testing the waters in south korea internationalization of sea

A Work Project, presented as part of the requirements for the Award of a Master Degree in

Management from the NOVA – School of Business and Economics.

Testing the Waters in South Korea

Internationalization of Sea & Sun Electronics to the

South Korean Market

APPENDICES

Linda Joana Kovacevic

#3044

A Project carried out on the Master in Management Program, under the supervision of:

Professor Sara Alves

06 January 2017

2

TABLE OF CONTENTS

Appendix 1 – Characteristics of Entry Modes ................................................................................. 3

Appendix 2 – Product Portfolio ....................................................................................................... 3

Appendix 3 – Research Programs .................................................................................................... 7

Appendix 4 – Sales evolution and forecast ...................................................................................... 8

Appendix 5 – Quantitiy sold and forecast ........................................................................................ 8

Appendix 6 – Market volume and growth ....................................................................................... 9

Appendix 7 – Porter’s Five Forces Analysis .................................................................................... 9

Appendix 8 – Organizational Resource Platform .......................................................................... 12

Appendix 9 – Results CORETM tool .............................................................................................. 13

Appendix 10 – Detailed results: Preliminary elimination .............................................................. 14

Appendix 11 – Scoring model: Description and source of indicators............................................ 15

Appendix 12 – Scoring model: Standardized data for all countries ............................................... 15

Appendix 13 – Formula applied for standardization of country scores ......................................... 16

Appendix 14 – Correlation matrix for selected indicators ............................................................. 16

Appendix 15 – PESTLE Analysis for South Korea ....................................................................... 16

3

APPENDICES

Appendix 1 – Characteristics of Entry Modes

Appendix 2 – Product Portfolio

(i) Measuring probes

Sea & Sun’s product portfolio consists of two broad types of measuring probes: Multiparameter

and Microstructure probes, which vary in size, weight, types of sensors and application field.

Multiparameter probes can be ordered to have an internal flash memory of between 8 and 128

MB. They are resistant against nearly all chemical compounds and absolutely corrosion free. The

smaller probes are further suitable for portable application as they do not require winches to lower

them into water. Also, some of the probes are fitted with rechargeable batteries. Multiparameter

probes can be applied really flexible, due to the ability to configurate the probes individually and

equip them with several types of sensors.

Control available to the focal firm over foreign operations

Resource commitment

Flexibility

Risk*

Minimum

Limited

Maximum

Low

Maximum

Substantial

Minimum

High

*does not hold for all sorts of risk, e.g. currency risk

Source: Cavusgil et al. (2014)

Export-based entry modesNon-equity-based entry

modesEquity-based entry modes

4

Source: Sea & Sun Electronics

All Microstructure probes of the portfolio can be applied in marine and limnic waters. They have

a sampling rate of 1,024 samples generated per second. In addition, they can be connected to a

computer via USB 2.0, in order to transfer the data samples.

Multiparameter

probesCTD 48 CTD 60 CTD 75 CTD 90 CTD 115

No. of sensors 4 - 8 5 - 12 8 9 12

Type of sensors

Pressure,

Temperature,

pH, dissolved

oxygen, H2S

Pressure,

Temperature,

Conductivity,

pH, dissolved

oxygen, light

transmission,

light scattering

Pressure,

Temperature,

Conductivity,

Turbidity, pH,

Redox,

dissolved

oxygen,

Chlorophyll A

Pressure,

Temperature,

Conductivity,

pH, dissolved

oxygen, light

transmission,

light scattering

Pressure

(installed),

possibility to

connect external

units like

fluorometers,

currentmeters

etc.

Water depth up to 6,000 m up to 6,000 m up to 2,000 m 6,000 m 2,000 m

Length 400 mm 620 mm 654 mm 600 mm 600 mm

Weight 1 - 1.2 kg 3 kg 3.5 kg 6 kg 7 kg

Resolution 20 Bit 16 Bit 16 Bit 20 Bit 20 Bit

5


(ii) Software

Sea & Sun develops the data acquisition software used to display and analyze the SDA data

collected by its probes itself. The software runs under both, Windows and Mac operating systems

and supports up to 8 probes at the time. It is important to the company, that the software is easily

to be used by customers.1

1 Standard Data Acquisition Software. 2016. Sea & Sun Electronics. http://www.sea-sun-tech.com/marine-

tech/oceanography/software.html.

Microstructure

probesMSS 60 MSS 90 MSS 90L MSS 90-D1 MSS 90-D2

No. of sensors 5 9 9 9 9

Type of sensors

Turbidty,

Oxygen

Turbidity,

Fluorescence,

Oxygen, pH

Turbidity,

Fluorescence,

Oxygen, pH

Turbidity,

Fluorescence,

Oxygen, pH

Turbidity,

Fluorescence,

pH

Water depth 200 m 500 m 500 m 1,000 m 2,000 m

Length 0.8 m 1.0 m 1.25 m 1.5 m 1.7 m

Weight 5 kg 12 kg 15 kg 25 kg 33 kg

Resolution 16 Bit 16 Bit 16 Bit 16 Bit 16 Bit

6

(iii) Equipment

Additional equipment provided by Sea & Sun comprises various types of cable drums, manual

and automatic winches as well as interfaces and remote displays to transfer and display data

collected by the probes. In the following one product per equipment type is exemplary examined

in more detail:

Bluetooth cable drum

Cable connected with measuring probe, but wireless

communication with data acquisition device

Cable length: 200m

Weight: 3.3 kg

Bluetooth reach: 10m in open field

Operating time per charge: 10h

Electrical winch (SMW 3000)

Electrical winch to automatically lower probes into

water and pull them out again

Cable length: 3,000m

Cable from winch to laboratory: 40m

Probe interface (STT)

Connects measuring devices (probes) without direct

connectivity with data displaying and analyzing

devices (generally computers)


7

Appendix 3 – Research Programs

Sea & Sun is a partner and supplier of several environmental research and monitoring programs,

such as a project of the German Federal Ministry of Food and Agriculture regarding the German

fishing industry. Another collaboration with the Federal Ministry of Economic Affairs and

Technology and several other high-tech companies is in place. Under the project name BOSS

(stands for “Bionic Observation and Survey System”) the firms and researches develop an

autonomous data collection probe, which looks and moves like a ray. This animal-looking device

can maneuver through the ocean by itself and can be equipped with different sensors, cameras and

sonars to capture a holistic data picture of its environment.

A complete list of all research programs, which use Sea & Sun’s water measurement solutions, can

be found at Sea & Sun’s webpage2.


2 Reference List for measurements and data processing. 2016. Sea & Sun Technologies. http://www.sea-sun-

tech.com/marine-tech/projects-references.html.

8

Appendix 4 – Sales evolution and forecast

* including solar business Source: Sea & Sun Electronics

** solar business was abandoned

Appendix 5 – Quantity sold and forecast

** solar business was abandoned Source: Sea & Sun Electronics

0

20

40

60

80

100

2010* 2011* 2012* 2013* 2014** 2015 2016 2017e 2018e 2019e 2020e 2021e

Sale

s in

mil

lion

€

Year

Conservative Optimistic

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2014** 2015 2016 2017e 2018e 2019e 2020e 2021e

Un

its

sold

Year

Conservative Optimistic

9

Appendix 6 – Market volume and growth

Source: Water Analysis Instrumentation: A Global Strategic Business Report, Global Industry Analysts

Appendix 7 – Porter’s Five Forces Analysis

1 Internal Rivalry

With around 28 firms, there is a comparably small number of players in the market for water

measuring probes. Globally, there are only three companies operating internationally, with Sea-

Bird Electronics clearly dominating the market. RBR and Sea & Sun are the only firms whose

products are able to compete in terms of innovative technology, capabilities and quality. There is

a global trend towards extensively exploring the environment on more granular levels, in order to

understand environmental contexts and developments. This tendency will strongly increase the

overall market size of the industry. In turn, this will attract new market entrants who aim at

capturing abnormal returns. Thus, internal rivalry of the industry can overall be considered to be

low, but will most probably increase in the future.

2 Buyer Power

The major buyers within the water measurement instrumentation market are considered to be

research institutes and universities conducting water-related research. Another group of buyers in

1.47 1.571.86

2.22.8

3.6

6.80%

18.47% 18.28%

27.27% 28.57%

0

0.05

0.1

0.15

0.2

0.25

0.3

0

0.5

1

1.5

2

2.5

3

3.5

4

2015 2016 2017e 2018e 2019e 2020e

Ma

rke

t g

row

th i

n %

Ma

rket

size

in

$ b

illi

on

Year

Market size Market growth

10

the industry are navies and fisheries worldwide, using the products for environmental research on

fish and the aquatic environment in general. Thus, the great majority of buyers is funded by

governments and therefore dependent on national R&D spendings. As such, they have a research

budget at their disposal and are not very price-sensitive. It is most important for them that products

meet their requirements as these customers show high involvement with the products. In addition,

the number of manufacturers of water testing probes is very limited, therefore buyers cannot widely

chose whose products to purchase, especially with regards to individualized products. Thus, prices

for measuring probes are generally fixed. However, another (smaller) group of customers are

private enterprises that are engaged in offshore exploration and ocean resource utilization (e.g.

offshore wind parks, monitoring of underwater oil pipelines and searching for undiscovered oil

resources in the sea). Within this group of buyers, some firms place particular large orders at times

(e.g. 100 new probes) and do have some bargaining power due to their purchase volume.

Buyers cannot easily switch between products of different manufacturers as each player uses its

own software to display and process the data. Switching to the product of another player means the

use of another software which is not compatible with the software of other firms. Thus, data

collected by different devices cannot be analyzed and compared together.

Due to these reasons, buyer power is considered to be low to moderate. As worldwide market

demand is expected to strongly increase within the next years and as new manufacturers of probes

will not be able to appear as quickly, bargaining power of buyers will decrease even more.

3 Supplier Power

There are four major groups of suppliers in the industry: (i) titan parts are supplied by mechanical

engineering companies of which exist a very high number worldwide. Thus, these firms have

almost no bargaining power as the titan parts can be produced by any firm and switching to

11

competitors is very easy for manufacturers of measuring probes. (ii) sensors are very product-

specific and the most important part of the probes. As suppliers of sensors are monopolists in their

specific field, prices are static and bargaining power of sensor suppliers is very high. (iii)

electronics like circuits are also not a very specific product and can be purchased from a very large

number of producers. Consequently, their bargaining power is very low as switching costs are low

as well. (iv) software is bought from third parties by some players, others develop the software for

its products themselves. As there is a large number of software developers and switching between

different suppliers is very easy, their bargaining power is very low.

As demand for test probes is expected to increase over the next years, bargaining power of sensor

suppliers will increase even more, yet, power of titan, electrics, and software suppliers will

remain the same due to the large number of players in the markets.

4 Threat of New Entrants

Entering the water measurement instrumentation market requires substantial capital resources to

set up the technical facilities required to produce and service of such kinds of probes. However,

the greatest entry barriers represent the need of technology and highly specified know-how, which

are difficult to obtain and very costly, but necessary to be able to compete in this industry. Besides

these factors, the major incumbents already built up a well-known reputation for their products,

which a new entrant would have to attain in order to convince buyers of the quality of his probes.

Yet, strong global market growth will surely attract new competitors as main materials are

relatively easy to access and distribution is left to the firms’ personal sales forces and specialized

dealers or agents. Also, the fact that the majority of players in the industry focusses on sea water

as their major field of application of products, might draw firms to enter the field of testing probes

for fresh water. In summary, the threat of new entrants is moderate but likely to increase.

12

5 Threat of Substitutes

Currently, there is no other way of measuring water characteristics as there are no alternative

products that offer similar benefits and occasions for use to the customer. Technology will most

probably advance further in the years to come with more precise measuring probes being

developed. However, it is not expected that substitutes for water measurement probes will evolve

within the next 10 years. Thus, threat of substitute products is very low today, but might slightly

increase in the future.

Appendix 8 – Organizational Resource Platform

CompetenciesRelative

Strength

Strat.

ImportanceSpecialized Assets

Relative

Strength

Strat.

Importance

Architecture of

relationships

Relative

Strength

Strat.

Importance

C1 HR (Technical Know-How) S1 Reputation A1 National Governments

Employees have very specific and

extensive know-how and

capabilities that enables Sea & Sun

to develop high-quality products

Solid reputation in the water

measurement market worldwide

Close relationahips with German

and Chinese governmental

institutions. Thereby important

contracts for projects are generated.

In other countries no such

relationships exist.

C2 Customer Service S2 IP Protection A2 Strategic Partnerships

BEMÜHT do provide excellent

customer service, however due to

large distance to customers in

foreign markets and absence of

subsidiaries in these markets, service

cannot always be provided as

desired.

Sea & Sun used to hold patents on

past innovations, but does not apply

patents to its new technology

anymore as competition in low IP-

protection countries has shown to

examine the patent paper and copy

the technology

Sea & Sun conducts a number of

projects together with strategic

partners in order to combine know-

how and components. Through

these partnerships it is able to enter

new niche markets earlier than

competition.

C3 Financial Management S3 LocationA3 Universities and Other

Research Institutions

Due to the default of financial

resources as the major equity-holder

left the company on account of

death, Sea & Sun has faced serious

financing problems in the past two

years. Yet, due to consequent

financial resource management and

downsizing, the firm has survived

and is propsering again.

Location of production site and

calibration laboratories is very

advantageous in Germany (close to

suppliers and customers), but the

network of calibration laboratories

worldwide has to be expanded in

order to provide high-quality

customer service

Founder holds lectures and

presentations at universities and

research institutes, which leads to

close relationships with existing

customers, new customers, project-

collaborations and recruitment of

high-potential employees

C4 New Product Development A4 Network of Investors

Around 50 new products developed

during the last 10 years in

comparison to competition (e.g. Sea-

Bird: none) due to ability to develop

specific products for individual

customers on low-scale

Difficulties to attract new invesotrs

during crisis and restructuring. But

investment from Chinese

governmental company might

facilitate to build up larger network

of (potential) investors

C5 Marketing and Sales

Low number of intermediaries in the

sales process, very personal and

customer-specific. Marketing almost

does not exist and should be

improved.

Scale: 1 - Lowest, 10 - Highest

7 7

9

8

8

7

9 9

5

6 8

8

3

6

8

5

4

7 5

10

2

3

8 5

13


Appendix 9 – Results CORETM tool

Source: Global EDGE – CORETM tool

Superfluous Strengths

Zone of Irrelevance

Key Strengths

Key Weaknesses

Rela

tiv

e S

tren

gth

Strategic Importance

C1

S1

A1

51

1

5

10

10 C4

C2

C3

S2

S3

A2

A4

A5 A3

Competencies Specialized Assets Architecture of Relationships

C5

Dimension Score Rating

Competitive Capabilities in Domestic Market 66 Moderate

Motivation for Going International 77 Moderate

Commitment of Owners and Top Management 81 High

Product Readiness for Foreign Markets 87 High

Skill, Knowledge and Resources 93 High

Experience and Training 70 Moderate

Overall 79 Moderate

14

Appendix 10 – Detailed results: Preliminary elimination

Country Index of Economic Freedom Country Risk Urban Population

1 Afghanistan N/A D 8,685,568

2 Armenia 67 D 1,891,291

3 Azerbaijan 60.2 C 5,271,567

4 Bahrain 74.3 B 1,222,642

5 Bangladesh 53.3 D 55,184,476

6 Bhutan 59.5 C 299,425

7 Brunei Darussalam 67.3 BB 326,710

8 Cambodia 57.9 D 3,228,208

9 Cyprus 68.7 B 779,830

10 Georgia 72.6 D 1,973,452

11 Iraq N/A D 25,303,697

12 Israel 70.7 BB 7,721,701

13 Jordan 68.3 B 6,355,041

14 Kazakhstan 63.6 D 9,341,721

15 Korea, North 2.3 D 15,313,299

16 Korea, South 71.7 BB 41,745,902

17 Kuwait 62.7 BB 3,827,584

18 Kyrgyzstan 59.6 D 2,127,066

19 Laos 49.8 D 2,626,533

20 Lebanon 59.5 D 5,136,484

21 Malaysia 71.5 BB 22,658,779

22 Maldives 53.9 D 186,316

23 Mongolia 59.4 D 2,131,760

24 Myanmar 48.7 D 18,377,852

25 Nepal 50.9 D 5,307,825

26 Oman 67.1 BB 3,486,501

27 Pakistan 55.9 D 73,223,503

28 Qatar 70.7 BB 2,218,456

29 Russia 50.6 C 106,643,169

30 Saudi Arabia 62.1 BB 26,219,511

31 Singapore 87.8 AA 5,535,002

32 Sri Lanka 59.9 C 3,848,519

33 Syria N/A D 10,667,751

34 Tajikistan 51.3 D 2,271,610

35 Thailand 63.9 B 34,233,848

36 Timor-Leste 45.8 D 407,991

37 Turkmenistan 41.9 D 2,688,739

38 United Arab Emirates 72.6 BB 7,832,958

39 Uzbekistan 46.0 D 11,382,063

40 Vietnam 54.0 C 30,806,058

41 Yemen N/A D 9,285,556

(grey marked countries are eliminated from the analysis)

15

Appendix 11 – Scoring model: Description and source of indicators

Appendix 12 – Scoring model: Standardized data for all countries

Indicator Description Unit Year Source

(1) ECON.FREED Index of Economic Freedom 2016 The Heritage Foundation

(2) TRD.FREED Index of Trade Freedom 2016 The Heritage Foundation

(3) CNTRY.RISK Country Risk Index 2016 Euler Hermes

(4) FEXCH.RISK Foreign Exchange Risk Index 2016 The Economist Intelligence Unit

(5) URBAN.POP Urban Population million ppl. 2016The World Bank

(World Development Indicators)

(6) CAGR.POP Population growth (CAGR) in % 1960 - 2015The World Bank


(7) IP.PROT Legal protection of property rights 2016 The Heritage Foundation

(8) R&D.EXP R&D expenditure million USD 2014The World Bank


(9) NO.RES Number of researchers people latest availableThe World Bank


(10) IMPR.WATER Population using improved drinking-water sources in % 2015The World Bank


(11) IMPR.SANIT Population using improved sanitation facilities in % 2015The World Bank


(12) TRIFFS.GER Tariffs on imports of measuring instruments from Germany in % 2016International Trade Centre (Trade

Map)

(13) TARIFFS.CHINA Tariffs on imports of measuring instruments from China in % 2016International Trade Centre (Trade

Map)

A

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aij

an

Is

ra

el

J

ord

an

M

ala

ysi

a

R

uss

ia

S

au

di

Ara

bia

S

ing

ap

ore

S

ou

th K

orea

T

ha

ila

nd

U

nit

ed

Ara

b E

mir

ate

s

V

ietn

am

(1) Index of Economic Freedom 27 55 48 57 1 32 100 57 36 60 10

(2) Trade Freedom 20 90 7 52 1 31 100 13 30 60 61

(3) Country Risk 1 67 34 67 1 67 100 67 34 67 1

(4) Foreign Exchange Risk 1 100 1 67 34 34 100 100 67 34 34

(5) Urban Population 1 3 2 18 100 21 1 37 29 4 26

(6) CAGR Population (1960 - 2015) 17 27 44 26 1 42 23 12 17 100 18

(7) Legal protection of property rights 8 80 60 54 8 34 100 74 34 54 1

(8) R&D expenditure (in million USD) 1 15 1 13 56 2 13 100 7 6 2

(9) Number of researchers 3 15 3 14 100 1 9 78 15 3 3

(10) Population using improved drinking-water sources (in %) 100 1 25 16 25 24 1 1 18 4 16

(11) Population using improved sanitation facilities (in %) 46 1 7 18 100 1 1 1 30 11 93

(12) Tariffs on imports of measuring instruments from Germany 11 1 1 1 1 100 1 1 1 100 1

(13) Tariffs on imports of measuring instruments from China 7 1 1 1 1 63 1 100 1 63 1

16

Appendix 13 – Formula applied for standardization of country scores

𝑋′𝒊𝒋 = [𝑋𝒊𝒋 −𝑚𝑖𝑛𝒊

𝑚𝑎𝑥𝑖 −𝑚𝑖𝑛𝑖∗ 99] + 1

𝑋′𝒊𝒋 scaled final score of country j for indicator i

𝑋𝒊𝒋 score of country j for indicator i

𝑚𝑖𝑛𝒊 minimum value for indicator i

𝑚𝑎𝑥𝒊 maximum value for indicator i

Source: Cavusgil et al. (2004)

Appendix 14 – Correlation matrix for selected indicators

Appendix 15 – PESTLE Analysis for South Korea

Political

South Korea is a presidential republic, with its presidents obtaining the highest position in the

hierarchy. It is a democratic system with its citizens having substantial voting rights, freedom to

express their selves, freedom of association and a free media, which is reflected in the country’s

rank of #69 in Voice and Accountability in the Worldwide Governance Indicators. Further, the

political system is relatively stable with a ranking of #523. However, the critical political situation

3 Worldwide Governance Indicators. 2015. The World Bank.

http://info.worldbank.org/governance/wgi/index.aspx# reports.

ECON.FREED TRD.FREED CNTRY.RISK FEXCH.RISK URBAN.POP CAGR.POP R&D.EXP NO.RES IMPR.WATER IMPR.SANIT TARIFFS.GER TARIFFS.CHINA IP.PROT

ECON.FREED 1

TRD.FREED 0.599 1

CNTRY.RISK 0.886 0.576 1

FEXCH.RISK 0.586 0.560 0.675 1

URBAN.POP -0.607 -0.516 -0.437 -0.017 1

CAGR.POP 0.320 0.225 0.365 -0.239 -0.493 1

R&D.EXP -0.001 -0.353 0.082 0.450 0.571 -0.390 1

NO.RES -0.283 -0.471 -0.188 0.248 0.854 -0.491 0.885 1

IMPR.WATER -0.433 -0.431 -0.615 -0.667 -0.082 -0.216 -0.285 -0.168 1

IMPR.SANIT -0.796 -0.298 -0.841 -0.403 0.660 -0.429 0.034 0.357 0.306 1

TRIFFS:GER 0.017 0.032 0.276 -0.275 -0.183 0.766 -0.266 -0.311 -0.054 -0.287 1

TARIFFS.CHINA 0.150 -0.220 0.364 0.166 0.013 0.350 0.537 0.242 -0.236 -0.404 0.564 1

IP.PROT 0.926 0.518 0.890 0.690 -0.457 0.228 0.180 -0.087 -0.596 -0.818 -0.062 0.194 1

17

between North and South Korea, which deteriorated in the past few years as well as the tense

relationship with Japan caused by the two countries’ joint history, poses certain political risks on

South Korea4. In addition, a political corruption scandal around president Park Geun-Hye in 2016

has led to further political uncertainty5. This incidence might be reflected in the Corruption

Perceptions Index 2016, which is not published yet. Past perception has been very positive, with

South Korea ranking #37 in last year’s index6. Also, South Korea is a member of the OECD and

the United Nations which shows its participation and belonging in world politics.

Economical

South Korea is the fourth biggest economy in Asia7 with relatively strong economic growth

expected in the next year (forecasted GDP growth rate for 2017 of 2.6%8). It is a member of the

World Trade Organization and has a network of 19 pluliteral and bi-literal trade agreements with

58 countries and the EU in place9. This is favorable, as South Korea has a strong trade imbalance

and is highly dependent on exports (net income from trading activities 2015 of $90.4 billion with

exports accounting for 38.2% of GDP10). Further, household disposable income grew by 3.65% in

2014, yet, high household debt of 170% of net disposable income in 201511 has led to inhibited

4 The World Factbook. 2016. Central Intelligence Agency. https://www.cia.gov/library/publications/the-world-

factbook/geos/ks.html. 5 Wirtschaftsausblick Winter 2016/17 – Korea (Rep.). 2016. Germany Trade and Invest. http://www.gtai.de/

GTAI/Navigation/DE/Trade/Maerkte/Wirtschaftsklima/wirtschaftsentwicklung,t=wirtschaftsausblick-winter-

201617--korea-rep,did=1599140.html. 6 Corruption Perceptions Index 2015. 2015. Transparency International. http://www.transparency.org/cpi2015#

results-table. 7 SWOT-Analyse – Korea (Rep.). 2016. Germany Trade and Invest. http://www.gtai.de/GTAI/Navigation/

DE/Trade/Maerkte/suche,t=swotanalyse--korea-rep,did=1589556.html. 8 Real GDP forecast. 2016. OECD. https://data.oecd.org/gdp/real-gdp-forecast.htm. 9 Regional trade agreements – Korea, Republic of. 2016. World Trade Organization. http://rtais.wto.org/UI/Public

SearchByMemberResult.aspx?MemberCode=410&lang=1&redirect=1. 10 Wirtschaftsdaten Kompakt – Korea (Rep.). 2016. Germany Trade and Invest. http://www.gtai.de/GTAI/

Navigation/DE/Trade/Maerkte/Wirtschaftsklima/wirtschaftsdaten-kompakt,t=wirtschaftsdaten-kompakt--republik-

korea,did=1584982.html. 11 Household debt. 2016. OECD. https://data.oecd.org/hha/household-debt.html.

18

consumption. On the other hand, the construction industry has strongly increased due to an

increased demand for real estate. Experts consider this inequality in growth as a potential risk

factor12. However, South Korea offers overall a very favorable business environment, ranking #5

on the Ease of Doing Business Index13.

Social

South Korea has a population of 49.5 million people14. Low population growth (0.41% in 201415)

and the lowest fertility rate within the OECD countries (1.21 children/woman in 201416) have led

to an aging population. This in turn has increased the dependency ratio, with 17.9 elderly being

dependent on 100 citizens aged 15-64, which poses challenges on government and society. Further,

the country shows relatively low inequality regarding life expectancy, education and income as

well as a low unemployment rate of 3.2%17. Also, South Korea has a labor and welfare system

which meets international standards18. Further, the country shows strong affinity to education with

one of the highest adult education levels in the OECD, having 45.5% of adults with tertiary level

of education. Among the ages 25-34 the tertiary education share even reaches 69%, scoring first in

the OECD19.

12 Wirtschaftsausblick Winter 2016/17 – Korea (Rep.). 2016. Germany Trade and Invest. http://www.gtai.de/

GTAI/Navigation/DE/Trade/Maerkte/Wirtschaftsklima/wirtschaftsentwicklung,t=wirtschaftsausblick-winter-

201617--korea-rep,did=1599140.html. 13 Economy Rankings. 2016. The Wold Bank. http://www.doingbusiness.org/rankings. 14 Human Development Reports. 2016. United National Development Programme.

http://hdr.undp.org/en/countries/ profiles/KOR 15 Population. 2014. OECD. https://data.oecd.org/pop/population.htm. 16 Fertility rates. 2014. OECD. https://data.oecd.org/pop/fertility-rates.htm. 17 Human Development Reports. 2016. United National Development Programme.

http://hdr.undp.org/en/countries/ profiles/KOR 18 Labor and Social Welfare System. 2016. Korea.net. http://www.korea.net/AboutKorea/Society/Labor-Social-

Welfare-System 19 Population with tertiary education. 2015. OECD. https://data.oecd.org/eduatt/population-with-tertiary-

education. htm

19

Technological

South Korea is the leading country in the OECD with regards to R&D investments, amounting to

4.3% of GDP in 201420. In the information and communication technology sector, several South

Korean firms are market leaders, underlining the country’s innovative mindset. This can also be

seen in the population’s high receptiveness to new technologies, making the market to a testing

ground for new products and services21.

Legal

The legal system in South Korea is a combination of Anglo-American, civil law and Chinese

classical thoughts22. The system is moderately effective, which can be seen in a score of 70 for the

protection of property rights, which indicates, how well laws are safeguarded and enforced23. The

score indicates, that private property is guaranteed, however not all contracts are enforced

successfully and the system shows delays in operations. Similarly, the strength of the legal rights

index of 5 measures protection of rights of borrowers and lenders and indicates moderate

enforcement only24. However, setting up a business is highly convenient, comprising 2 procedures,

that are completed within 4 days on average25.

20 Gross domestic spending on R&D. 2014. OECD. https://data.oecd.org/rd/gross-domestic-spending-on-r-d.htm. 21 SWOT-Analyse – Korea (Rep.). 2016. Germany Trade and Invest. http://www.gtai.de/GTAI/Navigation/

DE/Trade/Maerkte/suche,t=swotanalyse--korea-rep,did=1589556.html. 22 The World Factbook. 2016. Central Intelligence Agency. https://www.cia.gov/library/publications/the-world-

factbook/geos/ks.html. 23 Index of Economic Freedom. 2016. The Heritage Foundation. http://www.heritage.org/index/country/southkorea. 24 Strength of legal rights index (0=weak to 12=strong). 2016. http://data.worldbank.org/indicator/IC.LGL.CRED.

XQ?locations=KR. 25 Starting a Business in Korea, Rep. 2016. The World Bank.

http://www.doingbusiness.org/data/exploreeconomies/ korea/starting-a-business.

20

Environmental

Regarding the environment, South Korea performs poorly, as seen in the Environmental

Performance Index 2016, ranking #80 of 180 countries. Especially in terms of air pollution the

country faces large issues, especially health risks, obtaining one of the lowest ranks with #17426.

To fight this, the government has established several environmental laws and activities to strongly

reduce emissions in the country. However, the main issue causing strong air pollution is dust and

polluted air being blown from China27. One of the measures to reduce emissions was the adoption

of nuclear power instead of power plants using fossil fuels. However, this has led to a substantial

nuclear waste storage problem, with around 70% of all nuclear waste being currently stored in

temporary depots only28. Besides this storage issue, South Korea’s environmental efforts and use

of clean technology seem to forecast an improved environmental situation in the country.

26 South Korea – Country Overview. 2016. Environmental Performance Index. http://epi.yale.edu/country/south-

korea. 27 South Korea: Environmental Issues, Policies and Clean Technology. 2015. AZO Cleantech. http://www.azo

cleantech.com/article.aspx?ArticleID=552. 28 As nuclear waste piles up, South Korea faces storage crisis. 2014. Reuters. http://uk.reuters.com/article/us-

southkorea-nuclear-storage-idUKKCN0I10WR20141012.

testing the waters in south korea internationalization of sea

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