Intro to International Business
Name of Case and Lesson (Daewoo Case – Lesson 4)
1. I would describe Korea’s economic system as a state capitalism because it has intervened in the economy to direct the allocation and control of resources. There was a very high amount of government influence and control. The government targeted industries, controlling access to credit, foreign exchange, and imports. There is a close tie between the government, businesses, and banks. The government would provide businesses incentives such as lower corporate taxes, below-market interest rates, tariff exemptions, tax holidays for large businesses to do what they wanted to achieve such as exporting. These were all key elements in the system in achieving what the government wanted to achieve. Korea would provide a lot of funding to the chaebol, who were the biggest companies. So, the chaebol would have to be loyal to the government and do as they wished. The way I would describe the interaction between politics and the economics in Korea would be control. They controlled every aspect of business decision made by the businesses that went on in that country.
2. Korea does not look like a good place to invest because the government has way too much control in any business decision made by businesses. The government influences and controls too much of the business activity and have made really poor choices and private sector decisions. Government has too much power and ruling over trade policy, taxation, regulations, and monetary policy.
3. At this point there really isn’t too much for President Kim Woo-Choong to do to rescue Daewoo because he has already dug himself a very big hole that he would not be able to get himself out of. Ignoring the financial crisis that was going on in Asia and expanding was not the right business decision making that he’s chose. He should have never got so involved in letting the government make so...