Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / Lester Scholl's administrative assistant calls you on Monday afternoon to set up a conference call between you and the chairman tomorrow morning to discuss the board's reaction to your list and to discuss your next task
Lester Scholl's administrative assistant calls you on Monday afternoon to set up a conference call between you and the chairman tomorrow morning to discuss the board's reaction to your list and to discuss your next task. You call the number she gave you, and Lester joins the call shortly after.
"I'm pleased with your work," he says. The board was impressed with your list of factors. Your ranking made sense because your explanations were well-written. I suspect they read everything you sent because it was concise and clear. Good job."
"Thanks," you say, and you feel relieved that your first assignment was well-received.
"Your list provided the basis for a good conversation about the manufacturing operations," he says. "We want to know more about the economy of both countries to further inform our decision-making process."
"That makes sense," you say. "The United States and South Korea hold many distinct economic factors that may affect AutoEdge’s long-term financial performance."
"Right," he says. "Your research on the two economies will give the board enough information so we can advise the new, incoming CEO."
"What should my research include?" you ask.
"In your research, you must take into consideration several macroeconomic factors," he says. "We want to see information about the gross domestic product (GDP), unemployment, interest rates, and inflation for both the United States and South Korea. Make sure your research is current; that is, no more than 6 months old."
"I'll get started right away," you say.
"Very good," he says. "Let me know if you have any questions, and I'll put you in touch with some of the other members of the board if I can't provide the answers you need."
PBL (Problem-Based Learning): AutoEdge
South Korea is one of Asia's crucial economic and strategic partners to the US. The US-South Korean Mutual Defense Treaty of 1953 obligates the US to assist South Korea in defending itself, especially from North Korea. The alliance also assists the US further within East Asia as well as around the world. This includes the deployment of South Korean soldiers to US-led military disputes within the Middle East. This economic connection is supported by the US-South Korea FTA (free trade agreement). In 2020, South Korea was reported to be the US's 7th biggest trading partner, while the US was the 2nd biggest trading partner with South Korea, after China (Feffer, 2021).
Some businesses, such as AutoEdge, have found themselves with solid business connections with the US. AutoEdge started its business relations with South Korea in 2005 but began experiencing issues with the quality of its products in 2010. This has led to a dramatic loss of its reputation over the years. Hence, immediate action is needed to redeem the company's reputation by choosing whether to stay in South Korea or return to the US to facilitate more quality production. AutoEdge management needs to consider various legal, financial, cultural, and economic factors that may strongly influence their business to overcome this dilemma. Due to Covid-19, both the US and South Korea have had to deal with economic changes to contain the pandemic. The economy in South Korea contracted by one percent within 2020, outperforming most economies during the crisis (Paradise, 2021). The containment of the outbreak and the enormous worldwide demand for semiconductors, the top export, have benefited South Korea in remaining an economic giant.
Between 2019 and 2020, US services and products exports to South Korea went down by 12 billion dollars (-15 percent) to 69.5 billion US dollars, primarily due to pandemic-related issues. The spending of South Korea on US travel services also dropped by 4.6 billion dollars. The import by the US from ROK appears to have been less influenced by Covid-19, falling by 2.3 billion dollars (-3%) to 86.6 billion dollars. Autospares and parts are still the main US imports from ROK (24.4 billion dollars within 2020). Within 2019 (latest available), the FDI stock by South Korea in the US was 39.1 billion dollars. At a recent summit, Companies from South Korea declared a promise of 25 billion dollars in new US investments in future years while focusing on bilateral collaboration within critical technologies, such as semiconductors, AI (artificial intelligence), and electric vehicle batteries) (South Korea, 2021).
In terms of GDP (gross domestic product), the US ranks as the largest economy, while South Korea ranks at position ten worldwide, with a GDP per capita of $63,611 and $31 539, respectively. Currently, the unemployment rate in the US and South Korea is 6.5 percent and 4.9 percent, respectively. This shows that the US has a high unemployment rate as compared to ROK. In terms of the interest rate, it currently stands at 0% in the US and 0.75 percent in South Korea. Another critical factor for AutoEdge to consider is the rate of inflation, as it determines the prices for goods and services. The annual rate of inflation in the US has dropped to 5.3 percent in August 2021, from a thirteen-year record of 5.4 percent recorded in the last three months. In the same month of August, the inflation rate in South Korea was 2.6 percent, stagnant from July and in comparison, with market predictions of 2.3% (Country comparison South Korea vs. the United States, n.d). The effects of Covid-19 have been different in various countries due to additional measures put in place to curb infections. For this reason, critical economic elements such as GDP, interest, unemployment, and inflation rates have been affected based on a country’s ability sustain its strategies.
South Korea operates under a civil-law legal system since the civil law system from Europe significantly influences their laws. Nevertheless, US law has had a significant influence on recent legislation. The country does not recognize a federal legal system. The government of South Korea has heavy restrictions on foreign investments. It is only available in the carriage of goods and passenger transportation, telecommunication, and nuclear power processing, among others (Hearn, 2021). However, no specific restrictions are used solely on foreign shareholders after the successful completion of foreign investment. The primary source of legislation in the US is the Constitution, and the legal system operates under a federal court system. An appeal on a case can be done from a supreme court in a state to the federal supreme court, provided it relates to federal matters, like the US constitution.
The US has no currency or exchange control regulations; however, reporting and related requirements exist for particular transactions under anti-money laundering legislation. In terms of business culture, America is known for more direct communication, less hierarchical companies, and separation of business and personal/family life. In American companies, people are treated like equals despite their positions, but in Korean companies, the superiors are more respected. Also, American people and businesses value efficiency and quick completion of tasks. Therefore, they are more direct and more straightforward in expressing their expectations and feelings as compared to people from South Korea (Hearn, 2021). Lastly, the American people value their freedom, control, and independence regarding their lives. In South Korea, it is normal for a work team to become a 'second family.
