50 43

Small Less than 50 10 10

Micro Less than 10 2 2

2.2.2 Wedding sector (SMEs) in Korea

The sector has been a boom in recent years and is still expanding (Kim and Kim, 2013). The wedding sector (industry) as Terell puts it, comprises of all (and majorly) small and privately owned (SMEs) which provide several services and goods for wedding purposes. This services include wedding consultancy, photography, decorations, design services, honeymoon services ( Heui-Uk Yoon, and Kyungdo Park, 2009). The goods in this industry include the tangible infrastructure such as wedding halls and or venues, flowers, caterers (meals and drinks), make up, fittings and wedding wears (Lau & Hui, 2010). Kim & Choi (2011) commends the improvement and thriving of the wedding industry in Korea saying that this has helped sustain many people who venture into the sector and also it enables lots of people to earn a living.

Of importance is the brief analysis of the industry done b...