Local companies of South Korea are able meet the needs and tastes of Korean consumers, giving them an edge over global firms in the market, industry watchers note.
According to Justin Lee, Korea's managing director of Spire Research and Consulting, the strength and sophistication from local players come from their understanding of and ability to relate to local consumers.
Global companies have rules applied to all countries they function in and usually do not change it based on different countries, Park Jiyoung, strategy analyst at research firm Solidiance, observed. On the other hand, Korean consumers want services that are suited for the locals and local companies are better at quickly catching what they want and providing it, Park pointed out.
For instance, when Korean consumers buy a phone, the usual behavior would be to get a desktop charger and a regular charging option, which Samsung offers as a bundle to consumers but Motorola and HTC did not, noted Lee Youngmi, group account director at Millward Brown.
Japan, China markets show similarities
Japan is "notoriously famous" for foreign companies to penetrate but not succeed in, Kim explained. While consumer electronics companies such as Sharp may be struggling globally, they still maintain a stronghold on Japan's LCD TV market.
Samsung however, has not made much headway into the Japan market, with only its flagship smartphones such as Galaxy S3 and Note 2 being offered by mobile network operators such as NTT DoCoMo, Kim pointed out.
While the consumers in China love Apple's products, the domestic markets are generally dominated by local companies, she noted. For example, the leading brand for LCD TVs in China are local brands TCL and Skyworth, while foreign companies such as Samsung and LG struggle to make inroads.
Cost is also a major hurdle for foreign companies to be competitive against local manufacturers, because the Chinese government is contemplating increasing import duties for LCD panels, which may affect Samsung and LG, Kim added.
While the Korean TV companies' LCD panels are produced in Korea, the local TV manufactures have hogged the limited LCD panel supplies produced internally, giving them a cost advantage, she said.
South Korean consumers today are also very knowledgeable and discerning when it comes to consumer electronics and IT services, and want "the best of the best" products and services, Millward Brown's Lee pointed out.
Cho Inkyu, a South Korea-based student for instance, told ZDNet Asia she preferred using local search engine Daum's Sky View because it provided more accurate and detailed images when she needed to find a location.
Their comments come after U.S.-based Yahoo exited South Korea market last week, its first pull-out in Asia as it reorganizes to streamline operations and focus its resources on building a "stronger global business set up for long-term growth and success".
Last year, Motorola Mobility also pulled out of the country, in a move part of a continued global restructuring effort by its parent company Google. Taiwanese phone maker HTC also closed its doors in South Korea after to streamline operations and improve efficiency across the whole company.
At the moment, Samsung and LG dominate the Korean IT market with their powerful brand pull due to the intensity of their advertising and brand building in Korea as well as their ability to work with other players in the local business ecosystem, such as telcos, Internet sites and retailers, Lee of Spire Research, pointed out.
Not all global firms are dying in the South Korean market though, pointed out Minji Kim, research analyst at Euromonitor. She noted U.S.-based Apple and Japan-based Canon have managed to carve a niche for themselves in the smartphone and digital cameras market respectively in 2012.
"Apple's strong brand name and iPhone ecosystem commands loyal followers amidst a sea of Android smartphones, while Canon has been able to compete in Samsung's home turf with a range of cameras from point-and-shoot to DSLRs since 2008," Kim said.
Understand consumers to compete
If global companies want to survive in Korea's IT market, they need to better understand Korean consumers' needs, taste, trends and invest efforts to meet the high standards, Millward Brown's Lee noted.
Companies need to invest heavily in research and development to try to be in line with consumers' needs and tastes, Lee said.
Yahoo, for instance had a global standard but was not locally customized, he said. It should have tried to find out what Korean consumers want, how they search for information and provide user friendly interface, but they failed to understand the consumers and were not able to compete with local players, he explained.
On the other hand, Apple, Twitter and Facebook are still widely used by Korean consumers despite being global brands and not investing much in marketing efforts, because the quality and service are good enough to meet consumers taste and trends, Lee pointed out.