Investing in Korea: Carrefour

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We await a comprehensive analysis of why Carrefour failed to succeed in Korea. An article in yesterday’s JoongAng Ilbo suggests a failure adequately to “localise” — having French rather than local management; and despite having French management it is suggested that the need to refer decisions to head office (a familiar gripe) resulted in slow decision-making. The business model is contrasted with that of the Samsung / Tesco joint venture, which has a local boss. But a year ago, Carrefour was planning on doubling their Korean presence, and was reportedly making good progress in “localising”.

Tom Coyner’s anecdotal evidence is that on the plus side the stores were well laid out – which, on the minus side, meant that you could easily see that they didn’t have the stuff you wanted. So is it a case of not identifying your customer base properly and not giving them what they want? Or is it simply one of those irrational changes in strategy which sometimes occurs when someone gets out of bed the wrong side one morning at head office? There’s a thoughtful study of Samsung / Tesco’s localisation strategy on Manchester University’s website. This paper also suggests an element of consumer nationalism might be involved in the failure of obviously foreign stores to gain as much market share as they would like. Carrefour thought they had addressed this issue by sticking Hankuk in front of their name, but the lesson is that’s not enough.

Carrefour was also plagued by adverse publicity over aggressive treatment of its suppliers (1999 and 2002) – a strategy adopted by big retailers elsewhere – and despite a court victory (2001) in one of these supplier disputes, the press is on balance negative. Other negative coverage related to Carrefour’s attitudes to local unions – surprising given Carrefour’s home country – and Carrefour’s withdrawal from the market was rumoured in 2004. All in all, a fruitful case study for an MBA student.

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