D271 Doing Business in East Asia Exam 1

indicators of economic growth

GDP, GDP per capita, GNI, HDI

GDP

gross domestic product; real GDP is an inflation-adjusted measure of GDP (expressed in base-year prices)

GNI

gross national income; net foreign factor income

GNI in-class example

Professor Ma's income would contribute to South Korea's GNI

GDP per capita

purchasing power parity is an adjustment in GDP per capita to reflect differences in cost of living

HDI

human development index

HDI examples

life expectancy, length of education

creating economic wealth (production) - national endowments (factors of production)

natural resources, geography, physical capital, human capital, technological knowledge

creating economic wealth (production) - national endowments (factors of production) - China

abundant natural resources (coal, rare earth metals, iron ore), large population (labor force), vast land

creating economic wealth (production) - national endowments (factors of production) - South Korea

limited natural resources, human capital

creating economic wealth (production) - national endowments (factors of production) - Japan

limited natural resources, human capital, geographical advantage, technological knowledge base

Why do some countries have higher incentives? - reasoning

economic freedom in a market economy can create greater incentives for innovation and entrepreneurship than in either a planned or mixed economy

Why do some countries have higher incentives? - examples

market economy, strong property rights, dependable legal systems, honest government (low corruption), political stability

economic systems of East Asian countries - China

mixed economy with strong state-led components (Socialism with Chinese characteristics), transitioned from a command economy to a market-oriented system in the late 1970s

economic systems of East Asian countries - Japan

market-based economy with minimal government influence through industrial policies, cooperation between the government, businesses, and labor to promote economic growth (Keiretsu model)

economic systems of East Asian countries - South Korea

export-driven market economy, heavy government intervention during early industrialization, fostering large conglomerates (Chaebol), gradual shift toward liberalization and diversification

underlying factors of differences in economic development - PESTEL

political, economical, social, technological, environmental, legal

Japan's economic development - Meiji Era and Early Industrialization (1868-1945)

Zaibatsu - large family-owned industrial and financial conglomerates (Mitsubishi, Sumitomo) became dominant players in the economy

Japan's economic development - Post-World-War Economic Miracle (1950s-1970s)

high economic growth fueled by export-driven industrialization, close collaboration between banks, government, and industries

Japan's economic development - Modern Era and Economic Challenges (1980s-present) - bubble economy

in the late 1980s, Japan experienced rapid growth in asset prices, leading to a speculative bubble in real estate and stock markets

Japan's economic development - Modern Era and Economic Challenges (1980s-present) - economic stagnation

the bubble burst in the early 1990s, leading to the "Lost Decade" of economic stagnation, deflation, and slow growth

Japan - Keiretsu - definition

an interconnected network of companies characterized by strong alliances and cross-shareholding that originated from Japan and dominated the economy during the last half of the 20th century, particularly after World War 2

the creation of Keiretsu came after

the collapse of family-controlled vertical monopoly groups called the Zaibatsu

Why do some countries achieve better production organization?

innovation and entrepreneurship are the engines of growth

Why do some countries achieve better production organization? - innovation

includes new products, new processes, new organizations, new management practices, and new strategies

Why do some countries achieve better production organization? - entrepreneurs

first to commercialize innovative products and processes, provides much of the dynamism in an economy

types of Keiretsu

vertical and horizontal

pros of Keiretsu

stable supply chain, knowledge sharing and risk management, cost efficiency, info sharing, hostile takeover prevention

cons of Keiretsu

reduced competition, risk of overborrowing, market responsiveness, monopolistic tendencies, barriers to foreign participation

South Korea's economic development - export-oriented industrialization

economy devastated by the Korean War, heavy reliance on foreign aid (1950s-1960s), development of light manufacturing industries (textiles, electronics) for export, government-led industrialization with emphasis on heavy industries (steel, shipbuilding, chemicals)

South Korea's economic development - rapid industrialization and economic growth

the "Miracle on the Han River" characterized by sustained high growth rates, investment in education and tech-driven industries, integration into global markets, focusing on exports (automobiles, electronics)

South Korea's economic development - Contemporary Era (2000s-present)

dominance in sectors like semiconductors, smartphones, and renewable energy

South Korea - Chaebols

vital to the country's economy, spanning various industries, including manufacturing, finance, and technology

South Korea - Chaebols - example

in 2021, the combined revenue of 15 of Samsung's affiliated companies accounted for about 20% of the country's GDP

chae

wealth

bol

clan, highlighting their familial and interconnected natura

the Chaebol paradox: Driving economic progress or posing social challenges?

while Chaebols have played a crucial role in South Korea's economic development, they have also contributed to economic and social challenges, such as youth unemployment, wage inequality, and limited entrepreneurship opportunities

Chaebols in South Korea have roots in

the Japanese occupation of South Korea from 1910 to 1945

China's economic reforms - the first 30 years (1949-1978)

the founding of the People's Republic of China in 1949, command economy (centrally planned economy), rigid, isolated from outside, which was proved to be inefficient

China's economic reforms - the first 30 years (1949-1978) - command economy

before 1978, consumer goods were supplied by fixed quantity; food stamps

China's economic reforms - the second 40 years (1978-present) - 1978

reform and opening up began, led by Deng Xiaoping

China's economic reforms - the second 40 years (1978-present) - 1984

President Deng decided on economic zones and opening the coastal regions for foreign investments

China's economic reforms - the second 40 years (1978-present) - 1992

Chinese government attempts to strike a balance between capitalism and socialism, hence Socialism with Chinese characteristics

China's economic reforms - the second 40 years (1978-present) - 2001

China joins the WTO

China's economic reforms - the second 40 years (1978-present) - as of 2023

China has 21 special economic zones, consisting of various types such as SEZs, Free Trade Zones, Econ and Tech Development Zones, High-Tech Development Zones, and Bonded Zones

What is Politics?

power, rules of game, government, regulations

the political environment shapes

regulatory stability, market accessibility, and operational risks for international businesses

democracy index

the extent to which citizens can choose their political leaders in free and fair elections, enjoy civil liberties, prefer democracy over other political systems, can and do participate in politics, and have a functioning government that acts on their behalf

China - media censorship

world press freedom index ranks China near last, great firewall to block foreign websites, complete internet censorship that censors all types of media including social media, state-owned telecommunication industry monitors texts and phone calls

legal systems - common law

interpretation/ruling becomes law

legal systems - civil law

based on what law literally says

Legal Systems of East Asian Countries - China

civil law with socialist traits, judicial independence is limited (rule of law is subordinate to CCP), strict penalties and limited human rights

Legal Systems of East Asian Countries - South Korea

civil law system, strong judicial independence (chief justice - president nominates, assembly approves), fair trials, de facto abolitionist state

Legal Systems of East Asian Countries - Japan

civil law with common law influences, strong judicial independence (chief justice - cabinet selects, emperor formally appoints), high conviction rates, active death penalty, hostage justice

property rights and corruption - property rights violation - public action and corruption

public officials extort income, resources, or property; legal: levying excessive taxation, requiring licenses or permits from property holders, taking assets into state ownership without compensating owners, redistributing assets without compensating prior owners

property rights and corruption - property rights violation - private action

theft, piracy, blackmail by private individuals or groups

the protection of intellectual property

refers to property that is the product of intellectual activity

the protection of intellectual property - examples

computer software, a screenplay, a music score, and technological assets

political corruption index

captures the extent to which executive, legislative, judiciary, and bureaucracy engage in bribery and theft, and the making and implementing of laws is susceptible to corruption

China - Guanxi

the set of personal connections which an individual may draw upon to secure resources or advantage when doing business or in the course of social life; exchange of favors is critical

What is culture?

values, norms, lifestyle, and folkways

why culture matters - impact on economic growth

culture influences the adoption of innovation, entrepreneurial activities, and collaborative efforts, which are critical drivers of economic development and growth in international markets

why culture matters - consumer preferences and behavior

cultural norms and values influence consumer tastes, purchasing decisions, and brand perceptions, requiring businesses to tailor products, marketing strategies, and customer engagement

why culture matters - building relationships and trust

understanding cultural nuances is essential for establishing trust and strong relationships with local partners, clients, and employees in international markets

why culture matters - workforce management and motivation

cultural differences in leadership styles, work ethics, and employee expectations impact team dynamics, motivation, and productivity in multinational organizations

power distance

how a society deals with the fact that people are unequal in physical and intellectual capabilities

power distance - China

high power distance (score of 80), where hierarchy is accepted, authority is respected, and aspirations are limited by rank, leaving subordinates vulnerable to power abuse

power distance - Japan

moderate power distance (score of 54), reflecting a meritocratic yet hierarchical society, with slow, consensus-driven decision-making and an emphasis on equality in opportunities through hard work

power distance - South Korea

slightly hierarchical society (score of 60), where hierarchy reflects inherent inequalities, and leadership is centralized, with subordinates expecting clear directives from a benevolent autocrat

individualism versus collectivism

the degree to which societies are integrated into groups as well as their perceived obligations and dependence on groups

individualism versus collectivism - China

collectivist culture (score of 43) where group interests dominate, in-groups receive preferential treatment, and personal relationships take precedence over tasks, though commitment to organizations is low

individualism versus collectivism - Japan

moderately individualistic (score of 62), with situational in-groups, loyalty to chosen companies, and a focus on self-reliance within a paternalistic family structure

individualism versus collectivism - South Korea

relatively individualistic (score of 58), emphasizing self-reliance and merit-based hiring and promotions in the business environment

uncertainty avoidance

the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty

uncertainty avoidance - China

low uncertainty avoidance (score of 30) fosters pragmatism, flexibility, and adaptability, with a focus on entrepreneurial ventures and family-owned businesses

uncertainty avoidance - Japan

extremely high uncertainty avoidance (score of 92) drives meticulous preparation, ritualized social behaviors, and a corporate focus on detailed risk analysis and adherence to precedent

uncertainty avoidance - South Korea

high uncertainty avoidance (score of 85) emphasizes rigid rules, precision, and stability, with a strong work ethic and resistance to unorthodox ideas or innovation

Motivation towards Achievement and Success (former Masculinity versus femininity)

the relationship between gender and work roles

Motivation towards Achievement and Success - China

with a score of 66 on motivation toward achievement, China is highly success-driven; individuals prioritize work over family and leisure, as seen in late-night services, migrant workers leaving families for better opportunities, and

students' intense focus on exam scores and rankings to secure success

Motivation towards Achievement and Success - Japan

a highly decisive culture shaped by collectivism, where motivation thrives in team competition; workaholism reflects decisiveness but hinders women's advancement due to long working hours

Motivation towards Achievement and Success - South Korea

a consensus-oriented society focused on well-being, where effective management emphasizes support and inclusive decision-making, avoiding status displays

Long-term versus Short-term Orientation

the extent to which a culture programs its citizens to accept delayed gratification of their material, social, and emotional needs

Long-term versus Short-term Orientation - China

highly pragmatic (score of 77), with a strong focus on adapting traditions, saving and investing, thriftiness, and perseverance to achieve long-term results

Long-term versus Short-term Orientation - Japan

extremely long-term oriented (score of 100), prioritizing steady growth, R&D investments, and societal durability over short-term profits, guided by virtues and practical examples

Long-term versus Short-term Orientation - South Korea

strongly pragmatic and long-term oriented (score of 86), emphasizing adaptability, thriftiness, perseverance, and respect for virtues in achieving sustainable progress

Indulgence versus Restraint

limited focus on leisure, controlled gratification of desires, and societal norms shaping behavior and perceptions

Indulgence versus Restraint - China

restrained society (score of 24), characterized by cynicism, limited emphasis on leisure, and a perception that self-indulgence conflicts with

social norms

Indulgence versus Restraint - Japan

culture of restraint (score of 42), marked by cynicism, controlled gratification of desires, and minimal focus on leisure, shaped by adherence to social norms

Indulgence versus Restraint - South Korea

highly restrained society (score of 29), emphasizing pessimism, limited leisure, and a strong perception that indulgence conflicts with social expectations

geography of East Asia

surrounded by a series of mountain ranges in the west, Mongolia, and Russia in the north, and Southeast Asia to the south

the influences of Confucius

respect hierarchy and status, emphasis on education, people-oriented management concept, harmony and relationships, importance of ceremony

education of Asia

Confucian influence, competitive learning environment, exam-oriented system, emphasis on hard work, focus on STEM education

ethnicities - China

the Han make up over 92% of the Chinese population, minorities are concentrated in specific areas, diverse ethnic minorities

ethnicities - South Korea and Japan

homogenous, South Korea has a small percentage of Chinese immigrants, Japan has some South Korean immigrants

languages

approximately 2,300 living languages spoken in Asia, with some of the most popular being Mandarin, Cantonese, Burmese, and Filipino

Handshake or bow? - China

it's typical culture to nod, handshake, or slightly bow in greeting

Handshake or bow? - Japan

there are mainly 3 ways to bow, depending on how much you respect someone or how apologetic you are

Handshake or bow? - South Korea

it's more common in South Korea to shake hands when you meet someone for the first time, however, that hasn't entirely taken the place of bowing, which still takes place before or during the handshake

dining etiquette - China

seating hierarchy, should not offer to leave a tip, as this is not standard procedure in China and is technically illegal, business breakfast sometimes in certain provinces

dining etiquette - Japan

punctuality is important, accept everything offered, use formal titles during meeting, hold the soup bowl up and slurp noodles