International Business South Korea International Business South

International Business

South Korea International Business

South Korea: Introduction and Business Potential

South Korea is the 12th largest economy in the world. It has made tremendous growth in all manufacturing, industrial, and services sectors to become economically and technologically strong. Due to rapid economic growth and positive governmental behavior, South Korea has become an attractive target country for foreign corporations for their international business expansion strategies (Central Intelligence Agency, 2013). However, these foreign corporations face huge differences in the cross-cultural values, marketing practices and ethical values when they enter into South Korean market (Ball, 2010).

Cross Cultural Differences

Language Barriers:

The most significant cross-cultural difference which the U.S. businesses face in South Korea is the language barriers. In the U.S., people speak louder and more aggressively; whereas in Asian countries like Korea, they are soft in voice tone and communication styles. Moreover, differences exist in the native language and English-accent in the South Korea. This cross-cultural difference can directly impact the way U.S. businesses design their marketing and communication plans for their internal and external stakeholders. For example, they need to institute an organizational culture where employees should communicate with their local (South Korean) coworkers and customers in a voice tone and accent which is acceptable and understandable for them according to their local communication styles. The employees should also take care of fluency level and selection of technical terms while talking or writing to the South Korean stakeholders (Lee & Trim, 2008).

2. Decision Making Style:

Decision making style refers to the way managers in an organization make decisions, delegate authorities, divide job tasks and roles, evaluate alternatives, and resolve organizational problems. Managers in the local organizations in the U.S. give more preference to majority rule; whereas, South Korean managers believe transformational style. U.S. managers prefer group orientation while South Korean managers implement individual orientation at the workplace. The participation of female employees is also higher in the U.S. organizations as compared to South Korean firms. Decision making style is critical to be analyzed while expanding internationally due to its direct impact on the employee performance and organizational productivity (Wild, Han, & Wild, 2011).

3. Social Values and Cultural Norms:

There are huge differences in the social values and cultural norms between the U.S. And South Korean customers. Therefore, those U.S. companies that wish to expand to South Korea must keep in view these differences in order to operate in the most effective and efficient way. The major cross-cultural differences exist in the life styles, preferences, eating habits, earning and expending patterns, clothing, and religious beliefs of the South Korean customers (Ball, 2010). For example, the Americans prefer highly-spiced, refreshing, and strong eatables whereas South Korean customers are more health-conscious and avoid fatty products. Similarly, Americans are open-minded; love outing, fashion, and entertainment. On the other hand, South Koreans are quite conservative in nature (Central Intelligence Agency, 2013). This cross-cultural difference is critical for the success of international businesses as it directly affects the social, cultural, and demographic values of the customers. In order to operate in the most effective and competitive way, U.S. businesses will have to offer products that best match the eating habits, living styles, and cultural beliefs of the South Korean customers (Hill, 2013).

Part B: Comparison of Business Practices

1. Product:

The biggest challenge for U.S. companies in the South Korean markets would be to find the raw material suppliers, distributors, and business partners that will facilitate them in manufacturing the desired quality and quantity of products for the South Korean customers. In the U.S., there are a large number of suppliers for every type of material. On the other hand, South Korean market is concentrated with the suppliers and vendors from Japan and North Korea (Lee & Trim, 2008). However, the raw material prices, energy costs, and overhead expenditures are lower in South Korea as compared to the U.S. Moreover, the U.S. companies will have to manufacture products according to the life styles, cultural values, and preferences of South Korean customers in order to avoid criticism or boycotts from the local and international communities.

2. Price:

U.S companies will face a big challenge while designing the pricing strategies for their products. The local companies in South Korea offer products at very competitive prices due to readily available raw material, low labor, energy, and overhead costs, and favorable governmental behavior. On the other hand, U.S. is one of the most expensive markets for business organizations. However, the South Korean customers have the same perception for price-quality relationship as the U.S. customers. Therefore, U.S. companies will be able to charge a high price if they sell their products under well-recognized brand name, use top quality raw material in manufacturing, and provide efficient delivery to the final customers (Wild, Han, & Wild, 2011).

3. Promotion:

Companies in the U.S. use all the major marketing mediums for the promotion of their products. These mediums include; electronic media, print media, social media networking, and bill boards, trade shows, etc. On the other hand, the most widely used marketing medium in South Korea is newspapers and magazines (Central Intelligence Agency, 2013). The trend for holding seminars, trade shows, cultural events, etc. is grater in South Korea as compared to U.S. Keeping in view these facts, it can be said that U.S. companies that wish to expand to South Korean market will need to focus on print advertisements and promotions.

4. Place:

The network of local partners, suppliers, distributors, and business development firms is spread throughout the United States. In contrast, local and international businesses in the South Korean market find these strategic business partners and supply chain members in the major cities and town only. Therefore, they face difficulties in delivering their products to the potential customers in small towns and villages. The weather conditions and overall climate in South Korea remains quite favorable for all types of businesses throughout the year. However, the seaports and trade routes are not as developed as they are in the United States (Lee & Trim, 2008).