VIEWPOINT | DOING BUSINESS IN SOUTH KOREA

South Korea is a key production base for companies wishing to serve markets throughout southeast Asia. The recent trade pact between Korea and the U.S. is already having a positive impact on the opportunities for business growth in both countries. But as in any new market, there are special factors to consider in making a business venture successful. A recent webinar by the Dykema Automotive Institute explored the key issues in doing business with Korean companies in their home country and in the U.S.

The panel was led by Jin-Kyu Koh and Hoon Noh, the leader and assistant leader, respectively, of the Dykema Korea team. They were joined by James Park, chairman and CEO of Global Auto Systems Inc., a Detroit-based automotive consulting firm, and Joel Ewanick, the former chief marketing officer at General Motors Co. and vice president of marketing for Hyundai Motor Co.'s U.S. unit who joined Global Auto Systems in October 2012.

When does it make sense to make a move into Korea?

The window of opportunity is right now. Costs are reasonable, quality is high and the country has a hardworking and knowledgeable workforce. In that regard, Korea has an edge over China, which is still emerging.

There are only about 14 million passenger vehicles on the road in Korea today, so it's not a huge automotive market in itself. There will be a significant increase in the sale of foreign luxury brands there in the next several years. But the country is a major hub for exports, and that's where the opportunity lies. Establishing yourself in Korea opens up channels to export to other Asian markets and beyond.

Where can a company get background on doing business in Korea?

A good place to start is online. There's a huge amount of useful information available on the Web from KOTRA, the Korea Trade Investment Promotion Agency. Do your homework. Find consultants and others with experience who can build your comfort level. This is a big factor.

Unlike other major national markets, there are few carmakers in Korea. As an outside supplier, you'll need to develop a relationship with a local company. Fortunately, Korean carmakers want to expand their domestic supply base. They are looking for companies that can offer technology, innovation and production efficiencies.

Does it help to get started by doing business with a Korean company in the U.S.?

Hyundai-Kia is the key entry point because that company accounts for more than 40% of the Korean automotive market. General Motors Co. is another route. In any case, working with a Korean company's American operations provides an entr e. But the key is to have something of value to offer in Korea. Technology is a good example. If your product is a commodity, the company you're talking to is likely to remain with its local supplier.

What investment incentives do Korea offer to foreign companies?

The government may provide 5-10 years of tax exemptions and other incentives. The opportunities are there, but the Korea government has set rules and expects companies to follow them carefully. To get all the benefits, you must follow the process.

Are joint ventures a good idea?

Yes, but as in any country, you need a clear set of business objectives. It's also important to understand Korea's commercial code. U.S. companies tend to be guided by the contract. Korean companies look at the actual business. They're guided by the goals of the enterprise.

Korean business is relatively straightforward. It's important to show respect and extremely useful to understand the Korean culture's sense of hierarchy, which permeates almost everything including how consumers choose the cars they buy. Bringing the proper level of executives to a meeting is critical, and relationships are more important than paper contracts.

Western companies face an obvious language barrier, even though most Korean business people understand English. Foreign-based companies would be wise to hire local managers, just as Korean companies do when they set up operations in the U.S. and elsewhere It's a mistake to apply American or European business models in Korea and think you can do everything with Western managers.

What about other cultural challenges?

There are fewer than you might imagine. Koreans are easy to work with and willing to resolve differences. They've already climbed the learning curve. Westerners who perceive the country as backward or odd are seriously out of date.

Expect discipline and relentless drive, whether you're dealing with a Korean company in its home market or here in the U.S. Korean business people are accustomed to working 12-hour days, and they expert their American partners to show the same commitment. Do that, and you'll earn the respect and support of your Korean partner.

To learn more about Dykema and the Dykema Automotive Institute, click HERE or visit www.dykema.com.