PESTEL analysis of South Korea as an investment destination

PESTEL Analysis: South Korea

It is increasingly uncertain which nations are best to invest in, particularly given the volatile situation in the United States which will affect the world as a whole. One of the most useful tools to evaluate investments is that of PESTEL analysis, an acronym which stands for Political, Economic, Social, Technological, Environmental, and Legal analysis. Based upon this evaluation of resources, one of the most attractive nations in which to invest is that of South Korea due to its government stability and technological resources.

Political

South Korea has a relatively stable government. Although South Korea is occasionally outshined by its neighbor China because of China's sheer size, South Korea still boasts a democratically-elected government with a republican form of democracy and a constitution which "protects individual rights in additional to economic provisions, such as stable and balanced growth rates, proper distribution of income, and preventing abuse of economic power" ("South Korea," 2016). Government spending makes up a relatively large percentage of the Korean economy, almost 20% (Weissmann 2012).

Economic

South Korea's regulations have been improving regarding business. According to Barrons: "Korea has some of the most competitive and financially sound companies in Asia. It's also worth noting that Korea is the only market in the region to have enjoyed earnings estimate upgrades recently" (Zhong 2015). While Korean stocks have historically traded below their actual value and Korean companies have been criticized "for their disgraceful track record of corporate governance failures, empire building mentalities and cash hoarding," the government is attempting to change this with new investment and regulation (Zhong 2015).

Technological

Korea's technological resources are considerable, given that it boasts some of the most famous telecommunications and automotive firms in the world. While it is true that some of these firms have been criticized for copycatting the designs of major firms such as Apple, their importance cannot be questioned. In fact, the dominance of technological companies is one of the most curious features of Korea's unique economy. In fact, Samsung makes up an equivalent percentage of the Korean economy -- 20% -- as the Korean government's spending itself, followed close behind by the Hyundai Motor Group (Weissmann 2012).

Environmental

Korea is a relatively small nation, geographically speaking, and its primary environmental resources have been described as its human ones, namely its highly educated workforce living in relatively concentrated areas within the country (Guppta 2016). Also, "coupled with South Korea's blazing fast Internet access, the country is incredibly prepared to dominate our next generation of digital services" in terms of its infrastructure (Guppta 2016).

Legal

In the past, the Korean government was heavily criticized for allowing large corporations to dominate the economic landscape due to their economic clout. Samsung and Hyundai are known as "chaebols" or "massive family-run organizations [that] emphasize the importance of personal sacrifice and loyalty for the company; utilize military like hierarchies and management structures" (Guppta 2016). This can stifle innovation, although the government has diverted greater financial resources to support innovation in recent years, partially out of concern of an overreliance on the manufacturing sector versus the emerging information economy (Guppta 2016).

Final Analysis

Ultimately, although no nation is risk-free, Korea's educated populace and work ethic, the new government commitment to a more competitive business environment, and the strong dedication to technological innovation suggests it is a nation which would be a relatively low risk for investment, particularly in comparison to other emerging economic powers.