Dynamic Analysis of Retailer Internationalization: Wal-Mart and Tesco in South Korea

Abstract

This thesis focuses on the retail format of the hypermarket that is characterized as a large-scale retail structure with products ranging from household goods to food stuffs. In particular, it examines how two separate foreign retailers performed in the Korean market in terms of the institutional theory—Wal-Mart and Tesco. This thesis utilizes institutional theory to develop a dynamic framework to analyze factors leading to the success and failure of two major global retailers in the South Korean market. It introduces a new conceptualism of institutional theory to serve as a frame of analysis and offer insight into which factors of a host environment is integral to the success of failure of foreign firms (actors). This new conceptualism is done by re-interpreting the function of the 3 pillars of the institutional theory—regulative, normative, cognitive. The regulative element is the functions as a framing point of analysis. The normative element functions as the retail climate and norms of the point in time. And the cognitive element functions as the taken-for-granted essence of the host environment which must be addressed by foreign firms in order to gain legitimacy and survive in the host retail environment. There is a general consensus that Wal-Marts root of failure was its retail standardization strategy while Tesco was able to find success in the Korean market by localizing. This thesis finds the appearance of two strong linkages that are both integral to the Korean retail market and reverberates throughout the evolution of retail in South Korea. The first linkage is the unique setting of the manufacturer and retailer relationship. The second linkage is the establishment of the discount retail and hypermarket format in South Korea.