“More Important Than the Business Itself”
In Korea, business is personal. While getting to know a prospective business partner, one should never be surprised when asked a question like, “Do you have any particular religion?” or “Why aren’t you married?” Successful business in Korea is based on long-term relationships rather than short-term transactions. Therefore, in order to establish a personal relationship, it is important to share more about oneself than is common in the West.
Though Korean inquisitiveness in the early stages of a business relationship may make some feel awkward, those who can respond with openness will be rewarded with excellent opportunities in the long term as well as genuine friendship. As Peter Underwood, a long-time business consultant and fourth-generation American there, says, doing business in Korea takes “a leap of faith.”
Woori and Nam, Again
As we saw in the chapter on jeong, the concept of in-groups and out-groups—or “woori” (us) and “nam” (others)—is especially important in Korea. Perhaps due to their country’s history as a whipping boy for larger powers and the centuries of oppression experienced by ordinary people at the hands of the yangban aristocracy, Koreans like to feel an uncommonly strong sense of mutual assistance and comradeship with those close to them. People sharing such a relationship will go to great lengths to help each other.
Those with whom such bonds are not shared face a disadvantage. According to the World Values Survey of 2005, only 13.4 percent of Koreans trusted strangers, compared to a world average of 33.9 percent. A Korean is also less likely to trust a foreigner, even when the two are acquainted: in the same survey, 27.9 percent of Koreans said they trusted foreigners, compared to a 54.3 percent world average. In 2006, the author of this book joined a Korean investment management firm as the first foreigner ever hired in that company’s head office. Several times, it was reported to him that the chairman of the firm had said, “I like Daniel, but I don’t know if I can trust him yet. He’s a foreigner.”
For the foreign businessperson seeking to operate in Korea, this may sound alarming. However, if one puts in the effort, one certainly can develop a feeling of “woori” with prospective business partners. And when this does occur, one can benefit from being part of an inside group, with all the favorable treatment and access to connections that this entails. The key lies in one’s willingness to be less like a hard-nosed businessperson and more like a friend. As one Korean businessman with twenty-five years of experience dealing with both locals and foreigners puts it, friendship is critical and is sometimes “more important than the business itself.” So when asked, “How old are you?” or “What is your religion?,” one should be forthcoming; answering honestly shows that you are prepared to get to know the other person.
Since prospective business partners need to get to know and trust each other quickly, a relationship catalyst may be used, namely alcohol. It is a frequent source of surprise to those arriving on business trips to Korea that drinking sessions governed by the phrase “mashigo-jukja” (“let’s drink and die”) are used to seal deals. Of course, sober-eyed perusals of contracts are necessary too, but when doing business in Korea, being able to drink well is very advantageous. For maximum effect, a drink named poktanju (bomb alcohol) may be employed. This is a cocktail of either beer and soju (a Korean spirit based on rice or potatoes) or beer and whisky. Refusal to imbibe may not result in failure to do business, but it will slow down the trust-building process. The aim is to come to know the other person’s true nature, which drunkenness will reveal. Korean businesspeople tend to believe in the wisdom of the Latin expression, “in vino veritas.”
In building a strong relationship, mutual sacrifice is important. For this reason, one must expect to “take a hit” once in a while, says Peter Underwood, who has been running his Seoul-based consultancy firm, IRC, for over twenty years. Not every transaction will be profitable. Mr. Underwood tells the story of an American car parts entrepreneur who came to Korea with an approach of “I won’t do anything unless I can make a profit on it.” This would seem a perfectly sound philosophy in the United States or the United Kingdom. According to Mr. Underwood, though, the attitude the man should have had was, “It goes for a hundred, and you want me to sell for ninety? Well, I’ll do it this time, but next time I want a hundred and ten.” If both partners engage in give-and-take, a long-term relationship of mutual benefit can be established. While one may lose money on a deal today, one may get a better price next week, protecting oneself from undercutting competitors.
The relationship the chaebol had with President Park Chung-hee illustrates the effectiveness of this give-and-take practice. The chaebol built Park’s roads, bridges, hospitals, and other infrastructure, sometimes at prices they knew would lose them money. They did so because they also knew that Park would reward them in the long run. Even before Park’s time, Jeong Ju-young of Hyundai accepted a net loss of 70 million won on a project to build the Goryeong Bridge, when he could have simply walked away from it. The total contract size was 54 million won; for every single won coming in from the government, 2.3 won was going out on the various costs associated with the project. Though he realized the loss was coming, he insisted on completing the bridge and risk bankrupting his company, because he knew the best long-run approach was to secure his relationships by keeping his word. The result was, as he says in his autobiography, that Hyundai was “thought of very highly by the Ministry of Home Affairs. After that, we didn’t have difficulties in getting construction contracts from the government.”
Signaling Care and Respect: Etiquette, Hospitality, and Gift Giving
The importance of face in Korean culture, as well as general human courtesy, dictates that one must show care and respect to one’s prospective business partner. It is not advisable to say “no” directly to a particular proposal. Generally speaking, it is rude to utter a blunt refusal, though perhaps not quite to the extent that it is in Japan. A statement like, “that would be difficult,” would probably suffice and cause less social friction. Adhering to basic etiquette like this, as well as being aware of the importance of hospitality and gift exchange, is recommended for anyone seeking to do business in Korea.
There are several important rules of business etiquette that are second nature to Koreans, and indeed to foreign businesspeople living in Korea, that may not be obvious to outsiders. Business cards are extremely important and should be treated with proper respect. When one exchanges business cards, one should present one’s card with two hands and then receive the other person’s card with two hands. One should then examine the card one has just received and nod approvingly. Taking a card one-handed and simply placing it in one’s pocket with just a cursory glance would be considered rude.
The card will have print on both sides—one side will have Korean, and the other English. Many Koreans use English nicknames for international business purposes, in the belief that Korean names are impossible for anyone other than Koreans to remember. So it may be the case that the English side of your counterpart’s card says something like “John Jeong-won Kim, Head of Department” (note the reversal of the usual surname-first given name-second order). In Korea, one would never address a person one just met by their given name. However, the English nicknames are considered more acceptable to use. So, depending on the context, it may be acceptable to say “Hi, John” but not “Hi, Jeong-won.”
That said, a foreign businessperson who learns how to correctly address someone in Korean will make a good impression. This is done by combining the surname with the job title and then adding the honorific suffix “nim.” As we saw in the previous chapter, the head of a department of a Korean firm is known as bujang. So, in this instance, “John Jeong-won Kim, Head of Department” would be “Kim bujang-nim.” Foreign nicknames can be useful for the neophyte, but ultimately they are just nicknames. There will always be a certain distance between two people when one does not know the other’s real name.
When the alcohol flows, the rule of two hands still applies. One should not pour one’s own drink; instead, one should hold out one’s glass with two hands and allow the other person to pour it (with two hands). Then, one should return the favor, pouring the other person’s drink for them in the same way. If Kim bujang-nim asks, “One-shot?” this means, “Shall we drink the whole glass in one go?” One may politely decline, but taking the “leap of faith” and one-shotting one’s poktanju will get things off to a good start.
If two groups, rather than two individuals, are meeting, Confucian-derived hierarchical relations will come into play. There will be an overall atmosphere of deference towards the leader of each group, with the focus of the conversation naturally falling on the most senior person from each side. When drinking, these two people will clink glasses first and probably offer a few words about the hope for a bright future relationship. If one is playing a supporting role, one should not speak before the two leaders have spoken or drink before the two leaders have drunk. Traditionally—but less so these days—junior members of the group are supposed to turn their heads away as they drink, and also make sure the rim of their glass is lower than the rim of a senior member’s glass when they are clinked together.
Business drinking sessions in Korea also relate to the tradition of showing great hospitality to guests. Peter Underwood jokes, “When guests come, Americans hide their best whiskey, but Koreans keep theirs waiting for you.” If one visits Korea on a business trip, one will be taken first to an excellent restaurant and then probably to an up-market bar and given expensive whiskey—even if that whiskey later ends up being mixed with beer and one-shotted. If one is male, one may also be taken to a “room salon.”
Room salons are hostess bars. Patrons go down a flight of stairs and into a room with a large table, a karaoke machine, platters laden with fruit, and bottles of expensive whiskey. (South Korea is the world’s sixth-largest importer of Scotch.) Drinks are served by young women in their twenties, who in high-end places make more money than some of the men around the table. Though the room salon is not specifically about prostitution, prostitution of such women does occur; many a deal was done with the aid of such a service for a prospective business partner. Large chaebols devote substantial budgets for room salons, drinking, and other forms of jeopdae (corporate entertainment) and employ staff to oversee them. This culture will die out eventually as the role of women in business is increasing. For now, though, it continues to hold great importance.
According to Choi Mi-jung (not her real name), a room salon hostess, “there are four types of customer: those who want to touch the girls, those who want to talk to them, those who want to sing, and those who just want to drink with their friends.” The room salons provide pretty girls who can also hold a conversation (and are adept at feigning interest in everything the guests say), a karaoke machine, and vast amounts of whiskey. “This place has everything men want. That’s why they bring business partners here,” she says. The room salon is a form of hospitality designed to make men feel like kings.
Hospitality may well extend to being picked up at the airport in a limousine and being given trips around Korea’s tourist sights, depending upon the resources of the Korean partner. The important thing for foreign businesspeople to remember is that the business relationship is about give and take—so when a Korean partner comes to visit one’s own country, one should go to similar lengths for them. It is all a matter of showing mutual respect and care for each other.
The same is true of gift giving. Many Korean firms send out gifts to suppliers, clients, investors, and so on, on the two major national holidays of Chuseok (Autumnal Harvest Festival), and Seollal (Lunar New Year). These presents usually consist of gift-boxed food items rather than anything especially expensive. The important thing, again, is they signal that the company values the recipient. It is unlikely that many non-Korean businesspeople would send gifts on Korean national holidays, so being the rare Westerner who did would stand one in very good stead. Chuseok and Seollal are movable feasts, so make sure to look up the correct dates.
When meeting a prospective partner face to face, a more individualized gift would be most appropriate. The best type of present would probably connect the two of you: for example, if one is from New York and meeting a baseball fan, an item of New York Yankees memorabilia may go down well. One does not need to go completely overboard on the cost but rather signal one’s consideration of the other person’s interests and emphasize the things that are shared between you, in spite of your cultural differences.
Reputation
The importance of showing good face cannot be overstated, as Korean businesspeople care deeply about their reputations. It is surprisingly common for bosses of Korean firms to commit suicide in the wake of image-destroying scandals: in 2011 and 2012, after a series of mutual savings banks were found to have committed bribery and illegal lending, the heads of three separate banks killed themselves. Korean firms also respond aggressively to reputation-harming criticism. In a 2009 column, author Michael Breen made satirical reference to Samsung’s past corruption scandals. Samsung responded by suing him for a million U.S. dollars—despite the fact that he had said nothing untrue (in Korea, defamation can be found even when the criticism is correct). In the text of the lawsuit, specific reference was made to the “mocking tone” of Mr. Breen’s words. Eventually, Samsung dropped the case, most likely due to the negative publicity it was earning them.
Kim Woo-choong, founder of Daewoo, famously said, “It is too bad if you lose money, but money is one of those things that it is okay to lose, since you can always make more . . . but you should never lose your reputation. You should treasure it as dearly as life.” He knew this better than anyone. In the wake of Daewoo’s bankruptcy in 1999, Mr. Kim was convicted of accounting fraud, sent to jail, and ordered to pay back the equivalent US$22 billion.
Knowing that reputation is of such importance, one should think very hard before criticizing a Korean partner firm or a member of the partner firm in front of their colleagues. One should have a private conversation first and even then resort to open criticism only as the nuclear option when other avenues have been exhausted. Harsh words, when aired out in the open, will have a major impact on the relationship.
One upside to the importance of reputation is that Korean firms will generally take responsibility for failure and go all-out to correct it. “Without asking for money, they [Korean companies] will just fix the problem. . . . I remember Hyundai Motor recalling twenty-seven thousand cars, just because three had faults,” says Peter Underwood. And if a Korean company promises that a project will be finished by a certain date, one can take it on faith that it will indeed be finished on—or even before—that date.
Similarly, customers are taken care of in Korea. Because Korean firms want to preserve their good reputation, they generally provide impeccable after-sales service. Were a customer to take a defective gadget to its Korean maker’s service center, a man in overalls would appear in a few minutes, fix the problem, and send them on their way. There would be no charge for this and refreshments may even be provided. In Britain, by contrast, one would probably have to wait several weeks and in addition shell out a fair sum in labor, parts, and service fees, not to mention taxes on top.
Quick and reliable service is intrinsic in Korea. Peter Underwood cites the example of a Korean-American friend who called up a gas cylinder distributor in Seongbuk-dong (a charming, old-money area in the north of Seoul) for a delivery. When told that the canisters would be at his home in one hour, he was so amazed at the speed that he blurted out, “One hour! Are you serious?” The person on the phone misunderstood his reaction as anger and so responded with, “Okay, okay, ten minutes!” Sure enough, the delivery truck arrived with the canisters within ten minutes.
Korean customers are so used to excellent service that they will complain vocally when they do not receive it. Apple faced a storm of criticism from bloggers and the press in 2011, because of the American firm’s policy of replacing defective iPhones with refurbished handsets rather than new ones. Even the Korean Fair Trade Commission put pressure on Apple to change the policy. No Korean phone maker would dream of dealing with a defective handset in any way other than replacing it with a brand-new one.
Breaking the Rules
One important caveat about the “rules” of doing business as a foreigner in Korea is that there are occasions when one can get away with breaking them. This is a generally acknowledged principle among foreign businesspeople living in Korea. If one is not Korean, one will not be expected to know every intricacy governing Korean social relations. Furthermore, there will be rare occasions on which it is actually beneficial to commit a social sin.
One young American office worker tells of jokingly telling one of the top executives at a partner company, “Masyeora!” This is an informal, impolite way of ordering someone to drink. Had a young Korean coworker done this, the whole table would have fallen deathly silent in shock. But the executive’s reaction in this case was to roar with laughter and down his drink. Because the American in question had very little knowledge of Korean language and culture, he was probably assumed not to know any better. From that point on, he was taken as an amusing character and good company.
Such rule breaking is potentially risky and not recommended in most circumstances. However, the fact that one can sometimes get away with it does highlight that Korean business culture is not quite as rigid or impenetrable as some non-Koreans believe. Contrary to perception, Korean businesspeople can actually be much more open-minded than Western businesspeople. Once the hurdle of relationship-building has been overcome, a Korean may feel quite free in proposing additional ventures or making introductions to other potentially useful business contacts, as long as one is open to sharing one’s own contacts in return. The rapid pace at which the economy developed has rendered Koreans more likely to be optimistic about new ideas than Europeans or North Americans. This is particularly the case in the high-tech sector, which has been undergoing a boom in the 2010s. One Internet entrepreneur in his twenties boasts, “If I came up with a good idea and wrote it down on one A4 sheet of paper, I could have investors signed up by next week.”
Last But Not Least . . .
One of the simplest and most necessary things to know in Korean business is the existence of specific words for "ten thousand" (man), "one hundred million" (eok), and “one trillion” (jo). Even Koreans with the best foreign language skills sometimes struggle to translate large numbers, due to this difference. Foreigners whose proficiency in Korean is shaky should make sure to check that they have in mind exactly the same number of zeroes as their Korean counterparts before an agreement is concluded.
A final anecdote from Peter Underwood illustrates another basic point about doing business in Korea. An acquaintance of his noted the lack of competition for gazebos and garden furniture in South Korea and thought he had spotted an opening in the marketplace. This gentleman was breathlessly preparing to export large quantities of them to the country, until his error was pointed out: the fact is, the vast majority of Koreans live in apartments. The point: Do your homework, and get to know the market.