SOUTH KOREA

by Max Wan

South Korea's Flag

6.2 % economy grow in year 2010

Reasons for strong economy

·         Strong in domestic and export demand

·         Focus on developing next generation technologies, industries

·         Improvement in global business environment

KEY CHALLENGES

·         Unique standard

·         Less than transparent regulations

·         Pressures to reduce price

·         Ratify free trade agreements with countries except United States

KEY OPPORTUNITIES

Gyeongbokgung Palace

Excellent niche market sectors

·         Automotive Parts and Accessories

·         Broadcasting Programming and Equipment

·         Computer Software

·         Construction Machinery

·         Cosmetics

·         Defence Industry Equipment

·         Drugs and Pharmaceuticals

·         Education and Training Services

·         Healthcare Technology and Medical Devices

·         Pollution Control Equipment

·         Renewable Energy

·         Smart Grid Technology and Services

·         Specialty Chemicals

·         Travel and Tourism

·         Wireless Broadband Equipment and Services

Korea Aims

·         Highly advanced technology-oriented economy

·         Establish as an international business centre for North East Asia

·         Major financial and logistics hub

                                  

USING AN AGENT / DISTRIBUTOR

·        Appointing a registered commissioned agent (offer agent) on an exclusive or non-exclusive basis

·         Naming a registered trading company as the manufacturer’s representative or agent

             i.    Can manage import documentation and imports for their own account

·         Establishing a branch sales office managed by home office personnel with Korean staff.

ESTABLISHING AN OFFICE

·         Take advantage of serviced offered by “Invest Korea”

             i.    Is an investment promotion agency for Korea

             ii.    An arm of the Korea Trade-Investment Promotion Agency (KOTRA)

             iii.    A government-sponsored non-profit organization with offices throughout the world

             iv.    Staffed by KOTRA personnel and complicated by officials from relevant government ministries and specialists from private sectors

·         Invest Korea assistance

            i.    Identifying necessary administrative procedures

            ii.    Consulting on forms of investment, including M&A, joint ventures and real estate acquisition

            iii.    Providing legal and taxation advice

            iv.    Investment planning

            v.    On-going and follow-up support

            vi.    Maintains an Ombudsman to address foreign investors’ grievances

DISTRIBUTION AND SALES CHANNELS

·         Through large discount chains is one of the best ways to market foreign products to Korean consumers

·         Use parallel imports to marginally reduce the value of an exclusive distribution agreement

SELLING TECHNIQUES

·         Adapting products and procedures to Korean tastes and conditions

·         Regular communication with Korean business partners and customers

·         Consistently exhibiting a firm commitment to the Korean market over the long run

·         Selling to manufacturers

            i.    Good personnel contact on building long relationships to obtaining first-hand acquaintances with new processes and equipment

·         Suppliers should

             i.    Making visits to Korea to augment the efforts of the local representative

             ii.    Bring representatives back to the home office periodically to ensure they are fully informed, motivated and up-to-date on the supplier and its offerings

             iii.    Allowing the distributor or agent to appropriately select from your company’s full product line items for sale in the market

             iv.    Holding demonstrations, seminars and exhibitions of product in Korea

             v.    Increasing the distribution of technical data and description brochures

             vi.    Improving follow-up of sales leads

TRADE PROMOTION AND ADVERTISING

·         Korea International Trade Association (KITA)

            i.    Largest trade association in Korea

            ii.    Member of World Trade Centre Association (WTCA)

            iii.    Explores new trade opportunities by organizing trade missions and market survey teams to a number of foreign countries on a regular basis

            iv.    KITA’s Trade Service Centre (TSC) assists potential foreign buyers or sellers

            v.    TSC offers on-the-spot consultation and personalize advisory service regarding trade rules and regulations, export and import producers, business management, market research, technology development and, taxation

·         Convention and Exhibition Centre (COEX)

            i.    Covering 36027 square meters of exhibitions space

            ii.    Largest trade show venue in Korea

            iii.    Full-service trade organization

            iv.    Offer multi-lingual simultaneous translation

            v.    Equipped with world-class audio-visual equipment, state-of-the-art lighting and sound systems

            vi.    Provide up-to-the-minute information services

·         Other exhibitions centre

            i.    Seoul Trade Exhibition Centre (SETEC)

            ii.    Busan Exhibition & Convention Centre (BEXCO)

PRICING

·         Buying Resources

            i.    Buy lowest priced raw materials and equipment, even at the expense of quality

            ii.    Prefer Japanese goods than US goods

            iii.    Offset labour wages with lost-cost inputs

·         Marketing

            i.    Adapting their products to Korea by marketing basic units

            ii.    Taking into account in price quotations the likelihood of repeat business for spare parts and auxiliary equipment

            iii.    Emphasizing and marketing the idea that the superior quality of manufactured input products ultimately results in lower production cost

·         Commission

            i.    5-7% : Product categories - general machinery, including packaging, construction, and material handling equipment

            ii.    15-18% : Sophisticated products – medical, laboratory, and scientific analytical instruments

·         Tax

            i.    10% sales tax

            ii.    10% VAT on services provided in Korea

Business Customs

·         Korean not expecting foreigner to follow their tradition, however, it is much appreciate and admire if you show familiarity with their customs

·         Have great respect for age and hierarchy

·         Hierarchy is deeply entrenched in Korean psyche

·         Prefer to discuss business with persons of the same rank

·         Preferably bilingual business card

·         Common if being asked about age, marital status, and other personal information to help them determine how they should address you.

·         Mix business with social life

·         Appreciate individuals with clear in regard to their morals

·         After work activity “no-rae-bang” (Korean karaoke)

·         Should sensitive to Korea’s long history when doing business

·         Don’t compare Korea to other Asian countries except Singapore

·         A strong grasp of the English language is not common

·         Relationship are very important, Korean prefer to work with someone they knew

·         Negotiating style is important

·         Most Korean has three name, surname followed by two given names

·         Address using surname of formal titles if possible

Seoul

Fact Facts

Official Name	Republic of Korea
Population	48755000
Capital	Seoul
Area	99720 sq km
Ethnic Groups	Korean 100%
Religions	Christian 26.3% Buddhist 23.2% Other 1.3% None 49.3%
Major Language	Korean
Monetary Unit	Korean Won (US$1 = KRW1100)
Major Industries	Electronics, telecommunications, automobile production, chemicals, shipbuilding, steel
Major Export	Semiconductors, wireless telecommunications equipment, motor vehicles, computers, steel, ships, petrochemicals
Major Imports	Machinery, electric and electronics equipment, oil, steel, transport equipment, organic chemicals, plastics
GDP	US$ 1.459 trillion
GDP per capita	US$ 30000

Source: SME Magazine, November 2011, Malaysia Edition, Market Focus