Business Environment Analysis: Apple Inc. Expansion in South Korea

This report provides a comprehensive analysis of Apple Inc.'s business expansion strategy in South Korea. It begins with an overview of Apple Inc., including its financial performance, product range, and organizational structure. The report then delves into a detailed PESTLE analysis of South Korea's business environment, covering political, economic, social, technological, legal, and environmental factors. Key macroeconomic indicators such as GDP growth, inflation, and unemployment are examined. The report also explores the social and technological landscapes, including cultural diversity, literacy rates, and technological innovation. Furthermore, the report uses Porter's Five Forces to analyze the South Korean market system and considers factors like FDI. The analysis provides recommendations to overcome potential negative consequences and to navigate the South Korean market successfully. The report highlights the attractiveness of South Korea as a market for Apple, given its technological advancements and consumer market.

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1Business Expansion of Apple Inc. in South Korea
Executive Summary
The paper provides a detailed analysis of the business environment of South Korea. The
paper initially begins by providing a description of the concerned organisation that is aiming
to expand in the country, which is South Korea. Afterward, it presents the various political,
economic, legal, social, technological and environmental aspects of South Korea. Lastly, it
analyses the entire business environment of the country and recommends policies to
overcome the negative consequences.

2Business Expansion of Apple Inc. in South Korea
Table of Contents
Introduction................................................................................................................................3
Background information on Apple Inc......................................................................................4
Background Information on the Business Environment in South Korea...................................6
Business Analysis of South Korea...........................................................................................11
Conclusion................................................................................................................................12
References................................................................................................................................13

3Business Expansion of Apple Inc. in South Korea
Introduction
Several factors can affect the business scenario of a country or the performance of an
organisation. The factors mainly consist of macroeconomic or microeconomic movements of
indicators in a country. Stabilising and attracting a business environment attracts foreign
direct investment (FDI) into a country. An increase in FDI can be beneficial for the host
country as well as the multinational corporation aiming at expansion in the country. Similar
to this, South Korea has an attractive business environment that attracts top Multinational
Corporations to expand their business in the country. Since 1950, South Korea is one of the
fastest-growing as well as performing economies in the world. The vast domestic market and
the less risky business scenario of South Korea attract FDI into the country. In addition to
this, the demographic trends and the current interest in internationalisation are beneficial for a
global corporation to operate in the country. As a result, companies like Apple Inc. are trying
to expand their business in the country. Companies like Apple are attracted to economies like
South Korea because of their specialisation in communicating technologies and merchandise
production. The highly educated population and the developed market of South Korea are
beneficial for Apple's growth. However, several other factors discourage business in the
country. These factors range from a shrinking workforce and an aging population to a wide
range of government restrictions.
The following report elaborates on the business operation and expansion of Apple Inc. in
South Korea. The paper begins by introducing the financial figures and legal structures of
Apple. Thereafter, the company provides a PESTLE analysis of the South Korean business
environment. In addition to this, the paper tries to include the demand-supply analysis and
uses Porter's five forces to provide an overview of the South Korean market system for
Apple. Therefore, the paper yields a detailed analysis of the business environment of South
Korea and the expansion strategy of Apple in the country.

4Business Expansion of Apple Inc. in South Korea
Background information on Apple Inc.
Apple Inc. is a multinational corporation that is specialised in the production of
technology-based products. This multinational organisation is an American based company
with its office headquartered in Cupertino, California. The product of Apple ranges from
mobile to Artificial Intelligence (AI) goods. The software of Apple includes macOS, iPadOS,
iOS, tvOS and watchOS (Apple.com.2020). On the other hand, the range of products
consists of iPhone Smartphone, Mac personal computer, iPad tablet computer, iPod the
portable media player and the Apple watch or smartwatch. In addition, there are several
products, which indicates the range of diversification that Apple has adopted to grab the
entire technology market (Shin et al. 2015).
Apple Inc. is widely known for its great market capitalisation and a huge amount of
revenues. The current market capitalisation of Apple is about 37.5 million US dollars. The
five-year data on market capitalisation indicates a continuous increase in the market share of
the company. This trend is portrayed in the figure below.
Figure 1: Market capitalisation of Apple Inc. for five years
(Source: ycharts.com 2019)
On the other hand, the firm is facing a fall in revenue. The current market trend
suggests that the revenue of the organisation is about 260.175 billion US dollars

5Business Expansion of Apple Inc. in South Korea
(S2.q4cdn.com. 2020). In addition to a reduction in revenue, the firm is recording a loss in
operating income, total assets and total equity, and net income. At the end of the year 2019,
the net income of Apple Inc. was about 55,256 million US dollars. The net sale of Apple
products in the different parts of Asia excluding Greater China is about 17,788 million US
dollars. Thus, the operating income in the parts of Asia is 6055 million US dollars. Between
2017 and 2018, there was about a 15 percent increase in the net sales of Apple products in
parts of the Asia Pacific region. On the other hand, between 2018 and 2019, there is about a 2
percent rise in the net sales of Apple in the same area (investor.apple.com 2020). However,
according to the organisation, a weaker currency of the Asia pacific relative to the US dollar
had a significant negative impact on the total sales of the region in 2019.
The structure of Apple Inc. tends to be hierarchical organisational structure. The legal
characteristics of the company and its various states operation indicates the entire business of
Apple is subject to legal proceedings. The company is subject to litigations and
contingencies. The company is patent protected and any obligation over intellectual property
rights can threaten its operation. The company is defending allegations over patent intrusion
in several US courts. This indicates an increase in the cost structure of the company. This is
because legal proceedings are both expensive and time-consuming process. Apple Inc. is a
multinational organisation is affected by the legal structures of the various economies of its
operations. These include antitrust laws, data privacy and security, data localisation,
advertising and sales, billing and other forms of the digitisation process. Moreover, the
uncertainty of litigation can generate a negative outcome for the organisations' finances and
expansion. In addition to this, the company is subject to political and intense media scrutiny.
This is because Apple is widely exposed to governmental investigations, regulations and
penalties. Therefore, being a big FDI it continuously searches for economies with a flexible
legal system and stable political structure.

6Business Expansion of Apple Inc. in South Korea
Apple Inc. is one of the most successful running technological multinational
corporations in the world. The region of its worldwide operation includes America, Greater
China, Europe, Japan and the Rest of the Asia Pacific region. America consists of both North
as well as South America. Greater China includes the entire Chinese economy, Taiwan and
Hong Kong. The European country includes the entire European region, Middle East and
Africa (Apple 2020). On the other hand, the Asia Pacific region includes Australia, India,
South Korea and other economies. The different areas of operation are well maintained by
different segments of the company. This retail and distribution segmentation helps in the
expansion and customer management of the company. Additionally, all the economies have a
different and unique market, which provides geographical benefits to Apple. Similar to this,
the technical market and rapid economic growth of South Korea highly attract the
organisation in the country.
Background Information on the Business Environment in South Korea
South Korea is an attractive as well as a highly developed technological market for
any multinational company like Apple Inc. The wide market of communication and
information technology helps FDIs to establish in the country. Thus, the business
environment of the country can be portrayed with the help of a PESTLE analysis of South
Korea.
Political overview
South Korea is characterised by a turbulent political system in the past. There are
several changes in the government and administrative system of the economy. In addition to a
strict government, the little freedom in political and military system is a dominant factor in
the economy. The economy is a centralised democratic country with immense power in the
hands of the president. The economic reforms are formulated to benefit the political system.

7Business Expansion of Apple Inc. in South Korea
In addition to this, the strong foreign relationship manages FDI inflows into the country
(Islam and Mamun 2017). However, the dominating military influence and political violence
restrict independent business operation in the country. The unfavourable relationship with
North Korea is a severe risk for business operations in the country but the country is aiming
to build a strong relationship with the European Union to build a strong business hub (Ye
2017). Additionally, the strong and transparent government is helping South Korea to gain
the trust of a global organisation.
Table 1: Global Index of South Korea
Global Index Rank and score of South Korea in the Global
platform
Global Corruption Perception Rank 39
Global Terrorism Index 0.30
KOF Index of Globalization 29
Index of Economic Freedom 72.3
(Source: knoema.com 2020)

8Business Expansion of Apple Inc. in South Korea
Figure 2: Political stability in for 8 years
(Source: TheGlobalEconomy.com 2020)
The table above portrays the economic freedom and low corruption index of South
Korea. Additionally, the recent increase in political stability helps in attracting global
business in the country.
Economic overview
South Korea is known to be a rapidly growing mixed economy. The business sector is
extensively dominated by family-owned conglomerates knows as Chaebols. It is the 12th
largest economy in the world by GDP. The table below lists all the key economic indicators
of the economy.
Table 2: Key macroeconomic indicators of South Korea in 2020
Macroeconomic Variables Percentage
GDP Growth Rate 1.2
Inflation Rate 1.5
Interest Rate 1.25

9Business Expansion of Apple Inc. in South Korea
Unemployment Rate 4
Current Account to GDP 4.7
Exchange Rate Drop 0.02
(Source: tradingeconomics.com 2020)
The strong GDP growth rate of the economy is the crucial reason behind the entry of
FDI in the country. The credit surplus and the low-interest rate help in raising the ease of
doing business in the economy. The main area or industries in South Korea include
Electronics and Telecommunication sector (Jung et al. 2016). This factor helps companies
like Apple to increase its business domain in the country. The growth of the industrial sector
in South Korea is more than 40 percent. This is the reason behind the expansion of Apple Inc.
in the country. The export-led strategies and deregulation of interest rates helped the rapid
economic growth. These positive policy movements helped FDIs to expand in the South
Korean region. Additionally, the large amount of investment in education and effective
training modules acted as a driver of innovative growth. However, the fall in competitiveness,
increased wages and youth unemployment negatively affected the business sector of the
economy.
Social overview
The HDI of South Korea is about 0.91. This indicates the high living standards and
human development in the country. The cultural diversity of South Korea is high. However,
this creates cultural diversity and hurdles in the business operation in the country. The
ethnicity of South Korea consists of about 4.8 percent from the US, 2.7 percent in Japan, 15
percent in China and 38.7 percent in Ethnic Korean from China (knoema.com 2020). There is
the rapid urbanisation of South Korea and increased wages affect the business environment in

10Business Expansion of Apple Inc. in South Korea
the country. The social progress index is about 85.36, which indicates the greater benefits of
doing business in the country. The high rate of literacy is the reason behind the high cost of
labour that affects production costs of a company like Apple Inc (Webster 2015).
Additionally, the social etiquette of South Korea is high and can harm the social operation of
the country.
Technological Overview
South Korea is the most developed nation in terms of technological growth and
innovation. The country is famous for its merchandise exports and vast technological market.
The Innovation Index indicates the high voltage growth and development of the technological
sector. In addition to this, the data of the Network Readiness Index in 2016 implies the great
digitised development of the country. This type of technology-led growth induces the growth
of FDIS in the country. As a result, multinational Corporations enter South Korea to foster
expansion. Moreover, business innovation is fostered by the administration, which attracts
inward FDIs, and the sustainable growth of business in terms of greater inclination towards
the environment fosters the performance of corporations. The government is inclined towards
greater investments in R&D and greater commercialisation.
Table 3: Global Indices favouring technological operation in South Korea
Global Index Rank and score of South Korea in the Global
platform
Global Innovation Index 56.60
Network Readiness Index 6
(Source: knoema.com 2020)
Legal overview

11Business Expansion of Apple Inc. in South Korea
The key strength that the legal structure provides to global organisations includes
incentives, favourable tax policies and exclusive nature of the constitutional court. The
government of the country provides tax abatements to FDIs that induces them to operate in
South Korea (Miao and Jayakar 2016). However, there are challenges from Weak IPR
policies and an absence of judicial juries that creates hurdles in the path of business
operation. The International Property Rights Index is 6, which is low and affects the patent
theft fear of corporations like Apple Inc. The piracy rate is high and security is low, which
affects the private software or innovation of the corporations. This negative factor affects the
business confidence of the country.
Environmental Overview
The environment of the country is readily affected by the huge volume of gas emitted
from the factory outlets. About 6.6 percent of the total land cover of South Korea consists of
forest cover. The government is designing policies to overcome the threat to the environment.
The National Strategy for Green Growth aims at promoting strategic R&D and
commercialisation (Sonnenschein and Mundaca 2016). It also aims at creating a new market
to stimulate environmentally stable industrialisation. A stable economic, as well as the natural
environment, can yield a successful result for the economy.
Business Analysis of South Korea
The South Korean market is a highly developed, modernised and technology
dominated market. The new entrants face wide barriers from high economies of scale,
differentiation in a product, capital requirements and high cost of switching. The FDI faces a
wide range of difficulties from economies of scale, government policies and capital
movements. The country has a population of above 51 million. The country is a multi-party
democratic republic, which has a greater dominance over business operations. The consumers