A digital marketing consulting firm explains! How to do business successfully in Korea?

I would like to receive consulting services to expand my business into Korea.

What do I need to do to prepare for a successful business in Korea?

This article provides an overview of the following topics.

• Current market trends in Korea

• Regulations and business environment in Korea

• Strategies for Successful Business in Korea

If you want to do business successfully in Korea, please refer to the following information.

For more information on digital marketing in South Korea, please see "[2024 Edition] Digital Marketing Trends in South Korea | The Latest Information Based on Data.

The Latest Korean Market

According to Data Commons data, South Korea has a population of approximately 51.63 million and has experienced a rapid economic recovery since the Corona disaster. Despite inflation and supply chain challenges due to the Russia/Ukraine situation, the country continues to grow as restrictions on the service sector are lifted.

According to the National Geographic Information Institute (NGII), South Korea's manufacturing sector, especially semiconductors, batteries, and automobiles, has developed rapidly, producing many world-class companies such as Samsung Electronics and LG; in IT, AI, and robotics, South Korea is one of the best in the world, and 5G is becoming increasingly popular.

On the other hand, the country faces the challenge of addressing the issue of inequality, which could reduce the purchasing power of the middle-income class in the case of services for the "toC" market, thereby making the country less attractive as a market.

Regulations and Business Environment in South Korea

According to JETRO, Korea has a progressive corporate tax rate of 9-24%, depending on taxable income, and a progressive individual income tax rate of 6-45%.

On the other hand, for foreign companies, corporate income tax is imposed only on Korean source income, and a withholding tax rate of 2.2-22% may be applied under tax treaties.

VAT (value-added tax) is generally at 10%, but a 0% rate or tax exemption may apply to certain goods and services.

ICT infrastructure is well developed, with the fastest Internet penetration rate in the world at 96.2%.

Challenges include consideration of cultural differences, in-depth understanding of market characteristics, compliance with laws and regulations, language barriers, and preparedness for political risks.

However, with its huge market, high technological capabilities, and geographical advantage as a gateway to Asia, Korea offers great business opportunities with proper preparation and strategy.

Strategies for Successful Business in Korea

There are three strategies for successful business in Korea

• Execution of web marketing with a focus on NAVER

• Speed of decision making

• Understanding and practicing Korean manners and business customs

Execution of digital marketing centered on high access media

According to the DATAPORTAL survey in 2024, the most accessed website was YouTube, second was Google, and third was Naver.

Since these three websites are at the top of the list not only in terms of the number of visitors, but also in terms of average time spent, digital marketing in these mediums is effective for BtoC. Specifically, this includes advertising in each medium, SEO, and influencer marketing.

In addition, Facebook has shown to be highly referral effective.

If content marketing is done on websites and social networking sites, the number of inflows can be boosted by announcing the content. Therefore, it can be said that there is a positive effect on the algorithm of each medium and an increase in traffic can be expected.

Speed of Decision-Making

Second, in Korean companies, decision-making authority is delegated to individuals, and speedy decisions are required. Therefore, the Japanese style of taking decisions back to the head office for review cannot keep up with the speed in Korea.

Therefore, it is important to appoint a leader for each project to enable flexible decision-making onsite. At the same time, it is necessary to establish a system that enables timely and appropriate responses in cooperation with local staff and Korean business experts.

Understanding and Practicing Korean Manners and Business Practices

Third, it is important to understand and practice Korean manners and business customs. In Korea, there is a strong sense of seniority derived from the Confucian culture, and the importance of hierarchical manners is emphasized. Care must be taken in various business situations, such as greetings, exchanging business cards, and eating and drinking.

There is also a tendency to value introductions and connections, and human relationships often make the difference between success and failure in business negotiations. Ignoring these manners and business customs will likely lead to difficulties in local activities.

Introduction of Practical Information Websites for Entering the Korean Market

When entering the Korean market, it is essential to gather efficient and practical information. Here are some information sites that can be the key to success.

Points to Consider When Expanding into Korea

The following are some of the major risks that Japanese companies should be aware of when expanding their business in Korea.

• Foreign exchange fluctuation risk

• Management and training of local human resources

• Responding to changes in legal systems and conditions

Exchange rate fluctuation risk

Since the exchange rate between the Korean won and the Japanese yen fluctuates, it is necessary to take measures to minimize losses due to exchange rate fluctuations. Hedging risk by making forward exchange contracts at appropriate times is important.

Management and Training of Local Human Resources

Korea has a culture of straightforwardly expressing opinions, and many of its people have a national character that differs from that of Japan. It is essential to understand Korea's labor-related laws and regulations and to maintain close communication with local staff.

Responding to Changes in the Legal System and Circumstances

It is necessary to develop a system that can flexibly respond to changes in the legal system and political and economic situation in Korea. For example, there is a risk that changes in Japan-Korea relations, such as a boycott of Japanese products in 2019, could affect your business.

TheDigitalX provides digital marketing consulting support to help you expand into Korea

If you have concerns about expanding into Korea, please contact The Digital X for a consultation.

Our local native marketers and specialists in Japan will support you.

Please feel free to tell us about any concerns you may have.

We look forward to hearing from you.