Doing Business in South Korea

Overview

South Korea is situated in the southern part of the Korean peninsula. The northern part of the peninsula forms North Korea. These two countries were divided along the “38th parallel”, in the year 1945, with an intention of having two distinct military zones “as a provisional arrangement pending a resolution of the political conflict in what was previously a single country” (“New Zealand Trade & Enterprise”, 2010, p.1).

Through a “modernization and industrialization” program which began in the 1960s, the Republic of South Korea has been able to grow and at the present, it is ranked as the 14th largest economy in the world New Zealand Trade & Enterprise”, 2010, p.2).

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Great progress has been witnessed in this nation since it has been able to move from fertilizer, cement and industrial chemical production (being basic industries), to the production of electronics, automobiles and to computers among other technological commodities.

Political and Legal Aspects

The Republic of South Korea is “a constitutional democracy” (“New Zealand Trade & Enterprise”, 2010, p.3). The ‘Grand National Party’ is the country’s current ruling party. The inauguration of the country’s current president, Mr. Myung-Bak Lee, took place on the 25th day of February 2008.

The president and the prime minister are part of the cabinet. The cabinet has the responsibility to make government policies. Occasionally, talks concerning the reunification of South Korea and North Korea are held, but they are often disrupted by North Korea. However, there is need to resolve several political as well as ideological issues before reunification can ever be realized (“New Zealand Trade & Enterprise”, 2010).

The legal system of the Republic South Korea started being effective from the time this nation was organized as “an independent state” and its constitution introduced (Doing business in South Korea”, n.d, p.7). For the whole period the Republic of South Korea has been there, several amendments have been made on its constitution, and the most recent one was made in 1987.

The “Court Organization Act”, which was passed in 1949, enabled creation of “a three-tiered, independent judicial system in the Republic of Korea” (Doing business in South Korea”, n.d, p.7). South Korea’s judicial system consists of the supreme court, the constitutional court, thirteen district courts, 6 high courts and various other courts that have specialized jurisdiction (Doing business in South Korea”, n.d).

Economic and technological Aspects

In the course of the last four decades, the remarkable growth in South Korea’s economy “was part of what has been described as the ‘East Asia miracle” (“Doing business in South Korea”, n.d, p.8).

The remarkable economic growth enabled this nation to be ranked as the 12th largest economy in the whole world, in the year 2006. The country’s economy has been driven by the high rates of investment as well as savings. It has also been driven by “a strong emphasis on education, which boosted the number of the young people enrolled in a college or university to one of the highest levels in the world, 82.1% in 2005” (“Doing business in South Korea”, n.d, p.8).

In the course of that period, there was radical reshaping of the country’s industrial structure. Diversification of the major industries was carried out to encompass automobiles, electronics, and steel products among others (Doing business in South Korea”, n.d).

By a company investing in South Korea, it can be able to derive various benefits. For instance, this nation is situated between Japan and China and this makes it to a good location from where a company can engage in doing business with these two nations. China is the biggest world market and Japan is the second largest economy in the world.

It is also important to note that, South Korea has emerged quickly and has now turned out to be one of the “world’s leading ICT powerhouses” (“Doing business in South Korea”, n.d, p.8). Moreover, this nation has outstanding telecommunications networks which make the use of the internet and its maintenance to be quite affordable (“Doing business in South Korea”, n.d).

Social/cultural Aspects

In order for a company to do business in South Korea effectively, the management is supposed to understand this country’s cultural and social aspects. Effective leadership in this country entails setting a clear vision. Moreover, building rapport with the local people is required. It is also important to point out that the expat managers in this country need to get some issues right.

For instance, they need to ensure that they are perceived as “in-group members” (ITAP International, 2012). They also need to accept the way of carrying out operations in this country as being valuable competence (ITAP International, 2012). In South Korea, the expat managers are usually seen as being arrogant, outsiders and they are also regarded as being too theoretical (ITAP International, 2012).

The vendors can be effective in establishing rapport with prospective customers in this country by; having empathy and a non-judgmental attitude, spending time together while eating and drinking, and agreeing to the hierarchical order “between the principal and the vendor” (ITAP International, 2012).

The vendors should avoid doing certain things such as putting emphasis on their own needs and underrating the counterpart’s power. Moreover, there are some important things that the vendor should understand in the process of negotiating with the customers in South Korea.

For instance, in this country, relationship is considered to be very important. It should also be understood that conditions keep on changing. Moreover, having mutual trust is also considered to be a very important element. In a situation where a conflict may arise, this is resolved in a more indirect manner rather than through confrontation (ITAP International, 2012).

Hofstede’s Country Characteristics

Power distance: South Korea has a score of sixty on this dimension and this indicates that the country is a “hierarchical society” (“What about South Korea”, 2012, p.1). This implies that individuals have agreed to hierarchical order, where each and every individual has a place which does not need more justification.

Individualism: This country, having a score of eighteen, is regarded as being a “collectivistic society” (“What about South Korea”, 2012, p.1). This is seen in a “close long-term commitment to the member group” (“What about South Korea”, 2012, p.1). Having loyalty within a collectivist culture is vital, and supersedes a large number of other rules and regulations in the society. The society promotes powerful relationships in which every individual accounts for the actions of other group members.

Masculinity/Femininity: The score of this country on this dimension stands at 39 and this makes this country to be regarded as a feminine society. In such a society, focus is put on “working in order to live” (“What about South Korea”, 2012, p.1); the managers seek consensus and people attach importance to equality. Conflict resolution is carried out through engaging in negotiation and compromise. There is favoring of such motivations as flexibility and having free time.

Uncertainty avoidance: South Korea’s score on this dimension stands at 85, making it to be among the world’s most “uncertainty avoiding countries” (“What about South Korea”, 2012). The nations that show “high uncertainty avoidance” engage in maintaining “rigid codes of belief and behavior and are intolerant of unorthodox behavior and ideas” (“What about South Korea”, 2012, p.1).

In such cultures, there exists an emotional need for having rules; individuals have an inner desire to keep themselves busy. Precision and punctuality at work is a norm. Moreover, security is regarded as a very vital part in a person’s motivation. On the other hand, innovation may face resistance.

Long-term orientation: South Korea has a score of 75 on this dimension; giving an indication that this country is among the “long-term oriented societies” (“What about South Korea”, 2012, p.1). People in this country live under the guidance of virtues and realistic good examples.

In the corporate South Korea, the long-term orientation is seen in; “the higher own capital rate, priority to steady growth of market share rather than to a quarterly profit, and so on” (“What about South Korea”, 2012, p.1). All the companies engage in serving their own durability. The driving idea here is that the companies’ reason for existing is not to make profits for the shareholders each quarter but rather, to engage in serving the shareholders as well as the society for several generations to come.

References

Doing business in South Korea, n.d. Retrieved from, http://www.pkf.com/media/131978/doing%20business%20in%20south%20korea.pdf

ITAP International, (2012). Tips for doing business in South Korea. Retrieved from, http://www.itapintl.com/facultyandresources/country-tips/south-korea-business-tips.html?lang=

New Zealand Trade & Enterprise, (2010).Republic of South Korea: country brief. Retrieved from, http://www.nzte.govt.nz/explore-export-markets/North-Asia/Doing-business-in-South-Korea/Documents/South-Korea-complete-country-brief.pdf

What about South Korea, (2012). Retrieved from, http://geert-hofstede.com/south-korea.html