Doing Business in Korea Essay Example

Doing Business in Korea Essay Example Doing Business in Korea Essay Doing Business in Korea Essay Political and legal impacts on doing business in Korea Korea Is known as a country that showed miraculous economic growth, and considered one of the four tiger economies of Asia. Since the sass, South Korea has built a modern, internationally oriented industrial economy largely from scratch. This economy, the fourth-largest economies (after China, Japan and India) in Asia (World Bank 2014) is based on low -cost, high quality export production. Between the late 1980 and sass, the country has seen a massive Influx of FED projects to the South Korea, and recorded an Increase quadruple the foreign investment projects during the previous 35 years (Kim Lee 2007). This outcomes Is generally attributed to the countrys transition to a more open and democratic political system after years of authoritarian rule, with a pro-business government. However, these changes have also posed a number of latent tremendous challenges to the international business operating in South Korea, which include overpopulation, rising labor cost, and corruption 1 . Overpopulation: The overabundance of regulations and bureaucracy has been considered the mall seasons that Investors are packing up or moving to other Southeast Aslant countries or staying away from South Korea. A survey of Kim and Lee (2007) reveals that there is an inaccurate interpretation and improper implementation of investment regulations among the various government agencies at all levels. The poor governance at the local governments, as a result of the intense decentralization policies In the late sass, has created unnecessary bureaucracy and lack of consistency In laws and regulations enforcement at different cycles/provinces across the countries. 2. Rising labor cost and labor union: Since martial law ended and trade union activity became legal in 1987, workers compensation has double on average and the cost of benefits has risen dramatically. Korean factory wages are now the third highest in Asia, after Japan and Taiwan. For example, in 1992 the government attempted to limit wage hikes to 5. Percent, but most firms and trade unions settled on wage Increase of around 15. 5 per cent. Unions are powerful within South Koreans labor markets. This can prove a massive hurdle to Western organizations, which may have little experience of this kind of report intervention. Most workplace negotiations will involve unions and will include discussions about compensation levels. Not only does this restrict a foreign organization that needs to pay above the market rate to attract talent, but it also means human capital issues take longer to resolve. Labor militancy- A typical characteristic of labor force In Korea has resulted In many strikes In Korea. This Is another type of social unrest, which may lead to abrupt changes In the firms business policies. This could be seen through the strike which lasted for more than a onto in 2011 by workers at the Korean Standard Chartered Bank, as workers demand the company drop plans to introduce a performance-based pay system. Corruption: Transparency International, a corruption watchdog, gave South Korea a rating of 5. 4 clean. That ranks South Korea alongside countries and territories such as Botswana, Puerco Rice and Poland but far below many of the developed nations it has sought to emulate. The problem is embedded in the countrys bureaucracy and its Confucian- based culture that emphasizes family connections, regional ties and friendships roger in school. It also can be traced to decades of close links between past authoritarian governments headed by former army generals and the big business conglomerates such as Samsung, Haunted and the now-defunct Deadwood that drove the countrys industrialization. High probability of political risks Political risk has been defined as the likelihood that political forces will cause drastic changes in a countrys business environment that adversely affect the profit and other goals of a business enterprise. The major issue doesnt lie much in Korean government but with the North. The two Koreans are still officially at war and the situation remains fraught. In early October 2007, a historic Korean summit was held in Pyongyang, North Korea. During this summit, both countries agreed that a solution to the historic rivalry over border issues needs to be found and as such both sides have signed a peace declaration aimed at replacing the armistice with a permanent peace treaty. In addition, the summit also resulted in an agreement between North and South Korea to establish a Joint economic area in the border port city of Hajj in 2008. The proposal included Joint fishing areas along the sea border and a Joint shipyard at Hajj. This is seen as a necessary first step towards thawing relations between South and North Korea. However, the situation doesnt much improving.