Aug 10, 2009

Koreans Hold Unique View on Foreign Firms by Tom Coyner

For many years, the Korean market has been synonymous with protectionism in many foreign marketers' minds.
However, with the advent of a strong middle class and its successful struggle to gain a genuine democracy during the past two decades, many of the trade barriers have fallen. As more foreign products and services have become integrated into the Korean economy, a wider acceptance of foreign corporations has taken place.

However, it would be a mistake to say this is a trend.  A number of counter factors remain -- some of which are even strengthening.

Foreign companies, especially from the major countries, are regarded with mixed feelings.

While high technology and advanced products are admired and coveted, they are at the same time somewhat feared by Korean businessmen who perceive the possibility of having to depend on them.

When using foreign IT products and services, Koreans sometimes feel they themselves are not up to snuff in some way.

When work-arounds are devised using Korean solutions, many Koreans take pride in "getting smarter" -- no matter what may be the real costs, and often despite a lack of design for long-term flexibility.

In recent years, however, Korea has generally become more accommodating to foreign business, perhaps not by choice, but by necessity as its trade and investment overseas are expanding rapidly.

Even though most Koreans acknowledge that Korea's economy is highly trade-dependent, in 2004 it took seven months of deliberations and three failed attempts for the National Assembly to ratify its first ever free trade pact with another nation, Chile, because of the overzealous and nationalistic agrarian interest groups.

Nonetheless, the trend is evident in relaxing regulations on imports and foreign investments -- though most foreign chambers of commerce would say the pace of deregulation is still too slow.

In relations with major trading partners, Korea tends to have a "poor country mentality."

Just four decades ago, it was regarded as one of the poorest in the world, requiring much relief aid from advanced countries. Even after attaining their present prosperity, Koreans still regard themselves as poor, needing preferential treatment from trading partners.

Until fairly recently, the United States had been looked upon as a generous big brother with unlimited affluence and resources, while Japan continues to be regarded as a country that should eternally compensate Korea for its colonial exploitation.

Today, younger Koreans look upon the U.S. in less favorable terms -- partially out of concern that America seems at times an economic bully, and partially because a large number of younger Koreans blame the US for being an obstacle to unification of the country. In dealing with the ever-growing trade frictions with these two major trading partners, Koreans have maintained these attitudes.

The readjustment of past relationships, along with the recognition of a new relationship with China, increasingly recognized as an economic giant at Korea's doorstep, seems to take a long time, often to the detriment of cooperation.

Even after becoming an OECD member in December 1996, South Korea feels a bit disadvantaged. Korea's 2002 gross domestic product, at $898.7 billion, was 10th among the 30 member countries.

The average GDP of the OECD members was $962.4 billion. Perhaps by other developing countries' standards, Korea with its high tech strengths may be viewed as a "poor little rich country." Yet Koreans measure themselves by the standards of Japan, the US and Western Europe.

And from that perspective, they feel relatively impoverished.

Another factor in relation to foreign business is the growing sense of nationalism, especially among the younger generation.

As the nation's economy becomes healthier and stronger, there is a growing sense of nationalism, which may also be a latent legacy of past President Park Chung Hee's infusion of positive thinking and somewhat chauvinistic sentiments. More recently, under the Kim Dae Jung, and even more so the Roh Moo Hyun governments, populism has become a key element in the population's thinking.

This includes a strong element of "minjok-jui" which literally means "racism," but actually means something more akin to the Spanish "la raza," or prideful recognition of a common ethnicity. A natural, if unfortunate, side effect is a kind of generally benign racism that resents foreign influences on the fate of the nation.

These sensitive and idealistic young students who did not experience the hardships of war or poverty are inclined to more independent and nationalistic ideals.

The collective, younger generation's voice in the last presidential election was temporarily loud enough to win the acceptance of the majority of student voters and of the general public. With a nationalist, populist government in power, however, many of the weaknesses of this philosophy have become self-evident.

As a result, today there is an emerging moderate and practical _-- and at times even conservative -- body of young people. In any event, nationalism remains a very strong, emotional factor in the daily lives of Koreans, and foreigners have no choice but to handle the matter sensitively.

Koreans generally associate foreign-origin brands with quality and durability.

That's why many manufacturers and marketers like to give even truly local products western brand names or western graphics, even if the products are exclusively for local buyers.

Though nationalistic sentiment may indicate otherwise, nowhere is prejudice for foreign goods more evident than in buyer behavior or buying habits.

Buyer preference for quality seems to transcend ideology everywhere. In reaction to this trend, some consumer activists have attempted to discourage the purchase of foreign-brand products, alleging that high royalties have to be paid to foreign licensers for using their brands on local products with the same quality as foreign brands.

This kind of propaganda can seep into corporate buyers' thinking, sometimes convincing them that purchasing foreign goods represents a "loss" to Korea as money is remitted overseas as earned profits.

Still, the general perception of foreign companies among most Korean buyers is rather favorable, again relating to their quality goods and services as well as the impression that foreign corporations provide better working conditions for national employees.

This is counterbalanced by an overall anxiety as to whether foreign companies can provide the same level of apparently unconditional after sales support offered by local companies. While production quality assurance (QA) is greatly improving, too often in the past, the quality seemed to go in after the product was installed rather than during manufacture.

Consequently, 24x7x365 technical support has become standard in many information technology (IT) sectors.


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This article appeared in the Korea Times.

Tom Coyner is President of Soft Landing Consulting(www.softlandingkorea.com), a sales and business development consultancy, and serves as senior commercial advisor to J & S Law Firm's International Practice Group. His professional involvement with Korea began in 1975.  http://www.softlandingkorea.com/