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Purchasing economics in Korea and Asian supply chain profits

By Dominique Numakura

Japanese manufacturers survived because, in part, they implemented continuous cost reductions thereby helping to increase productivity rates which contributed to maintaining reasonably good margins and profits. Today, Japan still exports a considerable volume of electronic goods and automobiles against some of the highest labor costs in the world.

In comparison, both business style and culture among Korean companies can be viewed as somewhat similar to those in Japanese companies during the 70s and 80s. And, because of this, Korean companies will be able to continue exporting if Korean company management learns from the history of Japan’s manufacturers.

Korean company management must be able to distinguish the differences between the negative and positive aspects of Japan’s manufacturing history (and rise) and understand these differences. If so, Korea, in all likelihood, will probably experience some periodic confusion and lack of measurable forward progress such as a temporary slow down in exports and some bankruptcies in the near-term but, for the most part, most manufacturers in South Korea will survive.

Exporting companies in Thailand, meanwhile, have also been experiencing serious appreciation of their currency recently, the Thai Bhat. Thailand’s manufacturers and export businesses are also seeing financial damage brought on by their country’s currency’s appreciation. Unfortunately, we cannot be as optimistic in the case for Thailand or other countries in the greater Pacific Basin region, including Malaysia, primarily because of a predominantly different business culture when compared to Korea or Japan.

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