international business management (ibm) focus study: south korea
DESCRIPTION
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 & EtiquetteTRANSCRIPT
Group 2B
Class Presentation
Week 7- CSEB3102
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
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
• 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.
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
1945-1950. COLONIAL TO
INDEPENDENT ECONOMY.
Two senses of economy
separation sectors: SOUTH
(Agriculture & light industry)
and NORTH (Energy & Heavy
industry).
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
EPB (Economic Planning Board)
Five Year Development & Economic Planning
MoF (Ministry of Finance)
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
Top-down Leadership, (General Headquarter style)
Park himself made major decisions to control South Korea economy.
National Budget (Per capita income rises
17x) Coopted labor
• 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)
FAILURE,UNSTABLE
GROWTH &
RECESSION
(1979-1982)
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.
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
Computers, chip
Export on
Petrochemicals
Export Semiconductors,
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
• 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
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
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%
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
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
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
• Geopolitics: the combination of politics and geographical matters (natural resources, territory)
GEOPOLITICS
• Geo-economics: the combination of , geographical matters and economics/private business
GEOECONOMICS
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
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
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:
Chaebol business conglomerate multinationals
1940-1950Favourable
treatment fromthe government
1960's Militarytakeover and
clean-up
1970'sOligapolization.
Opening ofchemicalindustries
1980'sExpansion of
business1990's Asian
Economic Crisis 2010 Economicbackbone
Time Line
Chaebol Development
1st Type
• Owner Monopolization
2nd Type
• Core Company Control
3rd Type
• Mutual Ownership
Concentration of economic power and ownership
Collusion between politics
and business
Perspectives on Chaebol efficiency
Issues of legal discipline
Distortion of the market
order (SMEs)
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
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
• 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
« Etiquette is what you are doing and saying when
people are looking or listening. What you are
thinking is your business »
Virginia Cary Hudson
South Korean unique business etiquette mainly exhibits
in six aspects , which are :
Bear in Mind that the Cultural and Societal
aspects are very important to consider
Introduction Greeting Business
Cards
Business Meeting &
Negotiations
K-Type Management
Style Gift Giving
Introduction and Greeting
The usual Greeting in South Korea is a
bow followed by a handshake
Business Card
It is recommended that foreigners obtain bilingual
business cards with Korean on one side and
English on the other side
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
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
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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