South Korea: An Electronics Industry

Thèmes abordés

Porters diamond, South Korea, Korea, Electronic Industry

Résumé du document

On what competitive advantages did South Korea lean to build a successful model of economic development? What factors can make South Korea particularly attractive as a market and as a base for value-added activities?
After the war which led to the division of the peninsula and Korea in 1953, South Korea became the first-rate economic power and a model of speed and effectiveness in its development policy over the last decade.

Today, South Korea is the world's 15th economic power, after Australia and Brazil, while at the beginning of 1960s, the Korean GDP per head was equivalent to that of Cameroon or of Indonesia. South Korea is one of the few countries that are ranked worldwide in consumer electronics, the steel industry, cars and the naval industry. South Korea is the second biggest supplier to China, leaving behind the European Union and Taiwan.

The question is why during last decades South Korea and other Asian countries knew of such an economic development, while other countries stagnated or even regressed in spite of their efforts?

According to Porter, to be really efficient, the advantage must be at the same time unique, difficult to imitate, adaptable, and superior in terms of quality against competition. Two types of competitive advantages can be identified, they are costs and differentiation. An advantage can have numerous origins: A brand with solid notability, a unique expertise, an exclusive patent, an upper network of distribution to others, a not very expensive and malleable working force (as in the case of China), a rare resource or an ideal geographical position.

Extraits

[...] At the international level many unpredictable events can shape a nation's competitiveness, e.g North Korean War, thus the diplomatic situation is tense with this bordering country, seen by the whole world as a real threat to the peace. Then, International economic events: South Korea is in a permanent sovereignty crisis because of the USA interference in the foreign policy, due to the military presence of the USA in the Korean peninsula. Government : As every aspect of the economical life in Korea, establishment and functioning of clusters is supervised and coordinated by specific politics decided by the government. [...]

[...] By 1990 significant shifts were occurring within the electronics industry. In 1989 South Korea had lost some of its cost advantage to newer consumer electronics producers in Southeast Asia. At the same time, production of electronic components and of industrial electronics, particularly computers and telecommunications equipment, continued to expand to such an extent that overall demand for South Korean electronics products was expected to increase modestly in the early 1990s. In 1990 Seoul projected that the microelectronics industry would grow at an annual rate of 17.2 percent in the early 1990s. [...]

[...] The geographic location is also an advantage, because the country is situated in Asia, the most promising continent in terms of growth and of development. Concerning the advanced factors, first of all we shall see the modernity of the communications network. It is necessary to remind that the Korean society uses permanently the high-tech in professional and in private lives. E.g electronic entertainment. Video, audio and gaming devices accounted for around 23% of South Korean consumer electronics spending in 2009. [...]

[...] We may grade it 8 out of 10 in the category Factor Conditions. Demand Conditions : The demand remains weak while the export continues its exceptional growth. This allows us to draw a conclusion that in spite of a halting internal demand, South Korea benefits from a high international demand on its electronic products, because of its very good export. The country is a worldwide leader on the market of television and in the ship building industry. It has a good reputation concerning high-tech industry, as well as a well-known car and steel industries. [...]

[...] The chaebols founded their expansion on export. Supported by the government and by the banks, chaebols concentrate the majority of resources thanks to the concentration of domestic savings and of external financings towards them. Chaebols very quickly began diversifying and multiplying their activities, the necessary investments being financed by the debt. The key elements of Korean industrial growth, (the development of export or technical progress), were widely concentrated in the perimeter of activity of chaebols, leaving few space to the development of SMES and even less space to the foreign firms. [...]