Economics for Sustainable World: A Case Study of Korea South East Power Corporation

This report provides a case study of Korea South East Power Corporation, analyzing its business practices, key customers, competitors, market share, demand curve, micro and macro analysis, and sustainable practices. It also examines the political stability, unemployment, inflation, interest rate, and exchange rate in South Korea and Australia. The report aims to practically implement the learning on a real-life business organization and upgrade knowledge on the given title.

RUNNING HEAD: KOSEP
ECONOMICS FOR SUSTAINABLE WORLD

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Executive Summary
The discussion summarizes on the organization named ‘Korea South East Power
Corporation’. From the business introduction section, it is analyzed that it is a multinational
power supply business operating in South Korea. Its key customers are from Korea, India and
Australia. Its competitors and close substitutes are ‘Hanjeo’ and ‘KOSEP’. It has a market share
of 8.9%. It forms the part of Oligopoly market and thus its demand curve is kinked in nature.
From the Micro Analysis, it is observed that it attains fine control over its factors of production.
The Macro Analysis section states that Korea does not offer attractive environment for its
business operations. The last section states that ‘Korea South East Power Corporation’ attains an
active position towards adopting sustainable practices in business process.

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Contents
Introduction......................................................................................................................................3
Business Introduction......................................................................................................................3
Key customers..............................................................................................................................4
Competitors..................................................................................................................................4
Market share.................................................................................................................................4
Close substitutes...........................................................................................................................5
Demand curve..............................................................................................................................5
Micro Analysis.................................................................................................................................6
Factors of Production...................................................................................................................6
Macro Analysis................................................................................................................................7
Political stability..........................................................................................................................7
Unemployment.............................................................................................................................8
Inflation........................................................................................................................................9
Interest rate.................................................................................................................................10
Exchange rate.............................................................................................................................10
Overall macro-economic conditions..........................................................................................10
Sustainable practices......................................................................................................................11
Conclusion.....................................................................................................................................13
Bibliography..................................................................................................................................14

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Introduction
The business report is prepared on the title ‘Economics for sustainable world ’. The first
section of the report focuses on the business practices of the Korea South East Power
Corporation. It provides brief information about its customer and competitors. It also comprises
of the analysis of Micro factors. The macro analysis section determines the political stability of
South Korea. It also focuses on the aspect of Unemployment, Inflation, Interest rate, Exchange
rate and other macroeconomic conditions. The next section emphasizes on the role of sustainable
practices. It provides information about the various sustainable practices adopted by the KOSEP
in its business operations. The basic aim of the report is practical implementation of the learning
on a real life business organization named ‘Korea South East Power Cord Limited’.
Additionally, it provides a chance to upgrade the knowledge based on the given title.
Business Introduction
Korea South East Power (KOSEP) was a part of Korea Electric Power Corporation
(KEPSCO). It is also known by ‘KOEN’. It forms the part of Utility sector performing an
operation of power generation (Bloomberg, 2019). It has emerged as a separate entity in the year
2001. It has its headquarters in located in Jinju, South Korea. It is engaged in the generation of
electricity. It produces electricity through wind, water, thermal and solar power resources. It
attains number of thermal power stations, pumped storage power plants and five power plants.
Besides generating electricity, it also develops various forms of industrial materials (Magaldi ,
2019). In Korea domestic market, it is one of the best power supplying company. The basic
information about the company can be views from the figure presented below.
Figure1: Table presenting information about KOSEP

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Source: (Zaubacorp, 2019)
It generates around 10% of South Korea’s annual net electricity. Its practices focus on
cost innovation, Process innovation and field innovation (Hanarasoft, 2019). To enhance the
export, it has promoted 50 small industries with the help of G-Tops (Hee, 2016).
However, it also faces issues, as power plants require regular maintenance, renovation
and replacement. It faces random failures in its power plants. It also encounters the issue of short
lead-time in power plant operations. Adoption of ‘HanPHI’ has resulted subsequent enhancement
in its total electricity output. It has also assisted in raising the lead-time and saving maintenance
cost. It has also relied on the usage of ‘HanAra’ software. It is responsible for providing
maintenance solutions. After its adoption, KOSEP has acknowledged reduction in its plant cost.
It has also experienced better solutions with respect to plants (Hanarasoft, 2019).
It has emerged as a Global Power Leader and won the award named ‘Korea National
Quality Award’. It has achieved this price for its contribution in innovation and growth in the
power plants (Newsworld, 2013).
Key customers
As per the research, it key customers are Koreans. It is a multinational organization, as it
sells electricity in various part of the world. It also serves its services in countries like Australia,
Pakistan and India. Further, it is planning to invest major amount in the Indian market to gain
more customers (The Hindu Business Line , 2014).

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Competitors
As per the research, it is analyzed ‘Korean Electric Power Corporation’ and ‘Hanjeo’ are
the major competitors of KOSEP (KPS, 2019).
Market share
Market share is the portion of the market attained and controlled by the company. As per
the research, it is examined that the market share of Korea South East Asia (KOEN) is accounted
to 8.9% (IERE, 2019). This can be viewed from the figure presented below.
Figure 2: Market share of ‘KOEN’
Source: (IERE, 2019)
Close substitutes
According to the research, Korean Electric Power Corporation (KEPCO) offers similar
service like Korean South East Power Company (KOSEP). Thus, it counts as its close substitutes
(Hoovers , 2019).

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Demand curve
‘Korea South East Power Company’ is based on ‘Oligopoly’ market competition. It is a market
with a small number of firms attaining high market share. Additionally, it has high barriers on
the entry of new firms. Thus, the demand curve in Oligopoly market is not fixed as the
prices/quantity of output keeps on changing. Therefore, its curve will be kinked (Fudenberg,
2013). This can also be viewed from the presented below.
Figure 3: Demand curve under oligopoly
Source: (Toppr, 2019)
Micro Analysis
It aims at explaining the behavior of an organization with respect to given economy
(Trkman, 2010). In order to analyze the behavior of Korean South East Power Corporation, a
brief discussion of factors of production is given below.

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Factors of Production
Factors of production are the resources involved in the production of the good and services.
There are four inputs involved in this process (Trkman, 2010). These are as follows:
1. Land: It is a natural resource useful in carrying out business activities. It is one of the
essential component required while initiating a business. The total value of land attained
by ‘Korean South East Power Company’ is included in its total asset value of ‘9796
Million’. This is because land forms the part of Asset of an organization (IERE, 2019).
2. Labour: It refers to the efforts laid by an individual for producing a good/service. The
human resource of an organization forms the part of the labour. The total workforce of
Korea South East Power company is marked at ‘2417’ (Hoovers , 2019).
3. Capital: It is the amount invested in the business for carrying out business activities. It is
not directly engaged in production of goods/service but its availability is highly
significant. This is because it is used to carry out business monetary transactions. The
recent capital amount of the company is marked at ‘50,354 Million’ (IERE, 2019).
4. Enterprise: It is responsible for combining all the factors of production for producing a
product/service. The various factors included in enterprise are water and raw material
engaged in the development of power plants and generating electricity (Trkman, 2010).
Figure 4: Main financial status
Source: (IERE, 2019)
Macro Analysis
It refers to analyzing the various factors that operates in the external environment of the
business. It includes only those factors that have an effect on the organization’s performance,

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decision making and strategies. Examining the external environment of a business is mandatory
as it has a long-term effect on the business and its profitability. It assists in gaining knowledge
about the strength, weakness, opportunities and threats prevailing in the environment with
respect to the business. Further, it assists in making policies and plans to eradicate the possible
threats and fully utilizing the opportunities. It includes factors such as Unemployment rate,
inflation rate, interest arte and exchange rate.
Political stability
According to the research, it is assessed that low degree of political stability prevails
within South Korea. It is characterized by fluctuation with the passing years. In comparison with
the previous years, it is realized that South Koreas ‘political stability has been reduced to a major
extent. Thus, its current political stability is marked around 0.3 (The Global Economy, 2019).
This can be viewed from the graph presented below.
Figure 5: Bar graph representing Political stability
Source: (The Global Economy, 2019)

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Judicial system in South Korea is independent and efficient. Additionally, it is analyzed
that government has raised the corporate tax rate to 25%. Thus, it lays a heavy tax burden on the
business organizations. The government also lays attention towards protecting the private
property rights of the business organizations. It is researched that high degree of government
integrity prevails in South Korea (Heritage , 2019).
In relation to Australia, it is analyze that its political stability is also marked at an average
rate of 0.9. However, its political stability level is greater than South Korea but though it is not
well enough (The global economy , 2019).
Unemployment
It is the situation where individual is unable to find a work. It is used as an indicator to in
the macro analysis (Pigou, 2013). As per the research, it is examined that there is 3.1% of
unemployment rate in South Korea. (Trading Economics , 2019). The figure represents that there
has been a reduction in the unemployment level in South Korea. In relation to past months,
unemployment level was reduced by 0.9%. Thus, it indicates a good sign of growth in South
Korea.
Figure 6: Bar graph representing unemployment level in South Korea
Source: (Trading Economics , 2019)

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The unemployment rate is marked at 5.6% in Australia. It has higher unemployment rate
than South Korea. However, this is also because Australia is highly populated in comparison
with South Korea. Thus, it directly results in more unemployment in Australia (Heritage, 2019).
Inflation
It is the general increase in prices and fall in the purchasing value of money. It results in
the increase in price of goods and services. It enhances the cost of living of an individual. In
order to denote inflation via quantitative terms, it is represented by inflation rate (Barro, 2013).
Thus, an inflation rate should be low. In the context of KOSEP, it faces the inflation rate of 1.9%
in South Korea (Heritage , 2019).
In Australia, inflation rate is marked at 2.0%. However, it is parallel to inflation rate in
South Korea. Thus, both the countries offers similar inflation rate (Heritage, 2019).
Interest rate
According to the research, it is analyzed that average interest rate in South Korea is
3.14% with a current interest rate of 1.5%. There was subsequent degree of reduction in interest
rate in the year 2016. The figure represents that inflation rate was not stable in South Korea.
Figure 7: Graph representing Inflation rate in South Korea
Source: (Trading Economics , 2019)

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In Australia, interest rate is marked at an average of 4.3%. It is analyzed that with the
passing years, interest rate in Australia has been reduced largely. However, it is relatively higher
in contrast to South Korea (Trading Economics , 2019).
Exchange rate
It refers to the rate at which one currency is exchanged for other. It is used to determine
the value of one currency with respect to other currency. On comparing South Korea with
Australia, it is determined that ‘1 South Korean Won= 0.0012 Australian Dollar’. This suggests
that the currency of South Korea is relatively weak in comparison to Australia.
Overall macro-economic conditions
A favorable macro environment offers stable and low inflation rate. It provides low
degree of unemployment rate and specific interest rate. Additionally, it provides high exchange
rate (Cook, 2010). However, from the analysis of macro factors, it is determined that South
Korea offers low employee rate, average inflation rate and low exchange rate. Thus, macro-
economic conditions in South Korea are not much favorable. South Korea macro-economic
conditions can be understood from the table given below. Additionally, it is analyzed that
Australia offers similar macro environment to KOSEP.
Figure 8: Table representing macro-economic conditions of South Korea
S/N Macro-economic
factor
Rate in South
Korea
Ideal Macro-economic
condition
1 Political stability - High
2 Unemployment 3.1 Low Unfavorable
3 Inflation 1.9 Low Unfavorable
4 Interest 1.5 Low Average
5 Exchange rate 0.0012 High Unfavorable

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Sustainable practices
It includes practices that are performed without harming the environment. It is nonprofit
service performed with an aim of protecting the environment. Relying on such practices depicts
that an organization is fulfilling its responsibility towards the environment. It includes green
practices, and minimizing the use of natural resources with an aim of preserving them for the
future generations. Thus, a company should certain degree of sustainable practices in its work
process. In order to avoid any form of it operation failure, it operates work process on a daily
basis (Newman, 2012). Following are the points determining the KOSEP contribution in
sustainable practices.
1. In order to initiate sustainable practices and to provide the global world with
environmentally friendly solutions, it had adopted the installation of ‘FLUIMAC’ system.
It was adopted to alter the heavy oil combustion to environment friendly practices.
FLUIMAC is an innovative system assists in enhancing the performance of the boiler. By
its adoption, there has been reduction in the usage of coal. It has helped in reducing the
emission of harmful gases like nitrogen and Sulphur oxides (Magaldi , 2019).
2. KOSEP has also developed practices for recycling. It emphasized on its objective of
recycling 95% of Coal Cinders (Energy.Korea, 2013).
3. It lays high focused in reducing the emission of greenhouse gases via its power plants.
Through its practices, plant named ‘Yonghrung Thermal Power Plant’ has successfully
achieves low emission (Emerson, 2019).
Figure 9: Eco friendly power plant ‘Yonghrung Thermal Power Plant’

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Source: (IERE, 2019)
4. As per KOSEP sustainability report (2017), it is examined that it is transparent in its work
process. It has also aligned with the guidelines and GRI standards with respect to
sustainability. It lays prior attention that no business practices hinder its execution
towards sustainability. It also adapts strategies for executing sustainable practices in its
work process. It also assigns responsibility to each group for implementing the corporate
sustainability (Unglobalcompact, 2017).
5. In order to emerge as a highly sustainable organization, it has set an aim of becoming
‘Clean & Smart Energy Leader’ by 2025.
6. In order to minimize the environment degradation, it relies on the use of high tech
environment facilities certified by ‘ISO 14001’. It has also developed an ‘Integrated
Greenhouse Gas Information System’ and introduced the ‘Carbon Management System’.
7. It also measures the exhaust gases and sends the related data to the government and
Korean Environment Corporation. It shares its environment related information
publically. Thus, it states that KOSEP is taking efforts toward producing clean energy
and developing sustainable practices.
8. It has built a resource recycle system to develop the reuse of waste materials like coal
ashes. It also develop the reuse of wastewater generates from the power process.
Moreover, to reduce the emission of greenhouse gases, it has developed a reduction road
map for the same. It is also laying attention to improve the performance of old facilities.

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9. It has laid an active participation in programs favoring green practices. It has participated
in the ‘Greenhouse Reduction Research Group’ and ‘Korea CCS’. It also encourages
green policies developed by the government bodies (IERE, 2019).
Conclusion
The above discussion based on international business organization named ‘Korea South
East Power Ltd’. From the above discussion, it is analyzed that KOSEP is a recognized business
organization in Korea. It is engaged in generating electricity and supplying it to various parts of
the world. It is examined that it has a large customer base in South Korea. It also provides its
services in countries like Australia and India. Its major competitors are. From the analysis of
Micro factors (factors of production), it is examined that KOSEP attains a fine status in the
economy. The Macro Environment analysis is performed on factors like Unemployment rate,
Inflation rate, Interest rate, and Exchange rate. Thus, it states that Macro environment does not
offers a favorable environment for KOSEP. However, it is similar to the macro environment
factors in Australia. After analyzing the sustainable practices, it is learned that KOSEP has taken
various steps to adopt sustainable and renewable practices in its work process. Thus, it has laid a
countable contribution in sustainability. Hence, it is concluded that KOSEP attains a fine status
towards the economy and sustainability.

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