A division of Soft Landing Korea Ltd.
By Tom Coyner
Sept. 13, 2006
TOKYO - This week I' m writing from Tokyo, the city where I discovered Asia 35 years ago as a Waseda University student. Most of my career I have been better known as a Japan specialist than as an "old Korea hand.'' Majoring in Japanese as an undergrad and then getting my MBA, I eventually worked in Tokyo for over a decade in high tech sales and marketing. I started out cold calling on Japanese firms to sell mainframe computer utilities software, and in time became a marketing director of an American switching hub manufacturer.
From this experience I have been able to look at the Korean market through "Japanese eyes.'' Japanese business has been and seems to continue to be a model by which much of Korean business follows. For example, Korea's chaebol are very much patterned after the Japanese zaibatsu, written in the same Chinese characters, although these days the more politically correct term is zaikai.
The main difference between the two nations' industrial groupings has been that the Japanese have historically anchored each of theirs with a bank. But more significantly, the commonalities shared by the countries' economic development have been striking. While there is not enough space here to treat that subject in depth, let's consider where Korea is today and what Japan of the past can offer as an example of where Korea may wish to be going.
Both countries began their international trade with products whose acknowledged inferior quality was compensated for by low prices. The Japanese, and now the Koreans in their wake, have been able to evolve to where quality assurance, if not consistently at the very top, is nonetheless world class. Back around the 1960s, the Japanese arrived at the same crossroads which confronts many Korean firms today. That is, whether to continue on the safe, relatively risk-free course of selling their goods abroad through trading companies and/or as OEM products of foreign brands -- or to take the plunge and enter major markets, such as those in Japan, the US and the EU, under their own names.
Imagine where Sony would be today if corporate visionary Morita had decided decades ago that the safest and best course had been simply to sell its goods through and under the Radio Shack brand. Today many Korean companies are facing the same kind of export and marketing decisions that Morita-san faced in the 50's and other Japanese companies confronted a decade later. Like Sony and Toyota of the past, Korean companies such as Samsung Electronics and Hyundai Automobile are pioneering Korean brands today. Most Korean companies, however, have yet to effectively enter the largest markets under their own brand. The temptation is to sell through chaebol trading firms or possibly through some other Korean connection in overseas markets.
To compete effectively in any major market, however, requires becoming an inside player. While most if not all Korean companies recognize this, the apparent barrier is a lack of overseas marketing know-how. That includes how to promote and to sell products with little or no reliance on personal contacts. While relationship sales & marketing may be the alpha and omega in Korea, it works primarily only within the Korean environment. The next most comfortable option is to sell through Korean channels. While these Korean and Korean-American venues have much to offer in terms of ease and convenience, they cannot be considered part of mainstream marketing and distribution. The Japanese learned this long ago. Yes, they naturally gravitated to Japan-centered business associations abroad, but they have also found that the benefits of competing as if they were American or European players outweigh the risks.
The liabilities of where Korea stands today were illustrated in my discussions with a wide range of people during my ten-day stay in Tokyo. I met with individuals ranging from executives of Dentsu and Sumitomo to the Japanese Quaker community's thrifty spenders, whose less than aggressive consumption is balanced by their open-minded receptivity to Korean products, given their ongoing interest in and sympathy for Korea's economic and political development.
My questions to these people were as follows:
1. When you think of Korean products, which brands come to mind and for which products?
2. When compared to Japanese, American or European products, what kind of Korean products would you consider buying and why?
3. When you come across the names of Samsung, LG, Hyundai and Daewoo, which products come to mind for each brand name?
While I hardly came up with an empirically correct market sampling, I did discover some interesting points. In spite of some very visible Samsung billboards about Tokyo, Korean brands were not as well recognized as I had supposed. Probably the most successful brand is LG with its unique human face logo that doesn't clearly define itself as being Korean.
Samsung was sometimes correctly identified with consumer electronic products, and LG with appliances, and some Japanese recognized Hyundai as a carmaker. With a bit of prodding, some Japanese could recognize major Korean brands – but those brands were hardly on the tips of their tongues. Furthermore, very few Japanese whom I interviewed had even an approximate grasp of the wide array of products and services provided by these chaebol.
Frankly, beyond pop culture, the Japanese seemed less interested in Korea now than they were a decade ago – and even the hallyu charm seemed to have faded from what it was a year ago. China has replaced Korea as the primary country on Japanese minds, with Pyongyang's antics being the only topic of concern when it comes to Korea.
As for selecting a Korean item over a Japanese or Western product, price was the first consideration but there was also an element of concern about product quality, safety and overall value. The most common Korean products purposely selected by the interviewed Japanese were foodstuffs. For all other product categories, there was a general inclination to go with tried and proven Japanese brands rather than taking a risk on a Korean product. Actually, I had difficulty in finding anyone who had knowingly purchased a Korean product except for food. Some of the Japanese said they were open minded towards Korean products if they met their purchasing criteria, but none had decided on a Korean product simply because of its brand name. One executive said he considered buying a cheaper Samsung television but thought the cost savings did not merit the risk. He plans to seriously consider a Korean television next time he buys one, however – about five years from now.
All of which leads to the following conclusion: Korean products and brands are much less well regarded in the Japanese market than I suspect most Koreans believe them to be. Even worse, one can almost say that Korean consumer products are basically ignored unless they happen to stand out as price competitive at the time of purchase. I could find little correlation between Korean brands and product reputations. I suspect the Japanese example may be a bit more severe than what one may encounter in the US and the EU given the high Japanese standards for product quality. On the other hand, Japanese should be more familiar with Korean brands than Americans and Europeans.
In any case, however, Korean companies aspiring to become world class in their markets, but which are not affiliated with a chaebol group, need to explore new strategies. Advice and consulting from off-shore marketers could help guide them into major overseas markets. Actually, chaebol subsidiaries might be wise to do so as well, but could find it politically problematic. In any event, while the Japanese business model is less than perfect, it can serve as a basic roadmap of where to go, and suggest some turns to avoid. As in all business strategies, standing still is not a viable option. Korean companies now must decide how best to continue to grow internationally. Unlike in the past, it is now obvious that further growth requires world-class marketing, in which effective branding must play a major role.
Tom Coyner is a long-term resident in Korea and runs consulting firm, Soft Landing Korea. Coyner can be reached at www.softlandingkorea.com.