With a domestic population of over 50 million, the fourth largest economy in Asia and the 11th in the world, business in South Korea presents a growing opportunity for UK exporters. Here, we outline what it takes to meet the challenge of exporting to the region.
If you thought South Korea was one of Asia’s best kept secrets, you’ll be disappointed to learn that the secret is out; between 2010 and 2014 UK exports to South Korea rose by almost 50%[i]. The biggest driver of this change has been the EU-South Korea Free Trade Agreement, implemented in July 2011. As part of this agreement, tariffs on most goods imported to Korea from the UK are no longer imposed.
Though no one knows how the UK’s decision to leave the European Union will impact trade agreements like the one in place with South Korea, the region remains an attractive destination for UK businesses and investors.
Here, we offer 5 tips on beginning your export journey to South Korea.
Do your research
It goes without saying that SMEs should do their homework before entering any new market. For South Korea, it is particularly important to understand the entry barriers and requirements as well as doing background checks on any local partners or customers.
The search engine Naver is South Korea’s equivalent of Google and a useful starting point for finding out local information including business records, history and current operations of any potential business partners. It’s also a good place to start investigating your competition should you wish to do business in South Korea.
Find an agent
Once you’ve done your research and decided there is an opportunity for your product or service, it is best to find a local agent to handle distribution.
Whilst it is possible to set up your own business or representative office in the country, the costs and resource needed for this are high and can be prohibitive. With an effective agent, you are likely to get access to readymade networks as well as benefitting from the local knowledge and experience.
UKTI have a number of local teams and advisors who can guide you in choosing an experienced agent that suit your business. They also have a very helpful free guide too.
Respect the culture
Basic appreciation of Korean history, heritage and culture will get you a long way when doing business in the region. Etiquette and respect are particularly important when building business relationships and understanding local taboos will avoid any awkward situations.
For example, the number 4 is believed to bring bad luck and you would do well to avoid holding meetings on the 4th of any month or selling goods in groups of fours or renting an office on the 4th floor. On the other hand, 7 is believed to bring good luck and fortune so it may be a good idea to brand your product accordingly.
Be prepared for hierarchy
As a culture that places emphasis on respect, be prepared to follow certain hierarchical guidelines and procedures when doing business in South Korean, workinf with Korean partners or selling to Korean customers. Internal operations within any companies you work with need to be respected and processes are held in high regard.
Many of the larger Korean founded businesses still operate as family businesses with founder’s family continuing to exert a great deal of direct executive authority over business operations. If you’re dealing with a chaebol (a large family-owned business conglomerate in Korea) then patience will be necessary to achieve your end goals.
Find your niche
South Korea’s phenomenal growth has led to a number of British companies exporting to the region including well-known brands like Burberry, Standard Chartered, Jaguar Land Rover, and BA all have a significant presence in the region.
Nevertheless, opportunities remain for British SMEs and UKTI has identified a number of strategic priority sectors including aerospace, creative industries and ICT, automotive, consumer products, fashion, food and drink, education, energy, environment, financial and legal services, life sciences and sports infrastructure for companies to do business in South Korea.
Finding where your product fits in the market and assessing demand will be key in making your business a success in South Korea.
For more tips and guides on international trade, join us at Think Global, a free one day event for SMEs looking to expand internationally.