Lim Young Hak has proved hard times can be a blessing for Asian companies in need of restructuring. As the chief planner of Samsung Corp., South Korea's largest trade broker, Lim began worrying as early as the mid-1990s that the Internet would soon take away his company's traditional middleman business. Then came the 1997-98 Asian crisis. Lim exploited what was a disaster for many executives to wire up his company and move its business onto the Internet.
Now, thanks to Lim, Samsung is a powerhouse in the global electronic marketplace, specializing in steel, chemicals, and fish. "We have jumped early into what I think is a 10-year war of establishing standards and business models in the Internet Age," says Lim, 47. Lim has spent more than $50 million to prepare the company for electronic commerce, pulling together many global players to form online trading blocks. The move hasn't been painless: In the course of its transformation, Samsung Corp. (SSNHY) has cut its workforce from 11,500 to 4,700.
FISH COURSE. The most prominent Samsung online marketplace is GSX, for global steel exchange, which buys and sells steel on the spot market. GSX is a joint venture with Cargill of the U.S., Duferco Group of Switzerland, and TradeArbed of Luxembourg. GSX steel shoppers are forecast to buy $1.6 billion on the site this year. That volume dwarfs the estimated $300 million traded last year by GSX's chief competitor, eSteel Corp., in the U.S. GSX's partners split fees of 1% to 2% of the value of each deal. They have committed to buying or selling $5 billion worth of steel products through the site over the next two years.
But GSX is just the beginning. Samsung also persuaded 66 Asian companies to join a business-to-business site called ChemCross.com as shareholders. And it convinced 12 companies to invest in its FishRound.com site, which trades frozen fish and other seafood. Lim expects all three sites to break even by early next year.
What sets Samsung apart, Lim says, is the company's quarter-century experience as a trading house. That should prove to be a big advantage in the race to attract customers to electronic marketplaces, which in the West are normally created by IT experts. Trading companies not only understand buyers and sellers but also offer transportation, insurance, and financing services to clients. "That's an ideal one-stop service model when adapted on the Net," says Lim. Samsung's traditional business is bringing lots of traffic to its electronic marketplaces. Samsung's chemical trading department, for example, moved 5% of its business onto ChemCross.com, while its fish trading department is moving nearly half its $300 million business to FishRound.com this year.
Lim, who chain smokes long, thin cigarettes, doesn't look like a typical chaebol executive. His unpressed suit, unruly hair, and casual look fit his role as the company's resident deep thinker. Says colleague Moon Young Woo, who is in charge of discovering promising startups for business tie-ups with Samsung: "When everybody was pouring money in dot-coms, Lim was the man to cool me down."
Lim's 10-year stint with Samsung operations overseas prepared him for setting the company on a new Internet course. After selling construction equipment in Libya and working in London, Samsung's European headquarters, Lim was sent to the Netherlands in 1991 to set up a business to distribute computer monitors. There, Lim learned how to use information technology to boost efficiency and save costs. "In the Netherlands, I saw the problems of Korean systems. The arrival of the Internet proved an important tool to fix some of the chronic problems," he recalls.
Lim interviewed dozens of experts and consulted with the likes of Arthur Anderson and McKinsey & Co. before launching Samsung's B2B sites. But when it came to drawing up a business model, he refused to buy ready-made software. "We are still in the midst of the Internet revolution, and there are no proven standards or solutions," he argues. If Lim has his way, Samsung will itself become the standard-bearer.