Assignment Title: Walmart Stores in Germany

Authors Name: Neelam Lokwani

Madonna Id: 236488
Course Title: International Management
Instructors Name: Prof. Linda Lesnau
Submission Date: April 25, 2015

The research done by me is based on Wal-Mart the worlds largest retail chain. I have further
done research on Wal-Marts background, reasons for entering the German market, entry
strategies implemented by Wal-Mart, risks and circumstances faced by Wal-Mart and its current
status in the world. Ive done a thorough analysis based on what led to Wal-Marts failure in
Germany.
Background of Wal-Mart, Inc.:
Wal-Mart is the worlds largest retail chain is an American multinational corporation. Sam
Walton founded Wal-Mart in 1962 in Bentonville, USA with its first store in Roger, Arkansas. In
1967, the Walton family owned 24 stores, having approximate sales of $12.7 million
(corporate.walmart.com). In 1969, the company was incorporated and listed in the New York
Stock Exchange in 1972 with 51 stores and sales of $78 million.
Wal-Mart followed its three main ingredients: Brand names, Every Day Low Price strategy and
high ethical standards (Helen Deresky, International Management: Managing Across Borders and
Cultures). In the 1980s, Wal-Mart had annual sales of $1 billion and 276 stores with 21,000
associates employed. Also the first Sams club opened in Midwest City, Okla and in 1988, the
first Wal-Mart Supercenter opened in Washington combining general merchandise and a fullscale supermarket to provide one-stop shopping convenience, also David Glass was named as the
CEO (corporate.walmart.com).
By 1990s, Wal-Mart expanded globally by making its Every Day Low Price Strategy
international. The company first opened the Sams club in the Mexico City. Further Wal-Mart
expanded by opening its stores in Canada, China and UK. In 1998, Wal-Mart launched its stores
in Germany and South Korea.

In 2000s, Lee Scott became the CEO; Wal-Mart entered the Japan, Chile, India and South Africa.
Launched online convenience for its customers and further Mike Duke was replaced as the CEO.
As of 2014, Doug McMillon is the CEO and the company employs 2.2 million associates
worldwide and serves more than 200 million customers each week at more than 11,000 stores in
27 countries (corporate.walmart.com).
Reasons for entering into Germany as a foreign market:
Wal-Mart launched its stores in 1998 in Germany. Wal-Mart wanted to expand its business in
Germany by selling goods at low prices and have large number of consumers from different
cultures. After getting good results in several countries, Wal-Mart decided to expand its
operations to the German market. Considering that Germany has the third largest economy in
Europe, also having a population of 80 million. The company expanded by obtaining German
Wertkauf group of 21 stores and 74 Interspar hypermarkets. Like any other company, Wal-Mart
wanted to enter the global markets in order to increase sales and profits to satisfy the capital
markets. The United States accounts for just over 4 percent of the world's population. By limiting
itself to this market, Wal-Mart was missing out on 96 percent of the world's potential customers
(http://www.strategy-business.com/article/13866?pg=all). Also Wal-Mart did this in order to
maintain company expectations.
Strategies employed by Wal-Mart in Germany:
There were several entry strategies applied by Wal-Mart to enter the German market. Wal-Mart
made ethnocentric approaches to flourish in Germany. A simple strategy named Every Day Low
Price strategy was followed globally by this way the company could cater to the middle class
customers in the country and helped the company to gain the trust of customers & to make

supply chain management more helpful. Secondly, products were given the same brand names
worldwide. Thirdly, the high ethical standards followed by Wal-Mart in America were followed
globally in order to improve the standard of living as it was done in the US. Wal-Mart applied the
strategy of providing goods in all sections of retail products, more like a one stop shop for all
classes of customers which although failed due to its location being based out of the city.
However, even after employing several strategies in the German market, Wal-Mart failed its
sustainability, if Wal-Mart would have entered in the international market currently it would have
failed majorly affecting its reputation which means a research on the ethics and culture of
Germany was equally important even in the 1998.
Risks faced by Wal-Mart on entering Germany:
One of the major risks faced by Wal-Mart was being highly unaware of the German business
ethics, rules and regulations of the German government, cultural and social values. Following the
strategies of everyday low prices and standardized policies used in America and other countries
resulted in a failure for Wal-Mart in Germany. Moreover, Wal-Mart didnt change its policies
when operating in Germany. In Germany labor unions were formed to protect the employees
whereas America did not follow unionization was one of the risks faced by the company which
pictured that they were not aware of the legal environment of Germany and resulted Wal-Mart in
the court for violating the laws. Also the location of Wal-Mart stores made it difficult for
consumers to in and out of the city by having not much transportation facilities, which later the
company rectified by opening its stores in the main parts of the city. The Every Day Low Price
strategy didnt really gain the attention of consumers as the preference was mainly focused on
the higher quality merchandise products. However, Wal-Mart did face a lot risks but wasnt
prepared to have any alternatives to flourish in the market.

Circumstances that resulted the failure of Wal-Mart in Germany:

There are several critical reasons which led to Wal-Marts failure:1. Wal-Mart failed to consider Germanys cultural attitudes. The American market and
German market had totally different tastes and preferences led to the collapse of WalMart in Germany.
2. Another major reason was that in Germany has a strong reliance on labor laws and role of
unions played an important role for employee rights whereas US didnt impose much on
unionization. Not being aware of the labor laws led to failure and also took Wal-Mart into
law suits for violating laws and not giving employees the freedom.
3. Wal-Mart replaced local managers with foreigners which led to massive cultural clashes
as they didnt know German language which played an important role for increasing
sales.
4. Germans didnt show much interest towards the everyday low price strategy, therefore,
this strategy was followed by many local retail stores in Germany, consumers consider
high quality products as a priority rather than the discount strategy
5. Wal-Mart imposed its standardized policies in the same way as they did in its home
country and several other countries. There were totally different HRM practices followed
in Germany. The working hours were different compared to other local retail stores in
Germany Wal-Mart opened its stores two hours earlier from the standard time, employees
were paid lower wages and stingy policies were imposed on the management employees.
6. Wal-Marts productivity was majorly affected by its locality of stores; also customers
didnt have transportation facilities because of which customers didnt purchase products
in bulk.
7. German consumer habits were distant from American consumer habits. The customer
service provided by Wal-Mart was completely against the ethical conduct of customers,

Germans were alarmed to see greeter when entering the stores because none of the retail
shops were involved in such activity.
For example, the local retail store chain Aldi in Germany is an example of what consumers of the
German market expect. At Aldi, customers bag their own groceries, shopping carts are available
with the deposit of a quarter, and the store hours are reduced to save on operational costs. The
shelves are lined with products still in the boxes they were shipped in, to cut down on stocking
labor. Boxes are even available for customers to use to carry their purchases to their cars, in
place of plastic bags (http://www.academia.edu/7457822/WalMart_Failure_in_Germany_Japan_and_South_Korea_._Then_TESCO_Failure_in_Japan_and_T
ESCO_Success_in_South_Korea).
Current Status of Wal-Mart in Germany:
Wal-Mart flourished in its business in the US and several other countries successfully. Even after
10 years of business in Germany, Wal-Mart couldnt succeed in its operations. Wal-Mart tried
different ways to attract the German customers because of Wal-Marts rigidity of not adapting the
German culture and values led to its failure. Wal-Mart succeed in several countries like Mexico,
Brazil, Canada and China by imposing its standardized policies same as the US. Wal-Mart had a
ethnocentric approach towards its global expansion which resulted in failure in Germany and
South Korea. Wal-Mart also assumed to be successful in Germany because of its overconfidence, low price strategy and financial base of the company. In July 2006, Wal-Mart
announced that it would sell its operations in Germany to Metro AG, which operated rival stores
Real Hypermarkets. Wal-Mart exited the country with a loss of US $1 billion (Helen Deresky,
International Management: Managing Across Borders and Cultures).

References:
Books:
Helen Deresky, International Management: Managing Across Borders and Cultures, 6th Ed, 2008,
Pearson Prentice Hall.
Henry W. Lane & Martha L. Maznevski. International Management Behavior, Global and
Sustainable Leadership, 7th Ed, 2014.

Websites:
http://corporate.walmart.com/our-story/history/historytimelinehttp://www.academia.edu/7457822/WalMart_Failure_in_Germany_Japan_and_South_Korea_._Then_TESCO_Failure_in_Japan_and_T
ESCO_Success_in_South_Korea
www.readersinsight.net/wp-content/uploads/2014/07/Tahira-et-al.-2014-JPOM-pp.-9-16.pdf
http://www.iwim.uni-bremen.de/publikationen/pdf/w024.pdf
http://www.strategy-business.com/article/13866?pg=all