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Selecting The Right Korean Partner
By Tom Coyner
Korea Times
July 4, 2006
Most foreign companies in Korea, for
practical reasons, must partner with a local company to market, sell and
support their products and services. While once upon a time there were
legal requirements to do so, now Korea has a relatively free
market in this regard. Nonetheless, unless the foreign company is willing
to make a very substantial investment up front, it almost always makes
sense to partner.
Frankly speaking, finding a Korean partner company can be ridiculously
easy. Finding a successful partnership, however, can be surprisingly
difficult. That is, many Korean companies are willing to partner for all of
the wrong reasons. And this may be said for a like number of foreign firms.
Many Korean firms look at partnering with overseas companies as a cheap and
easy way to ``grow their presence by becoming "international," or
at least more international, via foreign partnerships. Partnering can add
to their market prestige and provide new products and services the domestic
competition lacks, or that they cannot easily develop on their own. Thus,
in their reasoning, sales may often be secondary to domestic market
positioning.
Foreign firms often regard the Korean market as important but secondary to
their overall global marketing strategy. As a result, they may be tempted
to do a "quick and dirty" market entry, finding a Korean company
selling into the right market niche and boasting a glib speaker of English
or some other appropriate foreign language. After the partnership agreement
is inked, its back on the plane without much
expectation to return to Korea
for another six or even twelve months.
These two descriptions are stereotypes, but unfortunately they are closer
to realitys mark than Korean and foreign firms
may like to admit. So what may be a better way to find and develop a
successful partnership?
First, look carefully at the company and the key people on whom you will
depend. Many Korean firms look absolutely great on paper, but it will be a
couple of key people who will largely determine whether your partnership
will succeed. Certainly the Korean company needs to be financially stable
and credible in your market niche. At the same time, that company must have
individuals with sufficient authority to ensure commitments with the
foreign company remain at a mutually appropriate priority level.
Key people include the CEO, marketing or planning director, sales director
and product support director. If you do not perceive a personal stake in
the venture for each of these people, your partnership may be in danger
from the beginning. You should be able to accurately articulate from the
Koreans perspectives why the partnership is personally important to each
key person. Then you should honestly compare their motivations with your
own. Even if you like the company and the people, if there is a not a good
match, its time to move on.
Second, consider how and with whom your company will be able to
communicate. Assuming you do not have Korean speakers in the home or
regional offices, it can be critical to ensure there are capable English
speakers at least in the marketing/planning and product support groups.
Ideally there should also be a strong English speaker representing the
Korean sales team, but that may be harder to find. Naturally, the larger
the company, the more likely the Korean partner will have employees with
foreign language skills.
That brings us to our third point: It is important to partner with the
appropriate-sized Korean company. It is surprisingly easy to go too big or
too small. The big companies are usually part of the giant chaebol or
business conglomerates. Their prestige often brings instant credibility to
the market for your products, but their ability to sell to other companies
within their chaebol group is usually exaggerated.
Furthermore, big companies typically have annual or even more frequent
organizational reshuffles. The net result can be that the Koreans in whom
you have invested a great deal bringing them up to speed on your company
and products may one day, perhaps without notice, be reassigned to other
departments. Major corporations anywhere in the world tend to be
systemically arrogant, holding the unstated assumption that you need them
more than they need you. Korean companies are no different.
Partnering with too small a company, meanwhile, may entail another set of
traps. The good news is that they may need you as much as you need them -
or even more so. Consequently they will be putting enough skin into the
game to consider you more than simply another arrow in the quiver. The
personnel you train are probably more likely to stay dedicated to your
products than those of the larger firms.
However, if you are selling large capital assets, these smaller firms may
themselves having to partner with other Korean firms to be credible
producers, marketers and supporters of your products for future customers.
Additional, de facto partners mean smaller pieces of the shared pie of
profits and/or higher pricing that may make your products less competitive.
Finally, even if you are able to get the right mix and balance, you have
just begun the partnership. Koreans look at all written agreements as just
the launching of a new relationship that will need to adapt to unforeseen
circumstances. So the foreign firm should not be shocked if, almost from
the very beginning, the Korean partner asks for variances from the written
partnership agreement as the first real sales opportunity approaches.
Such requests for variances might be justifiable in some cases, but there
are also times when the Korean partner has not done adequate due diligence
in selling or preparing support for the foreign products. At these times,
one needs a reasonable adjudicator who can advise from ground zero on how
to handle variance requests.
Established foreign firms usually have local representative offices with
enough employees to act as the local eyes and ears and advise home office
management. Those firms not yet ready to set up representative offices can
outsource to consulting companies, such as Soft Landing Korea and
others, to provide ongoing advice and assistance, and ensure the
partnership stays on course. Addressing how that may be done will have to
wait for a future column.
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