Doing Business in South Korea: Negotiations

January 15, 2016
  • Flag_of_South_Korea_(cropped)Not too long ago, when you asked someone in the U.S. about Korea, all they thought of was MASH. To them, Korea was a poor, underdeveloped country in the throws of a civil war, or a poor country just coming out of a civil war.  That is actually far from the truth. In the past 30 years, Korean has undergone a transformation from a poor country to a developed one.   Korea  is now the  11th largest economy in the world.   It is no longer an agrarian based society. It is an industrial society.  Look at  companies such as:
  • Samsung
  • LG
  • Hyundai
  • Posco
  • Daewoo Shipbuilding
  • Doosan
  • SK

South Korea, is dominant in  consumer electronics, shipbuilding, automotive manufacturing, semiconductors, steel and  of course entertainment such as K-POP!  If you visit Seoul (the capital of South Korea) you will discover an ultra- modern city with an advanced subway system, excellent mass transportation, great infrastructure and an internet the envy of the modern world.  In certain ways,  Seoul reminds one of  NY.  But be careful not to get caught in the trap thinking that Koreans think the same as Americans or Europeans.  When it comes to negotiations, it always pays to know a little about the party you are negotiating with.

Well, who are the Koreans?

Korea is country with a 5,000 year history.  It was a society based on Shamanism, Confucianism and Buddhism until recently.  It is now approx. 40 % Christian.  However, Korea is still a rather conservative society that still practices certain confucian principles and beliefs in daily life including ceremonies for good luck for a new business, fortune telling, etc. Koreans to a lesser degree believe in good luck, bad luck, evil spirits, and fulfillment of  worldly wishes.

Korea over the centuries was greatly influenced by Confucianism and to some degree is still a Confucian based society.  Therefore, set societal relationships are still dominant today.  Koreans believe in:

  • - Family harmony
  • - Respect and obedience to elderly
  •  -Defiance of subordinates not tolerated
  • - Open confrontation not welcome
  • - Welfare of the group is a main concern
  •  -Relationships- are not based on equality but is determined by age and title

The priority of group/collective/family/company is based on hierarchical distinctions resulting in a rigid code of conduct.  However, because of modernization- Korean culture is changing. Confucianism/Buddhism v Western influences.   So think about Korea.  Times are changing as Korea becomes more advanced and society becomes more Western in certain ways.  For instance, divorce is on the rise.  Everyone wants to drive a car.  And US style health clubs are becoming popular.  But, some things remain the same, such as:

  • An obsession with education
  • There still is a tendency to follow the group or collective
  • Koreans in general have conservative attitudes
  • Too much independence is viewed as bad

How Should You  Prepare for Negotiations With a Korean Counterpart?:

When negotiating with Koreans – remember that international business negotiations are much more complex than domestic negotiations.  There is a little bit of science and art involved with international negotiations- more so than domestic negotiations.  The science of negotiation provides research evidence to support broad trends that often, but not always, occur during negotiation.  The art of negotiation is deciding which strategy to apply when, and choosing which models and perspectives to apply to increase cross-cultural understanding. Therefore, negotiating with Koreans like any other different culture or society demands that one appreciate the Korean culture to understand the viewpoints of the Korean negotiator.

Think about the attitudes and characteristics you may face when negotiating with people from Korea.  For instance:

  1. what attitudes do they have towards negotiating?
  2. what are their attitudes towards protocol?
  3. what are their competencies?
  4. what are the interests of the parties?
  5. how prepared are they?
  6. how focused are they

Korea is a high text culture  that believes in the collective. For instance- :

-  being interdependent is good.

- to be too independent is bad

- to be too  independent is selfish

- an interdependent self will further harmony of the group.  Collectivism is good.

- being outside of the group is not good

So, in Korea- employees normally do not change employment because of  loss of face due to failure to work well with the group or loss of face for the organization as the employee left.  The concept of face is not as rigid as in Japan.  However, in Korea like Japan, a close knit interlocked human network is important.   School alumni or school ties are important.  Individualism is less important. Helping the team is what matters.

Remember, when negotiating in Korea, protocol is very important.  Following the rules of etiquette will help Koreans determine that  you are trustworthy.  If you follow form or formality  you are “trustworthy”. Form is valued.  There are some rules that are generally followed such as:

  • -Giving gifts to seniors is expected.
  •  -Koreans will engage in dinners or golf etc. prior to business to establish relationships
  • -Koreans still view  age is important.  Age is respected. The older one may have the more important position in the organization. Note- this is changing especially in the high tech and entertainment industries.
  • Relationships and  long term considerations are important.

Time- Your  Korean partner will expect negotiations will take a long time, perhaps  longer than you may expect so keep time reserved in case.

Dinner- be prepared for your Korean partner to give you important information during dinner, etc. Do not refuse dinner or drinks after official meetings.

Contracts-  if circumstances change  your Korean partner will  expect to renegotiate.  Remember- relationships are considered more important than the bottom line.

Decision  making-   It is normally by consensus.  Usually each project manager must sign off.  Be prepared for teams of people when negotiating.  Do not raise new ideas and concepts at the negotiation stage unless you have to as this may force a re-evaluation of the transaction by the Korean team.

Face- Avoid making your  Korean counterpart lose face at all times!!

Until recently , Koreans hated litigation.  Conflict was to be solved through negotiations or by the family or the community.  Litigation was looked upon as a tool of the government or the  foreign  outsider.  Not a tool utilized too much by most Koreans. But times are changing.  Koreans are becoming more litigious. Lawsuits are becoming popular as is arbitration adn mediation to resolve disputes.

Korean society is indeed in transition. Attitudes are changing. Your Korean counterpart is becoming to a certain degree more receptive to Western concepts including litigation or ADR.  They like western food- !  They like Italian and French  brand names! Your Korean counterpart’s language  skills are getting better ( English, German, Chinese, Japanese- soon Spanish) and better.

But at the end of the day, remember that Korea is still a Confucian country or a country with a Confucian/Buddhist past. Confucian norms and customs are still adhered to.  So when negotiating in Korea, don’t expect your Korean counterpart to have the same mindset that you or your colleagues from the US or Europe may have.  Therefore, when negotiating with your Korean counterpart, remember his viewpoint and the culture he comes from.

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