Case | HBS Case Collection | December 2017

In the Eye of a Geopolitical Storm: South Korea's Lotte Group, China and the U.S. THAAD Missile Defense System (A)

by Andy Zelleke and Brian Tilley

Abstract

By late 2016 and early 2017, Lotte Group, a South Korean chaebol (large family-controlled business group) had become embroiled not only in the domestic political turmoil surrounding President Park Geun-hye, but also—uncomfortably—in a four-country geopolitical storm. Amid rising tensions with North Korea, the South Korean government had agreed to deploy a U.S.-built anti-missile defense system known as THAAD (Terminal High Altitude Area Defense). The THAAD deployment had been strongly advocated for by Washington, Seoul’s treaty ally, and equally vehemently opposed by China—South Korea’s giant neighbor, with which Seoul had developed close economic ties and, in recent years, much improved political relations. In late 2016, the Park government decided that THAAD should initially be deployed on a particular property then in use as a privately owned golf course. The golf course’s owner happened to be Lotte Group. The case highlights the multifaceted, complex decision facing Lotte Group’s leadership: how to respond to the Park government’s national security-based request to transfer the land, while also taking into account China’s outspoken opposition to THAAD—seen in Beijing as impairing China’s own national security. As of 2016, Lotte Group had extensive operations, and even bigger aspirations, in the massive China market. As Lotte Group’s leadership grappled with its imminent decision at the end of 2016 and into 2017, the costs of defying Beijing were becoming more apparent, with the Group’s Chinese supermarkets hit by consumer boycotts and a raft of citations by Chinese authorities for fire code and other infractions.

Keywords: corporate social responsibility; leadership; decision making; politics; national security; Corporate Social Responsibility and Impact; National Security; International Relations; Decision Making; Government and Politics; Leadership; South Korea; China; Japan;

Language: English Format: Print 22 pages Educators

Citation:

Zelleke, Andy, and Brian Tilley. "In the Eye of a Geopolitical Storm: South Korea's Lotte Group, China and the U.S. THAAD Missile Defense System (A)." Harvard Business School Case 318-022, December 2017.

Related Work

  1. Supplement | HBS Case Collection | January 2018

    In the Eye of a Geopolitical Storm: South Korea's Lotte Group, China and the U.S. THAAD Missile Defense System (B)

    Andy Zelleke and Brian Tilley

    This case explores Lotte Group’s challenge of how to respond to Chinese government pressure in 2017, following the Group’s February decision to transfer land to the South Korean government, on which Seoul intended to deploy the U.S.-built THAAD missile defense system. Within a week of the deal’s announcement, the Chinese government had effectively caused 23 Lotte supermarket stores in China to shut down. Concurrently, however, South Korea’s political crisis climaxed with President Park’s replacement by the less hawkish Moon Jae-in. This “B” case chronicles the mounting losses in Lotte’s China business between March and September 2017, also a period in which bilateral relations between China and South Korea began to warm under President Moon, leaving South Korea’s commitment to a full THAAD deployment in some doubt. Against this uncertain backdrop, Lotte’s senior-most executives and board members had to reevaluate Lotte’s previously strong commitment to the China market.

    Keywords: corporate governance; leadership; multinational corporation; Corporate Governance; Leadership; International Relations; Decision Making; South Korea; China; Japan; United States;

    Citation:

    Zelleke, Andy, and Brian Tilley. "In the Eye of a Geopolitical Storm: South Korea's Lotte Group, China and the U.S. THAAD Missile Defense System (B)." Harvard Business School Supplement 318-023, January 2018.  View Details
    CiteView Details Related

About the Author

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Andy Zelleke
MBA Class of 1962 Senior Lecturer of Business Administration
General Management

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