Global Business Environment: American Auto Firm in China & Korea

This report examines the global business environment for an American motor vehicle company planning to expand into China and Korea. It identifies cultural risks using Hofstede's model, analyzes comparative and competitive advantages crucial for success, and explores how industry policies, factor conditions, related industries, and internal rivalry contribute to the company's potential success in these markets. The analysis covers power distance, individualism, uncertainty avoidance, masculinity, long-term orientation, and indulgence. The report highlights the importance of adapting to local conditions, leveraging competitive strengths such as product development and a multicultural workforce, and navigating industry-specific policies and competitive landscapes in both China and Korea. Desklib provides additional resources for students.

GLOBAL BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
Cultural risks................................................................................................................................3
Role of Comparative and Competitive advantage of American company in their success in
China and Korea..........................................................................................................................5
Ways through which China and Korea industry policy, factor conditions, related and
supporting industries and internal industry rivalry contribute towards American company
success.........................................................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Global business environment refers to the environment of various foreign countries which is
different from the home country environment of the organization (Mondliwa, Roberts and Ponte,
2021). The company that wants to start its business in any of the foreign country need to first
analyse and understand the culture and environment of that country because it influences the
decision-making on resources use and capabilities. The present report is based on American
company that produces and offers motor vehicle in U.S.A. The company wants to venture in
international business by entering new market such as China and Korea. For this, the report will
identify the cultural risk that the company may face in new market using Hofstede model along
with the steps they adopt to deal with it. Further, the report will discuss the role of comparative
and competitive advantages in American company that ensure its success in foreign market.
Lastly, the report will discuss the ways industrial policy, factor conditions, related and
supporting industries and internal industry competitors contribute towards American company
success.
Cultural risks
The company is looking for venture in China and Korea and with this regard it is prominent to
assess the major cultural risks which may create bottlenecks before its policy implementation in
the markets. With this regard company is following Hofstede model to assess such factors which
is as follows- (Yin, Moon and Lee, 2019)
1) Power distance index- This index shows the social structure in which the power is
prevailing. PDI of china is higher at the same time for Korea it is above average which is
manageable. It would be easier to penetrate Chinese market since there PDI is higher
which reflects that people are less likely to ask authority of new products. On the other
hand in Korea relatively PDI is lower. So company can form its marketing policy in such
way so can encounter this issue (Hacioglu, 2019)
2) Individualism vs Collectivism- This measures the internal structure of society how the
people are related to each other. If individualism is higher than mutual cooperation
among people am less whereas it is higher than people support each other when a conflict

arises with other group, If collectivism is higher it shows people are better in their
communication. Both China and Korea are collective society at the same time USA is
highly individualistic society so for the company it is important to pay attention on these
factors.
3) Uncertainty avoidance- A society's tolerance for ambiguity level is assessed under it.
China is one of the countries with high score with this regard at the same time Korea is
having low score. So in China any ambiguity may cause severe damages whereas in
Korea such mistakes may be forgiven by the customers to certain degree. So all aspects
must be evaluated multiple times to avoid it.
4) Masculinity vs femininity- A society prefers heroism, achievement or modesty,
cooperation. It is assessed under this phase. China is a masculinity society where people
like vintage life whereas Korea is also a masculine society but their score is lower so with
this regard the company can make its marketing plan so can attract the customers hitting
their needs. Can present the products in lavish way so can attract the potential customers.
5) Long term orientations vs short term orientation- High degree shows people are more
likely to move ahead and low degree shows people are sticking to their traditions and are
avoiding new changes. China is the society with high degree of this index whereas Korea
is comparatively scoring lower so while forming marketing policy in Korea company
may face more difficulty in penetration of market here consumer behaviour is needed to
be focused while marketing products (Meo, 2020)
6) Indulgence vs restraint- It shows the degree of freedom to the citizens to fulfill their
human desires. Both China and Korea are restraint societies with low scores. So people of
such countries are enjoying less freedom when it comes to fulfil their desires. For a
company such markets places more challenges since extraneous forces restrict people to
avail new services and products. By convincing such forces penetration is possible in
such rude market.

Role of Comparative and Competitive advantage of American company in their success in China
and Korea
Comparative advantages:
The comparative advantage of American company is such that they have the capability to
produce the cheap and best quality motor vehicle as compared to China and Korea countries. It is
because the company have agreement with cheap supplier of automobile parts in USA. The
impact of which American company without any difficulty can easily trade or enter China and
Korea market. It is analysed that in China and Korea the cost of motor vehicle is quite high
because of limited producer of motor vehicle. The impact of which poor people of China and
Korea can’t afford high price motor vehicle because of the lower income. So, by offering the
same motor vehicle to the poor people and other customer of China and Korean customer,
American company can make its existence in the both new market. Further, American company
can also export its automobile products to both the new market for sample testing that whether
their products are liked by the China and Korea people or not (Stek and Schiele, 2021). This
basically provide the company with confirmation that whether the company will succeed in
foreign market or not. In simple term, the comparative advantages of American company in
automobile sector as compared to China and Korea countries will definitely ensure its success in
foreign market.
Competitive advantage:
The main focus of American company is product development, efficient leadership and
multi-culture workforce which is basically American company’s biggest competitive advantages.
By using this advantages, the company can ensure its success in the China and Korea market.
The motor vehicle produces and offer by American company is comfortable and safe for the
people which is also one of the biggest advantage of American company car because it is not
provided by China and Korean automobile company in their cheap products. Further, the
workforce of American company includes different culture people which has helped the
company to understand the demand and issue of different culture people. So, because of this
advantage, American company do not face much difficulty in understanding the culture and
behaviour of China and Korea people. The biggest competitor of American company in China is
SAIC motor, Dongfeng, FAW etc. (Nwankpa, Roumani and Datta, 2021). along with Korean

automobile company is Hyundai etc. But the products they provide to its local customer is
expensive. So, in order to succeed in both market, the team of American company need to launch
its products at cheap cost as compare to its rivalry.
Ways through which China and Korea industry policy, factor conditions, related and supporting
industries and internal industry rivalry contribute towards American company success
The four factor or area that help American company in succeeding in China and Korea
market are as follows:
Industry Policy:
As from date 1, July 2020, China has revised automobile industry by banning automobile
companies to produce light-duty vehicle which basically comply the China V emission
standards. However, on the other hand, the automobile industry policy of Korea state that the
automobile industry of Korea is a highly value added and technology incentive industry. The
government of Korea has implemented liberalization policy for automobile industry which is an
advantage for American company to freely trade in Korean market with less rule, regulation and
government intervention. Further, the production of light-duty vehicle helps American company
to succeed in the China market. In this way, it can be said that following the industry policy of
country where the company wants to internationalize contributes towards the success of the
business (Wong and Ngai, 2021). In both China and Korea country, American company research
team need to identify the policy of government and its impact over their own organization if they
really want to exist in that market.
Factor conditions:
Factor conditions means the condition of resources and raw material that company
require to start their business in new market. For example, the land, labour, capital markets and
infrastructure condition. The competitive advantage of China is low cost structures, high skilled
engineers, sophisticated technology infrastructure and growing domestic market with high
potential contributes towards the success of American company in China market. But, the
expensive land and high rental plots is a challenge for American company to start their business
operation in China. Further, the Korean factor condition involve cheap labour, extensive capital
market, cheap land price but poor infrastructure and technological innovation. It is because

people of Korea are highly restricted to use internet, social media sites which is challenge for
American company to spread its brand awareness in Korean market. All other factor condition of
Korea is contributing towards American success but the poor technological innovation and
infrastructure is causing difficulty in the path of American company to succeed in Korean
Market (Cartwright, Liu and Raddats, 2021). In order to deal with it, the company need to adopt
offline communication and advertisement strategy for promotion of its automobile products.
Otherwise, the skilled and cheap labour will help American company to maintain its cheap and
best quality feature of its motor vehicle.
Related and Supporting Industries:
The related industries are the businesses which produces same products and service such
as automobile products. While on the other hand, supporting industries are the one that supply
necessary raw material, parts and capital goods to automobile industry. In both China and Korea,
the related industry such as automobile industry as well as supporting industry i.e., supplier of
motor vehicle parts is easily available to American company. Thus, it can be said that this factor
will definitely contribute towards the success of American company. But on the other hand, it is
also analysed that the supplier of motor vehicle in China and Korea provides the goods to foreign
companies at high price as compared to its local market in order to help local automobile
companies remain more competitive and top (Gao and Yi, 2021). Thus, American company in
order to became success in the foreign market need to deal and negotiate with foreign country
supplier to supply parts and capital goods at cheap cost. The success of any industry depends
upon the supporting industry and as the supporting industry of China and Korea will definitely
contribute towards the success of American company via supply chains, exchange of ideas and
resources.
Internal Industry Rival:
The industry rival affects the success of the organization to large extent. The rival of
American automobile company in China is SAIC motor, Dongfeng, FAW and in Korea is
Hyundai and Kia. The automobile industry rival in China and Korea will contribute towards the
success of American company because rivals force American to assess their strength and
weakness areas with the help of which the company can creates unique value proposition to

customers. The competitors also encourage American company to offer better customer service,
offers, discounts, quality products to its China and Korean customers. Competition is also
important for exploiting industry trends as in new markets competition provides an opportunity
to American company to follow the trends followed by its rivals. The impact of which the
company can also gain customer base in new markets with similar or more quality products
offering at cheap cost (Ferrannini and et.al., 2021). Here, American company can create alliances
with Hyundai in Korea and SAIC motors in China and exchange the goods provided by the local
supplier with each other in order to succeed in the foreign new market. Merger with biggest
competitors is also contribute towards the success of American company.
CONCLUSION
After summing up the above essay, it is concluded that there is various cultural risk that
American company have to face at the time of entering new market of China and Korea. The
strategy to deal with those cultural risk is also identified and recommended to American
company so that they can make its presence in new market. Further, role of comparative and
competitive advantage has been also discussed for ensuring American company success. Lastly,
the four areas have been discussed such as industry policy, factor conditions, related and
supporting industries and internal industry competitor’s contribution towards the success of
American company in China and Korea country.

REFERENCES
Books and Journals
Yin, W., Moon, H. C. and Lee, Y. W., 2019. The success factors of Korean global start-ups in
the digital sectors through internationalization. International Journal of Global Business
and Competitiveness. 14(1). pp.42-53.
Hacioglu, U. ed., 2019. Digital Business Strategies in Blockchain Ecosystems: Transformational
Design and Future of Global Business. Springer Nature.
Meo, M. S., 2020. Does temperature contribute to environment degradation? Pakistani
experience based on nonlinear bounds testing approach. Global Business Review,
p.0972150920916653.
Stek, K. and Schiele, H., 2021. How to train supply managers–necessary and sufficient
purchasing skills leading to success. Journal of Purchasing and Supply
Management. 27(4). p.100700.
Nwankpa, J. K., Roumani, Y. and Datta, P., 2021. Process innovation in the digital age of
business: the role of digital business intensity and knowledge management. Journal of
Knowledge Management.
Wong, D. T. and Ngai, E. W., 2021. Economic, organizational, and environmental capabilities
for business sustainability competence: Findings from case studies in the fashion
business. Journal of Business Research. 126. pp.440-471.
Cartwright, S., Liu, H. and Raddats, C., 2021. Strategic use of social media within business-to-
business (B2B) marketing: A systematic literature review. Industrial Marketing
Management. 97. pp.35-58.
Gao, B. and Yi, R., 2021. Industrial policy and competitive advantage: A comparative study of
the cloud computing industry in Hangzhou and Shenzhen. Innovation and China’s Global
Emergence, pp.232-262.
Ferrannini, A. and et.al., 2021. Industrial policy for sustainable human development in the post-
Covid19 era. World development. 137. p.105215.
Mondliwa, P., Roberts, S. and Ponte, S., 2021. Competition and power in global value
chains. Competition & Change. 25(3-4). pp.328-349.