Seasoned executives of multinational corporations would attest to the notion that Korea is one of the most challenging markets for foreign companies to properly enter and operate in — arguably comparable to Japan within Asia.

To begin with, similar to Japan's major conglomerates like Sony and Toyota, a short list of Korea's largest conglomerates, or “chaebol” in Korean, dominate nearly every industry in Korea, directly or indirectly shaping and influencing almost every facet of the local economic and social ecosystem.

The scale of this concentration is quantifiable: The top four largest Korean conglomerates collectively account for roughly 40 percent of Korea’s GDP, while the top 30 represent nearly 77 percent. Samsung alone is estimated to contribute over 20 percent of national GDP, underscoring the extent of economic concentration in the country.

The development and eventual dominance of the chaebol groups in Korea stems from their post-war facilitation and subsidization by the then-newly established government. These efforts were aimed at propelling the country’s industrial and global competitiveness, with a deliberate focus on core industries like manufacturing. This strategy proved extraordinarily effective. Korea today commands approximately 70 percent of the global DRAM memory chip market and remains a global leader in shipbuilding, while Hyundai has risen to become one of the world’s top three automakers.

While this approach successfully fast-tracked national growth, it also resulted in a limited number of family-controlled and managed conglomerates, leaving only a relatively small portion of the market available and up for grabs.

More recently, with the rise of the internet, there has been a shift in the socioeconomic paradigm. Platforms such as Naver and Kakao have risen to prominence, effectively becoming digital gatekeepers. However, the market remains broadly saturated and has evolved into a hypercompetitive environment for the rest of the business landscape — particularly for small and medium sized enterprises and non-Korean companies trying to enter the market

Korea is one of the most financially concentrated markets in the world among the advanced economies, so what should international companies in particular consider when pursuing opportunities here?

Many successful market entry cases have involved partnership-driven strategies. A notable example was the joint venture between Tesco and Samsung. The market had proven challenging for entrants such as Walmart and Carrefour, both of which ultimately exited in the mid-2000s.

Similarly, global professional services firms such as PwC and KPMG established strong positions through formal alignment with leading local consultancies, which continue to flourish. In advertising, global networks such as WPP and Omnicom were able to achieve critical mass through partnerships with some of the major conglomerates, leveraging in-house client bases to gain traction.

Exceptions do exist in sectors where Korean firms lack competitive strength or where the brand origin is itself the value proposition, such as in the high-end luxury market. Louis Vuitton and Ferrari exemplify this dynamic. However, while many foreign entrants initially generate strong consumer interest and long queues driven by hype, they often struggle to achieve long-term sustainability.

Korea is indeed a marketplace where localization is key. Organizational and operational localization is essential to conducting business effectively here, taking into account market requirements, the proper cultural context and durable leadership.

A compelling example would be the long-standing joint venture Yuhan-Kimberly, which has consistently outperformed global competitors. According to Yuhan-Kimberly's former CFO Jeff Doherty, during its rivalry with Procter & Gamble Korea in the early 2000s, their focus on products designed to meet specific Korean consumer needs contributed to their success and led P&G to significantly scale down local operations.

Korea is becoming an increasingly attractive destination for foreign direct investment, but this investment landscape is shaped by unique circumstances and sophistication. Foreign investors must understand Korea's consumption behavior, business culture and the structural environment — insights that underpin corporate efforts to match global investment intent with local adaptation.

Jeffrey Jones of Korea's largest and oldest international law firm, Kim & Chang, and former chairman of the American Chamber of Commerce in Korea, famously noted, “Koreans can endure hunger well, but cannot tolerate jealousy.” If you are going to conduct business successfully in Korea, you need to fully grasp and understand what this means and entails.

Sung Lee is a senior advisor and partner at Midas Private Equity; concurrent advisory and directorship roles at Hyosung Group, Kakao Games, Mirae I&C, and Yefira Group; former Country CEO of WPP Group, Global Head of M&A for Ogilvy Worldwide, and Regional Director for Clear Channel; Juris Doctorate, University of Michigan.

© The Korea Times