AUTOEDGE Submitted by: Student Number: Tutor’s Name: Date of Submission:

Legal Factors  National and Supra National Laws  Regulations  Minimum wages  Monopolies  Mergers

Social & Financial Factors  South Korea – 5 th largest Automotive industry  Cultural needs and market needs  Social and demographic

Economic Factors  US Economic Factors  GDP,  Unemployment rate,  Interest rate

Economic Factors  South Korea Economic Factors  GDP,  Unemployment rate,  Interest rate Country / Microeconomic Factor 2013 United StatesSouth Korea Gross Domestic Profit billion billion Unemployment Rate7.30 %3.10 % Interest Rates0.25 %2.50 % Inflation Rate1.50 %0.80 %

Elasticity of Demand  Relatively Elastic: is an elasticity alternative where a small change in the price, can have a large impact on the other variable, i.e. demand. Here this is where demand is very responsive to the price. The coefficient of elasticity is presented as: 1 < E < ∞.

Economies of Scale and Efficiency

SWOT StrengthsWeaknesses Leading National Automotive Supply * Been in market for over 30 years *Strong Brand name and recognition *Known for reliability, dependability, and high quality High labor costs *Lacking ability to meet the growing competition * Lack of liquidity * High overheads OpportunitiesThreats * Use the South Korean markets to improve the overall pricing problem * Effectively improve the overall profitability * Serve in the Korean markets as well Several Chances to sponsor and sell products to Olympic, and other sports teams Highly competitive markets * Low barriers to entry * Fake and replicas is a common issue * Different approaches and techniques used by different brands * Increasing currency fluctuations

Market Structure Comparison of Imperfect Competition Type of marketOligopolyMonopoly Monopolistic Competition Perfect Competition Number of FirmsFewOneNumerous / ManyMany Nature of Product Differentiated or Undifferentiated UniqueDifferentiatedUndifferentiated Freedom of EntryRestricted Almost completely Blocked or Restricted Low Implications on Demand Curve Downward Sloping, Mostly inelastic dependent on the reaction of competition to change in prices Downward Sloping, More inelasticity than Oligopoly and the price is controlled by the firm Highly elastic however not complete elastic Perfectly elastic, demand curve is a horizontal line on price Power on PriceSomeConsiderableSomeNone Competitiveness Based on marketing approach and the product differentiations Highly based on marketing and advertising Based on marketing approach and the product differentiations None ExamplesCars, CementLocal Water Company, Drug Company RetailersVegetables, Fruits, etc.

Risk, Cost and International Expansion Year Cost of Capital6% 7%8% 7% (US$ in millions) Revenue$30.10$34.20$38.10$40.40$45.60$50.00 Selling, General, Admin($16.10)($17.20)($18.90)($19.50)($21.40)($24.30) Depreciation($4.10)($4.40)($4.80)($4.90)($5.30)($5.70) Interest Expense($0.45)($0.56)($0.69)($0.73)($0.78)($0.81) Taxes($1.10)($1.30)($1.70)($1.90)($2.00)($2.10) Increase in fixed assets($1.30)($2.40)($0.90)$0.00($4.90)($2.10) Initial Capital Expenditure($18.00) Students need to calculate the following: Net Income $8.35$10.74$12.01$13.37$16.12$17.09 Depreciation (provided) ($4.10)($4.40)($4.80)($4.90)($5.30)($5.70) Operating Cash Flows (FV) $4.25$6.34$7.21$8.47$10.82$11.39 Increase in fixed assets (provided) ($1.30)($2.40)($0.90)$0.00($4.90)($2.10) Free Cash Flow $15.40$19.08$23.12$26.74$27.34$32.08 Pvif factor PV Cash flows $14.52$16.98$18.87$19.65$18.62$21.37 Value of future flows$ Initial expenditure($18.00) NPV$92.01

Conclusions  South Korean Operations continued  Send Personnel to South Korea, or  Quality Checks in US  Operations returned to US

Recommendation  Operations returned to US

References  Baker, H. K., & Powell, G. (2005). Understanding Financial Management: A Practical Guide. Blackwell Publishing.  Rittenberg, L., & Tregarthen, T. (2009). Principles of Microeconomics. Retrieved from Flat World Knowledge: ch03_s04#rittenberg-chpr  Rothaermel, F. (2012). Strategic Management: Concepts. McGraw-Hill/Irwin.  Sloman, Jack and Mark Sutcliffe. (2004). Ecnomics for Business, Third Edition. London: Pearson Education Limited.  Sowell, T. (2010). Basic Economics: A Common Sense Guide to the Economy. Basic Books.  Trading Economics - Inflation Rate. (2013). South Korea - Inflation Rate. Retrieved from Trading Economics:  Trading Economics - Inflation Rate. (2013, October 11). United States Inflation Rate. Retrieved from Trading Economics:  Trading Economics - Interest Rate. (2013). South Korea - Interest Rate. Retrieved from Trading Economics:  Trading Economics - South Korea - GDP. (2013, October 13). South Korea - GDP. Retrieved from  Trading Economics - Unemployment Rate. (2013). South korea unemployment rate. Retrieved from Trading Economics:  Trading Economies. (2013, October 11). United States GDP. Retrieved from Trading Economics:  Weaver, S. C., & Weston, J. F. (2013). Strategic Financial Management: Application of Corporate Finance. South-Western.

Thank You!