There are certain dichotomies in the Korean market. On the one hand, it is open for business; on the other, it is in many sectors dominated by the chaebol (a term used for family owned conglomerates) and there also remain less obvious barriers to entry which can be significant. Likewise, it has a highly skilled and generally English speaking workforce but there can be significant regulatory and cultural challenges. At the same time, Korean business people can be extremely pragmatic.
Korean society is based on a form of Confucianism. Historically, Korean industries were heavily protected. There has however been a demand for foreign goods which had both a certain cachet and were often perceived as higher quality than local products. Historically these were the subject of high tariffs. At the same time, they were perceived as symbols of status and very much sought after. Korea has signed FTAs with a number of countries; the demand for those foreign goods has remained the same.
Of course, a foreign company needs to give careful consideration as to the proposed business model: subsidiary, joint-venture, distributorship and it is interesting how different foreign companies, even in the same industry will choose different models. For example, one German car manufacturer is a wholly owned subsidiary. The importer of a US heavy displacement motorbike follows a distributorship model. A French automobile company has a partnership with a local chaebol.
Another example is in the supermarket business which is dominated by a local chaebol owned effective oligopoly. French grocer Carrefour was largely unsuccessful and exited Korea in 2006. The US giant Walmart exited the market around the same time arguably for cultural reasons. Likewise, the British grocery giant Tesco exited the Korean market within the last couple of years having had more success than its two other foreign predecessors. One of the main reasons for its lack of success was arguably capricious local regulations – changing Sunday trading days ostensibly to protect smaller grocers.
The British pharmaceutical giant Boots has recently entered the market in partnership with one of the big local players, Emart. It remains to seen whether they will prove successful. The moral of the story is that there are myriad economic, regulatory and cultural factors which need to be considered on entering the market. The small local nuances can mean a lot.
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