The export-based strategy that made Korea one of the world’s fastest growing economies of the second half of the 20th century has certainly proved successful. Today, the country of 50 million people is the world’s 15th largest economy and 8th largest exporter, with an annual trade surplus in the tens of billions of dollars. But as the eyes of the world carefully watch Asia’s shifting economic balance, Korea’s position is in flux.
The giant panda in the room is of course China, where rising manufacturing costs remain substantially lower than those in Korea, and domestic brands are starting to close the gap on quality standards – a key factor behind many of Korea’s most successful brands – creating more competition from new, unpredictable corporate foes.
As new brands from new markets have led to an increase in supply, demand in many of the most-prized markets has decreased. Export rates in 2012 were down from 2011 for just the fourth time in Korea’s history, largely attributed to the sluggish economic recovery in much of the world.
While there may be (slightly) fewer Korean products on the world’s shelves this year, Korea has undoubtedly shown its global dominance in a new space. I speak of course of “Gangnam fever” that seemed to reach everyone in the world with internet access; as of 1 May 2013, one post alone of PSY’s Gangnam Style music video had received more than 1.5 billion views. The song has been sung, parodied and danced to by celebrities, business executives and politicians worldwide.
PSY himself was even nominated to Time’s 100 Most Influential People in the Word in 2012. This may have been the first K-Pop hit people in some corners of the world had ever heard. But it marks the tipping point in Korea’s influence on popular culture, not its beginning.
The Korean Wave or Hallyu – the growing popularity of contemporary Korean music, television, food and culture – first began in Asia in the early 90s, took off after the 1997 financial crisis, and over the past decade has grown into the tsunami-sized wave that it is today. This steady growth suggests that Korea’s cultural influence is not a temporary, accidental fad, nor is it just about topping YouTube’s most watched list. The wider impact of this trend is much greater than the sum of its parts.
According to the Korea Foundation for International Culture Exchange, the Korean Wave contributed an estimated US$5 billion to the nation’s economy in 2011 – even before PSY made one of Seoul’s poshest neighbourhoods a household name on the opposite side of the globe. For the first time ever, the Bank of Korea announced a trade surplus for Korea’s culture and entertainment sector in 2012, and at the start of 2013, the Export-Import Bank of Korea announced that it would allocate nearly one billion dollars (US$917 million) for loans and financial support promoting further investment in Korea’s culture exports.
Yes, these figures are a small fraction of the annual profits of Korea’s tech giants. But what the Korean Wave has over Samsung, LG, Hyundai and POSCO is a surplus of soft power. A recent government survey showed the Korean Wave to be the most influential factor affecting Korea’s national image, more so than electronic goods and the Korean War.
While Korea’s top companies placed the nation on the world’s economic map, Korea’s soft power has placed it in the hearts of people around the world. If the latest smartphones positioned Korea as innovative, PSY’s “dress classy and dance cheesy” concept made Korea desirably cool. This soft power will unquestionably shape the role of Korea,its companies and its brands, in the global dynamic. Which creates a valuable opportunity for Korea’s brands if they know what to do with this power.
Among most Korean companies, the personality of the brand is built solely by a company’s founder or CEO. But leaders often shy away from the spotlight and do not actively engage stakeholders, particularly those outside of Korea. This means that from a marketing perspective, brands often lack the unique traits that would differentiate themselves in the global market.
This is not to say that those companies aren’t selling products. But telling the story behind a brand will be critical for continued success, both for those entering new markets for the first time and – perhaps especially – those already owning a significant portion of their industry. Companies defending their position against new challengers must be more vigilant in engaging stakeholders and creating and mobilising advocates, not just by making quality products, but also by establishing emotional connections with customers and fans. Which means leveraging soft power.
Soft power connects with people emotionally and creates passionate advocates. Certainly, innovation and quality remain the most critical factors for product brands, but Korea does not hold a monopoly on this. In order for Korean companies to sustain success in the global marketplace, they need to innovate not only their product offerings but also the ways these brands connect with customers emotionally, engaging Korea’s newest fans through a brand that stands out, with a unique personality and character.
The success of Gangnam Style was not because the audience understood the full parody behind the song. It gained a global following because it connected with people through personality, offering something new, entertaining and unexpected. There’s certainly a lesson there for Korean brands. We might all need a dose of Gangnam Style.
Tyler Kim is head of Corporate, Asia Pacific and managing director, Korea, at Weber Shandwick