Michael ‘Collin’ Zreet is currently a part time student at The University of Texas at Dallas where he is completing his mba and a Masters in Innovation & Entrepreneurship
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- FOREIGN DIRECT INVESTMENT IN KOREA
- EFFECT OF KOREAN CULTURE ON FOREIGN BUSINESS
- APPENDIX A – References
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Figure 5.0 Public Satisfaction with Seoul Public Transportation (Ko 2015) On May 29th 2015, South Korean lawmakers passed a national bill banning any type of transportation service provided by private drivers (Lee & Kim 2015). This ban is different than previous legislation in that it covers all versions of private driving services, and does more than just singling out Uber (Lee & Kim). In reaction to Uber’s arrival in Seoul, taxi drivers were actually able to work with local technology firms and create a smart phone application that performs similarly to Uber’s (Kwaak 2015). Since South Korea is such a technologically driven country, this is a logical step for them. One observation is why this has not happened in other large cities across the United States and Europe, in response to Uber. A creation of this technology for already existing taxicab services would help the current taxicab drivers in competition with Uber, and in the end benefiting customers on both sides.
FOREIGN DIRECT INVESTMENT IN KOREA In the business world, the influx of money, capital, and commerce from an outside country is called Foreign Direct Investment (FDI). FDI typically carries both pros and cons, especially with larger influxes of capital, like with smaller oil-rich countries that receive lots of investment from developed countries seeking some of the profits involved; or with labor-rich countries, like China and India, where other countries can make textiles and other labor intensive consumer products, for a lot cheaper abroad than at home. In the case Uber, there is no fear of environmental or worker exploitation. If anything, Uber allows the their would-be employees in South Korea to have a side job to allow them to have more financial freedom, though this could possibly come at the cost of some of the current taxi drivers. Overall, the more open an economy is, the more economically beneficial it is for the home economy and its citizens, as well as foreign competitors. When completing an analysis on the introduction of foreign competition into a closed market, there is usually a large growth in consumer surplus, even more so than what is lost in the producer surplus. Even when a tariff is implemented, it can be set to where local producers still gain more of a producer surplus, still with an overall gain in surplus compared to a closed market. The main actions and response of the Seoul Metropolitan Government indicates that are afraid of losing out on the producer surplus of their current local taxis, at the expense of growing of the industry. In the case of Uber, FDI should not be considered an issue due to the fact that their business model would not negatively affect the South Korean economy in the exploitation of labor or material resources. EFFECT OF KOREAN CULTURE ON FOREIGN BUSINESS 
Figure 6.0 6-D Model of Culture for South Korea (Hofstede) Another aspect to look at in this situation is from a cultural standpoint. Traditionally, most Asian countries are very collectivistic and are very closed-off to outsiders. Geerte Hofstede’s Culture Comparison tool confirms this, as South Korea has a low ‘Individualism’ rating of 18 out of 100 points, highlighting their loyalty to their families and government, and where employee relationships are perceived more in familial terms (Hofstede). This would lead to skepticism from foreign companies, including Uber. This is very interesting because Uber fared well with customers while running free trials early on in Seoul. South Korea also scores the highest possible on ‘Long Term Orientation,’ indicating that they are always looking towards the future, opting for long term growth strategies, instead of short term monetary advances (Hofstede). This also leads to high company loyalty, which would be another reason the Seoul Metropolitan Government would be against a foreign company coming in and trying to take over the market. These cultural dimensions are very similar across many countries in Asia, which has been a struggle for outside companies to create business opportunities in these countries. In light of this, Uber should have recognized this cultural difference and suggested in partnering with a local Korean in the creation of a Joint Venture with South Korean entrepreneurs. Though this may have relinquished some of the control over the region to another business partner, it possibly could have created possible expansion in the regional market for future projects in other countries. This issue is not unique to the transportation industry and these lessons learned should be applied across the board in all industries. There are numerous examples of these joint ventures occurring in other industries, including the aerospace industry where Bell Helicopter and Fuji Heavy Industries (FHI) were selected in the construction of the UH-Z, a multipurpose multi-role helicopter, for the Japanese ministry of defense. While Japan does not score as similar to South Korea in Individualism according to Hofsede, they are very similar is Uncertainty Avoidance, thus making Japan a difficult market to penetrate (Hofstede). Assuming Uber could successfully create a joint venture with a South Korean business partner, the opportunities are right in front of them. They can compete on the same scale since the taxicabs are in similar segments that Uber already provides (e.g. UberX and Regular Taxis, UberXL and Jumbo Taxis, UberPlus/UberSelect and Deluxe Taxis).
CONCLUSION Considering the facts presented, the demise of Uber was likely a combination of the taxis drivers’ fear of losing customers to a cheaper competitor, and the central and local governments’ fear of losing out on the revenues provided by taxes and the selling of taxi licenses. Despite high satisfaction with Uber and its services and considerably lower satisfaction with the current taxi system, the Seoul Metropolitan Government decided to support the local taxi drivers. In this kind of business environment, abroad and in the United States, the losers in this scenario are the citizens. Without competition in any industry, innovation and creativity are stifled and it begins to stagnate. While unlike their Western counterparts, South Korean taxi drivers are currently planning and implementing a smart phone application to at least facilitate hailing a taxi. This should be a lesson for U.S. and European cities with similar issues in dealing with Uber. The taxis are already losing out to the rise of personal cars and the expansion of the subways in Seoul in both ridership and public perception. In my opinion, Uber should have been embraced in part by the Seoul Metropolitan Government in order to jumpstart a stifled industry. It is understandable that the local government did not want to lose out the revenues generated by the taxicab licenses and transportation taxes, but should have been flexible to the point where both sides could have been profitable. In my opinion, the largest factor at play here is the collectivistic culture of the Seoul Metropolitan Government wanting to keep the local taxis profitable and in control of the Seoul personal transportation market, even at the expense of growing the industry. This should have been recognized by Uber, who could have used this opportunity to create a joint venture, which could have ultimately created a penetration into a traditionally closed region. APPENDIX A – References “Apps Rush: Uber, Google Analytics, Futures EP, AA Best Walks, Visible Body, UK Bus Checker and more.” The Guardian N.p., 2 July 2012. Web. 25 June 2015. Arrington, Michael. “Uber CEO Super Pumped About Being Replaced By Founder.” Tech Crunch N.p., 22 December 2010. Web. 25 June 2015. Chokkattu, Julian and Jordan Crook. “A Brief History of Uber.” Tech Crunch N.p., 14 August 2014. Web. 25 June 2015.
Hofstede, Geert. “Compare Countries.” The Hofstede Centre N.p., Web. 10 July 2015. Hwang, Sa Youn. “Seoul Says Uber Ride-Sharing is Illegal Before It’s Even Started.”
Hwang, Sa Youn. “Uber Defies Government Warnings and Goes Live in Seoul, Korea.” CNET N.p., 11 December 2014. Web. 25 June 2015. Jang, Min-young. “The Complete Guide to Seoul Taxis.” CNN N.p., 24 October 2011. Web. 25 June 2015 Kidambu, Ram et al. “The Contribution of the Automobile Industry to Technology and Value Creation.” AT Kearny N.p., September 2013. Web. 26 June 2015. Ko, J 2015, ‘Public Transportation System in Seoul’, Presented at the 17th Annual Case Study Program in Seoul, Republic of Korea Kulikowski, Laurie. “Uber Banned in 5 U.S. Cities That Want Your Taxi Business.” Main Street N.p., 3 September 2014. Web. 25 June 2015. Kwaak, Jeyup. “Seoul Moves to Ban Uber, Plans Own App.” The Wall Street Journal N.p., 21 July 2014. Web. 25 June 2015. Lee, Se Young and Sohee Kim. “South Korea to Ban Taxi Services by Private Drivers in Blow to Uber.” Reuters N.p., 28 May 2015. Web. 26 June 2015. Myers, Chris. “Decoding Uber’s Proposed $50B Valuation (And What It Means For You).” Forbes N.p., 13 May 2015. Web. 25 June 2015. Ritter, Larissa. “The Rise and Competitiveness of South Korean Automobile Manufacturers – A Comparative Study with German Auto Producers.” Auckland University of Technology, 2010. Web. 25 June 2015. Sawers, Paul. “Uber Continues its International Roll-Out with ‘Secret Testing Phase’ in Vancouver.” The Next Web N.p., 12 May 2012. Web. 25 June 2015. Shine, Conor. “Why Uber has Cracked the Taxi Market in 70 Cities – but not Las Vegas.”
Smith-Spark, Laura. “Courtney Love Rages at Violent Anti-Uber Protest by Paris Taxi Drivers.” Cable News Network (CNN) N.p., 25 June 2015. Web. 25 June 2015. “Taxi License Value, 100 Million Won for Entry Countdown.” Press Janjinung N.p., 15 July 2014. Web. 25 June 2015. Tsotsis, Alexia. “Uber Launches Its First International Efforts in Paris.” Tech Crunch N.p., 5 December 2011. Web. 25 June 2015.
United States Census Bureau. “United States Census 2010.” U.S. Census Bureau N.p., N.d. Web. 25 June 2015.  November 22-23, 2015
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