POSCO Case Study

POSCO has played a major role in Korea’s economic development by supplying domestic
manufacturers with high-quality, low-cost steel products. Despite its initial disadvantage and lack of
resources such as capital, technology, and raw materials, it has emerged as a worldclass steel maker
in a short span of time.

History
The dream of developing a steel industry in Korea started to come to light with the plan to construct
a general steelworks in the 1960s. Despite starting from scratch, with no capital, technology, or
experience, the great journey towards establishing an integrated steelworks began with the
founding of the Company on April 1st, 1968. The key milestones in the history of the company are

 1968- POSCO established

 1973-1981- Ramped up production from 1.03 MT in 1973 to 9.1 MT at Pohang Works (Plant
constructed in 4 phases)
 2005- construction of Gwangyang Works Phase 1 begun
 1986.- POSTECH opened
 1987.-Research Institution of Science & Technology) established

In June 2014, the World Steel Dynamics (WSD), a leading steel information institute, has awarded
POSCO as ‘World’s Most Competitive Steelmaker’ for 5 consecutive years.

Leadership
POSCO’s founder and legendary CEO Park, Tae-Jun played a pivotal role in building the foundation
and corporate culture of POSCO. TJ Park, before taking the helm at POSCO, proved his managerial
acumenby turning a deficit-ridden public corporation (Daihan Tungsten) into the black in his first
year in 1965. Impressed by TJ Park’s track record and leadership potential, President Park Chung-Hee
saw him as the ideal manager for the integrated steel mill project. His vision and faith in patriotic
service through steel, his attention to details and perfectionism, and his people-centered leadership
encouraged all employees to unite with a strong sense of commitment and loyalty. Some of the key
words to describe the leadership of CEO Park Tae-Jun could be “commitment to excellence based on
patriotic mission”. Park stressed a strong commitment to steel mill construction as it borrowed
capital and technology from Japan as compensation for its colonial rule, often saying, “Let’s turn
right and jump into the East Sea, in case we fail in the construction of the steel mill.” This has taken
hold as what is called “Right-Turn Spirit” of POSCO, which created a unique corporate culture
emphasizing a sense of mission, dedication to goal achievement, group loyalty and personal
sacrifice.

Park spent most of his time working together with POSCO employees at the construction site, which
enabled the company to complete construction of Pohang Works Phase 1, 2, 3 and 4 in a very short
span of time. Even on thanksgiving holidays, Chairman Park was on the site and made decisions right
on the spot if any problems occurred. When the construction of Phase 1 was delayed for three
months, the company came up with emergency plans and completed the project one month
aheadof schedule by working 24hours a day. Nonetheless, he never compromised on quality and

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never allowed shoddy construction to reduce the construction lead time. When installing facilities
for Pohang Works Phase 3, Park discovered major flaws in a ventilation system that was already 80
percent completed. Much to everyone’s surprise, he ordered the employees to blow up the system
and expel the construction company and the foreign project manager in charge.

Although he may have pressed his people to work without holidays, Park valued talent more than
anyone else. In 1968 even before he started building the steel plant, he borrowed KRW 2billion from
a bank and built residences for employees. The residences located near the construction site were
clean and comfortable, which helped attract many talents to Pohang. Another program he
emphasized prior to factory construction was employee training. Many international organizations
including KISA said that Korea had few workers with sufficient experience and knowledge and that
the factory operation should be left in the hands of foreign managers. However, Park thought
differently. He was convinced that POSCO people should take the initiative in operating and
managing the factories. Based on this firm conviction, he had sent POSCO employees to Japan,
Australia, Germany, and other leading steel producing countries around the world for technology
training, and they disseminated what they have learned overseas through companywide training
programs.

Technology Acquisition and Learning

In the initial construction phase, POSCO had to rely on technology experts from Japan Group for the
entire installation process of the first blast furnace in the Pohang steel mill. The Japan Group
presented the design and procurement plan to establish a steel mill capable of producing one million
tons of steel. POSCO, lacking the knowledge and experience to evaluate the business proposal
submitted by Japan Group, prepared a double-check system under which Broken Hills Proprietary
Corporation (BHP) from Australia was asked to review the design drafts and terms of purchase set
forth by Japan Group, while Korean experts based in Japan re-evaluated Japan Group ‘s reports with
BHP’s.

POSCO also depended on Japan for the production and operations technologies when Pohang Works
Phase 1 got up and running in 1973. Technicians from Japan Group transferred technologies and
skills such as inventory management, production scheduling, and maintenance to POSCO employees.
At first, POSCO workers teamed up with the Japanese experts to learn necessary skills and discussed
every single detail about the project until the construction of Pohang Works Phase 3. Later, however,
POSCO workers increasingly built up expertise and assumed a greater role over Japanese engineers.
During its facility expansion from 1970 to 1992, construction projects continued one after another as
the company began operating new blast furnaces. The workers had to train themselves for
technologies to operate a new blast furnace, while acquiring cutting-edge technologies to construct
and install a new form of furnace. The shapes and technologies of furnaces became more
sophisticated and expanded over time. Until the completion of Pohang Works Phase 4, POSCO kept
learning new technologies by experimenting with new combination of ingredients, controlling the
volume of ingredients, scheduling, managingthe flow of raw materials,and reducing bottlenecks.

POSCO made tremendous investments in training their employees. The number of trained workers
totaled about 61,400 from 1968 to 1979, of which 4,200 were trained outside the company, while
1,513 joined overseas training programs. The investment in employee training is partly reflected in

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the rapid improvement of labor productivity. POSCO reduced the number of hours worked per ton
of steel shipped from 32.65 in 1975 to 9.62 in 1984, in a relatively short amount of time compared to
Japan, which saw a dropfrom 10.8 hours in1975 to 6.5 hours in 1984.

POSCO encouraged individual employees to share knowledge learned from overseas training
programs with other workers and conduct rehearsals to carry out given tasks before actual
production. They were advised to repeat their tasks out loud and put them into execution to get a
better picture of each other’s work as part of an open training program. They stayed late at night to
share knowledge and brush up on what they learned from Japanese technicians during the day.

POSCO workers did not simply follow the rules and instructions, but were encouraged to actively
engage in productivity and quality improvement. Thousands of voluntary groups within POSCO were
formed to identify and solve problems related to quality and safety. Employees willingly participated
in the “proposal system” where they made proposals to enhance quality at the worksite. To
minimize downtime, they adopted a preventive maintenance system. To stabilize facility
management, they implemented a process monitoring system to identify problems and resolve
them through a thorough review of detailed information. It was not until Phase 3 construction that
the computer-based process monitoring system was adopted, as the manual monitoring system was
considered handy for the workers to absorb technologies and know-how. It was at that time that
POSCO went through process innovation by adopting Six Sigma, and reducing defects to the lowest
level in the world.

Technology Development
POSCO reinforced its own R&D activities as leading steel companies concerned with “boomerang
effect” refused to transfer advanced technologies to POSCO. The company set up a collaborative
R&D network among industry, academia and research centers by establishing Pohang University of
Science and Technology (POSTECH) in 1986, the Research Institute of Industrial Science and
Technology (RIST) in 1987, and reorganized its R&D organization in 1996 to accelerate the
development of new technologies. In particular, as customers’ needs became more sophisticated
and more demanding, the company had to change its existing strategy which mainly focused on
producing low-cost, commodity steel, and develop more high value-added specialty products. As a
result, since the 1990s, production of low value-added hot-rolled products decreased, while the
production of high value-added products such as cold-rolled sheet, steel plates, stainless steel and
electrical steel plate continuously increased. Some key facts about the POSTECH and RIST.

Institutionalizing Technology and Competence Development

Some of the key initiatives taken by POSCO for development of technology and competence are
given below

POSTECH

 Founded in 1986 as the first research-oriented university in Korea

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  Consistently topping domestic and international university rankings. In 2012 and 2013, the
Times Higher Education ranked POSTECH 1st in their "100 Under 50 Young Universities"
rankings. It is a full-fledged regular university providing educational services beyond POSCO.
 Tenets
o Produce well-educated and trained future global leaders
o Conduct pioneering research and development in science and engineering
o Serve the nation and humanity through education, research, and commercialization
with industry

Research Institute of Science and Technology (RIST)

 1987-established for the enhancement of POSCO's competitive edge in technology

 1988- Development of strip casting process for STS 304 (up to 1,300mm width)
 1990-Started research on next-generation steel technologies, strip casting, and FINEX
 2003- Coordinated research functions with POSCO(RIST focuses on practical technology in
the areas of steel structure, new material parts, automation, and environment energy)
 2007-Completed the Magnesium sheet plant

Slogan:We create the future with steel application technology

POSCO Technology College,

 Established in 2013
 Courses established in line with National Competency Standards (NCS)
 Open to on-site employees with more than 5 years of employment and experience, plans to
foster high level professionals with global level competitiveness based on training in the steel
integration field including metals, machinery, and electrical measurement to lead change in the
new steel environment.
 The course will be offered to one class each in Pohang and Gwangyang from Thursday to
Saturday.
 Course students who are part of a shift team will be reassigned to resident teams and will
engage in studies while working on site for the coming two years to support self-development.

The Innovative Smart Workplace

 Operational since December, 2012.

 Since 2011, POSCO has strategically cooperated with Google and collected various ideas
from POSCO’s own employees to materialize a unique way of working. It is labeled ‘Smart
Workplace’, combined with social media, mobile devices, cloud computing and numerous
state-of-the-art IT technologies.
 The ‘Smart Workplace’ interconnects and analyzes POSCO employees’ personal profile
(department, responsible task, past record), interests and expertise. With this function, the
system allows appropriate project partner searching and coordinates effective cooperation.
 The information is also shared with other organizations for smooth communication and
monitoring amid multiple work places.

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Outcomes of strategy in terms of products and technologies
Products

 Hot rolled steels, plates, wire rods, electrical steel, stainless steel, titanium products

Technology

 Finex
 Strip Casting
 Endless Hot Rolling

Operation Technology

 Low-fume Material High-Capacity Shaft Furnace Industry

 Management of continuous Operation
 Integrated Management Technology for the operations of Pohang and Gwangyang Works
 Controlling Technology for the Production of Hot-rolled Iron and Steel
 Precise Thickness-Adjustment Technology for Sheets

POSCO is today not only a leading steel maker but also a technology provider in many areas through
its affiliates .

 POSCO P&S - Material Processing & Fabricating, Solution Provider

 SNNC Global leader of Fe-Ni smelting technology
 POSCO P&S- Material Processing & Fabricating, Solution Provider
 POSCO AST- Leading Company specialized for Stainless Steel
 POSCO TMC-Global Player leading the high tech motor core industry

POSCO will continue to contribute to Korea's economy and further become a great company by
constantly providing new values to humanity. At the same time, POSCO, by embodying a philosophy
of always seeking to be respected and cherished by stakeholders, will instill 'dreams and hope',
provide 'materials and energy in the most efficient way possible', and become a 'company that
makes the world better.'