Korea is an interesting country! It was one of the poorest countries in the world in 1953 following the Korean War; now, it now has the 11th largest GDP. There is a seeming and increasingly palpable threat from its supposedly crazy (who is not) neighbour in the north, yet contrary to the harbingers of impending doom that is frequently the western press, its populace carries on blithely as normal.
One of its main strategic allies is the USA which has over 20,000 of its military personnel here. Recently, China placed an effective embargo on certain Korean exports including its entertainment industry which is huge in Asia (it may actually be a good thing that Psy is kept in the country!). The reason was the Korean decision to allow the US to deploy the THAAD defensive weapon system in its territory.
At the same time, it is estimated that the top ten chaebol (family owned conglomerates) are responsible for 80% of the GDP with Samsung contributing some 20%. It arguably only fully transitioned to a full electoral democracy in the late 1980s; however, its last President – the atavistic daughter of a dictator and that era – was impeached and is now awaiting to be sentenced on a variety charges including corruption.
Likewise, the Vice Chairman of Samsung, Lee Jae Yong (de facto Korean royalty), has been remanded in custody and is awaiting trial on bribery and corruption charges; the state of health of his father is unknown. This is almost unprecedented. Chaebol heads have historically been given slaps on the wrist for egregious white collar crimes. They were typically given Presidential pardons on the grounds that their skills are “essential” for the national economy.
The new reformist President – Mun Jae In – has just been elected and it is hoped, among other things, the process towards full economic and cultural democratisation will be expedited. Ironically, Samsung, with its family leadership indisposed, is doing better than ever perhaps because of this fact.
Korea is a great place to do business; there is a real thirst for foreign goods. So, what are the three biggest challenges for foreign businesses wishing to do business in Korea?
- Competition
The big boys (chaebol) “own” a lot of the economy. There is a significant level of horizontal and vertical integration. The maxim: don’t compete with the big boys might apply. This is certainly true but they can make excellent partners. The flip side to this is having the right product or service and being able to find the right partner.
- Regulatory Matters
The Korean regulatory system can be highly complex and pernicious. Regulations frequently change. It can be difficult to work around. An adjunct to this is what is perceived to be a relatively inflexible Employment Law system; it can be extremely difficult to fire non-performing employees.
- Business Culture
This is perhaps a naughty one! Korean culture is based on a form of Confucianism. This is transposed to the workplace which has historically been male dominated. Given that all healthy males must do military service this also often translates to the work place; companies can often be run in a militaristic fashion. It is perhaps better to say that culture is not the issue; rather, it is the failure of foreign businesses to understand it and have an appropriate strategy.
Again, Korea is a great place to do business but it has its challenges. What are the biggest challenges for foreign companies in your jurisdictions?
