When considering sales expansion in Asia, South Korea may not always come first in the mind of executives in the software industry. After all, Japan is a larger economy, and China is all the rage.
That is short-sighted. South Korea has a lot going on for itself these days. Many of us drive Korean cars, hold Korean phones, and perhaps have kids enamored with K-pop. And if the country has a smaller market than either China or Japan, at a population of 51 million and a GDP per capita above 31,000 USD (compared to 40,000+ for Japan and 10,000 for China), it compares advantageously to several Western nations.
Having a smaller market than neighbors also encourages one to develop international trade. Exports represent over 32% of Korean GDP in 2019 (Japan: less than 14%). And even more interesting for wannabe exporters, it imported 485 billion USD of products that same year, which compares advantageously to Japan's 654 billion USD (with a GDP twice the size of South Korea).
Still, succeeding in South Korea requires careful planning—and avoiding these four traps.
Trap #1: Ignore South Korea In Your Software Sales Expansion Plans
OK, so you decided to take the plunge and build software sales in Asia. And you definitely have a few first stops in mind. China and its 1.5 billion population and vibrant economy definitely beckons. And while Japan may offer a smaller market, it is still an economic powerhouse.
And then, perhaps you consider India. And skip right over South Korea.
Well, you definitely want to read the stats I mentioned above. And consider carefully what is your target market.
Sure, South Korea is a mecca for cell phones. And Hyundai is a leading auto OEM. But the country is also leading in industrial systems of diverse kinds. And while its military budget may be smaller than Japan's (about $54 billion), at almost $48 billion it is certainly juicy. Besides, based on my experience, there is a lot more domestic development of systems in Korea than in Japan.
So, anytime you spend considering entry into South Korea may pay dirt. It all depends on your target market.
And keep in mind what I said earlier: the country imports more per head than either Japan or China. That matches with my personal experience in Korea. If you have a good software, Koreans will want to talk to you, and you will encounter less hesitancy than either of the other countries.
But make no mistake. Less hesitancy doesn't mean easier. South Korea is just as sophisticated and complex as either Japan or China. And different from both of these juggernauts. So if and when you decide to enter the Korean market, you need to do it seriously.
Trap #2: Assume Korean Culture Is The Same As The Neighbors'
Being serious about entering the South Korean market starts by being curious about the country. Besides a solid market analysis including the usual fundamentals (size, prospects, channels, etc.), it also behooves you to pay attention to the local culture.
Keep in mind that South Korea is sandwiched between China's multimillennial history and Japan's long-time status and reputation. Sure, the country's reputation is on the rise with K-pop stars and other modern cultural productions attracting international attention. But I hope I won't insult my Korean friends by saying that traditionally the local culture has received less attention.
And this can be an advantage—for you.
The first time I visited Seoul, the representative of a local distributor interested in our business picked me up at my hotel. I actually took the time on the plane to learn a few well-chosen words in Korea, applying the lessons I described in this previous article. His reaction? "You will go far in Korea, people are going to like you!"
From there, I went on to learning how to properly serve alcohol to others (put your hand under the bottle while serving), get around town solo (through metro and bus), and order my own food (you should see waiters' reactions when I ask for "sannakji," the octopus so raw it comes on your plate moving).
Because of its situation, any attention a foreigner pays to the local customs in Korea is likely to be duly noticed and appreciated.
But this has no direct impact on sales, right? Wrong.
One day, I visited a promising prospect with the local distributor. The client was eager to show me some courtesy, and asked me how I liked Korea. Let us say that the guy was taken aback when I explained to him, partially in Korean, everything I actually did and ate in Korea, liking every bit of it.
Later, the partner told me that the client inquired privately with him how I knew so much about Korea. "Well, Steve has been visiting a lot." According to him, the client started perceiving my employer less as another foreign company and more as a local one. One with whom he could do business.
Needless to say, they became a repeat customer.
Trap #3: Underestimate The Value Koreans Put On Service
In enterprise software sales, service matters a lot, and for good reason. Your code ensures your clients' business continuity. A bug can cost them dearly. So, when they call in a support request, they better hear from you—stat!
But then, when you are going abroad, how can people trust you? Sure, there are laws and contracts, but cross-border enforcement can be a haphazard, costly affair. And it is all too easy to forget that it is NOT only about you not being paid—your clients want to know you will be there in their time of need.
Likewise, you should never forget that the expectations related to service are also dependent on where in the world you are operating. Some countries place the bar higher. Take Japan for instance: there are a few reasons why you should translate your user manual when selling there, and my article explains these.
If you think that South Korea is any different... well, you are right.
Don't get me wrong. The Koreans also enormously value quality and service. My experience there has been that they will not mind paying more for software if it is high quality—and backed by white-glove service. Trust me: they worked hard to get their companies at the top of the world, and they expect nothing less from their suppliers.
But some of the modalities of how you deliver that service will be different. Where the Japanese insist on a translated manual, Koreans tend to readily accept an English manual. But they want to make sure you, the principal—not only the reseller, and not only the local subsidiary—will be there in their time of need.
How do you deliver this? By showing up. You. The locals and the foreigners, hand in hand. That's how.
I spent over a decade visiting Seoul and other cities on a regular basis and demonstrating with words and deeds just how good our software tool truly was.
I remember one case. Just landed the night before an important evaluation meeting at 9 a.m. The responsible there kept on going for 40 minutes about how their hardware was impossible for us to support.
At the end of the 40 minutes, I essentially said that I understood, but since I came all this way he should let us try.
Challenge accepted, mate!
He was right. After two days working until late at night, we figured it out, and presented the solution. Needless to say, I was proud. And the responsible was a good sport.
That night, I understood just how much this was appreciated. I was invited to feast with the head honchos. And later, we started to see contracts multiply.
We were trustworthy.
Trap #4: Pick The Wrong Partner For Software Sales In Korea
Finally, note that earlier in this article I often spoke about local distributors.
Local partners are indeed important—and I interpret this term widely. The right distributor—or local employee leading the charge in your stead—can ensure your software sales will be bountiful.
Frankly, I have been blessed. When I first started exploring the Korean market, the distributor I handpicked proved to be excellent. They were proactive, dynamic, aggressive (in the positive sense of the term), professional, and competent. Together, we formed an efficient—and fun—team and achieved successes beyond my owner's wildest dreams.
Later, when I started to assemble a direct sales team, I looked for the very same qualities. And there again, I picked just the right partner for the job. It inspired in part this article.
However, the wrong local partner can cost you dearly. They can ensure you will never sell in Korea again for a long time.
You will certainly argue that this is not unique to the territory. And you would be right. In fact, I wrote an article on the recruitment of a good distributor (and how to manage them), and most of the lessons I explained in there would also apply to South Korea.
But later, I also discover one specific detail that is all too easily overlooked for those of us that are not lawyers. Even if your distribution contract is signed in another jurisdiction, the Korean law may still have additional responsibilities imposed on the principal in the case of a termination—and these can be substantial.
Since I am not a lawyer, I would definitely recommend you do more research and consult those of us expert in international legal matters (this article may be a good start).
In any case, it certainly reinforces my point: you want to ensure you pick the right partner. And based on my experience, it is certainly possible. You just need to do your due diligence and take some time to get to know the wannabe partner. And, shall I say, build a common understanding and trust, a real team? This is how you can strike it rich in Korea!