Carrefour's Exit from South Korea

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Case Details:

Case Code : BSTR241
Case Length : 19 Pages
Period : 1995-2006
Organization : Carrefour
Pub Date : 2006
Teaching Note :Not Available
Countries : South Korea
Industry : Retailing

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Carrefour Bids Adieu to South Korea Contd...

According to the President of E.Land, Kwon Moon-soon, "After a close inspection of the discount store chain, the final purchase price has significantly gone down."⁹ E.Land announced that instead of taking the competitors head on, it would concentrate on modifying the existing hypermarkets into a specialized chain of outlets, with a focus on fashion items.

Analysts opined that E.Land had a tough task ahead - that of integrating its operations with those of Carrefour. According to Park Jong-Ryul of Kyobo Securities¹⁰, "E.Land has a big burden. Including renovation costs, E.Land will have to invest almost 2 trillion won, very high in relation to the asset value of Carrefour."¹¹

In a span of one decade, Carrefour's South Korean operations recorded growth in revenues (Refer Table I for Carrefour's revenues in South Korea between 2000 and 2005). However, this was not sufficient to meet the expectations of the company's headquarters. On the departure of Carrefour (and the subsequent departure of Wal-Mart¹²) from Korea, the South Korean media reported that 'Native Korean retailers won a battle with the world's retail Goliaths.'

Background Note

In the early 1950s, the grocery industry in France consisted mostly of family-owned stores. Though there were some big department stores, these charged exorbitant prices. At that time, the concept of free service¹³ was gaining popularity but very few stores in France were equipped to allow shoppers to help themselves by providing them with trolleys, displaying the items conveniently, giving them access to the items, etc. In 1959, two entrepreneurs, Marcel Fournier (Fournier), a textile retailer and Louis Defforey (Defforey), wine and food wholesaler, from Annecy in Eastern France decided to establish a large discount supermarket.

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9] "S. Korea's E.Land Acquires Carrefour Korea for US$ 1.57 billion,"http://sg.biz.yahoo.com, September 28, 2006.

10] South Korea based Kyobo Securities was established in 1994, after Kyobo Life acquired Daehan Securities. By 2005, the company was among the top three securities companies in the country.

11] "E.Land Buys Carrefour Korea for US$ 1.8 billion,"JoongAng Daily, April 29, 2006.

12] Less than a month after Carrefour's exit from South Korea, Wal-Mart made its exit by selling its 16 stores to Shinsegae for 825 billion Won. In 2005, Wal-Mart recorded loss of 9.9 billion Won in the country.

13] Before free-service came in, sales clerks in grocery shops picked up the items consumers asked for from the shop shelves. With self-service, customers are given shopping carts or baskets. They move around the store picking up the items they need from the store shelves. Prices and quantities of the merchandise are clearly indicated.