Korean Business Entertainment (Part I)
It goes without saying that entertaining customers and prospects is a big part of doing business in Korea. But since the enactments of various overseas anti-corruption laws in North America and Europe, many businessmen hesitate to understand this topic. It is better to allow your Korean partner company to handle this part of the business process. They best know the market, the culture and the language. Best of all, it is often legally prudent to pursue a policy of ``don't ask so my Korean partner doesn't tell," should anything hit the fan down the road with your home office auditor.
But as wise as that attitude may be for Western business professionals, it can place one on the edge of a metaphorical cliff should one have to pre-authorize payment of business entertainment for one's Korean sales managers or whomever. Since many foreigners do not know how far the ``drop'' may be from that cliff, the natural reaction is to say ``no.'' This naturally can frustrate any Korean salesperson if (normally) he or (rarely) she feels it is required to win a major deal.
So as to shed some light on the topic, as your dedicated columnist, I have gone beyond the call of duty to find out what Korean business entertainment is really all about. Yes, it has been a nasty undertaking, but dog gone it, someone had to do it.
At first glance, all this business entertainment seems like an expensive way for Korean men to expand livers and shrink brain cell count under the guise of developing relationships that lead to sales and (wink, wink) having some fun in the process. But only if it were truly the case. It may start out that way when one is young, but by the mid 30's, serious entertaining is actually hard work.
To put all of this into proper perspective, let's consider how a traditional Korean salesman uses various forms of entertainment to capture a major business-to-business sale. (I will be using the term "salesman" since "saleswomen often have to drop out of the process and do team selling through their male counterparts)
While personal introductions are critical, often even with such introductions, the Korean salesman starts out dealing with strangers. Often the second sales call is scheduled just before lunch so that salesman can take his prospects out to a modest lunch. If the sales process is continuing well, later on the sales calls will be in the late afternoon. Sometimes ― not regularly ― the salesman may offer to take the prospect's staff member or two out to a modest dinner followed by a few beers. As both sales cycle progresses and personal relations improve, dinner may be followed by reserving a private room, drinking beer while playing ``go-stop'' card games. Alternatively, a salesman may take his guests to the local sauna and play card games for hours there.
From this point a good Korean salesman should be earning the trust and candor from his prospects to pick up ``inside information.'' And I can tell you from having sold in Japan and the United States, it can make for a startling comparison to elsewhere in how much inside info that comes out of these informal sessions. Not only can a salesman learn who the competitors are, how they are viewed by the decision-makers, but even at times what are the competition's price offerings.
While the above schmoozing continues to and past contract signing, we now reach the point when serious business entertainment begins. Contrary to many foreigners' opinions, expensive entertainment is not rampant. When serious money is spent, both the seller and buyer take such opportunities seriously. On the seller's part, it is important, of course, not to inflate the cost of sales. But also on the buyer's part, it is equally important not to mislead vendors. Buyers' corporate auditors consider acceptance of excessive entertainment as a form of corruption. In fact, it is not unknown if a seller concludes they have been ``had'' by the buyer's manager who is not seriously interested in buying from them, they may notify that manager's auditing department. So offering ― and accepting ― a night out on the town is not a lackadaisical affair.
Before we go any further, this is a good place to consider some common errors in this process. For foreigners, a common error is to pick up a prospect after dinner for drinks. Entertainment always starts with dinner and ends whenever, depending on the circumstances. A much bigger error can be entertaining the ``foreigner handler'' rather than the real decision-maker. Once the mistake has been uncovered, the foreigner will probably need to entertain once more but at a more expensive level, since the foreigner handler is almost always of a lower rank and to entertain the decision-maker at the same level would be considered a slight. For junior Korean salesmen, they almost always can correctly identify the right person whom they should entertain, but they can misgauge the proper timing to do so.