Walmart Korean Market Case Study

1.      Highly Competitive Industry

1. Threat of substitutes

• Large availability of substitutes

According to the New York Times, after penetration into the Korean market, Wal-Mart accounted for only 4% market share with ranked No. 5, Carrefour ranked No. 4 by about 8%, while Shinsegae with 30% market share, Tesco with 17% market share, Lotte Shopping 12%, the rest is shops and markets. Wal-Mart's revenues in the Korean market just reach about $800 million with losing $10 million.

• High variety of substitutes

Customers are not easy to can find fresh food in Walmart stores, but can easily buy them at any domestic shops or local markets.

• Substitutes are superior to existing products in quality and function

With the commodity category, while Walmart has some salient items such as electronics goods, clothing, handbags, shoes imported from around the world, local stores have the advantage of fresh food and drinks (Kim 2008, p.347). In fact, the main chains of the South Korean businesses with the advantage of understanding habits and preferences consumer have responded very well the needs of customers

1. Bargaining power of buyers

When going shopping, while Walmart stores are designed as a warehouse, the packaging style is too fix, difficult for customers when they want to check inside and have the decision before buying. Beside that, with the service of American style, no staffs for answer about information and consulting, customer has become discouraged. So, Korean people switch to local shop, convenient arrangement with shorter height for each stall (suitable with the average height of Asian people) and lead to easier to compare the same type, with regular staff answered any questions.

1. Bargaining power of suppliers

Compared to Walmart, the chain stores of Korea have become successful in the race because of the collaboration between distributors and manufacturers. The goods of manufacturer that provides for the retail store system always ensures prescribed standards available. In contrast, the distributors also try to keep prices stably, even when market have fluctuation. In contrast, Walmart frequently coerce manufacturers to get lower prices and lead to loss of goodwill with Korean consumers, where the ethic and environmental conditions are the first priority.

Kim, R 2008, 'Wal-Mart Korea: Challenges of Entering a Foreign Market', Journal of Asia-Pacific Business, vol. 9, p. 344-357.

Wal-Mart Selling Stores and Leaving South Korea 2006, The New York Times, viewed 29 June 2016, http://www.nytimes.com/2006/05/23/business/worldbusiness/23shop.html?_r=1.