Wal-Mart venture disappointing in Korea, fails to adapt to Asian market

Kara Gutormson

Kara Gutormson

SDSU professors, students and Brookings community members gathered on Dec. 3 to hear Korean exchange professor Dr. Kye-Chung Song speak on the Asian perspective of the globalization of American firms.

Song specifically discussed the failure of Wal-Mart in Korea and contrasted it to the success and economic growth experienced by the Korean division of GM.

At the opening of his presentation, Song spoke about the roles of economic globalization and glocalization. He defined globalization as “the trend of companies expanding across the world” and glocalization as “the process of adapting a product specifically to each locality that it is marketing.” An example of globalization is the presence of McDonald’s restaurants worldwide; the addition of fried rice to the menu is an example of McDonald’s glocalization process.

As a professor in the department of business administration at Chungham National University, Song has come to SDSU with a great deal of knowledge and expertise concerning the business world.

Throughout his academic career, he has acquired two Masters of Business Administration (MBA) degrees, as well as a doctorate in the specific disciplines of Organizational Behavior and Human Resource Management. In other words, he knows a fair amount about managing people.

Ineffective people management, Song said, contributed to Wal-Mart’s downfall in Korea. First of all, most of the Korean department stores have centralized locations downtown in areas easily accessible by subway. Wal-Mart has built facilities in remote locations. It is just not convenient. Wal-Mart’s grocery shelves stock frozen fish rather than the fresh fish preferred for the Asian diet. The store’s design was not altered to accommodate the average Korean’s height; therefore, the shelves and displays are higher than in the other stores.

Also, the brick and tile interior does not provide any sense of wealth or status, important points of Korean culture. Song explained that most of Korea’s people are affluent enough to be able to pay higher prices than what Wal-Mart advertises. As a result, a low price equals low quality association exists. For them, Wal-Mart is a step down in quality.

According to Song, a big part of Wal-Mart’s problems started with the fact that the corporate headquarters are in the U.S.A., and there was a lack of communication between them and the Korean division.

Former SDSU economics professor Han J. Kim, also of Korea, attended the presentation. “Good communication at all management levels is key,” Kim said. “If American firms want to become successful in terms of globalization, they need to figure out how to incorporate the overseas branch into their headquarters,” he said.

Also, executives failed to research the potential in the Korean market for a discount department store like the one in the U.S. that enabled Wal-Mart to become a household name. When Wal-Mart arrived, proper attention was not given to promoting the store.

“I think if American companies are going overseas, they should do their homework first,” Kim said.