Managing in Troubled Times Case Study

Wal-Mart’s Withdrawal from South Korea

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Abstract:

In May 2006, Wal-Mart, world’s largest retailer announced its exit from South Korea selling its 16 stores to Shinsegae Co., the country's top discount chain for 825 billion won ($882 million), subject to approval from South Korean regulators. Wal-Mart said that its decision to withdraw from South Korea was in keeping with its global growth strategy to expand in markets where they could realise the desired economies of scale. Wal-Mart’s performance in the South Korean market which was considered highly competitive and demanding had not been encouraging. Analysts blamed Wal-Mart’s failure to localise as the main reason for its exit. They argued that Wal-Mart had not tailored its stores and offerings to suit the needs of the Korean consumer. Analysts wondered why the world’s largest retailer, with annual total sales of $312.4 billion, as of January 2006 and serving more than 175 million customers weekly in 15 countries worldwide decided to pull out of a growing economy like South Korea.

While the majority blamed Wal-Mart’s failure to localise its strategies as the reason for the debacle many felt that the environment in South Korea was not conducive to foreign brands. Hardly a month before Wal-Mart’s announcement, Carrefour of France, world's second-largest retailer quit the South Korean market. Many international brands like Nokia, Nestlé and Google, struggled in the South Korean market. While analysing the reason for its withdrawal, experts felt that Wal-Mart should use this failure to its advantage in other Asian economies like Japan and China. How it would do this was to be seen. The case offers scope for discussion on localisation strategies to be adopted by retailers in overseas markets and the impact of failure to localise.

Pedagogical Objectives:

• To teach localisation strategies
• To discuss the outcome of a company’s failure to understand and tailor localized strategies.

Keywords : Wal-Mart; Localisation Strategy; South Korea; Asian Markets; Consumer behavior; Managing in Troubled Times Case Study; E-Mart; Shinsegae; Samsung Tesco HomePlus; Retail Industry; Multinational brands; Trade Unions; Carrefour Korea; Competitive Markets