[VIEWPOINT]Even global giants must think locallyWal-Mart and Carrefour recently decided to pull out from the Korean market. They are the world’s first- and second-ranked distribution companies. Why are these strong competitors, with diverse product buying power, vast amounts of information and distribution systems with their own satellite links leaving this country? An important factor that decides the success of international distribution companies in overseas markets is the harmony between the standardization of the company’s competitiveness and its adaptation to local markets.
However, Wal-Mart persistently stuck to the discount-store idea and its U.S. operation methods in the Korean market. By contrast, Carrefour made extreme efforts to meet the tastes of Korean consumers, even following some bad Korean commercial practices.
Wal-Mart failed to match its strong points with the products, services and atmosphere that Korean consumers wanted. And Carrefour failed to emphasize its own image and strong points by adapting recklessly to Korean distribution customs and the tastes of consumers. Ultimately they gave in to the Korean distributor E-Mart, which carries out completely local marketing for Korean consumers, and Samsung Tesco’s Homeplus, which is foreign but succeeded in adapting itself locally.
The U.K. company Tesco’s way of branching out into the overseas market is noteworthy. It is meeting the emotions and needs of local consumers not only in Korea, but also in Southeast Asian countries, combining its strength in the management of fresh foods with marketing.
It is carrying out various local marketing activities, such as collaborating with local companies or their brands and developing new businesses.
Wal-Mart and Carrefour had a hard fight in Korea, but the situation is totally different in China.
Carrefour is the leader among the many foreign discount stores in China. Carrefour has occupied good locations in major cities and has succeeded in getting a good reaction from Chinese consumers by providing a variety of products in an agreeable atmosphere.
Wal-Mart also considers the Chinese market the most important in Asia, and is planning to continuously expand its stores. However, Wal-Mart lags behind Carrefour in store expansion because the company has slowed down localization, insisting on its principle of global standardization, like it did in Korea.
Therefore, Korean distribution businesses should not boast that they defeated Wal-Mart and Carrefour. The Korean market is already full, so the retailers have to branch out into overseas market anyway. E-Mart, the largest discount store in Korea, is now consolidating a foothold in China by opening seven stores. On the other hand, both Carrefour, which has 70 stores and Wal-Mart, with 56 stores, are far ahead of E-Mart. Even if E-Mart defeated Wal-Mart and Carrefour domestically, it still has a long way to go in the world market.
This is why Korean distribution businesses should continue to try to adapt to the local markets, while strengthening their product buying power on a global level and establishing a global system.
When Korea’s distribution market opened, there was a lot of concern that the domestic market would be ruined because big overseas distributors would rush into the Korean market.
However, the pullout of Carrefour and Wal-Mart shows those concerns were unfounded.
Although the free trade agreement with the United States is being negotiated, there is no need to worry too much. The taste of Korean consumers has become quite sophisticated. Success in the Korean market now means success in the world market, too. What is important is competitiveness. More than anything else, distribution companies need to develop localized marketing activities and provide local consumers with more satisfying services.
This not only goes for the distribution field but also for other fields such as agriculture, fishing and the manufacturing industry.
If we start to build up global competitiveness now and slowly prepare ourselves in advance, we can succeed no matter what kind of FTA is concluded.
* The writer is a professor of business administration at Yonsei University. Translation by the JoongAng Daily staff.
by Oh Se-jo