BEO2002 International Business Context - Analysing International Business Opportunities In South Korea

Introduction:

Ever since the concept of globalization took over the business world by storm, food industry has been one of the most sought after area for expansion across borders. No matter how tempting the idea of global expansion may sound, one cannot just simply jump into the deep waters of international expansion. Analysing and forecasting the cultural, national, environmental, legal and socio-economic factors is one of the first steps towards expansion. After having a closer look into these factors, South Korea pops up as a promising target to pluck our slice of profit from this multi-billion industry.

Economic Factors:

The economy of South Korea is ranked 11th largest in the world and 4th largest in Asia (Global Tenders, 2019). South Korean economy has witnessed the weakest growth rate since 2009 owing to the sharp squeeze in manufacturing and construction sectors (Trading Economics, 2019). However, the brighter side of the picture shows a growth of 3.1% year-on-year in the last quarter of 2018, showing a rise from a 2.0% growth in the previous quarter.  Since 2017, it has been the fastest growth rate mainly owing to the services, agriculture, fishing and forestry sectors (Trading Economics, 2019). In fiscal year 2019, government spending has provided a cushion to the GDP of South Korea following a reduction of 0.4% in the last quarter till June (Kim. S, 2019). Consumer spending has significantly increased in South Korea over the years. In the second quarter of 2019, it touched the highest amount of 221901.20 KRW Billion from 220417.20 KRW Billion recorded in the previous quarter (Trading Economics, 2019). Registering to all these economic trends, South Koreans are inclined towards low-priced eating out options. Fast-food industry has seen a splurge in demand due to its competitive prices, set menus and on-going promotional offers whole year around. South Koreans, keeping in mind their busy work schedules and convenience associated with ordering fast-food through home delivery/online, prefer to spend money on this segment of food service (Mordor Intelligence, 2019).

Legal Factors:

A number of rules and regulations need to be taken care of before expanding business wings into this territory. Korean Commission for Corporate Partnership (KCCP) limits the expansion plans of multinational companies to specific geographical areas and certain number of branches. KCCP pays important role in the growth of local small and medium enterprises, hence imposes regulations on international subsidiaries (Korea Franchising, 2019).  An authority letter needs to be obtained from Korea Trade –Investment Promotion Agency (KOTRA) before making an investment. Thereafter a registration letter from the Tax Office is obtained. Annual audited financial statements need to be submitted to local tax authorities along with income tax returns (Open A Subsidiary in Korea, 2018). In August 2003, South Korean government developed a Free Trade Zone to attract foreign investment in the region. Various tax support incentives are also available to the foreign investors along with comfortable means of money transfer to the parent company (Hayes. S, 2017).  The legal structure of South Korea, with its pros and cons, welcomes foreign investment in the country by offering simpler set up procedures.