Abstract for:South Korean Shipbuilders' Overcapacity Dilemma

South Korean (Korean) shipbuilders have been successful in the global shipbuilding industry since its inception in the 1970s, and the major five firms captured a combined market share 25.8% in terms of output as of 2017. In the macroeconomic perspective, the shipbuilding industry has undergone a fluctuation of its demand: the recent trend for the demand sloping downward to 51 million gross tons (GT) for 2017, a huge drop from a peak of 117.1 million GT in 2013. Main contributors for the downward demand are low crude oil prices, and low economic growth rate. To make the situation worse, the overcapacity of global shipbuilders has suppressed the market prices in the industry, resulting in financial problems. In the assessments of current positions of global shipbuilders, Korean shipbuilders are perceived as an ambidexterity player, with the strengths in both differentiation strategy and efficient cost leadership. With the demand deteriorating and the global competition growing ever fiercer, Korean shipbuilders have to address the overcapacity dilemma with strategic alternatives. This paper examines with systems thinking approaches how the overcapacity is built in Korea, and how this dilemma was created, and the possible alternatives available for Korean shipbuilders based on a systems thinking framework.