Tony E. Madison
Colorado Technical University Online
Nov. 24, 2013
Introduction the Problem
Lester Scholl, Chairman of the Board at AutoEdge, told me during my interview, the company has been floundering since product quality issues caused millions of automobiles to be recalled. This morning he explain what he wants me to focus on initially. The board is considering several proposals in response to their situation, and they need me to create a list of the legal, cultural, financial, and economic factors that AutoEdge needs to consider about the location of our manufacturing operations. Most members of the board aren't familiar with this aspect of the business, so they want you to briefly describe the factors, rank the factors, and explain your reasoning. They want me to be specific when I explain my rationale. Background Information
We are looking at Korea, which I know from experience, was at one time one of the Four Asian Tigers (Taiwan, South Korea, Hong Kong and Singapore) favored nation status. This designation came from the four wealthiest nations on the planet, which held about 82% of the world’s wealth but were only 1/5th of the world’s population (Western Europeans, North America and Australia). Korea which at one time was ruled by Japan until the end of World War II, after which because of differences in the economic policies between them and their fellow countrymen in the north were in a civil war. When they emerged from this war they were a divided country thus this is where you get North and South Korea. South Korea was a capitalist nation while on the other hand North Korea was a communist country; this spurred the U.S. to give them many advantages including protection from their brothers in the north. The Koreans took advantage of their status as a member of the Four Tigers and reinvested wisely in education infrastructure and the economy. By the 1980’s they had become a wealthy nation along with the other nations that were a part of the Asian Tigers. They are now a member of the group of wealthiest nations in the world; they have trillion dollar Economies. (Poverty Education .Org, Chapter 4, The Rise of Asia, n.d) The most recent development with our Korean friends is the entry of a Free Trade Agreement (FTA) which was established on March 15, 2012. This is different from our original relationship, they no longer need the Favored Nation status they are equal partners in a trade agreement that allow us to export to them and also to import from them as equal partners because now they are not considered to be an impoverished nation (developing Country). (Office of the United States Trade Representative, Executive office of the President, n.d) Legal and Economical
With the signing of the FTA with South Korea there are very few barriers to consider at this high level, the existence of the free trade agreement means that the corporation that are a part of FTA’s are governed by the World Trade organization (WTO). The benefits of the FTA and its association with the WTO means that legally any organizational disputes with foreign governments would be settled based on international laws. The existence of the FTA and the fact that the Korean economy is as progressive as the U.S. economy, when you think in terms of the leading economic indicators, there may be more about which to be concerned. Below is a matrix of the four indicators we were told to consider for this exercise: Applied Managerial Economics
Phase 1 DB 2 U.S. vs. South Korea
Comparison Economic Indicators
Gross Domestic Product Per-Capita PPP
World Bank est.
World Bank est.
Inflation Consumer Price Index (CPU)