Kia in South Korea Porter's Diamond

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KIA in South Korea, A Porter’s Diamond Perspective
Timothy J. Rausch
Mount Vernon Nazarene University

MAN6093 Global Business
October 11, 2008
KIA, which means “arise from Asia” in Korean, started out making bicycles prior to World War II (Kia Motors Corporation, 2008). The company developed the manufacturing of steel bicycle tubing into a multi-national corporation producing cars and trucks. Prior to merging with Hyundai in 1998, Kia was the second largest producer of vehicles in South Korea (Kia Motors Corporation – Company Profile, Information, Business Description, History, Background Information on Kia Motors Corporation, 2008). Examining Kia’s transformation in a country lifting itself out of the wreckage of the Korean Conflict, is the focus of this study. Factor Endowments

South Korea’s recent history has included conflicts between Russia and Japan, annexation by Japan, division in a post World War II world, and invasion from North Korea (Central Intelligence Agency: The World Factbook: South Korea, 2008). Yet, when examining the country based on Porter’s Diamond concept of Factor endowments, the author questions why, besides the political implications, this country was such a critical part of world history (Hill, 2007).

South Korea’s natural resources are limited. According to a study by the United States Central Intelligence Agency (CIA), South Korea has almost no natural resources suitable for the production of energy. Oil production is not viable. The only natural resources listed are coal, tungsten, graphite, molybdenum, and lead (Central Intelligence Agency: The World Factbook, 2008). Korea imports roughly 2.3 million bbl/day of crude oil, making it the ninth largest consumer of oil in the world (Country Analysis Briefs: South Korea, 2007). Its consumption of Liquefied Natural Gas (LNG) was 22.1 million Metric Tons of LNG in 2005 (Country Analysis Briefs: South Korea, 2007). The third factor in the carbon based energy triad is coal. South Korea has a limited amount of coal reserves, but these reserves are of a low quality. In 2004, South Korea consumed 90.6 million short tons of coal (Country Analysis Briefs: South Korea, 2007). Similarly, while South Korea’s POSCO is currently ranked fourth in the world in the production of steel, most of the raw materials used in the production of steel are imported (POSCO Looks North, 2008).

The climate and terrain of South Korea are polar opposites for this country. The climate is classified as temperate with seasonally heavy rainfall, heavier in summer. Monsoons are typical during the summer months. The terrain is mountainous with plains areas in the western and southern regions (Central Intelligence Agency: The World Factbook: South Korea, 2008). This author’s experience in South Korea found hot and humid summers with bitterly cold winter months.

The Korean peninsula straddles the 38th parallel of latitude. This line has taken on a significant political reference in world history. South Korea is situated below this parallel of latitude (Central Intelligence Agency: The World Factbook: South Korea, 2008). The peninsula divides the Sea of Japan from the Yellow Sea in Eastern Asia (Central Intelligence Agency: The World Factbook: South Korea, 2008). This proximity to China and Japan has opened market opportunities in the region.

The South Korean labor market benefits from a strong work ethic. One observer characterized the Korean work ethic as equivalent to the Protestant work ethic of Europe (Korea’s Dynamic Progress, 2008). Another author writes that an American working in South Korea may face challenges, if they are unwilling to work the amount of hours that are typical in South Korean business (Working in South Korea, 2008). A population of 48,379,392, where 72% is between the ages of 15 and 64 years, generates a workforce of hardworking, literate (97%) employees (Central Intelligence Agency: The World...
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