Capital Game in K-pop’s Area Understand South Korean Conglomerates' Engagement in the K-pop Industry as A Diversification Strategy through Value Chain Analysis

Diversifying into different businesses is a natural course for most conglomerates. The target industry for diversification changes now and then with the emergence of new niches. As more stakeholders realize the necessity and huge potential of a creative economy, creative industries-- the heart of creative economy and a vital driver for innovation and productivity improvement-- become appealing markets for conglomerates to step into. Apart from ICT industries, Korean conglomerates also recognize the potential of k-pop, which recently grows into a global music blockbuster. And this trend became especially intensive after the 1997 Asian Financial Crisis (AFC). To understand Korean conglomerates’ engagement in the k-pop industry, this paper showcases the various values entailed in k-pop that stimulate these players through value chain analysis and depicts how they allocate their corporate resources to the k-pop industry to achieve the diversification via the case study of CJ Group and Kakao Corporation. The research shows, the 1997 AFC caused great losses for the country and conglomerates, further worsening the relationship between state and firm since conglomerates’ unlimited expansion and problematic structure were to blame for the crisis. South Korea started to call for the development of a more creative and sustainable economy and the activation of the nation's soft power. More conglomerates have therefore stepped into cultural and creative industries for a new breakthrough point for value creation and the relief of state-firm tension. K-pop is one of the target industries since it not only contains tremendous economic values produced through fan economy and cultural export but acts as a source of Korea’s soft power and gains notable support from the government. Besides, k-pop’s export-oriented nature aligns with Korea’s outward-looking economic policies and conglomerates’ focus and efforts in the export sector. And the government’s official support has created both reciprocity and a stable policy, which can be expected to initiate a better state-firm relationship.