TOKYO -- South Korea's entertainment industry has achieved great success overseas, in part out of necessity: The country's small domestic market means producers and entertainers are forced to focus on foreign markets from the start.

The government has also lent a hand, with a policy of promoting entertainment and other cultural exports. Since the 1998 currency crisis, each president has pitched in. Kim Dae-jung called himself a "cultural president," Roh Moo-hyun vowed to make South Korea one of the top five nations in the entertainment industry, and Lee Myung-bak set up a national branding committee.

Help from above

In 1999, South Korea increased its entertainment-related budget sixfold in a year. In setting up the Korea Creative Content Agency, or Kocca, the nation created a joint public-private effort to pitch South Korean entertainment to the rest of Asia. The result? A boom in the popularity of South Korean TV dramas and the emergence of the "Korean wave."

In 2012, 279.8 billion won ($253 million at the current rate) of the national budget was allocated to the cultural-content industry and 118.8 billion won to the media industry, reportedly about eight times Japan's allocations.

The nation's exports have been growing along with this effort, from $2.3 billion in 2008 to $4.6 billion in 2012. Japan is the top export destination, accounting for 30%, followed by China (27%), Southeast Asia (19%) and North America (11%).

In music, "Gangnam Style" by Psy reached the top of the pop charts worldwide, while the groups Girls' Generation and Bigbang have grown popular enough to launch world tours. The music used in the Microsoft Surface commercial is by girl group 2NE1. South Korean entertainment has made a global name for itself through a business model that combines online and live performances.

The collapse of the domestic CD market more than 15 years ago prompted industry players to look beyond the country's borders, according to YG Entertainment CEO Yang Ming-suk. Downloading services that boast lower per-tune fees than Apple's iTunes have become popular in South Korea. "I feared all talent agencies and record companies would go bankrupt," Yang said. This sense of crisis was one of the driving forces behind the push to develop overseas markets.

Hefty investment, big payoffs

The preparation has been solid. Industry players actively used the video site YouTube and social media to increase the popularity and moved to large-scale concerts so that they can monetize quickly. Language education is one focus, particularly teaching entertainers to speak Japanese so they can do well in their performances and marketing activities in Japan. The 12-man group Exo, managed by SM Entertainment, also has Chinese-speaking members, which has helped make the group even more popular in China.

YG usually trains new performers for more than five years before their debut. Subjects include singing, dancing and foreign languages, such as English, Chinese and Japanese. The training period at SM is three to five years. "The cost of training new artists is like research and development costs for manufacturers," said SM Entertainment CEO Kim Young-min. "To keep on producing hits, finding newcomers who have the potential for global success is more important than managing artists who've made their breakthroughs."

SM and YG attract tens of thousands of audition applicants in China, the U.S., Japan and elsewhere. South Korean talent agencies have multifaceted business models that cover all aspects of the entertainment business, from finding new talent, to training and managing them, to producing music, videos, advertisements and concerts. Overseas strategies are also in place for new artists from the time they make their debut. To ensure swift and smooth overseas operations, the agencies team up with local partners to meet the tastes and demands of each country or region. Another factor behind South Korean pop music's global success is collaboration with famous U.S. music producers like Teddy Riley, who worked with Michael Jackson.

The Korean wave has a ripple effect beyond the content industry. TV shows and movies feature a wide array of South Korean home appliances, cars and cosmetics, creating demand for those products among overseas audiences. A growing number of consumers have likewise developed an interest in South Korean food and fashion through entertainment, and many of them shop at South Korean chains.