You are on page 1of 1

Identify each of the domestic and foreign uncontrollable elements that this US ice

cream franchisee encountered in Korea.

Some of the uncontrollable elements that this US ice-cream franchise


encountered in Korea are as stated below:

1. The Korean government allowed the franchisee to be set up in Seoul under 2


conditions. Firstly, after a year of operation, the ice cream should be made in
Korea. And secondly, at the same time, take on a Korean partner with at least
25% stake in the company.

2. The Americans were pressurizing the Koreans to raise the value of the won
(i.e. the Korean currency) to make Korean exports more expensive and
American imports less. Due to this, it cost the ice cream franchisee 16% more
dollars to start operating.

3. Due to exchange rate jiggling, there was inflation in Korea. This was a by-
product of won strengthening against the dollar.

4. There were import taxes, tariffs, non tariff barriers on imported capital goods,
and duties which ranged from 20-38% additional costs.

5. Koreans resented US due to their trade bullying. This affected the ice cream
business in the form of vandalism and people staying away from the ice
cream shop.

6. Korean bureaucracy had mental blocks about foreigners, which caused


problems for the ice cream franchisee initially.

7. The meltdown of the won during 1997-98 was a major disaster since it
tremendously increased the import costs, and most of the ice cream was
imported.

8. The contamination scare and following that the finding of a dangerous strain
of bacteria on one of the American brands made the people apprehensive
about using American brands of foods.