South Korea calls on Bain, BCG and McKinsey for declining industries

01 November 2016 Consultancy.uk

The South Korean government has in recent months roped in Bain & Company, The Boston Consulting Group and McKinsey & Company to work on high profile projects. The consulting firms are taking three troubled industries under scrutiny – shipbuilding, steelmaking and chemical – and are drafting recommendations on how South Korea could transition them to better fortunes.

Sectors of South Korea’s industry are facing considerable pressures from changes in global market conditions and demand for commodities. The shipping industry in particular, has sailed into troubled waters – suffering from considerable overcapacity and high levels of debt. The steel industry also has seen considerable global pressure from lacklustre demand and overcapacity – with the largest companies sitting on considerable debt. Finally, the country’s chemical industry too has begun to feel the pinch, as demand for chemicals slows globally.

Yohap News, a local media agency, recently reported that, in bid to develop reform strategies to mitigate the effects of market change, and create long term competitive and sustainable companies, the South Korean government has called in three of the globe's leading strategy consulting firms – McKinsey & Company, Bain & Company and The Boston Consulting Group.

South Korea calls on Bain, BCG and McKinsey for declining industries

McKinsey & Company has begun working on a plan to support the country’s ship building industry which, given the downturn in global shipping, has come under considerable pressure as orders are delayed or cancelled. The firm's main task is to bring the country’s three largest shipbuilders – which last year had an operating loss of around $7.6 billion, resulting in considerable job losses – back to a safe haven.

Bain & Company has been hired to develop plans to bring sustainability to the ailing chemicals industry. The industry continues to face falling export demands as the global economy remains slow, as well as reductions in requirements for chemical precursors, such as terephthalic acid (used to make plastics), by up to 1.6 million tons, resulting in considerable regional job losses.

The Boston Consulting Group has been called in to craft a plan for the country’s steel industry, as prices remain depressed, while, particularly Chinese producers cope with considerable overcapacity – since 2000 China has added around 1,075 megatonnes of capacity, while last year there was a gap of 419 megatonnes between production and capacity. The firm is said to suggest M&A as a strategy for the industry, reducing the number of marginal companies and protecting workers where possible.

According to a government official, “Reports on each industrial sector are almost complete", with the consulting firms now working to resolve differences between businesses in each industrial sector that will be affected by the restructuring measures.

A number of consulting groups have in recent months been called in by governments to support plans for sectors, including projects in Saudi ArabiAzerbaijan and Morocco.

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