With a view to guiding Australian exporters to this lucrative culture, Joe Parkes examines tradition and modernism in South Korea.
When Australian exporters lob into Seoul for the first time they are invariably surprised at how modern and familiar everything looks: the high-rise business centres, charming suburban homes and flats, wide, busy streets and verdant hills and parklands on both sides of the city’s bisecting Han River. The surprise of exporters turns to admiration when they discover South Korea’s splendid hotels, glamorous restaurants, super high-speed internet services, and marvellously efficient subway networks.
Add to this the fact that South Korea currently imports around $11.715 billion of Australian exports (primarily coal, iron ore, crude petroleum and aluminium) and the market starts to look decidedly interesting. But it would be a mistake to assume that "modern" automatically means "western". Seoul’s high-rise façade hides a heart that is deeply traditional and ferociously proud.
Koreans respond to a show of appreciation of their ancient culture and their progressive nation-building. You can go a long way in Seoul by using a couple of simple Korean phrases like Thank You (gam-sa-ham-ni-da) and Hello (an-yong-ha-say-yo).
No society’s mores remain entirely rigid (with the possible exception of North Korea) and economic pressures have had an impact on the way South Koreans live and work. Males are no longer the primary earners in all households, and even where they are, they tend to hand over their pay-packets to their wives who take care of most purchase decisions. This is a fact that Australian exporters might like to consider when targeting their products at Korean consumers.
Brand Australia
Austrade’s Seoul-based senior trade commissioner, Elizabeth Masamune, says Korea is also a highly brand orientated society. A product’s Australian origins can provide the ‘brand’ support that produces good results.
"Using ‘Brand Australia’ to promote your products is an important marketing and business platform for individual exporters who aren’t well known in their own right," she says. An Austrade Australia Day product promotion to businesspeople in Seoul called ‘Many Faces of Australia’ generated hundreds of thousands of dollars in immediate sales and $1.5 million more in later deals.
It also highlighted the diversity of exports that Australia is offering to the Korean market—everything from golf swing simulators to beef, beer, and wine, women’s fashions to wildflowers and Aboriginal art, gourmet food items to natural cosmetics.
She offers the example of a soap product called Billie Goat Soap—created by NSW Central Coast businesswoman, Leanne Faulkner—as a good example of a small Australian company producing a handmade quality product on a commercial basis.
"Korean customers are always looking for good quality natural products," Masamune says. "Recent retail sales figures of bath and shower products in South Korea were around $263 million."
Balancing this preference for new, quality products is the fact that in many ways Korean society is dominated by issues of respect and status. The Korean language is packed with verb endings that indicate how much respect you should show to another person, but this won’t usually be a concern for visiting foreigners. Even visitors, however, won’t escape the national trait of curiosity and they may often find themselves being closely questioned on personal issues like "How old are you?" and "Are you married? How long? How many children?"
Business visitors may also find there is anopther expectation placed on them—to be very punctual. Expect, too, that you will almost inevitably get involved in some heavy drinking—Soju rice wine, beer and Scotch seem to be the preferred tipples, although wine is now increasingly popular—as your business relations develop. Alas, karaoke—called no-rae-bang in Korean—is still alive and popular and since most machines contain at least some songs in English, you will be expected to sing along at après des affaires events.
A lot more sensitive is the issue of Korea’s long and complex relationship with Japan, which invaded the Korean peninsular during World War II. Koreans generally admire Japanese business acumen but do not appreciate foreigners comparing the two nations.
Ben Ford, senior economist at the government’s insurance specialists, EFIC, says there is a standard warning to potential businesspeople to make sure they don’t use Japanese-language business cards when dealing with Koreans.
Many South Koreans are concerned about their country’s slowing economic growth, under pressure from a number of political issues which economists fear could constrain domestic demand and deter foreign investors. "But these challenges may become opportunities for Australian firms because we are strong in areas where they lack experience, such as aged care and the need to develop and manage pension schemes and health care systems for aging citizens," says Ford. "Australian exporters, especially SMEs, should try to identify areas where they believe their exports will draw a response from Korean consumers. Get to grips with Korea as a place to do business and don’t ever think of it as a market where fly-by-night businessmen will prosper."
Slowing inflation, accompanied by a softer growth outlook, means interest rates are likely to remain on-hold in coming months. Like Australia, however, Koreans are concerned over rising property prices and the government has announced new measures to cool the real estate market. There’s a presidential election slated for December 2007 to decide the successor of President Roh Moo-hyun, and it is looking increasingly unlikely that the ruling Uri party will retain the presidency.
Back at the business negotiating table, Koreans place a lot of importance on developing personal relationships with business contacts, so allow time to get to know your clients. Turning up cold and trying to do a deal is almost guaranteed to fail. The best way to get a foot in the door is through introductions by mutual contacts.
The exchange of business cards (preferably bilingual) is very important and must be conducted with respect. Present and receive cards with both hands—never with the left hand because that indicates disrespect.
The way you do business in South Korea can sometimes determine whether your offer succeeds or fails, though Koreans remain very price and quality sensitive even if they do prefer to work with people whose style they like.
They also show a definite preference for "contracts" based on consensus that allow for some flexibility, while an Australian will be anxious to get a written contract that specifies every detail. Even so, the exporter needs to be sure that all obligations are spelled out in a contract and that the details are fully understood.
"Korea’s business environment is not as open as Australia’s," says Ben Ford. "An international survey of corruption perceptions by Transparency International ranks South Korea 42nd out of 150 countries. In comparison, Australia is ranked ninth. Perhaps this perception of ‘corruption’ can be traced back to Korea’s rather opaque business environment and the links that exist between commercial operations, even though the power of Korea’s "mega-companies"—the chaebols—is said to be waning.
"But South Korea’s challenges are not insurmountable. If you put time into developing your business relationships they will be more likely to pay off. Just make sure your initial contacts are solid ones, brokered by str
ong, reliable people, and the process will put you in good stead."
Exporter’s Checklist
Visas: Australian passport holders can enter South Korea without a visa for up to 90 days.
Transport: Korean Air and Asiana airlines fly to Seoul from Sydney.
Currency: South Korea’s currency is the won. Notes are 10,000, 5,000 and 1,000. Coins are 500, 100, 50 and 10. (1,000 won converts to roughly A$1.30).
Hotels: A double room in a super deluxe hotel costs round 200,000-400,000 won; deluxe 150,000 to 250,000 won, first class hotel 100,000 to 150,000, second class 50,000 to 100,000 won, third class 30,000 to 100,000 won. Prices vary by season and location.
Vat: 10 percent value-added tax (VAT) is levied on most goods and services including rooms, meals, and other services.
Cards: Most restaurants, hotels, and shops accept credit cards.
