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International Business Management (IBM) Focus Study: South Korea

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A quick summary or a general outlook on international business management of South Korea. The outline is written below:

Introduction to South Korea
Economic Transition & Business-Industrialization Stage
Political Admin, Public Policy, Society & Culture
Geopolitics to Geo-economics
Emergence of Chaebol Industry
Foreign Investment Climate
Business Culture & Etiquette

Published in: Business
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International Business Management (IBM) Focus Study: South Korea

  1. 1. Group 2B Class Presentation Week 7- CSEB3102
  2. 2. Aziza Zaldarriaga Z(CEA100708)- Phillipines Cian W’O Brien (NEE130235)- Denmark Chaymae Samir (NEC130215)-Morocco Dominik Wagner (NEC130217)-Germany Firmansyah Shidiq W(CEB110723)-Indonesia Haya Shadab Ali (CEB110702)-India
  3. 3. Introduction about South Korea Economic Transition & Business-Industrialization Stage in South Korea Political Administration, Public Policy, Society & Culture In South Korea Geopolitics to Geo- Economics in South Korea Emergence of Chaebols Industry in South Korea Foreign Investment Climate in South Korea South Korea Business Culture & Etiquette
  4. 4. • Population: approximately 48 million • Seoul is ranked 8th in the Global Cities Index for 2012 and is considered to be a leading global city. • A great number of international companies are located in Seoul. • Hosted the 1986 Asian Games, 1988 Summer Olympics, 2002 FIFA World Cup and the 2012 G-20 Seoul summit. • Using Republic System with mixed legal system combined of European civil law, Anglo- American law, and Chinese classical thought. • Led by President in Executive Branch.
  5. 5. 1945-1950 The transition from a colonial to independent economy 1950-1959 The Korean War and Reconstruction 1960-1969 Transition from low to high growth (Park Chung Hee) 1970-1977 Five Year Plan & Export-Led Growth 1978-1982 Unstable Growth and Recession 1983-1996 High and Stable Growth, Economy Development & Low Inflation 1997-1998 The Asian Financial Crisis 1998-2005 KEF (Korea Economic Reforms) – Financial Restructruring 2005-Present Development of Creative Economy, Tourism & Expanding MNC-SMEs- PPP
  6. 6. 1945-1950. COLONIAL TO INDEPENDENT ECONOMY. Two senses of economy separation sectors: SOUTH (Agriculture & light industry) and NORTH (Energy & Heavy indus try). 1949-1960. POOR FINANCIAL CONDITION. Republic of Korea GDP was very low. GDP per capita around $100, poorer than Philippines after Post World War 1949. AGRICULTURE BASED COUNTRY. Republic of Korea (South) considered as an agricultural nation exporting rice, tungsten & fisheries. 1955-1960s. INITIAL TRANSTION from PURE AGRICULTURE to INDUSTRIAL ENTERPRISE. Industry mostly operated as textile industry. 1950-1951. REVAGED BY KOREAN WAR. It caused the high inflation, conflict of price stabilization policies, unstable trade structure especially import and export balances 1951-1956. OVER AMOUNT IN BIG AID VOLUME by US & IMF given in post-war which caused local agriculture business to be depressed
  7. 7. EPB (Economic Planning Board) Five Year Development & Economic Planning MoF (Ministry of Finance) Top-down Leadership, (General Headquarter style) Park himself made major decisions to control South Korea economy. state-owned banks & LAND REFORM POLICY MTI (Ministry of Trade + Industry) industry/business associations/Chaebol FKTU (Federation of Korean Trade Unions) (gov’t-controlled) industrial unions Businesses National Budget (Per capita income rises 17x) Coopted labor
  8. 8. FAILURE,UNSTABLE GROWTH & RECESSION (1979-1982) • Harvest Failure in 1981 • Slower Pace Growth • Negative Growth Rate into negative 1 • Radical Reappraisal of Economy Management • Unstable growth of export-led industries (highly creditable in 1981 but sluggish performance in 1982) ASIAN FINANCIAL CRISIS (1997-1998) HIGH GROWTH, & RECOVERY IN SOUTH KOREA (1983-1996) • The collapse of Some Chaebols Industry – Hanboo Steel in 1997 • More than 1 Million People were out of work • Bail out from government controlled bank credit didn’t work • Bail Out & loans in amount of USD 57 billion from International Monetary Fund • Money supply was tightened to keep inflation under control • Devoted to reduce government involvement into the economy. • Inflation was lied around 3-4 percent. • Known as Second-Take off stage into high and stable growth in South Korea until 1996.
  9. 9. Leading in K-POP Entertain ment Industry World’s 4th Oil Refinery World’s 3rd largest steel producer World 5th Automob ile Producer World Leading in Science & Techno World’s largest ship builder US, Japan, HK as strategic export partner China as largest export partner Export on Compute rs, chip Export on Petroche micals Export Semicon ductors, USD 466 Billion in Export Value Japan and US as Import Partners Import Partners: Saudi Arabia & Aussie China as largest import partner 4th largest oil importer Import oil, organic chemical USD 417 Billion in Import Value
  10. 10. • Achieving more with less-toward world class efficient government Government Reform • A world class economy ? Only with world class companies (Chaebols expansion) Corporate Reform: Chaebol • Setting free South Korea’s Labor Force for the next several strategic years. Labor Market Reform • Expansive Foreign Direct Investment as a new growth catalyst and driver Opening Up to Economy • Humboldt (Germany) and Harvard (US) Replications in South Korea Universities’ Reform • Utilizing Korea’s largest untapped human resource in regards of developing strategic sectors Emergence of Women Power • Building trust, empathy and emotional relationship in long term-basis Social Capital • Shining Koreans through by expanding Chaebols & Entertainment sectors Land of Opportunities, Trading & Business
  11. 11. SOCIETY AND CULTURE IN SOUTH KOREA Status system was replaced by modern democratic social system Broad range of political opinion Large influence of neoliberal capitalist system to society Confucian values became less viable High level of education Relatively homogeneous society
  12. 12. SOCIETY AND CULTURE • Gender disparity • Income inequality tends to increase • Longest conscription period behind Israel and Singapore Gini coefficient (OECD) 2011 Germany 0,30 Japan 0,33 South Korea 0,32 United States 0,38 OECD average 0,31 Gender wage gap (OECD) 2011 South Korea 37,47% Japan 27,40% United Kingdom 18,23% United States 17,79% Norway 7,78%
  13. 13. POLITICAL ADMINISTRATION & PUBLIC POLICY Before 1988: Capitalist developmental“ state Economic development was systematically led by government 1988: Sixth Republic of Korea - Democracy and prosperity became primary concern of government leadership - Ideas of Modernization, Democratization and Globalization
  14. 14. POLITICAL ADMINISTRATION & PUBLIC POLICY Transition Process from 1993- 1997 • Flexible labor market • Open financial and capital markets Period in1997- 1998 • Asian financial crisis and bailout by IMF
  15. 15. POLITICAL ADMINISTRATION & PUBLIC POLICY Presidents of South Korea 1988 – 1993 Roh Tae-woo 1993 – 1998 Kim Young-sam 1998 – 2003 Kim Dae-jung 2003 – 2008 Roh Moo-hyun 2008 – 2013 Lee Myung-bak 2013 – 2018 Park Geun-hye
  16. 16. GEOPOLITICS • Geopolitics: the combination of politics and geographical matters (natural resources, territory) GEOECONOMICS • Geo-economics: the combination of , geographical matters and economics/private business
  17. 17. A Scrimp Among The Whales (China, Russia, and Japan) Influenced by these powers Few Natural Resources but savings and education for development Bad position for efficient geopolitical strategy
  18. 18. MOVING AWAY FROM PENINSULAR KOREA (GEOPOLITICS) THROUGH FREE-TRADE AGREEMENTS ASEAN, USA, EU AND INDIA INVESTMENT IN RESEARCH AND DEVELOPMENT SUBSIDARIES TO PRIVATE COMPANIES SUCH AS SAMSUNG & HYUNDAI
  19. 19. GEO-ECONOMIC • Strategic relationships with China and Russia, Japan, and USA • Afraid of dependence of China (50% of export), looking west GEO-POLITICS • President Park Geun-hye is converting economical power to political power Geopolitics:
  20. 20. Chaebol business conglomerate multinationals
  21. 21. 1940-1950 Favourable treatment from the government 1960's Military takeover and clean-up 1970's Oligapolization. Opening of chemical industries 1980's Expansion of business 1990's Asian Economic Crisis 2010 Economic backbone Time Line Chaebol Development
  22. 22. 1st Type • Owner Monopolization 2nd Type • Core Company Control 3rd Type • Mutual Ownership
  23. 23. Concentration of economic power and ownership Collusion between politics and business Perspectives on Chaebol efficiency Issues of legal discipline
  24. 24. Distortion of the market order (SMEs)
  25. 25. After 97-98 crises, ROK FDI reforms which aided in positive development. Financial Institutions Capital Markets Competition Policy Allowing Non- Korean to own land & property Reformed Labour Law Improvised intellectual property laws Transparency
  26. 26. EU has total stock of 34.6% Followed by USA 24.6%, Japan 15.1% & Netherlands 11.2% The 1999 Foreign Exchange Transaction Act (FETA) Inbound FDI 13.7 billion & Service industry up by 15.4% FETA is fully liberalized all current-account transactions by business firms and banks
  27. 27. • Further aims to attract more foreign investment by promoting 6 Free Economic Zones • 6 Free Econ Zons are Incheon, Busan/Jinhae, Gwangyang Bay, Yellow Sea, Daegu/Gyeongbuk, Saemangeum/Gunsan • The FEZs differ from other zones designated for foreign investment in their focus on creating a comprehensive living and working environment • Such as biotechnology, aviation ,logistics, manufacturing, service and other industrial clusters • As well as international schools, recreational facilities, and international hospitals
  28. 28. « Etiquette is what you are doing and saying when people are looking or listening. What you are thinking is your business » Virginia Cary Hudson
  29. 29. South Korean unique business etiquette mainly exhibits in six aspects , which are : Introduction Greeting Bear in Mind that the Cultural and Societal aspects are very important to consider Business Cards Business Meeting & Negotiations K-Type Management Style Gift Giving
  30. 30. Introduction and Greeting The usual Greeting in South Korea is a bow followed by a handshake
  31. 31. Business Card It is recommended that foreigners obtain bilingual business cards with Korean on one side and English on the other side
  32. 32. K-TYPE • K-Type management, consists of top down decision-making, paternalistic leadership, clan management, personal loyalty, compensation based on seniority and merit ranking, high mobility of workers INHWA KIBUN • Inhwa and Kibun are two key principles of South Korean Business Culture GIFTS • Gifts help secure favors and build relationships AGREEMENT • A signed agreement will not always be considered an obligating agreement but a starting point for further negotiation
  33. 33. Bibliography Jung, J.-y. (2013). Post-crisi restructuring of the corporate governance of Korean companies. Corporate Governance, 4-17. Kee, K. B. (2013, Oct 02). Korean chaebol debt surpasses government's. Retrieved from Bamboo Innovator: http://bambooinnovator.com/2013/10/02/korean-chaebol-debt-surpasses-governments/ Nam, I.-S. (2013, July 13). Seol takes closer look at chaebols. Retrieved from Korean Real Time: http://blogs.wsj.com/korearealtime/2013/07/03/seoul-takes-closer-look-at-chaebols/ Savada, A. M., & W, S. (1990). South Korea: A Country Study. Washington: GPO for Library of Congress. Tanter, C. H. (2001). The antinomies of success in South Korea. Journal of International Affairs, 63- 89. Yon-se, K. (2013, Oct 13). Ting Yang woes reopen debate on chaebol limits. Retrieved from The Korean Herald: http://www.koreaherald.com/view.php?ud=20131013000289 Transforming Korean Politics – Democracy, Reform and Culture, Kihl Y, New York 2005 OECD Factbook 2011: Economic, Environmental and Social Statistic http://www.mongabay.com/history/south_korea/south_korea-social_ classes_in_contemporary_south_korea.html, retrieved 19.10.2013 http://databank.worldbank.org/data/views/reports/tableview.aspx, retrieved 19.10.2013 http://www.economist.com/node/21538104, retrieved 20.10.2013 Korea Confronts Globalization, Yun-Shik C., Seok H. and Baker D., New York 2009 Korea and geopolitics: http://www.indianexpress.com/news/korea-rising/1143722/0 Korea becomming a whale amongst whales: http://www.atimes.com/atimes/Korea/NH22Dg01.html http://www.atimes.com/atimes/Korea/NH22Dg01.html http://www.nationsonline.org/oneworld/korea_south_profile.htm http://www.koreaherald.com/view.php?ud=20120314001140

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