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Brenda Sternquist: Professor, Michigan State University, East Lansing, Michigan, USA
Byoungho Jin: Visiting Scholar, Michigan State University, East Lansing, Michigan, USA
The retail industry is a local industry. As such, it is often the object of government regulations. Governments use regulations to limit imported merchandise, reduce excessive price competition and protect small businesses. The Four Tigers of Asia (Hong Kong,Taiwan, Singapore and Korea), have approached retail regulation in different forms. Of these four countries, Korea is the last to open its doors to foreign retail investment. The state has exerted great influence over retail development in Korea. This influence continues even though the Korean retail market was formally liberalized in 1996. Understanding this degree of government influence is essential to understanding the Korea retail system - past, present and future.
First we will present a theoretical model (Figure 1) to explain how government interventions affects retailers. The conceptual basis for the State as Strategist in Retailing (SSR) model is Lenway and Murtha's (1994) State as Strategist Dimension and Mihn's (1988) Hierarchy of Government Involvement.
We will then discuss deregulations of Korea's home market, the domestic struggle for retailers, threats of foreign entrants and international expansion.
Theoretical framework
Government plays an important role in the business activities of many countries. The state becomes a strategist when it manipulates the commercial environment to achieve objectives. Lenway and Murtha (1994) present four dimensions of state organizational attributes that interact to affect international economic strategies: domestic policy capabilities, the impact of ideology and domestic political interest groups, and the state's foreign policy capabilities and legitimacy. We will discuss these dimensions next.
Dimension 1: domestic policy capabilities: regulatory versus developmental
Johnson (1982) identifies states' influence as regulatory or developmental. Regulatory states have little ability to form economic strategies and few policy tools with which to implement them. Regulatory states are not necessarily heavily regulated; government might take a very laissez-faire approach to business, but the action they do take is institutional and affects all businesses in the same way. The USA is an example of a regulatory state. Countries using regulatory approaches to national economic management assume that the competitive interaction of market forces will ensure economic growth.
Developmental states pursue a strategic, or goal-oriented approach to the domestic economy....