Jan 21, 2021
Business Outlook Survey in South Korea for 2021
Korean Enterprises Federation (KEF) has announced the latest results of their annual “2021 Business Outlook Survey.” A total of 212 domestic companies with both under 300 and over 300 employees were surveyed to examine business outlook for the future directly following the economic crisis caused by COVID-19.
Generally, outlook for 2021 has been negative with a less structural plan from management level than before. 52.8% of the respondents replied that they expect their operating profit to decline in the year 2021.
Economic uncertainty has been the main reason for many companies to reduce their spending on investments and implement austerity measures to reduce budget deficit. This careful approach, along with efforts to recover from the financial damage caused by COVID-19, has made Korean businesses more wary than ever before.
Continue reading to understand the effects of the COVID-19 crisis on Korea’s domestic companies and lasting imprint on its economy.
1. Establishing a Management Plan for 2021
When asked about whether a management plan for 2021 has been established, 14.3% of the companies with more than 300 employees said that a draft has not been established. For companies with less than 300 employees, 57.0% responded that a draft has not been established.
For companies with more than 300 employees, 36.3% responded that a draft has been established but the same is not confirmed. For companies with less than 300 employees, 23.1% answered the same.
When asked if a final proposal for a management plan has been submitted and confirmed, 49.5% of companies with more than 300 employees responded “yes”, and 19.8% of the companies with less than 300 employees answered likewise.
Regardless of the size of the company, the general favorability of “strict management” was high — for companies with more than 300 employees, it was 47.4%, while for companies with more than 300 employees, it was 51.9%.
It was surveyed that companies that responded with “strict management” prioritized reducing new investments and rationalizing manpower management to cope with high internal and external uncertainties.
2. Investment and Recruitment Plan in 2021
A survey of investment and hiring plans in 2021 for companies with business plan establishments revealed that more than 60% would like to include “reduction” strategies as part of their business model.
The 60.0% of the respondents who answered that they would like to “reduce” were in favor of “austerity management” over business expansion. This number effectively doubles the 30.0% who responded in favor of reduction last year, in 2020.
With regards to employee size and new recruitment, the response of favorability for “reduction” was the highest at 65.4%. Only 28.5% of respondents answered “reduction” of employee size in 2020.
3. Recovering Management Conditions to pre-COVID19 Crisis
37.3% of the respondents said that the time when their management conditions recover to before the COVID-19 crisis is “after the year 2023.”
The KEF has said that, “Due to the economic and financial uncertainty of the crisis, many companies still believe that management difficulties will continue for a considerable period of time.”
23.1% said they will recover “in the second half of 2021,” 17.9% said they have “already recovered,” 13.2% said they would recover “in 2022,” and 8.5% said recovery would be “in the first half of 2021.”
4. Expected Operating Profit in 2021
52.8% of respondents said that the operating profit in 2021 will “decline from this year (2020).” 27.8% stated that operating profit “will increase from this year (2020), while 19.3% said it will be “similar to this year (2020).”
Conclusion
This survey conducted by the Korean Enterprises Federation offers insights for how domestic companies in Korea feel about the current business conditions. After the economic crisis caused by COVID-19, companies are wary to make big investments or tackle large scale projects per usual. Rather, they are slowly entering back into the market with careful strategy.
Austerity measures are the most common approach from surveyed companies as they try to cut budgets in any area that they can. Investment and recruitment plans have been held off, at least for so that businesses can first recover.
Recovering from the economic damages in 2020 won’t be an easy one, but many Korean companies are determined to return stronger than ever. Keep an eye out for companies like KIA, Samsung and Coupang, who all have big plans for 2021.
To learn more about business trends and market insights in South Korea, check out the AJ Marketing Blog.
Read Next:
COVID-19 Risk Perception and Collectivist Behavior of Koreans
Korean Game Trends in Global Markets in 2020
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