The Crucial Aspects Of South Korean Business

Introduction

As the international affairs officer for Fontana Technologies, I was tasked with the responsibility of determining what country would be best suited for our 2019 expansion. After analyzing a number of socioeconomic components, South Korea is the location that compliments the needs as well as the vision of our company the best. This report will cover the crucial aspects of South Korean business including major advantages and potential challenges that our executives will face in this environment.

Economy

South Korea has established itself as a major trading partner for many countries. The consistent growth in the South Korean economy indicates the potential for future growth and longevity for foreign businesses. According to the World Bank, South Korea is ranked No. 4 in terms of the overall Ease of Doing Business (DB) index in 2018, while the U.S. is ranked No. 6. This correlates to the business freedom index in Appendix A, illustrating South Korea’s acceptance of business opportunity. Innovation and technology are the key factors that have supported South Korean export competitiveness and fueled the country's drastic economic rise over the past few decades. In fact, South Korea is now spending the largest share of its GDP on research and development (R&D), even larger than the U.S. and Japan, two of the global leaders in innovation based on R&D intensity as seen in Appendix B. Between 1996 and 2015, South Korea’s R&D intensity grew 88.5 percent (from 2.24 percent in 1996 to 4.23 percent in 2015). The country specializes in consumer electronics, which aligns itself with the focus of our company. South Korea was one of the few developed countries that was able to avoid a recession during the global financial crisis, with its economic growth rate reaching 6.1% in 2010, a sharp recovery from economic growth rates of 2.3% in 2008 and 0.2% in 2009 when the global financial crisis hit. South Korea’s GDP has been stable for the better part of the decade as seen in Appendix C. The trade agreement between South Korea and Canada includes a requirement that all Canadian businesses are to be treated no less favorably in South Korea than South Korean businesses, which consequently reduces the risks associated with investing abroad. The resources being dedicated to the technology industry combined with the economy’s ability to regroup after facing adversity proves that South Korea is a favorable location for the next phase of our expansion.

Climate and Environment

The South Korean climate is similar to the Canadian climate that our staff is used to. The long, cold winters are more prevalent than the rest of the seasons. Summers are often hot and humid, while fall and spring are generally pleasant. South Korea has also shifted their focus in the last decade towards more energy efficient and green based technology. This is noteworthy as our Corporate Social Responsibility (CSR) events are often modeled around promoting environmentally friendly innovation.

Etiquette

Being accustomed to the South Korean business etiquette is vital to effective networking and establishing invaluable business relationships. Greetings are comprised of a respectful bow with your legs together and hands straight down on the sides, instead of the standard business handshake. Handshakes are only appropriate if initiated by the other party, and should still be done during the bow. Punctuality is imperative in South Korea, and should not be compromised under any circumstances.

Disadvantages

Despite the high growth potential and apparent structural stability, South Korea suffers damage to its credit rating in the stock market due to the belligerence of North Korea in times of deep military crises, which has an adverse effect on the financial markets of the South Korean economy. However, this does not seem to impact the inflation rate as it has been relatively low for the last few years. The increasing unemployment rate is also a potential red flag, but has not resulted in economic turmoil. All in all, the strengths of the South Korean economy highlighted in this report prove why this country should be strongly considered as the next location of our expansion.