As everyone knows, Korea has become an economic powerhouse, and most will be aware of a number of Korean brands in common use across the world. This is impressive for a relatively small country of just 51 million people, nestled amongst much larger economies, sharing a border with a belligerent neighbour and have almost no natural resources of which to speak. How much further will Korea grow and what opportunities are there in and with South Korea for foreign investors? Hannes Humala, Asian Insiders partner in Korea, offers some tips on how to succeed in South Korea.
From the turmoil of the 20th century, Korea has risen from the ashes in a remarkable feat of resilience and focused effort to become a global phenomenon. From popular music to intense movies and TV shows, K-beauty and K-fashion, Korea is exporting its design-led cultural brand around the world. The Korean peninsula is only around 20% arable and offers little natural resource. Korea must import almost everything it uses, and its only natural resource are its people. Education-focused, hard working and energetic people.
The pressure cooker of history has led to Korea becoming a tech-savvy powerhouse of East Asia, alternatively collaborating and competing vigorously with Japan and China. Korea now boasts the fastest internet in the world and is at the forefront of artificial intelligence, robotic and biotechnology. Samsung, LG and Hyundai are global giants but the rise of innovative startups like Kakao, the ‘super app’ ecosystem demonstrates the solid potential of Korea going forward. Koreans are digital natives, embracing mobile payments, e-commerce and online entertainment and communication. Koreans have an appetite for modern, innovative choices in electronics, personalised entertainment, niche products in fashion and lifestyle as well as in how they optimise living and working spaces, transportation and leisure.
A great deal of Korea’s economic resurgence since the 90’s was due to exporting, particularly to the US. As the global economy slows due to effects from geopolitical tensions and the recent pandemic, Korea’s double-digit growth numbers are in the past. The population also is aging as birth rates plummet and the once labour exporter is now a significant labour importer. Partly due to this Korean companies now invest more heavily abroad. Doing business in and with Korea has changed.
Korea’s nominal GDP/capita in 2023 was USD 33,147, a growth of 22% over ten years compared to a growth of 16% accross Europe. Korean companies for the most part have a robust financial position while the Korean middle class is large and affluent. Attractive opportunities exist in both B2B and B2C categories however competition is fierce and in many cases dominated by one of the Korean conglomerates or chaebols. For example, Samsung Electronics dominates Korean value-added production, providing some 25% of the entire nation’s GDP, while there are some one hundred subsidiaries making up the wider Samsung group, active across a range of sectors. Behind these chaebols, there are around 10,000 companies, each with sales ranging from USD 100 million to a USD 1 billion.
Climate change is a major topic in South Korea, with significant investments in renewable energy, green infrastructure and eco-friendly solutions. The government has set ambitious targets for increasing the share of renewable energy in the overall mix. There are ample opportunities in Korea for western companies involved in any aspect of the renewable or green industries.
Similarly, opportunities exist also in healthcare as the aging, affluent society seeks ongoing health service options. The government offers robust support for this sector, along with a strong regulatory framework allowing a conducive environment for foreign investment, particularly in the pharmaceutical and biotechnology sectors.
To access the Korean market in any category usually requires a local partner with whom to work closely either as potential clients, distributors or as manufacturing partners. Ideally a company should remain closely connected to the market, building their relationships amongst Korean conglomerates and their subsidiaries.
Generally better and more up-to-date market information is available mainly in Korean language, including official statistics, databases and economic analyses. While top level national statistics are available in English, detailed breakdowns are not. Korean executives themselves generally have a poor grasp of English and most senior level negotiations need to be conducted in Korean. Due to the historical suppression of the native Korean script, Hangul, Koreans often seek to elevate the importance and use of Korean language in their international relationships. Further, cultural nuances are crucial in building respectful relationships in Korea. Koreans value hierarchy, respect and indirect communication. Western strategies in Korea, as well as in appealing to Korean consumers, must be informed by local preferences on traditional and modern matters.
Where Korean companies are making increasingly major investments abroad, especially in automotive, manufacturing and construction, most major investment and partnering decisions are still generally made in Seoul. Any serious effort to engage in Korea or with Korean companies requires a direct presence. These options include either a subsidiary, branch, representative or liaison office, while a proper partner selection and implementation of a functioning channel sales is critical to a successful business in Korea.
to succeed in South Korea in domestic sales absolutely requires a local presence. Where foreign companies attempt to cover Korea from their China, Singapore or Japan regional offices, usually performance lags behind potential. B2B sales in particular evolves around personal connections while participation in the procurement flow requires close proximity to the client organisation.
For sales into the domestic Korean market, long term commitment is crucial. A one-to-three-year business development cycle is normal for establishing a sustainable market presence. Brand building just takes time. Local references are absolutely required before any major scale business is realistic.
As Korea lacks natural resources, from the start of the economic rebuilding in the 60’s, Korean leaders emphasised the importance of education and skills, with Koreans being amongst the most studious of peoples. College degrees are seen as entry level with a high percentage of young people gaining an advanced post-graduate education. Many Korean companies offer in-house educational and professional development opportunities and there are many examples of successful corporate-university partnerships. The dynamic of large Korean corporate systems means that its often difficult for workers to adjust when changing jobs, especially if moving to a foreign-owned operation. Accordingly, many western companies seek to recruit from recent graduate outtakes and shape these people further through in-house training.
Korean companies tend to work at a fast pace. Deadlines can be short and same-day responses to emails and enquiries are often expected. This can put pressure on foreign company account management and executive processes. Similarly, Korean company rarely do things on a small scale, so foreign companies establishing themselves in Korea will need to have strong processes around communications and decision-making.
To succeed in South Korea is a process of working together with local partners, seeking good advice and connecting with a naturally dynamic, forward-thinking work ethic. The proliferation of Korean brands and companies abroad demonstrates that Koreans are people to work with.
Asian Insiders offers deep connections, expertise and long experience in Korea. To succeed in South Korea, you are invited to a no-obligation call with Jari Hietala, Managing Partner: jari.hietala(at)asianinsiders.com or with Managing Partner for Korea, Hannes Humala: hannes.humala(at)asianinsiders.com
