Global Players from Emerging Markets: Strengthening ... - Unctad

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96 Outward Foreign Direct Investment by Enterprises <strong>from</strong> the Republic of Korea Number of cases Number of projects 1,400 1,200 1,000 800 600 400 200 0 350 300 250 200 150 100 50 Figure 3. Korean OFDI: four major industries and firm size, 1996-2004 (Number and millions of dollars) Source: Export-Import Bank of Korea (www.koreaexim.go.kr). Overseas operation Table 1. Korean OFDI activities: current status and plan A framework for analysis. The motivations of OFDI by Korean firms can be illustrated based on the extended diamond model (figure 6). 74 This extension 74 Porter (1990) introduced the diamond model, which consists of four attributes of analysis: (1) factor conditions, (2) demand conditions, (3) related and supporting sectors and (4) strategy, structure and rivalry. However, Porter’s original model dealt mainly with domestic contexts and so (Percentage) Firm size Large TNCs Small TNCs Already owns 68.1 37.3 Plans to transfer 14.9 39.2 No plan 17.0 23.5 Total 100.0 100.0 Source: KCCI (2002). 0 Figure 3-1. Manufacturing 1996 1998 2000 Year 2002 2004 Figure 3-3. Service 1996 1998 2000 Year 2002 2004 2,500 2,000 1,500 1,000 500 0 350 300 250 200 150 100 50 0 Amount ($ millions) Amount ($ millions) Number of projects 1,400 1,200 1,000 350 300 250 200 150 100 800 600 400 200 50 0 0 Figure 3-2. Wholesale/ Retail 1996 1998 2000 Year 2002 2004 Figure 3-4. Mining 1996 1998 2000 Year 2002 2004 Large TNCs cases SMEs Cases Large TNCs Amount SMEs Amount Number of cases 2,500 2,000 1,500 1,000 incorporates the TNCs activities (Moon, Rugman and Verbeke 1998) and unconventional OFDI explanation (Moon and Roehl 2001). It includes factor conditions, demand conditions and strategy, structure and rivalry, and related and support sectors. was extended by Moon, Rugman, and Verbeke (1998) to incorporate international dimensions. 500 0 350 300 250 200 150 100 50 0 Amount ($ millons) Amount ($ millions)
�� Source: Export-Import Bank of Korea (2001 and 2004). 1. Factor conditions 1-1 Cost reduction China is the primary location for Korean OFDI because of its low labour cost, which is about onetenth that in the Republic of Korea. Examples of firms investing abroad for cost reasons include: • LG Electronics established more than ten production sites in China since mid-1990s and has significantly reduced its production costs. About 98 per cent of the company’s employees in China are local workers and more than 80 per cent of resources and components are sourced locally. Given the company's success in China, it has further expanded its production in China into high-value products. • Shinwon, a medium-sized clothing manufacturing company, has factories in Viet Nam, Indonesia, Guatemala and China since the Figure 4. Motivations of Korean OFDI, 1998-2004 �� Figure 4-1. Number of cases �� Figure 4-2. Amount ($ millions) �� CHAPTER VIII 97 1990s. It invested in these countries to reduce cost. • Korea Toptone, a medium-sized company that manufactures speakers and related parts, invested in China to access low cost labour. 1-2. Natural resources �� Volatile commodity market and price fluctuation encouraged Korean companies to go overseas to secure natural resources. Resource-seeking OFDI includes oil, gas and mining of natural resources. Examples of firms motivated by resource-seeking reasons include: • POSCO, a leading Korean TNC and the fifth largest steel producer in the world, established a joint venture Poschrome with Samancor in South Africa to secure a stable supply of ferrochromium, which is a major resource
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United Nations Conference on Trade
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Preface The landscape of internatio
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Acknowledgements This publication i
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