There are a lot of people, who trust globalization and think that people everywhere wear the same business suits, eat identical business lunches and drink mineral water, but they make a serious mistake – forget about the peculiarities of national cultures. But these peculiarities, like nothing else, have an impact on building business etiquette.
Firstly, let’s make a brief look at the development of the Korean economy in recent years. The business environment in Korea, Asia’s third-largest economy, ranks 30th in the world, according to a report released by the World Bank.( Korea’s business climate, 2007). Economy of South Korea in 2006 was the 10-th largest in the world by gross domestic product (at purchasing power parity) and the 14-th largest in the world by nominal GDP. Gross national income per capita has grown from one hundred U.S. dollars in 1963 to more than 20 000 U.S. dollars in 2005. In 2006 nominal GDP growth was about 7.5%. The level of expenditure increased by 5.9% compared with the budget in 2005 to 220 trillion wons (about 220 billion dollars). The taxation is assumed at 20% level. In South Korea the volume of foreign trade in 2005 amounted about 70% of GDP, and revenues of companies that have invested from abroad amounted to nearly 14% of sales throughout the industry. The largest investors in the South Korean economy are the United States and Japan.
South Korea is the fifth world producer of electronic equipment and for the production of household appliances takes the second place in the world. In addition, the South Korean firms confidently hold higher positions in areas such as digital television and computer technology. Today South Korea has one of the most advanced telecommunication systems in the world. In a country in which about 48 million inhabitants, 31.6 million are Internet users (among whom 11 million use the Internet with high-speed broadband), and 35 million of cellular subscribers. Today the share of ICT (information communication technology) represents about 15% of GDP and 30% of total exports. Also South Korea is a major producer of memory chips in the world.
South Korea is the birthplace of two largest and the fastest growing manufacturers of consumer electronics, products of which are well known in the world – Samsung and LG Electronics. For example, in 2004 the sale of Samsung was $ 55.2 billion and net profit – $ 10.3 billion Samsung and LG are now part of five largest producers of mobile phones. Koreans are interested in the development of the software, the result of the severe shortage of skilled programmers. Practically from 1994 in the country the capital market was fully liberalized, and foreign banks were allowed to enter the financial markets with the same conditions as local ones. In May 1998, the limit on foreign investment in South Korean equities has been abolished. From 25-th of May of the same year foreigners can buy shares in a South Korean companies without the permission of the committee of directors (excepting the military-industrial complex and community associations).
In general Korean business is characterized by export-oriented economic activity. The use of the free trade regime particularly facilitated, that has became an important factor in successful economic development. In Korea it is believed that maximizing of the freedom of entrepreneurial activities will help Korean exporters have greater access to foreign markets. This direction developed very successfully in South Korea. In particular, there is the United States’ decision to begin negotiations on a bilateral free trade agreement, which, when it will be finished, will make Korea the third largest partner of the U.S. in free trade after Canada and Mexico.
To do successfully business with the Koreans a man need to know some of the traditions and characteristics of business culture in this country. In this country the code of business conduct distinguishes a lot from Western standards, so the businessmen from other countries consider Korean businessmen as the most difficult business partners in the world.
For Koreans ritual greetings and expressions of gratitude are very important. The longer your acquaintance lasts with the Korean business partner, the greater may be the degree of familiarity in your relationship, but at the beginning, during the first direct physical contact Koreans restrict only by usual handshake. When handshaking the right forearm is often propped up by the left hand. Maintaining eye contact is good etiquette.Ā In South Korean business culture, women also shake hands. Western women doing business there will need to instigate a handshake with Korean men, as out of politeness, a hand will not be forthcoming (Doing Business in South Korea, 2007).
The biggest challenge which the foreign businessmen have to overcome in Korea is a barrier of mutual incomprehension, first of all, the language barrier. Koreans as usual have difficulties with the English language in which negotiations are held. Also the businessman should take into account the fact that Koreans are not easy to show their lack of understanding and refuse the interlocutor. It is necessary to take into account the national pride and the particular vulnerability of Koreans, because many centuries they have been oppressed nation, enduring cruel suffering. That is why they are so proud of their current economic success and painfully take any infringement on their dignity.
In Korea traditional Confucian morality is still strong, the foreigner must take into account the feelings of another person, to treat him on the basis of his social status, respect his rights and be sincere. According to this morality the Koreans are very hospitable and extremely make their guests a warm welcome. However, such reception does not mean that they are very interested in the partner ”“ it is a simple demonstration of courtesy.
Both in Japan and in Korea it is impossible to establish contact with businessmen by contacting them in writing form. Arranging a meeting also is not easy – negotiator is necessary. It is essential that someone introduce or recommend you to the Korean firm, with good knowledge of the staff of this company and the essence of the proposals. If the Korean businessmen will be interested in a partner, they fix a personal meeting – other way of negotiations they do not recognize. In South Korea, as well as in other industrialized countries, business cards, from which Korean businessmen can get the necessary information about the potential partner or his organization and his position in it, are very important. Therefore, if in response to the business card (as a sign of respect it is given with both hands), a Korean will not receive a business card of his partner, it will be misapprehend by him and regarded as disrespect. Age and social status are very important for Koreans, so listing of your titles and regalia are very important when you first meet your potential business partner. It is believed that this fact explains the extraordinary passion Korean to business cards, because only looking at the card you can understand the status of its owner and how to behave with him.
It is a rule in South Korea to address somebody by the post or the surname. It should be remembered that in Korea the first syllable is a surname, and two others are personal name. But because of the American influence in Korea, recently they started to write firstly first name then last name. Therefore, in order to avoid misunderstandings, it is better to specify your interlocutor’s name. It is necessary to say your surname clear, because the Koreans do not simply understand which of the three words, which are written on business cards, is a family or a name. For example, address people by their title alone or by both their title and their family name unless you are asked to address them by their first name. In Korean corporations doing business internationally, it’s been very popular to use the two initials of their first names, such as C. H. Kim for Chan-Ho Kim. (Kim, Eun Y., 2008)
One of the important conditions for successful negotiations is to comply with respect to the status of the Koreans. This is not easy to understand, because the system of posts and ranks in the Korean companies and organizations differs from ours, and in English translation can be inaccuracies. Thus, the highest official of the company may have different names and in Korean in English translations, and the same names can be translated into English in different ways. Typically, the head of the firm (and often he is its owner) is its chairman, often with no clear terms of responsibilities, but with wide powers. The main executive power is the president, the chairman of the board of directors, then vice-presidents, managing directors, department heads, and their deputies. For example, the owner of the company, whose position at home sounds like “Director”¯, in Korea, should call themselves only “the President of the company”¯, because “Director”¯ in KoreaĀ is only middle-level manager.
During solving many problems in the field of business relations in South Korea, informal communication plays an important role. There are strong local, clan, and friendly relations. The presence of relatives or friends in the highest echelons of power has great importance.
Ascertainment of the real importance of partners is very important to assess the viability of any undertaking, because only informal support can often solve the case.
Choosing the right clothing is a significant moment of the Korean business etiquette. A man must be worn in a strict business suit unshowy colors, white shirt, and soft tie. Trousers are excluded from women’s business clothes.
Smoking in the presence of older people and people, who have higher business position, is not accepted. Inferiors will never do something even in the slightest degree against the instructions received from his superiors.
Experience shows that attempts to change the behavior of Korean partners are unsuccessful. Those who want to collaborate with Korean businessmen successfully, it is necessary to carefully examine them, adjust, yielding in minor matters and seeking concessions in the main ones.