Socio-Cultural Analysis
IntroductionUGG Australia is a division of Deckers Outdoor Corporation. It is a registered trademark in the United States and has operations in over 130 countries. The firm is known for making boots using high-grade sheepskin. The product has gained popularity ever since its inception, leading to increased demand and growth. In this paper, the author provides an international marketing socio-cultural and economic analysis for the exportation of the product from Australia to South Korea. The aim of the assessment is to determine the success of the product in the new market.
South Korea: A History
The history of South Korea begins with its independence on August 17, 1948. During World War II, the Japanese defeat led to a United Nations arrangement that involved the U.S. administering the south and the Soviet Union the north of Korea. Due to disagreements between the parties, two separate governments were established. The establishments stabilized following the Korean War, leading to North and South Korea (Kummer, 2008). South Korea has had alternating periods of democratic and autocratic rules. Since its inception, South Korea has developed its culture, education, and economic systems (Hyeon, 2011). The current president of the nation is Lee Myung-Bak. He was inaugurated in 2008.
Geographical Setting
South Korea is located in Asia and covers 99,720 square kilometers. It is the 109th largest nation in the world. Its climate is characterized by four distinct seasons (Lee, 2012). Spring and autumn are short in duration. Summers are hot and humid. On their part, winters are usually long and cold. The long winter will be beneficial in the sale of the product. The country’s strategic location would provide a wide market for the product in East Asia.
- Social Institutions
- Family Setting
The family setting in the country is mainly characterized by close ties and dependencies (Kim, Choi & Kim, 2008). The rapid economic growth and excellent results in the country are attributed to favorable government policies and family expectations.
Education
As a result of the government policies, the country has managed to achieve a literacy rate of 97.9%. The situation makes it suitable for the marketing of the product (Pascale, 2012).
Political System
The South Korean political structure is determined by the constitution of the Republic of Korea. It is comprised of three main branches that include the executive, the judicial, and the legislative branches (Pascale, 2012). Under the arrangement, the president is the head of state. The country has a multi-party system that comprises four political parties (Kim et al., 2008). Generally, the country enjoys a stable political environment, which would foster export trade.
Legal System
It is a communist state under the Communist Party of Korea. The party was founded in a secret meeting in Seoul in 1925. The legal system has improved over the years, leading to democratic reforms since 1945 (Bluth, 2008). As part of the Vienna Convention on International Contracts, Korea participates in patents and other trademarks. The legal system fosters business relations and resolutions in times of conflict (Kummer, 2008).
Social Organisations
Rapid economic growth and development have led to the emergence of a middle class. The group has a unique racial and cultural heritage. The reason is that members proclaim their homogeneity and the pure bloodline of the “Great Han Race.” Despite being a multi-ethnic society, Koreans refer to themselves as one people (Kim et al., 2008). The diverse and rich culture of the country provides a strong base for the product based on creativity.
Business Culture and Practices
Koreans take pride in their traditional culture. In addition, they appreciate their success, especially in the face of foreigners. The business customs are mainly hierarchal in nature (Doing business and investing in Korea, 2012). High ranking individuals have more power and recognition than the subordinates. Even when early, they may be considered to be so late (Pascale, 2013). Business practices take a formal approach with a traditional touch that is favorable for efficient operations.
- Living Conditions
- Diet and Nutrition
South Korean food is favored by Japanese and Chinese. Rice is the main type of food. Cooking and presentation of dishes are considered to be an important skill (Min, 2011). Despite having one of the lowest levels of inequalities in the world, the country still reports cases of malnutrition, especially among children. A variety of foods are commonly available, though they vary from one region to the other. It would be paramount to implement different advertising campaigns that would be tailor-made for the various regions.
Housing
It has homeownership of 54.2%. As such, it is ranked 43 in the world. The rest are mainly renters. The number of squatters and homeless persons is small (Kim et al., 2008). The situation is mainly attributed to the country’s culture and the increase in income and investments. The high rate of homeownership shows a strong market potential for the product.
Clothing
Over the recent past, fashion has greatly evolved in South Korea. It is attributed to external influences and increased incomes. The national dress is Hanbok. It is usually worn on traditional occasions. However, most people prefer wearing suits to formal occasions. Diversity in the clothing trend would provide a great avenue for the consumption of the product.
Social Security
On April 1, 2001, an agreement between the U.S. and Korea was effected with the aim of improving social security in the country. It helped many people who were ineligible for the monthly retirement and other related benefits. As a result, more economic development is expected. The situation ensures a stable market potential for the product (Doing business and investing in Korea, 2012).
Language
Korean is the country’s official language. However, the Gyeongsang dialect is usually considered the most aggressive compared to the standard Korean. Through government policy and investment, nearly all children under four years have taken English as part of their education (Pascale, 2012). It would make the campaign for the product easy and unique as foreign goods and services are highly regarded.
Population
The total population in the country was recorded at 49,115,196 million as of July 2015 (refer to figure 1). The nation has a strong and large young population, which stands at 46.63% (Pascale, 2012). South Korea has an evenly balanced male-to-female ratio. Urban areas are more populated than rural regions, such as Seoul, Busan, Incheon, and Daegu. The dense population would provide a large market for the product, leading to high sales volume.
Economic Analysis
- Economic Statistics and Activity
- Gross National Product
As a result of the creation and implementation of favorable government policies on economic development, the GDP has grown steadily. The growth stood at 3.3% as of 2014 (refer to figure 2 below). The development shows potential growth in the product’s sales volume (Min, 2011).
Personal Income per Capita
The GDP per capita reached an all-time high of $24,565.56 in 2014. The figure was an increase from the $9,387.78 recorded in 1960 (Min, 2011). It will increase sales volumes given that most people can afford the product.
Average Family Income
The average family net disposable income per capita was $19,510 as of 2014. The figure is less than the OCDE average of $25,908 per annum (Hyeon, 2011). The situation calls for aggressive marketing of the product to counter competition in the market.
Distribution of Wealth
It is noted that 70% of the individuals in the country identify themselves as middle class. As such, there is inequality where the top 20% are assumed to earn six times what the bottom 20% earns. The current president has pledged to reduce the inequality gap (Doing business and investing in Korea, 2012). Consequently, different pricing and marketing strategies should be adopted to accommodate the disparity.
Surface Transportation
Modern transportation infrastructure in the country is attributed to the increased commitment to investments, which started with the five-year development plan (1962-66). The mode of transport includes extensive networks of railways, roads, waterways, and air. The networks are readily available and efficient. They come at relatively cheap rates (Hyeon, 2011). The situation will reduce the cost of doing business, leading to increased profits.
Communication Systems
Communications systems are highly developed and modernized. South Korea is popularly known for the ubiquitous internet cafes known as P.C. bang. It is known as the world’s most wired country (Bluth, 2008). Typical charges are about W1000 to W2000/hour. The low cost would be of great help in the online marketing of the product.
Foreign Investment
Foreign direct investment in the country has increased exponentially over the last decade has increased exponentially from 1997 being less than 2,000 but reaching 14,000 as of 2010. It is an integral part of the economy that the government has been active in through the passage of the Foreign Investment Promotion Act in 1998 (Doing business and investing in Korea, 2012). The business is bound to operate efficiently with minimal disruptions.
International Trade Statistics
Exports from South Korea amounted to $526.9 billion during 2015, down -8.1% from 2014. Exports accounted for about 28.5% of their total gross domestic product. On imports, South Korea shipped $436.5 in 2015, a drop from 573.1 billion, a figure that roughly represents 3.1% of the overall global trade. The current balance of payment measured in 2014 stands at 89.2201 billion, according to the World Bank. The Korean economy has a single exchange rate as the USD to KRW rate current at 1173.56130. The KRW has been strengthening against the dollar over recent years, as shown in figure 3.
Trade Restrictions
On March 15, 2012, the US-Korea Free Trade Agreement was implemented to enhance investor climate. South Korea does not have a trade embargo issue on the retail sector though it is notable in the weapons and security sector. On the quotas, only rice remains subject to import quotas under the WTO Agreement on agriculture (Bluth, 2008). Import taxes range between 0-40 percent. It has an average rate of 4.17%. 10% is levied on imports on the sum of the CIF value, duty, and other taxes if applicable.
Tariffs have been eliminated on a number of products under the Korean-Australia Free Trade Agreement (KAFTA): with the product being amongst. On licensing, there is a requirement for approval and authorization for certain products. Customs duties on consumer goods are charged per unit of measure ranging between 5% and 20% on the sum of the CIF value and duty (Bluth, 2008). All these lead to the competitive pricing of the product in the region.
Labour Force
The labor force in the Korean economy is highly skilled. The labor participation rate percentage increased between January and February 2016 from 61.10 to 61.80 with a total labor force of 26,073,006 in 2013, according to the World Bank. It does signify a large pool of labor for the firm.
Conclusion
From the above socio-cultural and economic analysis of South Korea, it is evident that the product would do well in South Korea. There is a huge potential for expansion. However, some challenges were identified. The problems can be managed with ease. The management should be aware of the challenges that the company is likely to face in the new market. They should come up with strategies to manage the risks.
References
Bluth, C. (2008). Hotspots in global politics: Korea. Cambridge, UK: Polity Press.
Doing business and investing in Korea. (2012). Web.
Hyeon, K. (2011). Transport law in South Korea. Seoul: Kluwer Law International.
Kim, K., Choi, J., & Kim, J. (2008). Social change in Korea. Paju-Si: Jimoondang.
Kummer, P. (2008). South Korea: Enchantment of the world. New York: Children’s Press.
Lee, C. (2012). Frommer’s South Korea (3rd ed.). Hoboken, N.J.: Wiley.
Min, S. (2011). Cost structure and efficiency of Korea’s road and rail in the manufacturing industries. Journal of Infrastructural Systems, 10(1061), 118-128.
Pascale, C. (2012). Social inequality & the politics of representation: A global perspective. Thousand Oaks: SAGE Publications, Inc.