Carrefour case study

The case describes Carrefour's entry and expansion strategies into the South Korean market and the reasons that led to its exit from the country. The company failed to localize its stores and the products sold according to the needs and preferences of Korean consumers.

Carrefour chose to venture into the Korean market on its own without a local partner, due to whom it failed to understand the market and was unable to select good locations for its stores. The company employed most of the top management personnel from France and this was not viewed favorably by the local employees, and Carrefour too often faced problems from local labor unions.

During the late 1980s, the economies of several Asian countries like Taiwan, Singapore, South Korea, Thailand etc. werebooming. In order to reap the benefits of this growth, Carrefour started its Asian operations by entering Taiwan in 1989. It established a joint venture with Uni President Enterprises Corporation there. Its next destination was Malaysia, followed by China and South.

In the early 1990s, there was a growing demand from the South Korean consumers for modern shopping experience owing to the country's rapid economic growth and increasing income. The Government had adopted protectionist policies and the retail sector was not open for foreign direct investment at this time. The retail sector was dominated by mom-and-pop stores, which accounted for about 80% of the total retail sales in the country

Despite its experience elsewhere, Carrefour failed to localize its stores to a sufficient extent, as per the preferences of South Korean customers. Instead it tried to introduce its global practices and strategies in the country. Carrefour's stores layout, ambience, products, location, etc. failed to attract customers. The company wanted to attract the customers by providing them high quality products in bulk at low prices. Its stores were styled like warehouses and were simple in appearance compared to the stores of its competitors.

Initially, customers in South Korea were enthusiastic about the warehouse style of Carrefour stores, but most of them were not bulk purchasers. In several other countries in which Carrefour operated, the customers were more concerned about the price of the products and not much attention was given to the ambience, but in contrast, South Korean customers especially housewives, preferred a clean and sophisticated atmosphere along with low prices and turned to retailers like E-Mart which offered both.

After a decade of unsustainable operations and cut-throat competition, Carrefour finally announced the sale of its South Korean business in April 2006.

When Carrefour announced its decision to withdraw from the Korean market, the decision surprised analysts. Despite its problems they believed that the company was on the verge of success and had made an unnecessarily hasty retreat. They pointed out that the country was just recovering from credit card related personal debt problems and there was a marked improvement in consumer confidence, and retail spending had been registering continuous growth. Other factors like the stable job market and increasing incomes were also helping consumer spending.

question: Identify the major issues with Carrefour in South Korea?