Analysis of Business Environment of South Korea
Analysis of business environment of South Korea :-
South Korea, also called the Republic of Korea is surrounded by China in the west, Japan in the east, the Korea Strait in the south and North Korea in the north. The total land area of South Korea is 99,392 square km. and has a population of 50 million. The capital and largest city of the country is Seoul. South Korea is a Presidential Republic and one of the developed countries with a very high standard of living. The national currency is South Korean Won (KRW) issued by The Bank of Korea since June 12, 1950. The South Korean Won is not regulated by any governing body, but determined by the demand and supply dynamics in the market.
South Korea over the past four decades has demonstrated incredible growth and global integration to become a high-tech industrialized economy. In the 1960s, GDP per capita was comparable with levels in the poorer countries of Africa and Asia. In 2004, South Korea joined the trillion dollar club of world economies, and is currently the worlds 10th largest economy. Per capita GDP of South Korea (US$ 16308 in 2005) is lower that some of the developed Asian countries like Japan, Hong kong, Taiwan, Singapore , but better than Malaysia , Taiwan and Philippines. Initially, a system of close government and business ties, including directed credit and import restrictions, made this success possible. The government promoted the import of raw materials and technology at the expense of consumer goods, and encouraged savings and investment over consumption. The Asian financial crisis of 1997-98 exposed longstanding weaknesses in South Koreas development model including high debt/equity ratios and massive short-term foreign borrowing. GDP plunged by 6.9% in 1998, and then recovered by 9% in 1999-2000. Korea adopted numerous economic reforms following the crisis, including greater openness to foreign investment and imports. Growth moderated to about 4% annually between 2003 and 2007. South Koreas export focused economy was hit hard by the 2008 global economic downturn, but quickly rebounded in subsequent years, reaching 6.3% growth in 2010. The US-South Korea Free Trade Agreement was ratified by both governments in 2011 and went into effect in March 2012. Throughout 2012 the economy experienced sluggish growth because of market slowdowns in the United States, China, and the Eurozone. The incoming administration in 2013, following the December 2012 presidential election, is likely to face the challenges of balancing heavy reliance on exports with developing domestic-oriented sectors, such as services. The South Korean economys long term challenges include a rapidly aging population, inflexible labor market, and heavy reliance on exports – which comprise half of GDP.
From 1995 to 2000, discount stores in S Korea grew from 1% to 10% of total retailing industry. This was possible due to entry of foreign