Everything Korea February 13 Episode, Licensing: a Faulty Model
I have a history licensing Brands to Korea….
At times representing Korean firms licensing the foreign brand and at times the international company seeking a Korean partner. In the best cases, I bring partners together, resolve their differences, and work towards an amicable agreement. In less so pleasant circumstances, I have been engaged when terms of an agreement are in dispute.
For entry into Korea, the current model is for an international brand to request the potential Korean company to prepare a “go to market” Business Plan. The plan would usually include background on the company, the competition, a 5-year sales and revenue projection and the number of locations they will open over that time period.
This model of asking the local partner to outline their plan may work well internationally between western companies — similar norms shared. For Korea, this model has faults for a number of reasons and ends in Brands less than pleased over time. This experience is not uncommon.
First and foremost Korean companies have high uncertainty and prefer to minimize risk in new ventures. They feel circumstance may change and not wish to be locked in to a rigid commitment. More significant, they see an Agreement as a roadmap subject to constant “adjustment” (code word for downsizing) and modification. This means the Plan they craft may be one attractive on paper for the sake of securing the Brand — and open at a later date to re-negotiation.
What’s more, when asked to draft a Business Plan/ Go To Market Plan, the actual teams developing the plan may have limited (some no) experience in actually launching a brand with western expectations. In turn, their business plan on paper may be very different what they will do in reality.
So what does this mean for 2017?
Frankly, I have been increasingly hesitate when asked about approaching potential Korean partners for international brands knowing the current Korean mindset and their preferred business practices.
Instead, I strongly recommend international brands present their potential partners with the Brand’s business plan for the market vs. asking for their Korean team to prepare their version.
This, of course, is a new model, however, it is over time in both parties best interest with expectations agreed upon up front and less subject to disagreement down the road…
As for crafting a localized business plan, this is something I can assist ….