Introduction
South Korea is one of Asia’s most advanced economies, yet at the same time one of the most difficult markets for European companies to enter. Outwardly, the country appears modern, digital, and highly international. In practice, however, its economic and decision-making structures remain deeply closed. The market does not operate on open competition, but on long-established institutional networks and hierarchical relationships.
From a European perspective, South Korea often feels more familiar than many other Asian markets, but this sense of familiarity is partly misleading. Its operating logic differs significantly not only from Europe, but also from several other Asian economies such as China and Japan, where market structures, decision-making processes, and responsibility allocation follow different patterns. Entering South Korea requires an exceptionally strong understanding of institutional structures, roles, and how responsibility is distributed within the system.
Historical Background and Korea Inc.
South Korea’s economic structure is the result of a post–Korean War development model in which the state concentrated resources on a limited group of family-controlled conglomerates as part of an export-oriented industrialisation strategy. From these firms emerged the chaebols, such as Samsung, Hyundai, SK, and LG, whose role was to build the country’s industrial base and secure economic independence. This arrangement is often described through the concept of Korea Inc., where the state and major corporations form a mutually dependent system.
In 2023, the combined revenue of the four largest chaebols (Samsung, SK, Hyundai, and LG) amounted to approximately 40.8 percent of South Korea’s GDP. The share of the thirty largest chaebols rose to around 76.9 percent. These figures illustrate the exceptional concentration of economic responsibility and productive capacity within the South Korean economy.
The concentration of economic power also increases systemic vulnerability. When individual conglomerates play such a central role, a significant downturn affecting even one key actor, such as Samsung, can rapidly spill over into exports, employment, and investment. The structure is further characterised by political–economic entanglements, and South Korea has witnessed multiple cases in which the relationship between major corporations and the political elite has become the subject of investigations and public scandals.
Chaebols and the Concentration of Decision-Making
The South Korean market is characterised by a clear scale–power paradox. Although the country is relatively small in population terms, with approximately 50 million inhabitants, its corporate structure has produced conglomerates of exceptional size and influence. Chaebols are not merely large corporations; they function as extensive economic ecosystems that span production, financing, distribution, and often even the practical interpretation of regulation.
This scale creates a structurally asymmetric market. Even globally significant foreign companies rarely have a realistic opportunity to challenge chaebols on their own terms within the South Korean market. As a result, foreign firms are typically forced to position themselves as complementary components within the existing system rather than as parallel or competing alternatives.
Samsung is one of South Korea’s largest chaebols. It is not merely a company, but an entire economic ecosystem whose influence extends deeply into the national economy.
South Korea’s corporate landscape is strongly hierarchical. Large chaebols orchestrate extensive supply chains in which smaller firms operate within narrowly defined and clearly delimited roles. Decision-making authority is concentrated at the highest levels, and significant changes almost invariably require approval at the group or conglomerate level.
The state plays a central yet largely invisible role within this structure. Historically, the government has supported chaebols through regulation, financing mechanisms, and industrial policy, while expecting economic stability, export capacity, and crisis resilience in return. As a result, corporate activity and national interest are tightly intertwined, making it difficult to analyse decision-making purely through a market-based lens.
Supply chains are organised around a clearly defined tier structure. Tier 1 suppliers, which deliver directly to chaebols, are responsible for integrated system-level solutions, supported by multiple layers of subcontractors beneath them. Although tier 1 firms retain some operational flexibility, strategic direction and risk-taking are typically aligned with chaebol priorities and, indirectly, state interests. Consequently, technical excellence alone does not constitute a sustainable competitive advantage unless the firm occupies a recognised position within the existing institutional framework.
South Korea Beyond the Chaebols
Discussions of South Korea often focus on chaebols, but beyond them operates a broad ecosystem of smaller firms, subcontractors, and service providers. This “non-chaebol” economy, however, does not function according to the logic of European small and medium-sized enterprises. Firms are rarely independent market actors; instead, they almost without exception position themselves as part of a larger institutional and industrial whole.
In quantitative terms, SMEs form the backbone of the South Korean economy. Approximately 99.9 percent of all firms are small or medium-sized, and they employ an estimated 88 percent of the workforce. Economic power and value creation, however, remain heavily concentrated within large conglomerates, creating a clear structural asymmetry across the corporate landscape.
Firms operating outside the chaebol core typically depend on supply chains, public programmes, and institutional frameworks. Growth does not mean challenging the market or building an independent market position, but rather deeper integration into the existing system. As a result, autonomous expansion or the development of a standalone market identity is rare, and strategic manoeuvring space remains limited.
From a European perspective, this often appears as a lack of independence or flexibility. In reality, it reflects system-level risk management and the deliberate diffusion of responsibility. Companies reduce exposure to failure by remaining embedded within larger structures, rather than assuming visible and individual risk in the market.
Negotiations and Decision-Making
In South Korea, negotiations are rarely actual decision-making moments. Instead, they form part of a longer evaluation and information-gathering process aimed at assessing the counterparty’s reliability, institutional position, and compatibility with existing structures. Individuals attending meetings are often not final decision-makers but function as internal information carriers within the organization.
Negotiation culture in South Korea is long-term and hierarchical. Presence in a meeting does not automatically imply decision-making authority.
Decisions are typically made later through a closed internal process, often involving multiple hierarchical layers. To European actors, this may appear as slowness, ambiguity, or a lack of commitment. In practice, it reflects systematic risk management rather than indecision.
A central concern in the decision-making process is institutional acceptability. Solutions must not only be technically sound but also structured in a way that does not expose individual managers or organizational units to visible failure. Ensuring that responsibility is sufficiently diffused within the system is often more important than speed or first-mover advantage.
As a result, processes may end without explicit explanation if a proposal fails internal evaluation. Conversely, engagement may resume unexpectedly at a later stage through a more formal and institutionalized channel, once the solution is deemed safe and justifiable within the broader system.
Who Bears the Responsibility?
In South Korea, the primary function of regulation is not to facilitate decision-making, but to constrain and manage risk at an institutional level. Government permits, certifications, and compliance with standards are necessary prerequisites, but they do not in themselves make a decision safe for the decision-maker. Regulation defines the minimum threshold, not final approval.
Unlike in many European systems where regulatory approval largely transfers responsibility to the system, in South Korea responsibility remains in practice with the organization and the individuals within it. Even when all formal requirements are met, the personal and organizational risk associated with failure does not disappear.
As a result, regulation is tightly intertwined with supply chains, corporate group structures, and established institutional practices. A solution must be not only compliant, but also structurally compatible with the existing system. For external actors, this means that meeting regulatory requirements is merely a starting point, not a guarantee of market access.
Regulation as Institutional Risk Management
In South Korea, responsibility is a central factor guiding decision making. Decisions are not primarily made on the basis of which solution is best or most efficient, but on who carries responsibility if a project fails. Failure is not merely an economic issue, but also entails a loss of face for the individual and the organization they represent.
For this reason, decision making seeks to avoid personalized risk. Responsibility is deliberately shifted away from individuals and anchored in structures, processes, and collective decisions. A solution becomes acceptable only when its consequences do not visibly fall on a single person or unit.
For an external actor, this means that technical or commercial superiority alone is insufficient. It is necessary to demonstrate that responsibility for the solution’s performance has already been carried elsewhere, for example through established references, recognized standards, or prior implementations.
Silent Testing and Risk Avoidance
Because responsibility is deliberately avoided at the individual level and regulation alone does not eliminate risk, new products and solutions in South Korea are often tested quietly within existing structures. Testing takes place without publicity and sometimes without the foreign actor being aware that it is under evaluation. This is not an exception, but a systematic risk management practice.
Large chaebols have exceptional capabilities in this regard. They control their own supply chains, subsidiaries, subcontractor networks, testing environments, and end user interfaces. Through these structures, a foreign component, technology, or solution can be integrated into the ecosystem and its performance monitored over months or even years without external visibility.
Open pilots or public trials are typically avoided, as failure would constitute an institutional risk. If a solution does not meet requirements, the process ends quietly without formal feedback. If expectations are met, contact is made later through a more formal and institutional channel, often from a higher organizational level.
The Foreign Actor as Part of the System
In South Korea, foreign companies are rarely perceived as independent market actors. Their role is typically complementary, providing technology, components, or narrowly defined expertise. Value is not created through visibility or by challenging the market, but through how well the actor fits into the existing system and supports its functioning.
For this reason, entering the market independently without a local anchor is exceptional and high risk. Success almost always requires a partner or integration into an existing supply chain, particularly in B2B environments. The foreign actor positions itself as part of a broader whole, not as an external alternative.
In practice, this often takes the form of so called white label logic, even if it is not referred to by that name. A foreign product, technology, or solution is integrated into a Korean company’s overall offering without visible origin branding. Responsibility, face protection, and risk management remain with the local actor.
The white label model aligns well with South Korea’s market logic. It enables the testing and adoption of new solutions without exposing an individual decision maker or organization to visible risk. The foreign actor remains a provider of technology or expertise rather than a market challenger, which makes the model institutionally acceptable.
Consumer Markets in South Korea
Consumer markets in South Korea are more open than the industrial B2B environment, but only under specific conditions. Success requires a strong brand, effective local distribution, and the ability to adapt quickly to consumer behavior. Competition is extremely intense, and mistakes are both highly visible and costly.
The demanding nature of the market is illustrated by failed entries as well. Both Carrefour and Walmart withdrew from South Korea in 2006 after years of effort, having failed to adapt their operating models to local structures and consumer expectations.
IKEA, by contrast, is often cited as an example of a more successful market entry. The company prepared for the South Korean market for an exceptionally long time, effectively over several years, before opening its first store in 2014. This was not a rapid experiment, but a strategic and carefully planned expansion. Even so, IKEA made mistakes in its early phase, highlighting the market’s structural and cultural sensitivity.
IKEA was required to significantly adapt its offering to match South Korea’s market structures and consumer behavior.
IKEA has since succeeded in the South Korean market, but its experience illustrates the market’s true level of difficulty. If even a globally recognized and well-resourced company is forced to fundamentally redesign its concept, the entry threshold is exponentially higher for actors that do not prepare for market entry in a long-term and systematic way. Consumer markets are not easier than B2B markets, but demanding in a different manner. They reward persistence, but punish structural incompatibility quickly and visibly.
South Korea at a Glance
Particularly suitable for:
- companies with a strong brand and a market-ready product
- firms with prior references or operating experience in Asia
- actors willing to operate in a complementary or subcontracting role as part of a larger system
Less suitable for:
- companies seeking rapid growth or lightweight pilot projects
- SMEs relying on an independent, standalone sales organization
- services lacking institutional anchoring or a local structural link
Key precondition:
Success requires the ability to operate within the system. External actors do not reshape the structure; they adapt to it.
About the Author
Kasperi Anttila is a specialist in Europe–Asia cooperation with long-term experience living and working in Asia. He is the founder of Kabei Ltd., an Asia-focused advisory firm, and approaches Asian markets primarily through institutional, cultural, and market-structure analysis.
Themes and keywords:
South Korea, chaebols, Korea Inc., market entry in Asia, institutional decision-making, risk management, B2B markets in Asia, consumer markets in South Korea, foreign companies in Asia, white-label models, supply chains, hierarchical decision-making.