Walmart initially had success entering the German market through acquisitions in the late 1990s, but then struggled significantly. Some of the key reasons for their failure include not conducting proper consumer research to understand German preferences, appointing multiple CEOs in quick succession who did not speak German, and attempting to directly transplant their US retail model without adapting to German cultural norms around preferred products, pricing, and customer service approaches. Walmart's strategy of emphasizing low prices also did not provide a competitive advantage as many German retailers already utilized that approach. Ultimately, Walmart's refusal to acknowledge cultural differences and listen to local employee feedback damaged its reputation in Germany.
Walmart initially had success entering the German market through acquisitions in the late 1990s, but then struggled significantly. Some of the key reasons for their failure include not conducting proper consumer research to understand German preferences, appointing multiple CEOs in quick succession who did not speak German, and attempting to directly transplant their US retail model without adapting to German cultural norms around preferred products, pricing, and customer service approaches. Walmart's strategy of emphasizing low prices also did not provide a competitive advantage as many German retailers already utilized that approach. Ultimately, Walmart's refusal to acknowledge cultural differences and listen to local employee feedback damaged its reputation in Germany.
Walmart initially had success entering the German market through acquisitions in the late 1990s, but then struggled significantly. Some of the key reasons for their failure include not conducting proper consumer research to understand German preferences, appointing multiple CEOs in quick succession who did not speak German, and attempting to directly transplant their US retail model without adapting to German cultural norms around preferred products, pricing, and customer service approaches. Walmart's strategy of emphasizing low prices also did not provide a competitive advantage as many German retailers already utilized that approach. Ultimately, Walmart's refusal to acknowledge cultural differences and listen to local employee feedback damaged its reputation in Germany.
Walmart initially had success entering the German market through acquisitions in the late 1990s, but then struggled significantly. Some of the key reasons for their failure include not conducting proper consumer research to understand German preferences, appointing multiple CEOs in quick succession who did not speak German, and attempting to directly transplant their US retail model without adapting to German cultural norms around preferred products, pricing, and customer service approaches. Walmart's strategy of emphasizing low prices also did not provide a competitive advantage as many German retailers already utilized that approach. Ultimately, Walmart's refusal to acknowledge cultural differences and listen to local employee feedback damaged its reputation in Germany.
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1. Wal-Mart Stores, Inc. is the largest retailer in the world, the world’s second-largest company and the nation’s largest non-governmental employer. 2. Wal-Mart Stores, Inc. operates retail stores in various retailing formats in all 50 states in the United States. 3. The Company’s mass merchandising operations serve its customers primarily through the operation of three segments. The Wal-Mart Stores segment includes its discount stores, Supercenters, and Neighborhood Markets in the United States. 4. Wal-Mart serves customers and members more than 200 million times per week at more than 8,416 retail units under 53 different banners in 15 countries. With fiscal year 2010 sales of $405 billion, Wal-Mart employs more than 2.1 million associates worldwide. Nearly 75% of its stores are in the United States, but Wal-Mart is expanding internationally. 5. The Group is engaged in the operations of retail stores located in all 50 states of the United States, Argentina, Brazil, Canada, Japan, Puerto Rico and the United Kingdom, Central America, Chile, Mexico, India and China.
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In the early 1990s Wal-Mart announced plans to take their operations global due to tough competition in the U.S. markets and the opportunities available in new markets across the world. The company realized that the United States contained only 4 percent of the world’s population and that confining sales to the United States would significantly limit their ability to grow and dominate the market (ICMR, 2004). To fulfill their global expansion goals, the company created Wal-Mart International which has grown into a $63 billion business and is the fastest growing part of the company. Most of Wal- Mart’s international growth comes from acquisitions, differing from their domestic strategy of building new stores. This has allowed them to penetrate new markets quickly and easily. Wal- Mart international operates in 15 markets, with a similar goal throughout—to maintain low prices by controlling cost procedures.
SLIDE – 7, 8 1. Wal-Mart’s initial entry into German market was through the acquisitions of renowned 21 store Wertkauf chain for an estimated $1.04 billion in December 1997.It was followed one year later by the acquisition of In-terspar’s 74 hypermarkets from Spar Handels AG. 2. Thus, Wal-Mart immediately became the country’s fourth biggest operator of hypermarket. 3. The objective was to expand to 500 stores in Germany. 4. However, the number of stores never exceeded the 95 stores that were originally purchased in the first two years. SLIDE – 9
1. Mistakes Even though Walmart is the number one retailer in the world, the company’s experience and their famous business approach did not seem to do the trick on Germany. There were numerous mistakes the Walmart made with its approach to the German market SLIDE – 10
1. Walmart’s acquisition of Spar Handel ended up not being to Walmart’s advantage.
2. The locations were areas that the previous owner was unable to make profitable and Walmart did not have any better luck. 3. Also, Spar Handel had a poor reputation of being lower quality, a reputation that Walmart was not able to shake. 4. Lack of Consumer Research Walmart went into the mindset that since Germany was a western society similar to the United States 5. In retailing, failure to secure attractive sites (MS) - There were not enough appropriate locations for Wal-Mart stores available in Germany SLIDE – 11
1. Lack of sensitivity and understanding of language barriers, local traditions, consumer
behavior, merchandising, and employment practices irreversibly damaged Wal-Mart’s image in Germany. 2. One of the main reasons that failed Wal-Mart in Germany is when it attempted to transport the company’s unique culture and retailing concept to the new country. 3. The top management refused to even acknowledge the differences in customer behavior and culture in Germany when compared to its US customers, and the top management failed to listen to the feedback from its employees. SLIDE - 12 1. With the strategy of “Everyday low prices,” Wal-Mart is very successful in the United States and also in many other countries. 2. In Germany, there is extreme competition in the retail food sector. Therefore, the German customer is quite accustomed to the low prices that are offered by numerous discount supermarket chains. For this reason, Wal-Mart’s strategy of offering low prices did not create sufficient competitive advantage. 3. Wal-Mart’s low-price strategy didn’t create any competitive advantage since many German local retailers were already using that strategy. 4. Wal-Mart’s biggest competitor, Metro, took specific counter-measures to prevent Wal- Mart from executing their expansion plan. SLIDE – 13 1. Language barrier between English-speaking managers and older German businesspeople who don’t speak English. 2. Some of Wal-Mart’s methods for providing service were not accepted by German customers. For instance, the customers did not like the concept of the “greeter”. 3. 10-Foot rule Every ten feet, a service employee offered some help to the customer. SLIDE – 14 1. Instead Wal-Mart chose to use its US style merchandise display strategy – where premium priced products are kept at eye level and discount products are kept at higher shelf or in the bottom racks. 2. This irritated the German shoppers. Wal-Mart also got its store inventory wrong, Wal-Mart stocked its store with clothes, hardware, electronics and other non-food products were given much bigger floor space than food products, as a result more than 50% of the revenue was from non-food products. 3. But other German retailers’ stock more of food products. 4. For example, for Metro, food products constitute more than 75% of the revenue. Germans prefer to bag groceries themselves into reusable carriers, or at least to pay a small fee for the avoidable sin of needing a plastic bag.
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1. To begin with, it appointed four CEOs during its first four years of operation. Not only did he not speak any German. Due to his unwillingness to learn the language. 2. Before expanding its business operations to a new country, the Company should understand the Political, Social, Economic and cultural aspects of the Country in depth. 3. Germans degree of communitarianism is on the higher side mainly because Germans prefer participating on a team. Most Germans see business as a group of related persons working together. But, most of Americans see their company as a set of functions, tasks, people, machines and payments in which individuals compete.
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