Analysis of Enterprise Activities using the Concept of Business Functions : Case of Korean Automobile Industries

Since the 1990s, trade costs have been decreasing dramatically and trade volume worldwide also has been increasing. Multinational Corporations(MNCs) are the main players for this kind of globalization. UNCTAD (2009) documents that there were about 82,000 MNCs with about 810,000 foreign affiliates in 2008. Those foreign affiliates accounted for approximately a third of world exports and employed 77 million. Since MNCs offshores its production facilitates for some parts of its functions or production stages but not the whole production process itself, it is necessary to understand patterns of the MNCs’ activities based on their production stages or functions.This paper provides descriptions of the empirical results from analyzing Korean automobile industries, using the concept of business functions and questionnaires introduced by Nielsen (2008). The paper focuses especially on firstly and secondary part and components suppliers in Korea for a major car manufacturer. The survey was conducted by a third-party survey corporation under the supervision of the Korea Institute for Industrial Economics and Trade (KIET), funded by the Ministry of Strategy and Finance (MOSF) in Korea. Nevertheless, the views expressed in the paper are those of the author and do not represent any position of either the MOSF or KIET.Since the 2000s, Korean enterprises in the automobile industries have been offshoring abroad significantly. Figure 1 shows the industrial offshoring trends over time. Since the mid-2000s, about 100 enterprises offshored abroad every year in addition to conducting one billion dollars in foreign direct investment (FDI). In regards to a significant number of enterprises offshoring abroad in the industry, it is possible to have a deep understanding of the offshoring pattern of firms in the industry and impacts on the economy based on the business functions. Furthermore, the results of the survey are valuable because such an analysis of the industries or the economy in Korea has not been attempted before