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COVER PAGE

Title : Country Analysis - South Korea

Subject : International Business Environment

Level / Semester : III / Oct 2010

Programme : MBA - FULL TIME

Subject Tutor : Mr. L. Surendra

Name of Student : Vivekanandan M

Student’s Registration Number : GPBL-B/F10/15

Date of Submission : Dec 01, 2010

Word Count : 1867 words

Word Limit : 2000 words

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Checklist

Students Name Vivekanandan M

Registration Number GPBL-B/F10/15

Date of submission of the Assignment 01/12/2010

Is the cover page in the correct format as indicated in the “Guidelines to writing Assignments”?

Yes

Have I done a complete spell-check of the Assignment? Yes

Have I done a complete word count for the Assignment? Yes

Does the table of contents include numbers? Yes

Are the pages numbered correctly? Yes

Are the figures numbered correctly? NA

Are the tables/charts numbered correctly? Yes

Are the captions for the tables and charts proper? Yes

Are the references/bibliography listed in the Assignment? Yes

Are the references cited correctly in the text? NA

All references material has been cited from the books & the University of Wales online library. Any other internet source

quoted is with the permission of the module tutor.

NA

Are the references in the text in the proper format as indicated in the “Guidelines to Writing Assignments”

Yes

Has the soft copy of the Assignment been enclosed? Yes

Declaration:

All material written in this assignment is my own and I have not used any material, content or information of others claiming them to be mine. Wherever materials have been used, proper citation has been done in the text. I am fully aware of the rules and regulations governing plagiarism. Should at any point of time my work be suspected/investigated and established to have been plagiarized, I am aware of the consequences. I have read the Student’s Handbook in detail. ___________________ Signature of the student Date: 01/12/2010

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TABLE OF CONTENTS PAGE No.

List of Tables 1

Introduction 2

Country Overview 2

Demographic and Social Environment 3

Political and Legal Environment 4

Economic Factors 5

Trade with India 6

Conclusion 7

Bibliography 8

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LIST OF TABLES PAGE No.

Table 1 - Population of South Korea 3

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Introduction

The purpose of this report is to analyse the macro environmental factors for South Korea,

which has an impact on the business for a Multi-National Corporation (MNC). As part of this

analysis, social factors, political factors, legal factors and economic factors that impacts

MNC’s business in South Korea are analysed in detail.

Country Overview

South Korea is officially called as Republic of Korea and is located in East Asia. The capital

city of South Korea is Seoul. Its neighbouring border counties include China in to the west,

Japan to the east and North Korea to the north. South Korea is a member of United Nations,

World Trade Organization (WTO), Organization for Economic Co-operation and

Development (OECD) and G-20. It is also a founding member of Asia-Pacific Economic

Cooperation (APEC) and East Asian Summit.

The total are of South Korea is around 1 lakh square km. South Korea is divided into 8

provinces, 6 metropolitan cities, one special autonomous province and one capital

metropolitan city. Around 70% of the land area is mountains, which makes it one of the most

densely populated country in the world with 482 people per square km. South Korea has

13350 square km irrigable land. South Korea is mostly surrounded by water and has 2413 km

of coastal line along 3 seas.

Each province in South Korea is further sub divided into counties and cities. South Korea has

totally 360 districts. There are 3 mountain regions in South Korea - Taebaek Mountains, and

Sobaek ranges, and the Jiri Massif. South Korea does not have active volcanoes, does not

have strong earth quakes and less vulnerable to typhoons. South Korea experiences long

winter and short summer and the average temperature ranges from 23oF to 77oF.

During Jan 2010, South Korea had a record snow fall in the past 100 years.

South Korea has natural resources like coal, tungsten, graphite, molybdenum and

lead.

Transportation includes Rail, Trams, Roads, Ferries and Airway.

There are about 3000 islands in South Korea.

There are 9 international airports in South Korea.

There are 11 Ports and Harbours in South Korea.

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Demographic and Social Environment

The total population of South Korea is 47 million. Population growth rate is 0.28%. Birth rate

is 8 births / 1000 population and death rate is 6 deaths / 1000 population. Around 35 million

(72%) people fall in the age group between 15 to 64 years, 8 million (16%) are children aged

below 14 years and 5 million (11%) are old aged people who are above 65 years.

Provinces

Area in

sq. km

Population

during 1990

Population

during 1995

Population

during 2000

Population

during 2005

Busan 760 3,798,113 3,814,325 3,662,884 3,523,582

Chungcheongbuk-do 7,432 1,389,686 1,396,728 1,466,567 1,460,453

Chungcheongnam-

do 8,586 2,013,926 1,766,854 1,845,321 1,889,495

Daegu 886 2,229,040 2,449,420 2,480,578 2,464,547

Daejeon 540 1,049,578 1,272,121 1,368,207 1,442,856

Gangwon-do 16,572 1,580,430 1,466,238 1,487,011 1,464,559

Gwangju 501 1,139,003 1,257,636 1,352,797 1,417,716

Gyeonggi-do 10,135 6,155,632 7,649,741 8,984,134 10,415,399

Gyeongsangbuk-do 19,024 2,860,595 2,676,312 2,724,931 2,607,641

Gyeongsangnam-do 10,516 3,672,396 2,878,193 2,978,502 3,056,356

Incheon 965 1,817,919 2,308,188 2,475,139 2,531,280

Jeju-do 1,846 514,605 505,438 513,260 531,887

Jeollabuk-do 8,050 2,069,960 1,902,044 1,890,669 1,784,013

Jeollanam-do 11,987 2,507,439 2,066,842 1,996,456 1,819,819

Seoul 606 10,612,577 10,231,217 9,895,217 9,820,171

Ulsan 1,056 0 967,429 1,014,428 1,049,177

Total 99,461 43,410,899 44,608,726 46,136,101 47,278,951

Table 1: Population of South Korea

People migrating to Gwangju, Gyeonggi-do, Incheon provinces has increased by 40% when

compared to 1990.

Around 38 million (81%) people are living in urban area. Around 37 million people aged

above 15 years can read and write. 0.6 million people are Engineers and 0.5 million

population are skilled migrants.

Distribution of 24 million labor workforce across various sectors – Government and Public

authority is 4%, Commerce & Services is 42%, manufacturing 28%, agriculture & fishing is

19%, construction is 4% and 3% of the work force are un-employed. There are 37 million

internet users and 45 million cellular mobile phone users.

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South Korea is a homogeneous society with majority of the population of Korean ethnicity.

Around 46% of the population does not follow any religion, 26% of the population follow

Buddhism and 26% of the population follow Christianity. 14% of the total 26000 marriages

are between Koreans and foreigners. Many Koreans marry Chinese, Vietnamese and Thai.

Korean language shares several grammatical features with Japanese and there have

strong similarities with Mongolian.

Business 2.0 and Korea CNN are popular news media in South Korea.

Family is the most important part in Korean life.

Father is the head of the family and his responsibility is to provide food, clothing and

shelter to his family and to approve the marriages of family members.

Eldest son has special duties to his parents, then to his brothers, then to his sons, then

to his wife and finally to his daughter.

Family welfare is more important than the individual.

Political and Legal Environment

South Korea is a republic, with powers shared between the President, the legislature and the

judiciary. The head of the state is the President, who is elected by the people for a 5 year

term. Current president of South Korea is Lee Myung-bak from Grand National Party. The

legislature consists of National Assembly, whose members are elected. Out of 299 national

assembly members, 243 members are directly elected by the public. Major political parties

are Democratic Labor Party, Democratic Party, Grand National Party, People-First Party and

Uri Party. The head of Government is the Prime Minister (PM) and the current PM is Kim

Hwang-sik from Grand National Party.

The Constitution consists of three-branch governing system whereby law-making function is

governed by National Assembly, administrative functions are governed by executive branch,

headed by the President, and judicial functions. Structurally, these three branches are highly

independent of each other. The members of the National Assembly are elected by the people,

and the National Assembly's leaders and officers are chosen by the members themselves.

The President need not obtain the approval of the National Assembly in appointing top

executive officials, except for the Prime Minister and the Director of the Board of Inspection

and Audit. Local governments are considered as part of the executive branch and thus

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controlled by the Central Government. All major policies, including those specifying to local

government functions, taxation, resident welfare and services, and personnel management,

are determined by the central Government.

Currently there is a political tension between South Korea and North Korea. There is a

possibility of this tension leading to a war between these countries. This will have an adverse

effect in both the country’s economy and the global economy. This was between South Korea

and North Korea can be dated back to 1950, when the Korea got divided into South Korea

and North Korea. Pre independence, North Korea was under the control of Russia and South

Korea was under the control of USA. So North Korea became a communist nation and South

Korea became a democratic nation. This difference has resulted in the war between these 2

countries and they have fought many wars in the past - Battle of Pusan Perimeter, Battle of

Inchon.

The judiciary system consists of 3 levels, Supreme Court, High Court and the Constitutional

Courts. Supreme Court consists of 13 Chief Justice and there are 5 High courts. The

executive branch is headed by the President and consists of the Prime Minister, the State

Council, seventeen executive ministries, seventeen independent agencies, the Board of

Inspection and Audit, and the National Intelligence Service. The Prime Minister, appointed

by the President with the approval of the National Assembly, supervises the ministries and

independent agencies. The Prime Minister performs his function under the supervision of the

President, and in this sense he/she is the chief assistant to the President. The head of the

Supreme Court, the Chief Justice is appointed by the President with the consent of the

National Assembly. Legal system consists of European civil law systems, Anglo-American

law, and Chinese classical thought.

Economic Factors

South Korea currency is won. During 1960s, South Korean Government instituted sweeping

economic policy changes emphasizing exports and labor-intensive light industries, leading to

rapid debt-financed industrial expansion. During 1970s, South Korea began directing fiscal

and financial policies toward promoting heavy and chemical industries, consumer electronics,

and automobiles. Manufacturing continued to grow rapidly in the 1980s and early 1990s.

South Korea bounced back from the 1997 - 1998 Asian financial crisis with assistance from

the International Monetary Fund (IMF). During global financial and economic crisis in the

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third quarter of 2008, annual GDP growth slowed to 2.3% in 2008 and the GDP growth was

just 0.2% in 2009. Some of the major companies that are based in South Korea include

Daewoo Group, Hyundai Group, LG Group, Samsung Group, Fila, etc.

GDP of South Korea is $ 970 billion and average annual growth in real GDP is at 4.7%. Per

capita income is $20010. Agriculture contributed to 3% of GDP, manufacturing contributed

39% of GDP and services contributed 57% of GDP. South Korea balance of payment is $30

billion surplus.

Government revenues were at $200 billion and Government expenditure was at $213 billion.

Average inflation rate is between 2 to 4%. Major exports from South Korea include

Information & communication products, Semiconductors, Chemicals, Machinery &

Equipment. Major imports were crude petroleum, machinery & equipment, semiconductors

and chemicals. Major export destinations were China, United States of America, Japan and

HongKong. Major imports were from China, Japan, United States of America and Germany.

Trade with India

India's export to Korea was at Rs 4325.84 crores during 2005 and it was of 1.21% of the total

Indian Exports. India's import from Korea was at Rs 14351.54 crores during 2005 and it was

2.98 % of the total Indian Imports. The trade balance had been in favour of Korea. India’s

export was limited to commodities such as cotton, oil cake, iron ore, iron and steel, organic

and inorganic chemicals and electrical equipment’s and machinery. India imports machinery

& equipment from South Korea. South Korea is one of the top 10 countries to invest in India

and the sectors include - transportation industry, power & oil refinery, electrical equipment

(computer software & electronics), chemicals (other than fertilizer) and commercial, office &

household equipment. India’s investments in South Korea are in the automobile sector.

During 2009, India and South Korea signed Comprehensive Economic Partnership

Agreement (CEPA) that will facilitate duty cuts on auto parts and electronic items, among

others. During 2010, Social Security Agreement (SSA) was signed between 2 countries,

which allowed movement of professionals between the two countries and strengthen the trade

and investment. Currently India and South Korea are discussing on a $30 billion civil nuclear

deal.

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Conclusion

This macro environment analysis for South Korea can be used by Multinational Corporation

which wants to enter South Korean market. Further analysis can be done to analyse the

country risk for a specific industry or sector.

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Bibliography

1. http://www.korea.net/index.do (Nov 18, 2010)

2. http://www.state.gov/r/pa/ei/bgn/2800.htm (Nov 18, 2010)

3. http://en.wikipedia.org/wiki/South_Korea (Nov 18, 2010)

4. http://en.wikipedia.org/wiki/Demographics_of_South_Korea (Nov 18, 2010)

5. http://www.state.gov/www/background_notes/southkorea_0006_bgn.html (Nov 18,

2010)

6. http://en.wikipedia.org/wiki/Demographics_of_South_Korea (Nov 20, 2010)

7. http://www.citypopulation.de/KoreaSouth-Mun.html (Nov 20, 2010)

8. https://www.cia.gov/library/publications/the-world-factbook/geos/ks.html (Nov 23,

2010)

9. http://www.world66.com/asia/northeastasia/southkorea/people (Nov 23, 2010)

10. http://www.nationmaster.com/country/ks-korea-south/lab- labor (Nov 23, 2010)