03 November 2010

Look sideways for green shoots, and observe crisis veterans

A side effect of the global downturn has been that companies, which once enjoyed strong revenues from robust industries, are being forced look elsewhere for growth. In other words the events of the last two years have kindled entrepreneurial spirit. And there are lessons to learn from Asia – particularly South Korea, Japan, Indonesia and Thailand – where the 1997 financial crisis can be freshly recalled and coping strategies have been fine tuned. 

A case in point is Samsung Electronics, the South Korean consumer electronics heavyweight which powered through the Asian economic crisis with just short-term dips in sales and pre-tax earnings. The firm is now heading full throttle into the medical devices market with a rumoured move on Medison, South Korea’s leading manufacturer of diagnostic ultrasound equipment, less than six months after bringing a Samsung blood tester to market in partnership with a local pharmaceuticals company.

The group has pledged USD 21 billion over the next ten years to expand in healthcare and clean technology – two very desirable industries when considered together as they combine the promise of consistent, non-cyclical revenue and the potential for stellar growth. All eyes will be on Samsung’s biotechnology and medical technology strategies over the coming years.

Meanwhile, LG Electronics, part of the chemicals-to-telecoms LG conglomerate and a major rival of Samsung Electronics, is moving into the water treatment sector. Two months ago it announced a plan to invest more than USD 400 million over the next decade with the aim of generating USD 7 billion in revenue by 2020 and becoming a top ten global water treatment company in the process.

The Seoul-based LG group already collaborates in a variety of business and technology fields by using strategic alliances with the likes of Intel, Google and Dolby. Its reach extends from consumer electronics to drinks and industrial chemicals. And what’s more it recorded sales growth both through the crisis in the late 1990s and in the two years leading to 2009, which proved catastrophic for so many.

Media reports have latterly focused on firms which are drastically scaling back their sprawling operations to improve efficiency, and it is clear that diversifying is not a fix-all. The Samsung conglomerate – South Korea’s largest – can testify to a dissolved multi-billion dollar auto venture during the Asian Economic Crisis as evidence of this fact. However, for those with the firepower, well-timed and researched investments in new sectors will provide a way to adapt and overcome.

© Zephyr