A division of Soft Landing Korea Ltd.
By Tom Coyner
October 15, 2008
As someone who makes a living helping foreign companies come into the Korean market and being successful in their sales activities, I often find myself almost negotiating with foreign executives over the phone as to their timing of entering the Korean market, as opposed to their going into Japan and China first.
There is a strong argument of why Korea should be considered a first entry point into the large Asian markets where English is not a national language.
Compared to Japan, with its multiple economic centers, most business opportunity is concentrated in the greater Seoul metropolitan area and thereby offers simpler marketing and distribution.
China offers the greatest statistical attractions, but it is by far Asia's most hazardous market where rule of law is more a concept or convenience than a reality and where caveat emptor is taken to exasperating lengths.
In fact, I regularly advise that Korea is a great place to learn how to do business in the real Asia that lacks a Western colonial legacy.
The costs of experience are relatively low and even the strategic costs of failure are less than having things go sour in China or Japan. Ultimately, if one cannot succeed in Korea, one is hardly likely to do better in Japan or China.
Given that, one may think Korea would be a more popular place for foreign companies to invest. The reality is that Korea remains, even today, a secondary market. Korea is too often regarded as an introspective society with flash points that Western observers are often too quick to describe as being xenophobic.
In fact, Korea is probably not substantially less introspective or xenophobic than many other countries, but it definitely suffers being a relatively small country between two of the world's largest nations with similarly sized economies. At the same time, Korea retains a robust economy that many other countries may envy ― even during times when the economy suffers by Korean standards, when in fact most countries would be satisfied with similar GNP growth in good years that Koreans complain as representing their bad years.
Nonetheless, there are some real, concrete issues ― many of which are not entirely in the public view. But their collective results are discernable, such as the drop in foreign direct investment (FDI). According to the Korean Ministry of Knowledge Economy (an English translation that illustrates part of the problem), FDI has dropped from $12.79 billion in 2004 to $7.42 billion so far this year.
During the past few years, this FDI drop has coincided with the Lone Star saga of troubles in trying to sell Korea Exchange Bank.
The problem of Korean government agencies standing in the way of Lone Star's repeated sales attempts, often trying to come up with retroactive rules for taxation of Lone Star profits, has surely given pause in many overseas board rooms.
Furthermore, as zany an impression the irrational anti-mad cow disease demonstrations may have made on foreign executives earlier this year, what probably was more significant was President Lee having to order his subordinates to return to Washington to renegotiate the terms and conditions of the U.S. beef imports resumption agreement.
More than many Koreans may realize, Korea suffers an image problem when it comes to contractual compliance. To be fair, this is one aspect of how Koreans conduct business amongst themselves.
Yet in a global economy, while one needs to act locally, one also needs to think globally when it comes to the basics of business. And that includes the validity and reliability of consummated contracts.
When President Lee sent his representatives back to Washington to renegotiate the beef import agreement, many foreign business managers recalled unpleasant memories and stories about misadventures in doing business in Korea.
After all, if the word of the Korean head of state cannot be trusted, what may one expect in working out a deal with a Korean company's CEO?
Given this, Korea needs more effective national branding. Rather than the current practice of various bureaucracies sending out non-complimentary messages about Korea, one would think Korean government decision makers collectively need to return to the basics of Marketing 101.
That is, beyond each bureaucracy establishing growth targets and inductively rationalizing what needs to be done, there should be greater consideration, on a national government basis, of the needs of Korea's targeted countries and companies.
In other words, government planners need to better think in terms of what potential investors may desire, vis-a-vis competing nations' offerings, rather than what Koreans think foreign investors would be satisfied in finding here.
Admittedly, some of this type of thinking has been in play during recent years, but that is where things seem to stop.
If planners dusted off their old marketing text books and looked at Kotler's Four P's of marketing and then considered Asia-Pacific as the entire market, they might do better in defining Product (what Korea has to offer), Price (what kinds of tariffs, taxes and investment incentives to provide), Place (what kind of distribution and logistics and related costs Korea offers both domestically and internationally) and finally, and only after serious consideration of the first three Ps, Promotion (what kind of message does Korea wish to consistently send out to the rest of the international business community).
Back in 1981, Al Ries and Jack Trout came out with a fifth P, Positioning. They argued only after careful analysis of the first four P's can anyone effectively establish the position of one's product, company ― or country.
Turning back to current realities, too often it seems we witness trade and tourism promotions trying to position Korea without adequate appreciation of how non-Koreans may view the first 3 Ps. As such, the promotions fall flat. In fact, promotions such as "Hi Seoul," "Korea Sparkling" and "Dynamic Korea" don't seem to hit the intended targets. At worse, and too common, these slogans seem even comical to many foreigners.
So why is this? Korean bureaucrats are not stupid. They are highly educated and often spend money on international marketing companies.
The problem seems to be that the tried and generally true approaches by these PR and marketing companies are mangled in the bureaucracies, often at inception.
The necessary investments that other, less affluent countries are willing to pay for proper research and launch of national branding are arbitrarily dismissed as being too expensive by Korea's all wise and powerful bureaucrats.
Instead, and too often, cheap short-cuts are implemented that rarely, if at all, adequately survey what foreigners perceive Korea to be and what messages may positively impact on foreigners.
Instead, any sort of market research is generally done within Korea, often involving Koreans who have little or no overseas experience.
And as potentially lame as that approach may be, I know of at least one major campaign where even that kind of domestic research was apparently discarded in favor of a bureaucrat's ``bright idea'' so that bureaucrat could boast to others in private that he came up with the slogan by himself.
So it seems to come down to much of Korea's image problem may be traced to competing egos among senior officials who often unwittingly, and possibly callously, place the nation at a disadvantage ― be it in terms of interpreting financial and taxation regulations or determining national and city branding.
While most foreigners may not have a clue as to why Korea seems to continuously act against its overall best interests, they could care less. It takes real intellectual fortitude on many foreign investors' parts to see past the nonsense of what many government officials throw up, which hides the genuine and often incredible business opportunities within Korea.
Sometimes, as in the case of Lone Star, there is indeed good reason for foreign investors to be wary. But more often than not, the nonsense is greater than the market reality.
Unfortunately, egotistical government officials, when often making off-the-cuff decisions, seem only in retrospect, if ever, to understand the damage they are doing to Korea.
The good news is this kind of problem is not part of the ``Korean DNA.'' Private industry has shown itself to more likely to pay sincere attention to outside professionals' advice.
It is no wonder. Private companies properly understand how hard it is to earn money and generally invest more wisely than many government officials. That is why brand names like Samsung and Hyundai are now globally respected. In contrast, consider the frequent giggles generated by ads touting "Korea Sparkling" and "Hi Seoul."
Policymakers Need to Apply Basics of Marketing
Korea offers excellent investment opportunities for foreign direct investment in Asia. Korea is in some ways the best, first market for foreign firms to enter among the major Asian economies. Yet, the nation suffers from a significant image problem that inhibits market entry. Part of the problem is negative stereotyping by foreigners, but more often the problem can be traced back to government officials and bureaucracies in how they represent Korea abroad or to foreign investors. Too often there seems a reluctance to apply the basics of good marketing in favor of senior bureaucrats' off-the-cuff decisions.
Korea needs a common national branding, that cuts across all government boundaries, to give a consistent message abroad. At the same time, Korean decision makers should follow other countries' better examples in adequately investing in professional public relations and marketing companies and applying outside advice to the final decisions. Too often to date, decisions have been based on poorly thought out expediencies and even egotism.
In contrast, some of Korea's leading companies have successfully achieved positive global recognition in corporate images and branding. Korea's poor image is not a matter of cultural differences but a lack of applied common sense.
Who is Tom Coyner?
Tom Coyner is president of Soft Landing Consulting, Ltd. He studied at Waseda University in Tokyo and at UCLA. He has a BA in Japanese literature from University of Colorado and an MBA in international business from the University of Southern California. In 1975, Tom first came to Korea as a Peace Corps Volunteer in the same group as US Ambassador Kathleen Stephens. Since then, he has worked in both HR and high tech sales & marketing in Korea, Japan and the United States. Soft Landing Consulting focuses on improving sales results of primarily foreign firms in Korea and Japan.