Political Risk in the Kaesong Industrial Complex Description
The Kaesong Industrial Complex (KIC) is a 1.25-square-mile industrial park six miles north of the Demilitarized Zone in the Democratic People's Republic of Korea. The complex includes both North and South Korean workers, and is subsidized by Seoul. The result of an agreement between North and South Korea in 2000, Kaesong stood as the sole beacon of hope for economic cooperation between the divided states, and remained open for business despite a number of hostilities over the ensuing decade. This case reviews the political and economic risks and opportunities of entering Kaesong through the lens of Bright Ray Apparel, a hypothetical South Korean textile manufacturing firm. Jihoon Lee, Bright Ray's CEO, is encouraged by his CFO and a trusted senior economist to enter Kaesong. But risks abound. North Korea's nuclear threats and leadership transition have brought a new wave of uncertainty to the Korean Peninsula. Facing its own upcoming presidential election, much remains to be determined in Seoul regarding future economic policy and outreach toward Pyongyang. As Jihoon Lee's meeting with his financial adviser nears, Bright Ray's leadership must consider a variety of influences and factors involved in entering Kaesong, from political instability to economic opportunity, and the potential to improve the working condition of North Korean employees.
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Case Analysis of Political Risk in the Kaesong Industrial Complex
Political Risk in the Kaesong Industrial Complex is a Harvard Business (HBR) Case Study on Global Business , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. Political Risk in the Kaesong Industrial Complex is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. Political Risk in the Kaesong Industrial Complex case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. Political Risk in the Kaesong Industrial Complex will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.
Case Study Solutions Background Work
Political Risk in the Kaesong Industrial Complex
case study solution
is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Global Business, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of Political Risk in the Kaesong Industrial Complex, is to not only build a competitive position of the organization but also to sustain it over a period of time.
Strategic Management Tools Used in Case Study Solution
The Political Risk in the Kaesong Industrial Complex case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.
Texas Business School Approach to Global Business Solutions
In the Texas Business School, Political Risk in the Kaesong Industrial Complex case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.
We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – Political Risk in the Kaesong Industrial Complex
Step 1 – Problem Identification of Political Risk in the Kaesong Industrial Complex - Harvard Business School Case Study
The first step to solve HBR Political Risk in the Kaesong Industrial Complex case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Kaesong Korean is facing right now. Even though the problem statement is essentially – “Global Business” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Kaesong Korean, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.
Step 2 – External Environment Analysis
Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the Political Risk in the Kaesong Industrial Complex.
The external environment analysis of Political Risk in the Kaesong Industrial Complex will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.
What is PESTEL Analysis? Briefly Explained
PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in Political Risk in the Kaesong Industrial Complex case study. PESTEL analysis of " Political Risk in the Kaesong Industrial Complex" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.
How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?
As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with Political Risk in the Kaesong Industrial Complex macro-environment and how it impacts the businesses of the firm.
How to do PESTEL Analysis for Political Risk in the Kaesong Industrial Complex
To do comprehensive PESTEL analysis of case study – Political Risk in the Kaesong Industrial Complex , we have researched numerous components under the six factors of PESTEL analysis.
Political Factors that Impact Political Risk in the Kaesong Industrial Complex
Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.
Policy Making Impact on Political Risk in the Kaesong Industrial Complex
Government policies have significant impact on the business environment of any country. The firm in “ Political Risk in the Kaesong Industrial Complex ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.
Data safety laws – The countries in which Kaesong Korean is operating, firms are required to store customer data within the premises of the country. Kaesong Korean needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.
Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. Political Risk in the Kaesong Industrial Complex has numerous instances where the competition regulations aspects can be scrutinized.
Import restrictions on products – Before entering the new market, Kaesong Korean in case study Political Risk in the Kaesong Industrial Complex" should look into the import restrictions that may be present in the prospective market.
Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Kaesong Korean in case study “ Political Risk in the Kaesong Industrial Complex ” should look into these export restrictions policies.
Foreign Direct Investment Policies – Government policies favors local companies over international policies, Kaesong Korean in case study “ Political Risk in the Kaesong Industrial Complex ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.
Taxation & Regulation Impact on Political Risk in the Kaesong Industrial Complex
Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.
Tariffs – Chekout how much tariffs the firm needs to pay in the “ Political Risk in the Kaesong Industrial Complex ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Kaesong Korean can compete against other competitors.
Government Scheme & Subsidies Impact on Political Risk in the Kaesong Industrial Complex
Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at Political Risk in the Kaesong Industrial Complex case study have to assess whether their business can benefit from such government assistance and subsidies.
Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.
Political System & Stability, and its Impact on Political Risk in the Kaesong Industrial Complex
Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.
Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.
Corruption level – Kaesong Korean needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.
Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.
Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.
Economic Factors that Impact Political Risk in the Kaesong Industrial Complex
Social Factors that Impact Political Risk in the Kaesong Industrial Complex
Technological Factors that Impact Political Risk in the Kaesong Industrial Complex
Environmental Factors that Impact Political Risk in the Kaesong Industrial Complex
Legal Factors that Impact Political Risk in the Kaesong Industrial Complex
Step 3 – Industry Specific Analysis
What is Porter Five Forces Analysis
PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in Political Risk in the Kaesong Industrial Complex case study. PESTEL analysis of " Political Risk in the Kaesong Industrial Complex" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.
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