Why Government Blessing is Crucial in Korea
When foreign companies set their sights on Korea, the playbook often revolves around wooing consumers—what they like, what trends they follow, and how to open their wallets. But there’s a critical piece of the puzzle that often gets overlooked: the government. In Korea, having government support isn’t just helpful—it can be the deciding factor between success and hitting a regulatory brick wall.
So, what makes the government blessing such a big deal here? And how can foreign brands win them over?
Why Korea doesn’t trust you
Korea’s watchful stance to foreign businesses is shaped by its past. For much of its history, Korea’s sovereignty was constantly under threat—whether from colonization, war, or financial crises. These experiences have left a lasting legacy of caution, especially when it comes to protecting the economy and doing business with foreign entities.
Take the 1997 Asian Financial Crisis, for example. Korea had to accept what people regarded as humiliating bailout from the International Monetary Fund (IMF), which came with painful conditions. Sure, it stabilized the economy. But struggling companies were sold at bargain to foreign investors, and decisions often felt like they were being made to appease them rather than benefit Korea. Many saw this as an infringement on Korea’s sovereignty and national pride. Memories of this period still fuel skepticism about whether foreign businesses act in Korea’s best interests.
This mistrust climaxed in the 2000s when Lone Star Funds, a U.S.-based private equity firm, bought Korea Exchange Bank at a bargain price during the post-crisis recovery. They later sold it for a massive profit, leading to accusations of market manipulation and tax evasion. The public backlash was so fierce that the government put the brakes on their exit.
The Lone Star incident reshaped how the government sees and regulates foreign investors. Layers of scrutiny were put in place to make sure foreign players are not here to just cash in.
Levelling the Playing Field
Korea’s chaebols—industrial giants like Samsung, Hyundai, and LG—have been pivotal to the nation’s rapid transformation from a war-torn economy to a global economic powerhouse. These conglomerates played a key role in driving industrialization and creating jobs. However, their dominance has also led to significant economic inequality. Small and medium-sized enterprises (SMEs), which make up over 99% of businesses in Korea, often struggle to compete with the immense financial and operational advantages of the big players.
To balance the scales, the government has introduced “co-existence policies” (“상생”) that encourage big companies to collaborate with and help grow the smaller ones. These policies reward businesses that partner with local SMEs, and foreign brands are no exception. Collaborating with local players and ecosystem isn’t just a nice gesture—it’s an expectation.
Uber’s Rough Ride
When the ride-hailing giant made inroads into Korea in 2013, it failed to address the concerns of key stakeholders, especially the local taxi union—a powerful political group. They saw Uber as a direct threat to their livelihood, leading to strong opposition, protests, and strikes. Policymakers followed suit with legal challenges, and Uber’s ambitions in Korea hit a roadblock.
The takeaway is that foreign brands must proactively collaborate with public authorities, understand their incentives and values, and contribute to the broader economic and social ecosystem to ensure sustainable growth.
How to Make the Government Your Best Ally in Korea
Foreign brands are not exempt from these expectations. Being an active proponent of the co-existence ecosystem is crucial for gaining the goodwill of the government. By partnering with local SMEs, developing the local talent, and collaborating closely with the government, foreign companies can set the stage for smooth sailing in Korea’s competitive domestic market.
Team Up with Local Businesses: Find ways to collaborate with SMEs and start-ups. Whether it’s co-developing products or sharing resources, these partnerships can open doors to the trust of the government and consumers alike. Plus, it’s a great way to tap into local insights.
Help Develop the Local Talent: a major factor of the co-existence policy revolves around developing the local talent. Offer training programs or upskilling opportunities, especially in industries where demand for skilled labor is high. It’s a win-win: you get a talented workforce, and the government sees you as a valuable contributor to the economy.
Engage the Government Early: Don’t wait for issues to arise—build relationships with public officials early on. Establish public-private partnerships that align your brand’s initiatives with national priorities. Equally important is communicating your efforts clearly, both to the government and the public. Visibility is key to building trust and goodwill.
Netflix’s script for Government Relationships
Netflix has successfully integrated into Korea’s co-existence economy by supporting local production companies and small businesses. Through initiatives like the Production Academy in partnership with Korea Creative Content Agency (KOCCA), Netflix nurtures emerging talent, local professionals and production companies. Netflix provides training, resources, and global exposure to Korean filmmakers, while building authentic relationship with the government.
Additionally, Netflix’s investments in local content, such as Squid Game and Culinary Class Wars, not only boost the local entertainment industry but also add a unique offerings to Netflix’s global audience. By forming strong partnerships with local SMEs, creators, and public agencies, Netflix has successfully positioned itself as an indispensable member of Korea’s creative ecosystem.
Building Bridges and Looking Ahead
Korea is a market teeming with opportunities: a tech-savvy consumer base, cutting-edge infrastructure, and access to one of the world’s most influential cultures. But success here isn’t just about selling products; it’s about being part of the ecosystem.
By partnering with local businesses, investing in workforce development, and engaging the public sector stakeholders, foreign brands can build trust and foster meaningful relationship with the government. With the government support and blessing, brands can lay the foundation for sustainable, long-term growth in Korea.