GOLD STAR CO. LTD.: A CASE STUDY Introduction

This case study is concerned with the position of the Gold Star Co. Ltd. in the United States in 1984. The focus questions in this case study are as follows:

1. Is the concept of comparative advantage relevant to the Gold Star decision to site television manufacturing in the United States?

2. Do changes in production processes reflect pressures for a rationalization and processes and markets by Gold Star?

Gold Star's position in the United States in 1984 was affected more by the state of the American economy and by the state of international economic relations between Korea and the United States than it was affected by factors and issues such as comparative advantage, production processes, and market rationalization. During the firsthalf of the decade of the 1980s, South Korea emerged as a middleindustrial power. In the structure employed by The World Bank, Korea is grouped in the upper middle income subclassification of the middleincome economies classification, along with such countries as Argentina, Brazil, Greece, Hong Kong, Mexico, Singapore, South Africa, and others.

Real per capita gross national product (GNP) in Korea grew at an average annual rate of 9.8 percent during the firsthalf of the 1980s. Although this rate of growth was higher than that

recorded in the 1970s, it is of even greater significance because it proceeded from a much higher base point.

Rapid growth in exports was a salient feature of the Korean economy

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h their population). Such countries typically received principal payment deferrals, and additional loans to cover interest payments. The ruse perpetuated the myths (1) that the developing country is not in default, and (2) that the assets (loans to the developing country) held by the creditors remain productive. In actuality, however, the developing country was simply being pushed further into debt, and the assets held the creditors are becoming progressively more worthless, with a strong likelihood that they will never be paid. Korea's external debt placed heavy pressure on the country's economic managers to retain the emphasis on exports. In the face of rising domestic expectations, this task became more difficult politically. Export emphasis, however, was an integral component of the country's industrial policy. Korea's industrial policy provided several incentives for export manufacture. Among these incentives were tax reductions, ready access to credit, subsidized interest rates, foreign loan guarantees, and direct subsidies. In the firsthalf of the decade of the 1980s, Korea's industrial policy relied heavily on the diffusion model, whereas in the past it had relied on the human capital model. The diffusion mo

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