Case Study: Wal-Mart In South Korea

Introduction

The mass merchandiser Wal-Mart, founded 1962, is stated as the world largest retailer with over 11,100 stores in ~ 27 countries. The market is over $275 billion and Wal-Mart’s rank among the top ten companies in the S&P 500 index.

Wal-Mart’s philosophy is to provide everyday low prices and superior customer service. They invested in its unique cross-docking-inventory-system, which is one of the largest supply chain in the world. Through cross docking, goods are continuously delivered to stores within 48 hours and shelves can be replenished 4 times faster than their competitors can do. The purchases in bulks and distribution of the goods on their own reduce the costs of sales. (Pahlguni, 2015). This influences the price strategy.

The company stated to declining returns on investments and capital as the reason for its exit from South Korea. Wal-Mart’s spoke man Bill Wertz pointed out that they feel that they can take the investments that they had in South Korea and put it into other growth opportunities elsewhere around the world and do better for the company. The investments in South Korea did not help the company to grow and Wal-Mart never managed to rise past the fifth place among their major competitors. They blamed the severe competition and domination of the South Korean retail market by E-Mart.

Some blamed Wal-Mart’s failure to localize its strategies as the reason for their failure and other blamed the environment in South Korea that is not conductive to foreign brands and the market in South Korea seems difficult because many international brands like Nokia, Nestle and Google struggled in the South Korean market. Analysts stated that withdraw was the right decision to get resources to concentrate on other markets like South America, China and India.

There are different ways to enter the foreign market (except the direct and indirect export of the goods): wholly owned subsidiaries, merger & acquisitions, joint ventures, franchising/licensing agreements and minority investments. After determining the entry mode the company will choose the market and evaluate it to find the best way to enter it. The different forms of market entry strategies have advantages and disadvantages. Standardization of market operations and processes are more different if a company chooses merger & acquisitions and joint ventures, because first the partnerships need to be harmonization. These partnerships are valuable because of the partner’s knowledge about the local market. A slower form of expansion, which offers higher standardization options are wholly owned subsidiaries with more risks because of the different culture and customer behavior, and franchising/licensing agreements. High levels of standardization provide the possibility for adaption of the local needs and thus sales growth. (Zentes, Swoboda, & Morschett,