INSIGHT 4.0

MANAGEMENT & STRATEGY

Management Strategy in the Era of Low Growth: What Should Companies Cut and What Should They Keep?

As South Korea's potential growth rate drops into the 1% range (approx. 1.8%) and is projected to fall toward 0% around the 2040s, the market has entered a structural low-growth era where expansion-driven growth models no longer work. Companies with an interest coverage ratio of less than 100% have reached an all-time high of 42.8%, and the proportion of zombie firms has also hit historic peaks, deepening the polarization of corporate resilience while the resource occupation by distressed firms creates a congestion effect that drags down the growth of healthy companies. What must be reduced are business portfolios unrelated to core competencies, fixed costs accumulated from growth inertia, and top-line operations with weak margins and cash flow, with 'selection' based on priorities rather than indiscriminate cuts being the key. What must be retained until the end includes core talent and organizational capabilities, selective investments in future growth engines such as digital and AI, and financial soundness and cash reserves to withstand external shocks. The question for executives in the low-growth era has shifted from 'How can we grow faster?' to 'What should we cut and keep to build the resilience to endure the next cycle?', proving that strategy ultimately begins with knowing what to give up.