2.1.1 The Essence of Hallyu: Hybridity of Universality and Particularity

Originating from anthropology and cultural studies, cultural hybridity refers to the creative process in which distinct cultural elements interact to generate new meanings and forms (Bhabha, 1994). Bhabha defined this concept not merely as the physical mixture of two cultures, but as an active agency that creates a Third Space through negotiation. The key driver behind the global proliferation of Hallyu lies precisely in this hybridity.

Hallyu has established a unique cultural form by creatively combining Korean aesthetics, sentiments, and social values (particularity) while adopting the grammar of Western pop culture (universality). This dual attribute simultaneously offers global audiences cultural familiarity and exotic novelty (Jang and Song, 2016; Kim, 2025). In particular, the hybridity of Hallyu is qualitatively different from the Western-centric cultural imperialism of the past. Whereas cultural imperialism marginalized local cultures by unilaterally imposing dominant values, Hallyu adopts a mode of mutual enrichment that respects and embraces local traditions and contexts (Jang, 2013).

For instance, consumers in transitional societies such as Tunisia or Vietnam accept Hallyu without resistance because it provides an alternative modernity that stimulates their desire for modernization while bypassing aversion to Westernization. Therefore, the essence of Hallyu lies in its ability to maintain its own cultural identity while flexibly incorporating other cultures to create cultural resonance (Kwak and Ryoo, 2024; Hyun and Hong, 2023; Shin et al., 2022).

2.1.2 Hybridity as Global Business Strategy

On the cultural foundation established by Hallyu, firms global expansion strategies are required to move beyond existing dichotomous discussions. Traditionally, global business strategies have been discussed within the spectrum between standardization, which pursues efficiency, and localization, which enhances local fit (Dumitrescu and Vinerean, 2010). The concept that emerged to resolve this tension is Robertson’s (1994) glocalization. Under the banner of “Think Global, Act Local,” glocalization adopts a dual-structure strategy of maintaining global standards and brand identity (universal) while modifying detailed product specifications or marketing to suit local conditions (particular). However, this strategy still presupposes a top-down hierarchy where the headquarters is the subject and the local market is the object of adaptation, and it has limitations in that the scope of localization remains at the level of instrumental adaptation of product design or marketing mix.

In contrast, cultural hybridity proposed in this study refers to a process of reciprocal co-creation that goes beyond passive adaptation. This is not a case of a firm unilaterally adjusting to the local market, but rather the creation of completely new values and business models by combining the firm’s core competencies (e.g., IP, systems) with local cultural resources (e.g., consumers, partners, traditions).

The hybridity strategy is distinguished from glocalization in the following aspects. First is the active nature of the process. It is not simple modification, but the creation of a third value through collaboration with local partners. Second is the extensibility of the outcome. It secures social legitimacy by deeply rooting itself in the local society through socioeconomic contributions such as job creation and infrastructure modernization, rather than merely stopping at product sales.

In conclusion, if glocalization is a logic of balance and adaptation, cultural hybridity is a logic of fusion and co-creation. This is a key mechanism that allows global retail firms to position themselves not as simple commercial actors in the local market, but as cultural and economic partners that ensure sustainable growth.

Source: Adapted from Dumitrescu and Vinerean (2010), Jang and Song (2016), Kim (2025), and Kwak and Ryoo (2024).

2.2.1 Entry Barriers in Global Expansion

The fundamental challenge firms face when entering foreign markets has traditionally been explained as the liability of foreignness (Zaheer, 1995). This refers to the additional costs incurred due to unfamiliarity with the local language, culture, and regulatory environment, as well as being perceived as a stranger by local consumers. The early Uppsala Model posited that to overcome this, firms should sequentially enter countries with close psychic distance and gradually accumulate market knowledge (Johanson and Vahlne, 1977).

As the business environment has become increasingly networked, Johanson and Vahlne (2009) redefined the nature of entry barriers through their revised Uppsala Model. They argued that the source of uncertainty faced by firms lies not merely in the foreignness, but in the liability of outsidership stemming from a lack of embeddedness in the relevant market’s business network. Transitioning from an outsider to an insider requires a long period of interaction and relationship commitment.

However, empirical evidence from K-retailers presents a striking anomaly to these gradualist perspectives. For instance, GS25 in Vietnam rapidly ascended to the No. 1 brand position immediately post-entry, outpacing established global competitors such as Circle K and Family Mart, which had entered the market four to six years earlier. Similarly, CU achieved the milestone of opening 200 stores in Mongolia within just four years of entry. Such accelerated expansion and immediate market dominance cannot be fully elucidated by existing theories.

2.2.2 Reputation Renting: Leveraging Cultural Capital as a Catalyst

This study proposes the concept of reputation renting as a strategic mechanism to overcome outsidership. Originally introduced by Chu and Chu (1994), reputation renting refers to a strategy where a firm with low recognition leverages the fame of a reputable agent who has already established high trust to reduce uncertainty regarding its own quality. This study extends this concept beyond interfirm alliances to the convergence of cultural and retail industries. Here, Hallyu functions not merely as entertainment, but as reputational capital accumulated in the global market through consistent quality and appeal over a long period (Keller, 1993).

The specific mechanism operates as follows. In markets such as Vietnam or Mongolia, Korean retail firms (e.g., GS25, CU) are initially nothing more than unfamiliar outsiders. However, by actively introducing K-Dramas, K-Pop, and Korean food culture content into their stores, local consumers come to perceive these spaces not as strange foreign shops, but as familiar and aspirational physical spaces of Hallyu. In other words, by renting the positive halo effect of Hallyu, firms save the immense time and cost required to build trust independently and acquire the status of a quasi-insider immediately upon entry.

In conclusion, reputation renting in retail expansion operates as an efficient catalyst that allows latecomer firms to offset the costs of outsidership and accelerate initial market settlement in markets where cultural capital is highly accumulated.

2.3.1 Unidirectional Trust Transfer

Studies addressing trust transfer within brand portfolios or between retailers and private brands (Ailawadi et al., 2008; Koschate-Fischer et al., 2014; Seenivasan et al., 2016) have primarily focused on the one-way influence from the parent brand to the sub-brand. The Country-of-Origin Effect where the positive image of advanced nations or cultural powerhouses transfers to trust in products from those countries also assumes the flow of trust is unidirectional (Bilkey and Nes, 1982).

Yet, unlike manufacturing, the retail industry is characterized by frequent and experiential consumer contact points. Therefore, there is a high probability that consumers direct brand experiences can, in turn, influence the source image. Consequently, to explain the modern global retail environment—especially business models combined with cultural content—a dynamic framework encompassing the reverse flow and circulation of trust is required.

2.3.2 Bidirectional Trust Transfer between Hallyu and Retail Brands

To fill this theoretical gap, this study proposes the bidirectional trust transfer model (Kim and Chung, 2024a, 2024b). This perspective posits that trust does not flow unilaterally between Hallyu and retail brands but forms a cyclical structure of mutual reinforcement.

In the initial entry stage, retail firms lower consumer entry barriers by renting the positive reputation of Hallyu. However, once the firm successfully settles in the local market and accumulates positive Customer Experience through product quality, service reliability, and cultural resonance, the direction of trust is reversed. A feedback effect occurs where trust in the firm reinforces the value of the overall national brand.

For example, when Vietnamese consumers experience high-quality ready-to-eat food and a modern store environment at GS25, this extends beyond a simple preference for the specific convenience store to a perception that Korean food culture is hygienic and sophisticated. Similarly, the pleasant rest areas and social infrastructure functions provided by CU in Mongolia enhance trust in the national brand of Korea. This elevated national brand value, in turn, leads to increased favorability toward Hallyu content and other Korean products, completing a Virtuous Loop that further solidifies the competitiveness of the retail brand.

In conclusion, bidirectional trust transfer is a key mechanism of the maturity stage, where the retail store evolves beyond a simple sales channel into Cultural Infrastructure that consumes and reproduces the culture of the home country while strengthening national brand assets. This is significant in theoretically elucidating the reciprocal relationship where cultural appeal creates economic value, and economic success, in turn, reinforces cultural legitimacy.

3.2.1 Control Cases: Success and Failure of Global Retailers in the Korean Market

The Korean market has provided a unique environment where opportunities and crises coexist for global retail firms. This study selected Walmart and Carrefour, which failed in this market, and Costco, which successfully settled, as control cases.

1. 1) Failure Cases (Walmart, Carrefour)

   Despite their immense capital and brand power, these firms revealed the limitations of cultural imperialism by adhering to their headquarters standardized models and overlooking local consumer preferences and culture. These cases serve as counter-evidence showing that the absence of cultural hybridity leads to failure.

2. 2) Success Case (Costco)

   In contrast, Costco successfully adapted to the Korean market by building trust with local consumers and contributing to society while maintaining its global standard of warehouse-style discount stores. This case demonstrates that standardization and hybridity are not mutually exclusive and serves as a crucial comparative reference supporting the theoretical framework of this study.

3.2.2 Main Cases: Expansion of K-Retail Utilizing Hallyu

For the analysis group (Success Cases), GS25 (Vietnam) and CU (Mongolia), Korean convenience store chains that have achieved remarkable results in overseas markets by leveraging the reputational capital of Hallyu, were selected.

4.1.1 Failure Cases: Walmart and Carrefour

Walmart and Carrefour entered the Korean market in 1998 and 1996, respectively. At the time of entry, they were dominant players equipped with immense capital and global retail know-how, yet both withdrew in 2006, marking a failure. While existing studies have attributed their failure to a lack of understanding of local consumer preferences or poor location strategies (Kim, 2009)¹, this study interprets it more fundamentally as a lack of cultural hybridity and the limitations of cultural imperialism.

First, both firms fell into the trap of standardization by mechanically transplanting their home-country success formulas into the Korean market. They adhered to warehouse-style store layouts, high shelving, and product assortments centered on processed goods, which directly conflicted with Korean consumers' preference for high-quality fresh food, accessibility, and a comfortable shopping environment.

Second, in establishing relationships with local stakeholders, they prioritized unilateral control over co-creation. They leveraged their global sourcing capabilities to demand excessive unit price reductions from domestic suppliers or engaged in unfair trade practices. Furthermore, they adhered to headquarters-centric policies regarding employee welfare and labor relations that were divorced from local sentiments, thereby losing social legitimacy. This attitude reflects a culturally imperialistic perspective that views the local market merely as an object for the extension of the headquarters system (Gereffi and Christian, 2009; Lee and Kang, 2006).

Consequently, the cases of Walmart and Carrefour suggest that global brand reputation or economies of scale do not guarantee success in local markets. By adhering to rigid standardization strategies without modification or fusion that considers the local cultural context, they failed to create value through cultural hybridity, which ultimately led to market withdrawal. Their failure serves as a counter-example paradoxically demonstrating that a flexible hybridity strategy combining headquarters efficiency with local particularity is essential for global retail firms to settle in local markets.

4.1.2 Success Case: Costco

Unlike Walmart or Carrefour, Costco, which entered the market as Price Club in 1994 and rebranded in 1997, has successfully settled in the Korean market, achieving continuous growth. Costco’s warehouse-style stores, bulk sales method, and high shelves appear to follow a standardized model similar to Walmart. However, Costco realizes cultural hybridity by maintaining this global standard while integrating unique operational practices that could resonate with Korean consumers and stakeholders.

Costco’s hybridity strategy manifested in building local trust across three major dimensions.

First is the symbiotic pricing policy with suppliers. Costco adhered to a policy of limiting margins to 8-15%, which was significantly lower than that of domestic hypermarkets (20-25%) or department stores (over 50%) at the time. This policy became the foundation for forming mutual trust among the firm, suppliers, and consumers by guaranteeing suppliers profitability while providing overwhelming price competitiveness to members. This contrasts with Walmart, which caused conflict by demanding excessive unit price reductions from supplier.

Second is the improvement of employee welfare and service quality through internal marketing. Costco treated local personnel not as mere objects of cost reduction but as partners in value creation. Whereas Walmart was criticized for low wages and poor welfare benefits, Costco provided industry-leading wages and welfare packages, including health insurance. In fact, Costco’s turnover rate was 17% (6% after one year), significantly lower than Walmart’s 44%, and this job satisfaction naturally led to a high level of customer service, enhancing Korean consumers satisfaction (Cascio, 2006a, 2006b).

Third is the securing of legitimacy through social contribution. Costco demonstrated its responsibility as a member of the local community beyond simple profit-seeking. By acting as the largest donor to food banks among hypermarkets in Korea, donating approximately 6.2 billion KRW from 2009 to 2014, it strengthened its social legitimacy as a corporate citizen through continuous social contribution activities (Kim, 2019).

In conclusion, Costco’s case proves that standardization and hybridity are not mutually exclusive. Costco exercised flexibility by respecting and integrating local labor practices, supply chain culture, and social expectations while maintaining the headquarters operational efficiency of a membership warehouse club. This implies that global retail firms do not necessarily have to abandon their headquarters identity for localization, and that sustainable competitive advantage can only be secured when operational standards and local contexts are combined to co-create value.

4.2.1 Contextual Setting: Formation of High Cultural Capital in Target Markets

Prior to the individual firm analysis, it is necessary to understand the unique environmental context shared by the Vietnamese and Mongolian markets. In both markets, the entry of Korean retail firms operated not merely as commercial expansion but as a mechanism to resolve local cultural thirst.

First, in the case of Vietnam, data from the Korean Foundation for International Cultural Exchange (KOFICE, 2024) indicates an overwhelming propensity for pop culture consumption, with a 92.1% experience rate for Korean dramas. This backdrop allowed local consumers to accept Korean retail brands as the physical realization of the lifestyle they aspired to through media.

Meanwhile, in Mongolia, the cultural influence is evidenced by changes in everyday language beyond statistical figures. According to an interview with a BGF Retail official (Yoon, 2024), the brand name CU is used as a generic noun to refer to convenience stores in Mongolia, indicating that the Korean retail model has deeply penetrated as a local lifestyle standard.

In summary, Vietnam demonstrates extensive content consumption, while Mongolia exhibits an overwhelming brand synchronization phenomenon, both representing the tangible reality of high-involvement cultural capital. This context functioned as fertile soil where the reputation renting strategy could effectively lower entry barriers and facilitate rapid consumer acceptance during the initial entry of Korean retail firms.

4.2.2 Case A: GS25 in Vietnam

4.2.3 Case B: CU in Mongolia

5.1.1 Observed Pattern

GS25 promoted its brand in Vietnam through K-Drama merchandise and K-Pop marketing, while CU designed its stores in Mongolia as spaces for experiencing Korean culture. This strategy is distinct from Walmart and Carrefour, which entered markets relying exclusively on capital and systemic power without such cultural mediators, thereby failing to overcome the psychological barriers of local consumers. It is, however, comparable to Costco’s use of the “American lifestyle” image, yet K-retailers differentiated themselves by leveraging cultural content rather than just product origin as the source of reputation.

5.1.2 Analysis

In markets where cultural capital is highly accumulated (e.g., Vietnam, Mongolia), latecomer firms can effectively rent the cultural stature of their home country. This strategy offsets the initial uncertainty felt by consumers and drastically lowers the costs of market entry.

5.1.3 Proposition 1

The more the cultural capital of the home country is accumulated within the target market, the more likely a retail firm is to offset the costs of the liability of outsidership and accelerate initial market settlement by employing a reputation renting strategy.

5.2.1 Observed Pattern

Costco maintained its global standard while offering a merchandise mix aligned with local tastes and symbiotic supplier policies. GS25 created a new category of safe street food by combining Vietnam's street food culture with modern hygiene systems. CU identified the harsh winter climate and lack of infrastructure in Mongolia, transforming convenience stores into social infrastructure functioning as heated shelters, public restrooms, and a nationwide logistics network.

5.2.2 Analysis

Unlike passive adaptation or instrumental glocalization, co-creative hybridity creates a Third Value that fills specific institutional voids in the host market, such as the lack of heating infrastructure in Mongolia (CU) or hygiene standards in Vietnam (GS25). Theoretically, this represents a fusion where the headquarters' systemic hard power (operational capabilities) and the local partner’s contextual soft power (local knowledge) interact to generate novel value, rather than simply adjusting existing models. This distinction is critical: while the absence of this reciprocal creation leaves a firm as a stranger—exemplified by Walmart’s failure—its success transforms the firm into a legitimate and essential insider within the local society.

5.2.3 Proposition 2

The sustainability of global retail expansion depends not on simple standardization or localization, but on the achievement of co-creative hybridity, where the headquarters systemic capabilities and the local partner's contextual capabilities combine to generate new forms of customer value (e.g., social infrastructure, hygienic food culture).

5.3.1 Observed Pattern

In Mongolia, the successful listing (IPO) of CU's partner and the usage of CU as a proper noun for convenience stores signify that the Korean retail system has been elevated to a local standard. In Vietnam, GS25's success serves as a platform facilitating the entry of other Korean consumer goods firms. Interview results indicate that local consumers have developed a higher level of trust in the entire national brand of Korea through positive experiences (cleanliness, kindness, taste) at these convenience stores.

5.3.2 Analysis

This transcends the unidirectional transfer described by traditional Country-of-Origin theory (Nation → Firm). The firm's successful localization and hybridity activities reinforce the national brand assets, and the strengthened national brand, in turn, enhances the firm's competitiveness, forming a Virtuous Loop.

5.3.3 Proposition 3

When a retail platform secures social legitimacy in the local market through hybridity, bidirectional trust transfer occurs, where trust in the firm reinforces the value of the national brand. This creates a sustainable competitive advantage through mutual reinforcement effects.