Five lessons on doing business in Korea

Kea helps Kiwi companies go global by connecting them to industry experts around the world. Following Kea’s tour of North Asia, we talk to Seoul based expat and World Class New Zealander Lewis Patterson.  Lewis shares five lessons that Kiwi companies should know about doing business in Korea.

1.  Trust is paramount and must be both earned and maintained

The first thing Kiwis should know about Korea is that this is a land where relationship-building and trust are of the utmost importance.  In the realm of business, one’s ability to earn the trust of local commercial partners and forge personal bonds determines whether a business will ultimately succeed or fail.

At its core, a business in Korea must be built around a trustworthy operation and offerings, regardless of where it slots into the business cycle, be it in supply, brand-wise, in distribution or in promotion.  This is a learning that both big and small brands operating in Korea are now starting to register, or at least the smart ones.  A move towards greater transparency within business practices can be seen flowing right down the local supply chain.

The emphasis on trust in business practices can partly be attributed as a response to the ‘trust crisis’ that has engulfed Korean institutions in recent years.  The Sewol disaster, the 2016 impeachment of President Park Geun-hye, and Samsung's acting head Lee Jae-yong’s bribery charges have all eroded public faith in existing structures.  A layer down from the ‘big ticket’ shake-ups, there have been false representations of food products, and scandals around tampered shelf life and country of origin misrepresentation.  These are issues that have popped up periodically over the years. Once soon forgotten by the Korean public, in the current atmosphere, such issues are less likely to be accepted.

The outcome of the ‘trust crisis’ is that Korean consumers now turn to independent brands, foreign brands, or look to launch their own brand, rather than blindly trusting in historic local brands for goods and services.

2.  Understand the Korean business model and adapt your Kiwi practices

So being trustworthy will help New Zealand companies secure business in Korea, but that is not enough.  It is also vital to have visibility and a level of control over one’s product, or service, right through to the user.  Your fortunes are directly aligned to how products and services are presented, whether or not you had a hand in the presentation.  In practice, this means companies have to be engaged throughout the product or service lifecycle, even if only supplying a component or service to a brand/company in Korea.


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Understanding and adapting to the Korean business model is about risk mitigation.  If you show your Korean partners that you are committed to supporting them, they will give your product or service more attention and represent it better.  If the product is being sold under your own brand, then the link to success in the market is even more obvious.  The more you do your research, the more positive benefits will flow. 

Additionally, engaging and understanding the Korean market will provide insights into existing opportunities and how to avoid common mistakes.  Time and time again, we have seen good local partners build up a brand, or develop a market for a product, only to see the partnership break up and business decline because of misgivings on the New Zealand side.  Perhaps the Kiwi partner wanted to avoid commission payments or couldn't appreciate the work and investment that was being done, or why in some cases, why it wasn't being done.  Equally, very good opportunities can be missed due to slow reaction time, or the inability to appreciate the size of an opportunity relative to investment.

Once the trust is gone, so too is the business.

3.  Own your brand

New Zealand companies entering Korea are increasingly focusing on a brand-first approach, taking steps to engage the market and control their own destiny.  This is great to see. 

ZESPRI, Jacks Links, Shott and Comvita are examples of firms that have undertaken a brand-led approach and have committed resources in-market to ensure that their brand and business practices are controlled throughout the overall business cycle.  While it is never smooth sailing, positive outcomes of their in-market representation are clear to see in terms of brand recognition and control.

Companies that don’t have finished or branded products in the market, such as ingredient suppliers, have also seen the benefits of a more engaged approach.  Deer Industry New Zealand has worked for years to build up relationships with manufacturers through in-market representation and this too has paid off in terms of how New Zealand deer velvet is increasingly valued in-market, with growing levels of business and research opportunities now being realised.

4.  Leverage New Zealand’s positive image internationally to inform your marketing, BUT develop your own unique value proposition

At an international level, New Zealand companies backed by stringent government standards have established a strong reputation for safety, quality goods and services, which is critical in terms of trust in product offerings.  Safety and quality of service are however standard requirements for succeeding in Korea and should not represent one's point of difference or brand focus.  To stand out from the rest in Korea, you need to build your own unique story.  

In addition to a unique value proposition, align yourself with an image of honesty, clear communications, prompt response times, and a true representation of what you have to offer.  These are the default requirements for succeeding in Korea and the foundations for your marketing platform. 

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5.  Sustainability is the default setting

Another important part of one’s offering to Korea is a track record for sustainability.  As a consumer market, Korea is at the stage of ‘tilting’, whereby Koreans are increasingly linking unsustainable traditional consumption patterns with harmful environmental phenomena.  New Zealand companies entering the Korean market without a solid environmental platform in place run the risk of getting caught out by the change in the consumer landscape; if for no other reason, their ‘trust credit’ will drop. 

Taking a step further, applying principles of the Circular Economy and disruptive design to a business model for Korea could provide significant opportunities for Kiwi companies.  A circular economy is a regenerative system in which resource input and waste and emissions are minimised through future-proofed design, recycling and reuse of goods.  Korea’s unique institutional and business environment (i.e. high skill levels, R&D investment and smart connected users) present an exciting opportunity for companies that have the will and long-term vision to lead the way through innovation.  With both large and small Korean businesses looking to build their own trust credentials, there are opportunities in-market for canny NZ companies looking for finding partners willing to co-invest in Korea.

A number of factors are behind Korea’s move to more sustainable business practices.  These include a shift in generational perspectives, increased connectedness, and the increasingly ‘in-your-face’ nature of recent environmental issues affecting the region.  Of the latter, dangerously high levels or fine dust pollution in the air is one of the most significant, as it has affected the day-to-day lives of the Korean public. This is notwithstanding the Korean government’s already significant commitments to environmental change.

As a Kiwi breathing in the fine dust in Seoul on a daily basis, it would be great to see more of innovation coming out of New Zealand, or innovative New Zealanders for that matter, giving more focus to this market and the opportunities it presents. 


 

lewis200 BLewis Patterson

World Class New Zealander Lewis Patterson works with innovative businesses to deliver business solutions that help deliver on circular economic principles. Lewis’ company, Latitude Inc, is proactively investing in innovation projects that challenge existing linear business models. Through its Innovation & Sustainability Conference series, it brings together other like-minded businesses to fast-track the transition to a new economic model.

With stints in New Zealand, London, South America, Lewis has now been based in Korea for over 10 years and is fluent in English and Korean.

Connect with Lewis or other members of the World Class New Zealand network through Kea Connect, and help grow your global ambitions.