South Korean retail industry: government’s role in retail liberalization

Abstract

The Korean government has played an important role in the development of the domestic retailing industry. Korean manufacturers were nurtured until they were able to compete with manufacturers throughout the world. Korean retailers are now caught in the domestic market between the powerful Korean manufacturers and foreign retail competitors who have themselves learned to be competitive by going head to head with world‐class retailers. Manufacturers, rather than retailers, have dominated the Korean distribution industry. Korean retailing is characterized by large department stores owned by the chaebols, and small, inefficient family‐centered operations. In contrast to the department store’s decline in sales, the growth of discount stores is the strongest trend in Korean retailing. The government has chosen the manufacturing sector for aggressive development. The result has been a world competitive, export intensive manufacturing sector and a weak, inefficient retail sector. We use state as strategist in retailing (SSR) model to explain how dimensions and stages of government involvement affect retailing.