The Failure of Walmart in Germany

The Failure of Walmart
In Germany
Mbongeni Zuma and Esenzhanov Kubanychbek

Winter 2019
CASE STUDY & ANALYSIS 1

Introduction
This case study is a critical analysis of the failure of Wal-Mart stores in Germany. The era of re-
tail has emerged and was perceived as a wild market, and firms are trying to capture as much as
possible in a couple of decades. Wal-Mart, based in Arkansas, USA, is a well-known and largest
retailer due to its reliable management system, high quality and low price. Ten years later, he ex-
panded his empire to Europe and Asia to demonstrate continued success in the retail market. Alt-
hough its growth seemed to slow down, the concept of “low price” gives Wal-Mart a strong
competitive advantage over competitors around the world.
The mismanagement of cultural diversity and the adaptation of inappropriate leadership styles
are factors identified for this gigantic failure. Germany’s Wal-Mart leadership should use the Pa-
kanovsky and O'Donnell Trujillo organizational culture model, Levin’s change management
model, and transformational leadership to avoid this defeat, as this will have a profound impact
on cultural diversity management and will help managers identify policies that can succeed to
overcome the problems of different national cultures and help people to work in a team in addi-
tion to different cultures.

Background Information
No one describes a company better than growth. In 1945, Sam Walton opened his first
Ben Franklin franchise in Newport, Arkansas. Living in the countryside of Bentonville, Arkan-
sas, Walton, his wife Helen and his brother Bud ran the most successful Ben Franklin franchise
in the country at the time. “We were a little chain,” Walton said of his work in 16 stores. “Every-
thing went so smoothly that we even had time for our families.” What else can a person want?
As it turned out, a great deal.
Sam and Bad Walton could see that the variety store was gradually dying because super-
markets and discounters were developing. Far from safe, Walton knew he was under siege, and
decided to counterattack. First, he tried to convince people of Ben Franklin's top management to
introduce a discount. After their refusal, Sam Walton made a quick trip around the country in
search of ideas. He then began opening his own discount stores in small towns in Arkansas, such
as Bentonville and Rogers.
The company opened its first Wal-Mart discount department store in November 1962.
The first stores had bare tiled floors and pipe racks. Wal-Mart did not begin to significantly up-
grade its image until the mid-1970s, and growth in the early years was slow. However, as soon as
the company became public in 1970, sales began to grow rapidly. When it was first published,
100 Wal-Mart shares would be worth $ 1,650. Now, these 100 shares are worth more than $ 6
million.
Having established itself as the dominant player in its domestic market, Wal-Mart de-
cided in the late 1980s to make an ambitious attempt to internationalize in order to maintain its
rapid corporate growth. The declared strategic goal was that by 2005 its foreign operations
would bring a third of Wal-Mart's total profit. In 1991, the first store outside the United States
was opened in Polenko, a suburb of Mexico City - SAM's Club membership warehouse. Today,
Wal-Mart operates in 9 more countries, and already in 1993 a separate division, Wal-Mart Inter-
national, was created to control and manage the company's international operations.
Wal-Mart's investments outside North America have shown mixed results: its operations
in the UK, South America and China have been very successful, while enterprises in Germany
and South Korea have failed.
Nevertheless, on the international stage, Wal-Mart's proven success formula in the USA
is daily low prices due to the widespread use of advanced IT, sophisticated logistics and inven-
tory management methods, a strong emphasis on customer service and highly motivated staff
(aided by a quasi-religious corporate culture) - so far it pays off only in neighboring Mexico and
Canada, where Wal-Mart has become the undisputed market leader. Therefore, without exagger-
ation, it can be argued that the report of the London investment bank West LB Panmurne says
that “Wal-Mart has not yet succeeded in markets where it cannot drive a truck. “Not only does
this verdict include a company in Indonesia, which was suspended after two years of heavy

losses - while Wal-Mart's remaining operations in Asia, several outlets in China, South Korea
and, since 2002, Japan is considered profitable (although to a much lesser extent than its activi-
ties in North America), as well as in Latin America (Brazil and Argentina). In particular, its entry
into the German market, the third largest retail market in the world after the United States and
Japan, and certainly the most important in Europe, has so far turned out to be a fiasco. As we will
argue in this article, he even offers an example from a textbook on how not to enter the foreign
market. Our analysis is organized as follows: After a brief description of Wal-Mart, Inc. and
Wal-Mart, Germany, as well as guided tours of retail competition, we will discuss industry-spe-
cific approaches and barriers to internationalization in retail. After that, we provide an overview
of the German retail market, including an overview of the relevant institutional and legal frame-
work. Finally, we will critically evaluate Wal-Mart's entry and business strategy in Germany.
As of January 31, 2017, Wal-Mart has 11,695 stores and clubs in 28 countries with a total
of 63 banners. The company operates under the name Wal-Mart in the United States and Canada.
She works as Wal-Mart de México y Centroamérica in Mexico and Central America, as Asda in
the UK, as the Seiyu Group in Japan and as Best Price in India. It is wholly owned by operations
in Argentina, Brazil and Canada. He also owns and operates Sam's Club retail stores.
According to the Fortune Global 500, in 2016 Wal-Mart is the largest company in the
world in terms of revenue, as well as the largest private employer in the world with 2.3 million
employees. This is a family business, as the company is controlled by the Wal-Mart family. Sam
Walton's heirs own more than 50 percent of Wal-Mart's shares through their holding company
Walton Enterprises and through their individual holdings. Wal-Mart is also one of the world's
most valuable companies at market value, as well as the largest retailer of products in the United
States. In 2016, 62.3 percent of Wal-Mart sales in the amount of 478.614 billion dollars. The
United States accounted for its activities in the United States.
Wal-Mart stores typically have 36 departments and offer a wide range of products, in-
cluding clothing for women, girls, men, boys and babies. Each store has curtains, fabrics and
haberdashery, shoes, household items, hardware, electronics, household goods, films and music,
furniture, clothes, shoes, sporting goods, toys, pet products, food, etc. Cameras and accessories,
health products and cosmetics, pharmaceuticals and jewelry. Wal-Mart began selling limited
product lines under the name Sam's Choice. Product is carefully selected to guarantee quality and
must be made in the United States. Wal-Mart has also developed new clothing lines, such as a
collection of sportswear and clothing by Kathie Lee. Basic equipment of sportswear and chil-
dren's clothing Mckids.
As an international business corporation, Wal-Mart is constantly expanding its activities
in the United States. Despite some restrictions slowing her development, in 2004 she could man-
age hundreds of retail stores, including her specialty; discount stores. The world’s population is
growing day by day, but after maximizing Wal-Mart’s continuous growth, it seems to reach mar-
ket saturation. Wal-Mart not only has its own business but also tries to dominate small firms in

its entrepreneurial culture. The company began to consider international expansion after 10 years
of tremendous development in its country. In the 1990s, Wal-Mart was considered the country's
largest retailer and continued its achievements by opening more stores within the country and
abroad. In Canada, the company bought 122 Woolco stores and built three stores in Argentina
and five stores in Brazil in 1995. She entered China through a joint venture in 1994. In Germany
in 1997, Wal-Mart acquired the 74th division of INTERSPAR. supermarket chain and 21-store
WERTKAUF. Later, in 1998, the company entered Korea with a joint venture, and a year later it
went to the UK and bought the third-largest UK grocery chain called ASDA. The company en-
tered Japan by purchasing a 36% stake in Seiyu in 2002, and Wal-Mart was steadily increasing
its stake by approximately 67% by 2007.
However, a vibrant retail market is indeed precarious. At a time of rapid development,
Wal-Mart represents less than 10% of the total retail market, which is still a huge space for
growth with constant paste. In fact, Wal-Mart was faced with a huge number of restrictions and
obstacles from local residents in some parts of their country, especially in California and the
northeastern part. In addition, small firms in certain state regions that do not like monopolization
unite each other and prevent Wal-Mart from entering its market. However, market saturation
may be one of the forces that are driving Wal-Mart to expand worldwide.
Some people claimed that Wal-Mart will stop growing somehow differently, unlike real-
ity, which is completely different. The growth of the global economy provides an increase in dis-
posable income, and this can lead to the fact that international firms will become a target for a
small emerging market. In addition, public interest in retail markets, especially discount stores
compared to wholesale, has stimulated retailers for further investment. The countries of Latin
America and China have recently become economically developed countries with the ultimate
source of land and labor. According to Ansoff's Product Market Matrix, Wal-Mart demonstrated
the Product Development model, in which it presents its retail concept to other emerging mar-
kets. In addition, the domestic market seemed saturated, and thus, international expansion is by
no means mandatory for Wal-Mart.
The development of global markets can reduce various barriers set by local and regional
rules and regulations that expand the scope of free trade, new technologies, and communication
methods. Some people think that the global market will not be created due to great diversifica-
tion in the political, economic, social, cultural, technical dimensions between different countries.
Wal-Mart's main strategy is the low-cost retail. Founder, Sam Walton, realized that retail mar-
kets were less popular at this particular time compared to wholesale markets, which were more
economical than retail. His assumption was quite satisfactory and led to the consistent expansion
of hundreds of discount stores, retail markets and large supercenters around the United States in
a relatively short period of time. Sam Walton believed that a low price with a high level of cus-
tomer service and an effective company management system would be an effective competitive
advantage not only in the country but also in other countries.

Wal-Mart itself outperforms the US retail market by purchasing products cheaply and
with low labor costs. But for the sake of international expansion, Wal-Mart needs a more strate-
gic, clear and managerial plan. There are three main international strategies: transnational, multi-
national and global. By definition, it is clear that Wal-Mart has taken international steps through
a global strategy in which standardized products are offered in the country's markets and the
competitive strategy is dictated by the home office. Clearly, Wal-Mart, with its astounding low-
cost advantage, needs a strategy with more centralized control by the country. As a retailer, not
much scale and innovation need to be adjusted to regional requirements. However, a global strat-
egy requires higher pressure at low cost, as opposed to lower pressure on the local response. A
multinational strategy, on the other hand, has the opposite effect of a global strategy. Thus, we
can conclude that there are some discrepancies between theory and the practical aspect of strate-
gic management established by Wal-Mart.
Wal-Mart believes that the global market will require a low-cost retail market with rea-
sonable customer service as its own strategy. In addition, in European countries, there are com-
petitors with a very large scale who are trying to enter emerging markets. Moreover, countries
such as China and India provide cheap labor and cheap products, as well as fewer trade re-
strictions, such as labor laws and supplier demand, which are difficult to handle even in a coun-
try. Thus, we can say that Wal-Mart's main strategic flow is more or less simple for the develop-
ment of international expansion, although there are many restrictions ahead.
In America, Wal-Mart has high production economies of scale with nearly 3,000 giant
discount stores and supercenters. It is mainly aimed at continuous growth. According to this
case, eight out of ten US home appliance stores in Wal-Mart at least once a year and more than
100 million customers visit Wal-Mart stores every week around the world. It swept Latin Amer-
ica, Europe, and China, suggesting its consistent development. Wal-Mart has become one of the
largest companies in the world nominated in the top 500 list of Fortune magazine.
Wal-Mart's growth has not yet diminished, but it faces many constraints both domesti-
cally and internationally. Even in some states, local suppliers oppose either in person or in a
small business group over the emergence of giant supercenters. In contrast, small retailers are
joining forces to gain market position and can upgrade services to gain a competitive edge over
Wal-Mart. Thus, from a customer perspective, Wal-Mart is a standard in the retail market.
Wal-Mart's corporate reputation has been shattered due to:
• Inability to provide a better workplace for their employees;
• Litigation and gender discrimination;
• Low wages compared to other corporations;
• Illegal workers are washing the floor.

Here are some of the examples that Wal-Mart has always been criticized for. Some say
there is an evil company in Arkansas. A company can do everything to get a higher market
profit.
Cultural differences are the main cause of Wal-Mart's failure in Germany and South Ko-
rea.
• In America, employees offer to buy products for customers, but in Germany, people
don’t like it because they prefer to do it on their own.
• The second reason for failure in Germany is because workers instructed management to
smile at customers, but in Germany people thought that smiling workers were flirting
with them.
• In Korea, people usually have short heights. Wal-Mart has opened stores with huge
shelves, because of which people have to use stairs to get to the upper shelves.
Here are some of the cultural issues associated with the failure of Wal-Mart in Asian
countries. Another problem was that people in Korea prefer to buy food and drinks, while Wal-
Mart focused on electronics, according to the workweek.
As for competitors Wal-Mart. As for market share, other discount retailers cannot com-
pete with Wal-Mart, but this does not mean that there are no competitors in the market. Due to
the tremendous diversification of Wal-Mart, there are so many competitors in the domestic and
international markets. It’s hard to find one exact competitor. According to the market of competi-
tors, Wal-Mart can be summarized as: local competitors (direct and indirect) and international
competitors.
Costco and Target are direct competitors to Wal-Mart in the local market, and they pose a
more serious threat to Wal-Mart's market share. Costco is the largest wholesaler who can com-
pete with Sam Wal-Mart's club (Gough, 2013). The target may be the biggest threat in terms of
competing with Wal-Mart at all levels. Target’s low price strategy is the same strategy Wal-Mart
uses. Target has recently gained a growing market share by adding more grocery stores to stores
and spending its stores internationally.
According to an indirect competitor, Dollar Stores may be a threat to Wal-Mart's market
share due to the recent success of Dollar Stores such as Dollar Tree, Dollar General, and Family
Dollar, but the fact is that they cannot compete. with Wal-Mart. Mart, because these competitors
are small and not able to provide the same services and products as Wal-Mart.
There are many international competitors available on the market, but I will focus only
on some of Wal-Mart's main competitors.

Companies Countries Revenue International Domestic
Growth Growth
(2010 to 2018)
Wal-Mart United States $469.1B 9.8% 2.7%
Carrefour France $112.6B 7.7% 3.2%
Tesco U.K $96.8B 10.5% 5.9%
Metro Germany $90.5B 7.4% 1.6%
These four retailers actually spend more stores around the world. Wal-Mart is the largest
in revenue compared to competitors. Comparing the other three retailers, Carrefour is in second
place after Wal-Mart's sales. However, in terms of compound annual growth, the UK is growing
at 10.5% internationally and 5.9% in the domestic market.
Here, Michael Porter’s five competitive forces are used to determine industry competi-
tion, as shown in Figure 4 below. This tool will help Wal-Mart compete in this market.
• Rivalry among existing competitors. If there are several competitors in the industry,
then competition may be weak, but many competitors will lead to increased competition
and reduced market attractiveness. In the case of Wal-Mart, competition remains moder-
ate due to the company's ability to expand its products and operations.
• Bargaining power of suppliers. There are several reasons when suppliers are more in-
fluential, such as; few substitutes are available on the market, the supplier’s product is
unique or most effective, and the cost of moving from one supplier to another is high.
Wal-Mart occupies a large part of the market, and suppliers are aware of this, so the in-
fluence of suppliers in the case of Wal-Mart is small.
• Trading power of the buyer. If the goods are not differentiated, buyers can move on to
another retailer, as the buyer seems to be more price sensitive. If the products are similar,
then the buyer will compare prices among suppliers, which increases competition and
leads to lower prices and profits. Wal-Mart offers a wide range of products with a “low
cost every day” strategy, designed for a wide audience.
• The threat of a new entrance. If the barrier to entry is reduced in the market, then the
threat of new entrants increases. As a rule, new firms are more expensive in industries

with a high barrier. Wal-Mart's brand image is too strong, and it is very difficult to enter
the market for a new firm. However, if a firm enters the market, then it will face difficul-
ties in the market.
• The threat of product replacement. The buyer is mainly affected by low prices. There-
fore, if the cost of switching a product is low, then the threat of substitutes is higher.
There are usually three factors that can affect a customer to switch a product, such as;
the willingness of customers to switch goods, performance and price. On the other hand,
if customers become loyal to products, the threat of substitution can be reduced (Camp-
bell, 2002). At Wal-Mart, the “Low Cost, Everyday Strategy" keeps customers con-
nected to the company.
Wal-Mart has the highest net margin of 3.62, a financial ratio of 2.8, and an asset turno-
ver of 2.39, and the company generates the highest ROE (22.53) compared to Target and Costco.
This model can help evaluate a company's market position through its strong operating
performance. We will also identify the strengths and capabilities of the company, which will also
increase investor confidence. However, extreme competition can affect company margins.
SWOT ANALYSIS OF WAL-MART IN 2018:

STRENGTH WEAKNESSES
• Scale of operations. The strong market po-

• Labor disputes. Wal-Mart's business repu-
sition is the main strength of Wal-Mart with
tation has been shattered due to an inability
more than $400 billion revenue and almost
to provide a better workplace for its employ-
11,000 stores worldwide and consumer’s
ees. Poor working conditions, voluntary
trust that differentiate Wal-Mart from its
overtime, gender discrimination, and legal
competitors. Wal-Mart can also achieve
costs are some examples Wal-Mart has al-
higher profit because of its huge size and it
ways been criticized for. This led to the
has a strong buyer power on suppliers to
company annually paying millions of dollars
trim down the costs as compared to competi-
in fines and lawsuits.
tors.
• High staff turnover. Due to the high staff
• Competence in information systems. The
turnover, Wal-Mart's staff turnover has in-
one reason of Wal-Mart’s success is its Sup-
creased significantly. This should entail
ply Chain and Logistics management. The
large expenses for staff training and work;
company is saving significant cost by using
The main reason for these costs is low
its information system properly that man-
skilled labor and low wages.
aged inventory level, orders, sales and other
information. Any information can be easily • Negative advertising. Wal-Mart has always
accessible at each store at any time. been criticized for bad practices such as mo-
tivation and poor working conditions for
• Cost leadership strategy. Everyday low
employees. Several lawsuits against the
price strategy makes different to Wal-Mart
company have undermined the brand image;
from its competitors. Wal-Mart built differ-
therefore negatively announced.
ent discount stores and selling goods at low
cost as much as no other competitor can do.
Low cost strategy has helped Wal-Mart to
become leader in the Market
• Wide range of products. The company is
offering broad range of both branded and
own label products to attract its customers.
Wal-Mart sells health and wellness, enter-
tainment, clothing, home and grocery related
goods under different categories.
• International operations. Wal-Mart has ex-
pended its store Worldwide and the com-
pany is also looking to open more stores in
different countries in upcoming days. Ac-
cording to one study, Wal-Mart earned $135

billion in sales in 2013 from its international
stores, which will be grow more faster after
opening more stores.

OPPORTUNITIES THREATS
• The growth of the retail market in emerg- • Increased competition from competitors.
ing markets. The company plans to increase Best Buy also plans to launch the “Same
sales by 5-7 percent next year. According to Day Home Delivery” option as Wal-Mart,
the CEO of Wal-Mart International, the and some other competitors, such as Target,
company will balance the existing market Tesco and Amazon, are also trying to reduce
and through acquisitions it will reach higher the difference in Wal-Mart prices used by
growth rates and large markets. the company. The company is not so differ-
• The growing recognition of our own prod- ent from other low-cost sellers, which will
uct labeling. The company has the potential increase competition in the future.
to make higher profits by increasing sales of • Increased resistance from local communi-
its own goods under its own brand in its ties. According to one market analysis re-
stores. However, over the past 10 years, port, when Wal-Mart opens a new store in a
sales of private label products have in- specific area, some local retailers are usually
creased by 40. forced to close their operations. In this re-
• The growth of online stores. In the first gard, Wal-Mart is facing stiff resistance
quarter of this year, Wal-Mart online sales from communities and retailers, making it
grew by 30%, and in March, total sales difficult to open new Wal-Mart stores.
amounted to about 9 billion. However, the • Rising prices for marketable products.
company reported expanding its worldwide Due to the increase in production costs,
sales through e-commerce operations. Wal-Mart raised prices for its products /
goods, which led to a decrease in Wal-
Mart's profit and lower competitiveness.
FACTORS THAT INFLUENCE WAL-MART’S MANAGEMENT
In the domestic market, the strategies used by Wal-Mart's management are the BCG ma-
trix and the general Porter model. But, knowing how Wal-Mart decides to enter a new market
globally and how many chances there are to succeed in this market. Katie Smith, Wal-Mart’s
chief financial officer and executive vice president of strategy development, talks about the fac-
tors that make it difficult to enter a new market.

Katie Smith is working with neighboring partners around the world to make Wal-Mart
more effective in serving customers around the world from Europe to South Africa and from
Latin America to China. She said, seeing that the market was suitable for expansion, the factors
affecting senior managers in the international market, and the filters that we use to focus, are:
Factors:
• Cathy said first we focus on how much risk is there?
• Then we sort out our ability to capture market by using market trend.
• She said customers are the most important assets for Wal-Mart, due to this management
looks at particular markets where there is an emerging consumer because the Company’s
mission is to save people money for their better living standard.
• Smith said to know the above mentioned points, the management do a lot of research by
using the strategies given below;
Strategies:
• Market Research (Enter organically or through Acquisition)
• Competitor Analysis
• Quantitative Analysis
• Raising the level of retailing ---- Buy or Build?
• Economies of Scale
Smith said the Wal-Mart management team does a lot of research before entering the
market. The company sends a small team to the market to spend most of the time on the market
and learn from competitors, as well as study customer trends that help managers understand the
market. The team usually conducts competitor analysis and quantitative analysis using research
and simple sampling. After the team conducted the study, the company decided to enter organi-
cally, opening new stores or entering through the acquisition. For instance; In the UK, the com-
pany acquired the third largest ASDA chain, but in China, the company has grown organically
by opening stores in poor areas to serve people on a large scale.
According to Smith, there are 1.35 billion people in China; most of them are from the
middle class. So Wal-Mart has a chance to grow another 7-8%.
All things considered, Wal-Mart is trying to monopolize the global market with its fast-
paced economy and strategy. Wal-Mart's CEO is focusing on international expansion to begin
updating current globalization trends. In addition, he wants to balance the growth and return of
his operating strategy. Its total sales per year prevail in the entire retail industry, but delays inter-
national expansion, and Wal-Mart is unsatisfactory with this. Under the conditions and scale that

Wal-Mart possesses, it can gradually and gradually penetrate the world market, achieving the ul-
timate goal of expansion at a certain time.
Wal-Mart decided to build its initial presence in Germany through acquisitions. In De-
cember 1997, she acquired the well-known Wertkauf chain of stores with 21 stores (revenue: 1.2
billion euros) for about $ 1.04 billion, and a year later acquired 74 Interspar hypermarkets (reve-
nue: 850 million euros) from Spar Handels AG, a German a division of the French Intermarche
Group, for 560 million euros. After these deals, Wal-Mart immediately became the fourth largest
hypermarket operator in the country. Nevertheless, with a current turnover of about 2.9 billion
Euros and a stagnant market share of only 1.1 percent, the American giant remains insignificant
in the German retail market (Table 4). Even worse, it is estimated that the accumulated losses
amount to more than 1 billion Euros, it literally drowns in red ink, although according to the cur-
rent Wal-Mart Germany CEO Kay Hafner, his non-food assortment, which accounts for about 50
percent of his income, it’s profitable. Rumor has it that Wal-Mart Germany makes money in only
two (!) Places. And instead of expanding the network of its stores by 50 units by the beginning of
2001, as originally planned, the company was forced to close two large outlets, and at the same
time, it managed to completely rebuild only three branches into its flagship Supercenter format.
Due to its problems, recently the company also had to lay off about 1,000 employees; further re-
ductions are very likely. Retailers act as intermediaries between producers of goods, certain ser-
vices and end users.
Typically, the latter can be described as small, motionless and uninformed with an attrib-
ute.
• a small reference to the fact that each of their purchases usually represents only a small
fraction of their total household expenses and the incomes of retailers of their choice (in
other words, in a hypothetical world without retailers, end consumers cannot exert any
market power in relation to manufacturers or just as effectively control product quality).
• motionless, referring to his inability or, due to high transportation costs, unwillingness to
travel far for his usual (small) purchases.
• in the form, referring to their lack of detailed information on the availability, quality and
prices, including special offers, of specific goods, as well as on the size and coverage of
the assortment of all (local) retailers. Besides explaining the existence of retailers, these
characteristics also have fundamental consequences for how they compete with each
other. Accordingly, the competitive advantage of the retailer may be due to
• lower prices (including the reputation of proven or at least trustworthy suitable value
propositions, such as the famous Wal-Mart “everyday low prices” or “we sell at lower,
always” promises).

• more advantageous, i.e., a close or easily accessible location (which, in turn, may even
allow its owner to charge higher prices to customers in exchange for this additional con-
venience).
• better product selection and category management (that is, an assortment of products that
better meets the specific needs of the consumer than their competitors), and / or
• Excellent customer service (real or imagined).
However, legal barriers and some forms of behavioral regulation can effectively protect
employees from innovative, more efficient and / or more service-oriented newcomers. In particu-
lar, they include, but are not limited to.
• strict planning regimes and zoning rules, which may delay or even prevent new entry
through investment in new projects, or expansion or reconstruction of existing stores,
• limited rules for store opening hours,
• antitrust and (non) fair trade rules, which may limit price competition or prohibit certain
forms of advertising or sales promotion.
Compared to most other industries, retailers are late for internationalization. Given the
relatively small size of their respective home markets, it is not surprising that European compa-
nies were leaders. Carrefour (France) and Aldi (Germany) began to go abroad with their specific
formats - hypermarkets in the case of the former, with hard discounting (see below) in the case of
the latter - more than three decades ago. Only in the 1980s, with significant acceleration during
the 1990s, the internationalization of retailers began to gain momentum. Nevertheless, in our
opinion, only a few of the players who carry out international operations deserve the label “inter-
national retailer” in the sense that they realize a significant share of their sales outside their coun-
try of origin and that they have successfully created a long-term presence in a large number of
culturally diverse and/or geographically distant countries. Again, most of these companies are
based in Western Europe and not in the United States or North America.
All retail is local. Consequently, the mail order / e-commerce segment may be aloof, re-
tail is special in the sense that export is not a viable option for expanding business across na-
tional borders. Consequently, other internationalization strategies must be implemented, i.e. ei-
ther
• organic growth,
• joint ventures,
• strategic alliances,
• franchising,
• minority or majority shareholdings in established local retailers, or

• mergers and acquisitions.
A large and still growing body of theoretical and empirical literature has evolved to high-
light the respective strengths, weaknesses, and certain risks of any approach. In retail, however,
with increasingly stringent zoning rules that significantly limit the scope for expanding, at least
for larger format operators, relatively low-risk strategies such as organic (internal) growth, it is
almost impossible to implement in extremely densely populated areas . countries of Europe (or
East Asia). Despite the unusual failure rate, most retailers decided to use the most risky strategy
for entering foreign markets: mergers and acquisitions. In general, the efforts to internationalize
most retailers do not deserve to be called unconditional success stories; many even failed and
therefore were forced to leave at least some countries. Although the root causes do constitute a
“mixed package” - in addition to the general barriers to entry into retail, which we will discuss in
the next section, aggressive reactions (price and foreclosures) from existing oligopolies have al-
ways been the main contributing factor -, valuable lessons can be extracted from several success-
ful ones such as Carrefour, Tesco, Aldi, Metro, Hennes & Mauritz (H & M) and Ikea.
• All of them discovered, occupied and used a specific market niche that local competitors
ignored or overlooked. Thus, they were in a favorable position to offer their customers a
very peculiar value proposition, which was very difficult for their local competitors to
imitate.
• Most of them relied on organic growth or joint ventures or other forms of collaboration
with local residents. Some others chose to enter new foreign markets through acquisi-
tions. However, all the retailers who have been successful in this have taken over the
leading position of the local operator in order to build quickly (on a large scale).
• Nevertheless, despite their individual strategies for entering the market, they were all
ready and well-tuned in their proven business formulas, operations and product range to
reflect and satisfy the various tastes and preferences of a critical mass of local consum-
ers.
• They primarily used excellent knowledge of the local manager market and continued to
invest in local talents to bridge the inevitable cross-cultural gaps.
• To minimize exposure to political risk, they did not participate in politically unstable ge-
ographical regions and countries.
Germany accounts for about 15 percent of the European retail market at $ 2 trillion a
year. With a GNP of 2 trillion euros and a population of about 80 million wealthy consumers,
this is by far the largest national retail market in the old world. However, as in most other West-
ern European countries, the birth rate has been slightly negative since the mid-1960s. The Ger-
man (and, to a lesser extent, European) retail market is currently in a state of deep crisis. From

the 1950s to the early 1990s, when the boom after reunification came to an end, retail sales in
Germany traditionally grew slightly faster than GNP. They have since stagnated before plum-
meting since 2001. It is believed that 2002 was the worst year for German retailers, and 2003
looked even worse. On average, consumers spend 30 percent of their current income with retail-
ers, compared with 40 percent just ten years ago, as households are shifting an increasing share
of their spending to areas such as housing, tourism, and communications. As a result, from 1996
to 2001, the number of employees decreased from 2.75 million to 2.5 million, with 50 percent of
them working part-time. Finally, the German retail sector relies heavily on skilled and semi-
skilled labor, about a quarter of which are unionized. Concentration in the German retail market
is gradually increasing, and the Top-10 accounts for about 84% of sales. Only the five leaders -
Metro (19.7%), Rewe (13.6%), Edeka / AVA (12.7%), Aldi (10.1%) and Tengelmann (7.6%) -
account for 63% market. percent. However, the German-specific format prevails in the retail
trade in food (and medicine), first proposed by Aldi in 1962 (see box below), and then success-
fully imitated by leaders such as Lidl (part of the Schwartz group), Norma and Penny. (part of
the Rewe group): hard discounters, usually offering an assortment of 600 to 700 products, with a
high proportion of their own brands at a very low price and an ultra-low margin. Currently, these
merchants, working on the principle of "a lot of high, sell without money," control about a third
of the food market - instead of 10% in the UK and 8% in France - with a share. 40 percent fore-
cast for 2007.
However, hard discounters are increasingly competing with traditional retailers in the
non-food segment. For example, Aldi, which sells high-quality personal-brand computers at very
attractive prices about twice a year for about half a century, has become Germany's largest PC
retailer with a market share of 21.5%, ahead of Fujitsu Siemens (16.9 percent), and is also one of
the largest distributors of clothing in the country; in fact, in almost all of the products on offer,
Aldi is among the first 3 and 5 sellers in the country in terms of sales.
Given that the average profit in West Germany reached only 0.8 percent of sales, com-
pared with 3.4 percent in 1970 and 0.5 percent in the poorer eastern part of the country, retail in
Germany is probably the least profitable in all the industrialized world. These numbers are well
below the German average for the manufacturing sector, at 3 percent (US: 8 percent). Profits are
especially scarce in the food segment, with 0.5% of revenue compared with 5% in the UK and
3.5% in France, as well as in supermarkets, hypermarkets, and DIY formats. Unlike them, they
are, at least by German standards, quite healthy - in the business of hard discounts, with Aldi
again leading this company. With an estimated profit of around 2% of sales, the group is not only
the most successful and stable profitable retailer in Germany. He even managed to double his
profitability to almost 4 percent in the crisis years of 2001 and 2002.
However, the strong and entrenched position of the hard discounter and their huge impact
on prices are just one, albeit important, explanation for the extremely low profit margin in the
German retail sector:

• The vast majority of German retailers are not listed, but belong to families, to be sure,
one of the richest families in the country or the world, or organized as cooperatives. Not
only does this imply relatively higher barriers to exit compared to countries dominated
by joint-stock companies (UK, USA, France). It also means that maximizing shareholder
value cannot be their most important business principle.
• Despite the fact that zoning rules impose serious restrictions on the construction of large
stores (> 2500 m 2, that is ≈ 27 500 sq. Ft.) And shopping centers from scratch, they are
noticeably less stringent, especially for small stores (<700 sq. meters or ≈7.700 square
feet) required by hard discounters than the building codes of France or the UK. As a re-
sult, retail space has grown 10 times over the past fifty years, and another 10 percent -
until 2007. Currently, the trading area of Germany is 293 square meters. M per 1000 in-
habitants compared to 160 in France and the UK. insignificant 133.
• The euro conversion on January 1, 2002 and the resulting consumer confusion (wrong)
were used by some retailers to skyrocket prices - an increase of 10 or 20 percent was not
exceptional - with equally dramatic consequences not only for their turnover and profits,
but also for sector as a whole. However, Aldi, taking advantage of its reputation for ex-
cellent quality (high quality products at very low prices), responded with the largest
price cuts in its corporate history. As a result, he was able to increase his sales by more
than 10 percent in 2001 and, as mentioned above, double his profit.
• Finally, German consumers appear to value and value much more than service and qual-
ity. According to a recent survey conducted by Mc-Kinsey, a consulting company, the
proportion of so-called customers in terms of price / cost ratio is 42 percent (France: 48
percent, UK: 32 percent), while only 13 percent (France: 48; UK: 13) consider them-
selves a variety of services / quality. Affinity consumers, that is, brand-oriented and cus-
tomer-oriented, account for 45 percent (France: 25; UK: 55). The very high demand
elasticity demonstrated by German consumers has also been confirmed by a number of
other studies.
The American retail giant, which enters the most mature European market (Germany) in
1997, is due to return within 9 years in 2006 with one of the most talked-about failures of the
century. Regarding poor financial performance, Wal-Mart never officially announced a loss dur-
ing its venture in Germany. Therefore, some analysts argue that the possible losses for the Wal-
Mart venture in Germany ranged from 200 to 300 million US dollars per year. Although official
figures were not published, the return of the retail giant, which is not accustomed to failures,
spoke louder than the numbers Wal-Mart is failing in Germany, and the cultural factor plays an
important role in this gigantic comeback.

Wal-Mart was unable to understand consumer and retail environments in Japan. With a
population of 127 million people, the highest per capita income and the second largest economy
in the world, Japan is a very smart retail market. The opportunity exists, but there is still much
research and planning that needs to be done before the expansion begins. Instead of adapting
business operations to Japanese culture, the company essentially assumed that the Japanese
would readily adapt to Wal-Mart. For example, in Japan there is a much greater need to set up a
local store. Buyer-buyer behavior is very different from that in the United States: shopping pat-
terns and product choices vary widely by region. They tend to buy smaller quantities at regular
intervals, rather than the more American idea of “stocking up." Similarly, the concept of large
retail stores is alien. The retailers with the highest growth rates are small specialized stores; the
exact opposite of Wal-Mart. Culture tends to buy more fresh food than pre-packaged goods.
Finally, the Japanese consider a high price equal to quality. This mentality forces them to
buy 40% of luxury goods in the world annually. Packaging and the appearance of the goods play
a huge role in making purchase decisions. If you look at the Wal-Marts product range, it be-
comes obvious that they are usually not intended for buyers of luxury brands. All of these cul-
tural misunderstandings lead Wal-Mart to success in Japan. Perhaps more research on their cul-
tural values and patterns could help avoid some of these failures.
Japan has a strong and strong network of suppliers that provide retailers with their goods.
This country attaches greater importance to close local relations, which makes it difficult for for-
eign firms to enter the industry. Given the large number of changes in products due to the speci-
fications of local stores, this forces companies to deal with many different suppliers. This is not
beneficial for large retailers, as they do not have the time or national presence to establish the
necessary relationships for doing business. Wal-Mart is not used to such a high level of supplier
influence. Their value usually lies in the fact that they reduce costs with suppliers in order to
transfer them to their customers, using synergies to increase efficiency. Difficulties in managing
their supply chain are another significant reason Wal-Mart is fighting in Japan.
Types of competitions in Japan include both domestic and international players. Its larg-
est Japanese competitors are 7-Eleven Japan Co. Ltd., Aeon Co. Ltd. and Ito-Yokado Co. Ltd. As
of 2008, all these companies have significantly surpassed Seiyu Ltd. (Wal-Mart). Although all of
these companies have different strategies, much of their success can be attributed to their experi-
ence of understanding how buyers and sellers interact in their respective countries. The two main
international competitors are Carrefour from France and Tesco from the UK. These firms faced
similar problems with Wal-Mart in their international expansion, but each of them faced them in
its own way. While Carrefour had such complex complications that it entered the market in
2004, Tesco was able to gradually expand and flourish. Tesco made major investments in market
research, enabling them to build stores that better meet the needs of Japanese consumers. Their

cautious expansion and thoughtful plans have helped them succeed in the Japanese retail indus-
try. Seiyu and Wal-Mart must recognize the strengths of their competitors and formulate more
effective responses.
Most people believe that Wal-Mart was not able to understand South Korea's consumer
preferences. Wal-Mart relied on its proven business model and strategy, offering low product
prices. However, low prices alone were not enough for successful business in South Korea.
South Koreans have different consumer preferences than Americans; they are not necessarily in-
terested in the same products. For example, South Koreans prefer fresh vegetables and fresh
foods rather than dry foods and the type of clothing Wal-Mart sells. The culture of South Korea
is also very attached to its markets; they are one of the largest countries that are deeply involved
in local markets.
Most Wal-Mart outlets in South Korea were located outside cities. South Koreans expect
easy access to shopping in major cities without having to travel. In addition, South Korean con-
sumers shop more often than most Americans. They may not buy many things at once, but usu-
ally get at least one item. Some people thought that Wal-Mart was supposed to be in the center of
cities, where consumers felt more comfortable with their shopping needs. South Koreans do not
distinguish between discounts and normal prices. Thus, they may not see a compelling reason to
shop at Wal-Mart.
A South Korean marketing specialist remarked: “Wal-Mart pushed South Korean con-
sumers to stick to Western marketing strategies that focused on dry goods, from electronics to
clothing, while their local competitors focused on food and drink, a segment that experts say at-
tracts South Koreans. to hypermarkets. South Koreans are also visually-oriented customers. They
tend to buy goods not only because of the product itself but also because of its appearance or the
services that the customer receives in the store. “In fact, some South Korean women do not like
the Wal-Mart warehouse atmosphere, which American consumers do not seem to mind since the
products are still cheap. They prefer a department store with a neat, clean and sophisticated at-
mosphere. If you go to E-mart, which is the largest South Korean supermarket, you will never
think of it as a discount market.
These and other characteristics seem subtle and confusing to a foreign observer, but obvi-
ous, even standard for local marketers. As a result, the local point of view among Koreans is that
the failure of Wal-Mart in South Korea was primarily due to its inability to understand the buy-
ing preferences of local consumers and adapt its business model to the prevailing domestic cul-
ture.
When the first Wal-Mart opened its doors in South Korea in 1998, it was sensationally
and ambiguously welcomed by competitors and consumers. Wal-Mart simply could not meet ex-
pectations for quality, so customers stop visiting it, because there is no reason to come. The
buyer says: “Yes, this is a low price. But I'd rather pay for quality food at E-Mart. I will buy my

daily necessities when I am there to buy food. I don’t want to make another shopping trip, just to
save a little dollar, because it’s too cumbersome and time is money. ”
Many global managers who tried to hack into Japanese markets would know how cruel
the market is. The biggest problem is sophisticated and demanding consumers. Great efforts are
required to understand, design and deliver in order to satisfy his needs. This is even a challenge
for Japanese firms. Foreign companies that are part of Japan will need to fight for yet another
hurdle in their global practice and the problems caused by a lack of understanding on the part of
the headquarters of Japanese consumers and a reluctance to show flexibility in adapting their
work strategy only to satisfy Japanese consumers. In addition, Japan has another level of prob-
lems that it has to deal with. Japanese perception of good quality. If value for money is quality,
not price, the Japanese seem to attach greater importance to quality in a certain price range.
Quality is perceived as quality, and the brand plays a crucial role in ensuring perception in Japan.
Wal-Mart's initial entry into the German market was through the acquisition of the well-
known Wertkauf chain of stores from 21 stores for $ 1.04 billion in December 1997. A year later,
the acquisition of 74 Interspar hypermarkets from the German division of Spar Handels AG fol-
lowed. French Intermarché Group, for 560 million euros.
Thus, Wal-Mart immediately became the fourth largest hypermarket operator in the coun-
try. However, with a turnover of about 2.9 billion Euros and a stagnating market share of only
1.1 percent, the American giant was still insignificant in the German retail market. Even worse, it
is estimated that the accumulated losses amount to more than 1 billion Euros, it literally drowns
in red ink, although, according to Wal-Mart CEO Germany Kay Hafner, her non-food assort-
ment, which accounts for about 50 percent of his income , it's profitable. Instead of expanding
the network of its stores by 50 units by the beginning of 2001, as originally planned, the com-
pany was forced to close two large outlets, at the same time, it was able to completely rebuild
only three stores in its flagship Super center format. Due to its problems, the company also had
to lay off about 1,000 employees. In July 2006, Wal-Mart announced its official defeat in Ger-
many and sold its 85 German stores to the rival Metro supermarket chain and reserved a pre-tax
loss of about $ 1 billion (£ 536 million) in the failed venture.
In 1977, Germany adopted strict planning and zoning rules designed to protect traditional
retailers and thus prohibited the construction of stores with a sales area of more than 800 m2 in
places not intended for retail. This led to the fact that the development of large stores was limited
to cities/city centers. However, even in cities where retail restrictions were less burdensome, the
process of approving a new store can still take 1 to 4 years.
Opening a large retail store outside of urban areas as possible, but it took several steps.
The retailer will need to create a plan for the use of the building, which will cover a comprehen-
sive development concept that takes into account environmental, environmental and private legal
issues. An example is a fact that a new site cannot sell products that will directly compete with
stores in nearby cities. The plan must first be approved by the city or city council, and then by

the regional planning councils at the state and national level. This led to almost zero success, es-
pecially since the German government did not want retailers to take customers out of the city,
leaving the old buildings and monuments in the city center empty. This would be extremely
problematic for Wal-Mart because all of its stores in Germany were Supercenters.
Culture is a common understanding, goals, values , and assumptions that are received
from previous generations, are applied by current members of society and are transferred to the
inheritance of generations. Usually, this leads to general codes of conduct, expectations, and re-
lationships that subconsciously control and guide certain norms of behavior. Walmart’s experi-
ence in Germany reflects a low level of understanding among German culture leaders and, above
all, of how environmental variables affect management functions.
After entering the German market, Walmart was shocked by several rules, for example,
that a retailer can work a maximum of 80 hours a week, which limited Walmart's competitive ad-
vantage in its convenience stores in Germany. In addition, retailers are not allowed to sell below
cost for an extended period, which posed a serious problem for Walmart because it was sued for
violating this law. All this suggests that Walmart rushed into the German market before properly
examining the German legal system and finding out how this could affect Walmart's competitive
advantage. Another institutional problem is that the representation of workers in Germany was
not correctly understood by Walmart, which led to conflicts with them and their representatives.
Trompenaars and Hampden-Turner (2012) examined seven aspects of cultural differences
in business, divided into three categories, including people, time, and the environment. One di-
mension is universalism versus particular. In both the United States and Germany, universalism
prevails, since each country has its own absolute rules that apply regardless of circumstances and
situations. However, this difference in any of the legal systems has damaged Walmart.
On a sociocultural topic, variables include education, religion, and language. Walmart
commissioned Wal-Mart in Germany to lead an American who did not say a word in German.
Moreover, Walmart made English the official language of the company, which negatively af-
fected the morale of German employees, not because they did not speak English well, but be-
cause they felt like outsiders, which is disastrous for the Germans, who are famous for their pride
in they speak german. their native language and use explicit communication. If the dimensions of
Trumpenaars are recalled, then the measurement of the internal and external directions is ap-
plied. My argument is that by making English the official language of the company in Germany,
Walmart reflects the conviction inherent in the US culture that the environment can change
through internal control. This has led Trumpenaars to expect conflict and resistance to change.
Cultural variables, including norms, values , and beliefs, are reinforced by national and
socio-cultural variables. Cultural variables define attitudes toward time, work, change, individu-
alism, and materialism. Attitude influences behavior and, thus, individual expectations and moti-
vations regarding the workplace and work relationships. The cultural mismatch that Walmart ex-
perienced when integrating Wertkauf and lsterspar together and integrating them reflects a low

level of understanding of cultural variables. Interspar employees worked as part of decentralized
operations with independent regional units. Walmart did not properly study the cultural variables
that determine Germany’s attitude towards change and work in order to avoid such difficulties
and absorb the confusion of labor.
As a result. The morale of employees at Walmart in Germany was greatly affected by
changes to internal rules and regulations that Walmart had influenced. I see this kind of gap, sim-
ilar to the Trumpenaar dimension “specific versus diffuse”. While the German work culture has a
more consultative style, Walmart’s autocratic leadership style in making decisions was rather
disappointing for both ordinary employees and managers. Moreover, Walmart even reduced ex-
ecutives' expense accounts, while Interspar and Wertkauf provided liberal spending accounts to
their executives. Hofstede and Minkov (2010) proposed a model of five dimensions of national
culture that influence our thinking about organizations. The results show that American organi-
zations have a greater power distance than German ones, and this can interpret the behavior of
American managers at Walmart in Germany when making decisions that are not valued in Ger-
man culture.
Turning to customer thinking, many Walmart practices in Germany have not been duly
approved. In addition to the fact that German culture is an individualistic culture, German people
are assertive and use explicit communication, as Hall and Hall (1990) discussed. Thus, the ten-
meter Walmart rule was considered fake, not genuine, because its employees are unfamiliar, and
thus the Germans did not appreciate it. The same applies to the idea of meeting in stores. Obvi-
ously, the Trumpenaar dimension is neutral and affective, and is relevant for discussion in this
context. He is not familiar in German culture, which is neutral, expressing emotions in business
relationships. Therefore, it was strange for them that the stranger smiles and speaks with them
while shopping. Another cultural aspect is that German consumers realized that it was they who
would pay more because of the guy standing at the door, who met, which made the result-ori-
ented and value-oriented culture, such as German culture, more underestimated.
Walmart faced other problems in the operating environment in addition to Walmart's
competitive advantages, which were limited by German law and public opinion. Firstly, the com-
petition was very fierce, and there was no support to do anything else. Secondly, and most im-
portantly, the vendors, Walmart's most powerful competitive advantage, were not cooperative
enough because they were not used to the central distribution adopted by Walmart. Instead of im-
proving relations with German suppliers, Walmart tried to control them and apply their roles,
which led Walmart to try to sell products that its customers did not want, but which suppliers
wanted to promote. I see two cultural reasons for what happened.
To summarize, Wal-Mart broke into the German market in 1998, expecting the story of
its phenomenal success in the US to repeat itself in Europe’s largest economic context. The sce-
nario did not develop in this way. Instead, Walmart ran into various problems. It began with en-
tering the German market when it was in a stagnant state, and acquiring two poorly located and

valued retailers, buying stores but not land, having trouble renting from Walmart, and limiting
change and expansion. In addition, Walmart hired American senior managers and made English
the official language, which was completely inconvenient for German employees. Even after hir-
ing German CEOs, their spending level was reduced, and they were even asked to split rooms for
the night for company meetings. In addition, Walmart was unable to establish good relations
with German suppliers, controlling them and integrating the corporate cultures of the acquired
companies with their own, which led to the loss of a powerful competitive advantage and clashes
with the union, respectively. In addition, Walmart was not able to establish good relations with
both employees and customers due to the fact that she clung to the approach taken in the USA,
which led to a distortion of Walmart's image and popularity in Germany. Finally, pricing and fi-
nancial reporting issues have forced Walmart to disarm from its competing strategies.
Walmart remained with its 85 stores in Germany until July 2006, in which stores were
sold to Metro. The deal has not been made public. Thus, financial details were not disclosed.
However, some analysts estimate that Metro paid $ 1 billion less than Wal-Mart's assets in Ger-
many. The German lesson prompted Wal-Mart to rethink its position in the international market,
after which Walmart sold all of its stores in South Korea. By 2007, Walmart's international mar-
ket had shrunk to operate in only 13 countries. On the other hand, Walmart's international com-
petitor, Carrefour, operates in 29 countries. Historical experience shows that Wal-Mart has al-
ways achieved the best results in the markets closest to the USA, namely in Canada and Mexico,
where either the cultures are very close to the cultures in the USA or Walmart is very familiar
with them. Walmart also has a success story with Asda in the UK providing 43% of Wal-Mart's
worldwide revenue.
When considering Germany in the context of Wal-Mart, Wal-Mart’s US administration in
Germany was not based on a participatory style; according to the facts, Wal-Mart’s management
in Germany did not take their subordinates into account due to changes in Wal-Mart’s internal
environment in line with national and Germany’s social culture, for example, employee manage-
ment practices such as the morning workout following Wal-Mart were perceived by German
workers as annoying. In addition, forcing employees to take unusual actions contrary to German
culture, such as cashiers, was suggested to say goodbye to customers, which was considered an
unusual practice for the German people. Consequently, these are some recorded incidents that
generally affect employee productivity, as they were forced to work against a German working
culture practitioner.
Wal-Mart did not want to maintain the well-being of working employees, as the salary of
a Wal-Mart employee was not compatible with working hours, because the structure of benefits
and sanctions was predetermined and strictly enforced, which in itself is a characteristic of auto-
cratic leadership. Consequently, Ver.di, the largest union in the world, sued Wal-Mart in Ger-
many for not disclosing year-end figures that could be used for wage negotiations. Thus, this

non-negotiable attitude towards wages clearly reflected in the high turnover of staff, and this
never allows the retail giant to firmly maintain its position in the German market.
Wal-mart in Germany was so classic and egocentric in its approach to leadership that
they rigidly applied their traditional Wal-Mart strategies in their German company, not paying
attention to any advice and perceived values of employees. As reported in numerous incidents,
American Wal-Mart managers put pressure on German leaders to introduce the American style
of workplace management, as subordinates were forbidden, for example, to meet colleagues at
the workplace, and workers were also not allowed to flirt with each other. However, this did not
work and ultimately leads to many internal and external negative results. In addition, manage-
ment also threatened employees to close certain stores if employees resisted working for the long
working hours stipulated by their contracts and did not allow video surveillance of their work.
Thus, these are some reported facts that led employees to poor productivity and ultimately forced
the retail giant to leave Germany.

Analysis
This is a case study of the insolvency of Wal-Mart stores in Germany in the context of
organizational behavior.
With the largest economy in Europe in 2001, Germany accounted for about 15% of Eu-
rope's annual retail market. In 1997, Wal-Mart entered the German market, acquiring the Wert-
kauf network (24 stores) and the loss-making Interspar network (74 stores). Two networks oc-
cupy less than 3% of the market. Interspar stores were in poor condition and in poor locations.
The leading German retailer was the Metro Group, then the Rewe Group. The ten largest retail
chains in Germany in 2001 captured 30% of total retail sales.
In the 1990s, retail market growth averaged 0.3% per year. Profits in Germany were also
low for retailers compared to margins in other European countries. Bankruptcy filings were nu-
merous. In 2002, 10,000 retail stores filed for bankruptcy. This indicates a competitive environ-
ment that may be a problem for Wal-Mart's success.
Wal-Mart's original strategy was to repair stores to improve its appearance and maintain
price leadership through price leadership, as was the case in the US market. They will review
supply chain systems and include new scanning systems, centralized distribution and high qual-
ity customer service. Thus, Wal-Mart created a tough price war in Germany.
According to a Goldman Sachs report, Wal-Mart could be entrusted with the implementa-
tion of its strategy in the United States and increase efficiency, low prices, and inventory control
and thereby push the undeveloped German market into the future. However, on the contrary, an
analyst in a DG Bank report warned that many foreign retailers are failing in Germany due to
land-use restrictions.
In Germany, store hours were limited, pricing rules (prohibiting retailers from selling
goods below cost) and stringent zoning requirements were limited. In addition, unions were more
influential than their American counterparts. Planning laws and zoning rules preclude the large-
scale new entry of any major operator. However, some other industry regulations also have a sig-
nificant impact on corporate strategies and, therefore, retail competition:
• The maximum allowed store hours in Germany is 80 hours a week. This is one of the
shortest hours in Europe. Sunday and holidays are not allowed at all. This contrasts
markedly with 168 hours a week in the UK, 96 hours a week in the Netherlands, and a
minimum of 144 hours a week in France.
• German fair trade and antitrust laws contain some important restrictions or pricing for
retailers. To summarize briefly - ignoring (a few) exceptions to this rule - they prohibit
sellers from selling goods below cost on an ongoing basis. Thus, a pricing strategy based
on some loss leaders is most likely illegal under German law (but more often than not, it
is not entirely legal in the United States and Great Britain).

Country Mon-Fri Sat Sun/Holidays Hours/Week
Uk 00.00 – 24.00 00.00 – 24.00 00.00 – 24.00 168
Netherlands 06.00 – 22.00 06.00 – 22.00 Closed 96
Spain 00.00 – 24.00 00.00 – Closed 144

2400
France 00.00 – 24.00 00.00 – 24.00 Open* 144 (Mnimum)
Germany 06.00 – 20.00 06.00 – 16.00 Closed 80

[From June 1st, [From June 1st, 2003;
2003;
06.00 – 20.00]
(* Note: Only store-owners and their family-members, but no employees are permitted to
work on Sundays and holidays)
The German service union Ver.di, the largest union in the world, has filed a lawsuit
against Wal-Mart for not publishing year-end data that could be used for wage negotiations. This
ultimately led Wal-Mart to the negotiating table with Ver.di. As a result, the retailer allowed
wages to increase by 0.5% compared with the agreed level of the retail sector.
Since 2003, the Store Closing Act limits opening hours to 6:30 p.m. on weekdays and 8
p.m. on Saturdays. Stores could not open at all on Sundays, except as provided by the state gov-
ernment or if they performed the “primary” functions: pharmaceuticals and tobacco. It was cre-
ated to protect domestic retailers from larger competitors, who could afford to open their stores
longer at lower costs. This was also reinforced by religious groups that supported the importance
of family time, while the left side of the political spectrum believed that retailers working longer
than other workers were inherently unfair. Reduced working hours led to higher wages per em-
ployee in retail. For example, full-time full-time employees in Germany demanded a 19% allow-
ance compared to workers from the UK on average.
Overall, the perception of Wal-Mart's “target customer group” was that the company did
not fulfill its offer to offer the lowest prices and excellent customer service. In his retreat, Wal-
Mart acknowledged that its formula is not suitable for every culture.

A retailer who wants to follow Wal-Mart’s low-pricing strategy needs to expand rapidly.
Germany lacked suitable places to support such an expansion. Wal-Mart did not build its own
stores, but acquired existing supermarkets that had a completely different business model — they
were very small and had a limited range of products. They were also located far from each other,
which led to high logistical costs.
Wal-Mart is very successful in the United States and other countries with its “everyday
low price” strategy. However, due to intense competition, the Germans are accustomed to low
prices, which are offered by numerous discount supermarket chains. For this reason, Wal-Mart’s
low price strategy has not created a sufficient competitive advantage.
Unlike many of its German competitors, Wal-Mart offered credit card payments and free
bags for purchased goods, and improved store interior and friendly customer service. Since Ger-
man customers were not used to friendly greetings, they paid more attention to how much Wal-
Mart charges customers for these additional services. The absence of wage earners has helped to
reduce the costs of having to pay higher wages per employee compared to the UK. Customers
were also loyal to major retail players, including Metro, Aldi, and Rewe.
Wal-Mart had great difficulty working with suppliers. The retailer was not able to trade
goods from suppliers at low prices, and also did not have a reputation for low prices from Ger-
man consumers. And after introducing their centralized distribution system, they encountered
high lag rates (20% versus 7% on average in the industry) and, thus, successfully introduced new
scanning systems for better inventory management.
In 2001, a consumer study showed that Wal-Mart prices were 11-25% higher than its
German competitors. This can be explained by the simple business model of many competitors,
aimed at minimizing costs, even if it is aimed at reducing the level of customer service. Many of
its competitors focus on providing minimal customer service and using minimal labor to mini-
mize costs. Before the advent of Wal-Mart, retailers burdened with high labor costs and the need
to keep prices low, decided not to invest in-store design, IT systems or merchandising. However,
after Wal-Mart entered, an increasing number of German retailers began to use advanced scanner
systems and increased pressure on suppliers to lower shelf prices.
Higher costs, lower margins, small shops, undeveloped supply chain relationships and
price-sensitive customers loyal to German chains forced Wal-Mart stores to have margins of less
than 1%, while ASDA Wal-Mart had 6-8% In Great Britain. However, this problem also affected
other foreign companies, such as GAP and Marks & Spencer, which decided to leave the Ger-
man market.
There were several factors that contributed to Wal-Mart's failure in Germany. Amazing
management mistakes haunted the German company Wal-Mart from the very beginning. The
main mistakes Wal-Mart in the German market can be summarized as follows:
• Cultural insensitivity was the main cause of failure.

• Entering the German market by acquisition strategy.
• Inability to offer their legendary “daily low prices” and “excellent service”.
• Bad publicity about the company due to violation of some applicable German laws and
regulations.
Germany is the largest retail market in Europe, and the country's GNP in 2000 amounted
to 2 trillion euros with a total population of 80 million people. Retail in Germany is a very com-
petitive and low-profit industry. Wal-Mart entered the country due to the large market, but dur-
ing this time the industry in the country was saturated.
Wal-Mart's cultural insensitivity led to his failure in Germany. Most global mergers and
acquisitions did not bring any benefits to shareholders and did not reduce the cost, which was
mainly explained by the lack of intercultural competence. The lack of sensitivity and understand-
ing of language barriers, local traditions, consumer behavior, merchandising and employment
practices irreversibly undermined Wal-Mart's image in Germany. One of the main reasons for
Wal-Mart's failure in Germany is an attempt to transfer the company's unique culture and retail
concept to a new country. Senior management refused to even recognize the differences in cus-
tomer behavior and culture in Germany compared to their American customers, and senior man-
agement did not listen to feedback from their employees. Not every new international retailer can
be a retail giant outside of their home. The mistake of exporting its culture in bulk rather than
adapting to the local market leads Wal-Mart to fail in the German market.
People in Germany were very valuable when it came to retail. Far more people consid-
ered themselves valuable rather than quality and service. As a result, retail in Germany was the
least profitable compared to other industries in Germany, as well as retail in other countries. Tar-
get customers in Germany usually wanted lower prices, and affordable or nearby location, an ex-
cellent selection of products and excellent customer service. In general, they prefer price and
value over service and quality. McKinsey interviewed German consumers and found that price-
sensitive customers make up 42 percent of the market, while only 13 percent care more about
service and quality. Brands matter to 45 percent of the population, as do consumer group prefer-
ences.
Competitors, both local and foreign, have been successful in retail markets around the
world by following a simple formula:
1. Grow by acquiring
2. Rely on differentiating store offers
3. Customize key strengths such as logistics or product mix to match your local pref-
erences.
4. Keep local managers accountable for using their customer and culture knowledge.

Consolidation of retail competitors in Germany is currently such that the first five retail-
ers control 63 percent of the market, and the first ten control 84 percent. This concentration of
sales prompted these companies in many cases to introduce their own brands, which allowed
them to free themselves from price competition and give them the opportunity to change their
price offers in order to remain competitive. Hard discounters offer between 600 and 700 very
low margin products, including food. In fact, these merchants in Germany control three times as
much food market as in the UK, and four times as much as in France.
Such competition and product range did not leave much room for Wal-Mart competition.
Even when Wal-Mart lowered prices as a loss leader to drive store action, he was surprised to see
that many of its competitors matched its low - even unprofitable - prices.
Wal-Mart’s ambitions to position itself favorably on European markets across Germany
have been hit hard by their inability to fully understand and adapt to specific business conditions
in other countries. This revealed their apparent lack of intercultural competence and managerial
skills. The main problem of integration after the merger is even more complicated when it comes
to cross-border mergers or acquisitions, all of which are often exacerbated by a lack of language
and cultural skills. Failure to fulfill this task satisfactorily leads to mutual distrust, demotivation
and negatively affects the competitiveness of the combined companies, profit, and shareholder
value. This is exactly what happened with Wal-Mart Germany.
It was clear that Wal-Mart's cultural insensitivity began right at the top. To begin with,
during the first four years of his work, he appointed four general directors. The first leader of
German operations was Rob Tyarks, an emigrant from the United States who did not understand
Germany or its culture. He previously led about 200 super centers in America. He not only did
not speak German. Due to his reluctance to learn the language, English was soon declared the of-
ficial language of the company at the management level. He also ignores the complexity and le-
gal framework of the German retail market, ignoring any strategic advice given to him by former
Wertkauf executives. This led to the resignation of the first three Wertkauf executives. His suc-
cessors also failed to combine German stores with Wal-Mart's business model and culture.
Secondly, the Wal-Mart Code of Ethics also combines frustration among German em-
ployees who are likely to monitor your colleagues and report any misconduct that can be as-
sessed in the United States, while in Germany this is not so. In addition, cashiers at the cash desk
and front desk at Wal-Mart were ordered to always smile at customers, which made cashiers feel
embarrassed because smiling at strangers was a rare practice in German culture. These reported
practices were unfamiliar to practitioners of German culture, which made them feel stressed
while working at Wal-Mart, as German people were highly valued to avoid ambiguity compared
to US thinking, as shown in table 2.2 above. Therefore, these are some well-known practices that

make Wal-Mart not the ideal place to work and force Wal-Mart to face a large number of em-
ployees, and this never allows the retail giant to firmly maintain its market position in the context
of a high potential European market.
Avoiding Uncertainty. From the Client’s point of view, similar facts were published, as
German customers did not appreciate Wal-Mart’s approach to retailing, as they found this to be
the opposite compared to their culture of practice practiced by local retail giants. in the shop.
Similarly, merchandising was erroneous because it placed all the expensive premium products on
attractive shelves, while all discounted goods were placed either on the bottom or on the upper
shelves, which irritated German buyers. Secondly, the habits of average German buyers have not
been identified and effectively studied, since German buyers are considered effective and are not
used to spending a lot of time on purchases. While Wal-Mart was designed in such a way that it
forces customers to spend more time at retail outlets, which may be a good strategy for increas-
ing sales, but which is annoying for German buyers. Finally, the brand’s unpopularity in the Ger-
man market due to its unfriendly approach to the environment, the reason is the concern of the
German people about the "green" of Germany, so the plastic packaging and plastic bags Wal-
Mart caused more irritation than the pleasure of shopping in the Megastore US These are some
notable mistakes in analyzing the practical culture in the local market and determining customer
requirements, which leads to poor customer retention and poor financial performance of this
massive retail giant in the German market.
Uncertainty avoidance is assessed as the most important aspect of visualizing differences
in the national culture of the United States and Germany. Although in the context of the Wal-
Mart scenario in terms of employee perspectives, some of the American employee management
methods may not fit perfectly into the German context, for example, each employee should at-
tend morning exercises, this should not be harmful, but the uniqueness of this training was that
they were asked to sing Wall-Mart! During the training, which can be seen as a practice of in-
creasing loyalty and morale in America, but in Germany, it was perceived as an annoyance.
Power distance. Longer distances of power are expected to create more inequalities that
will make less powerful people more dependent on powerful people, and in practice, less power-
ful people will become polarized among dependency and dependency. Consequently, in the case
of Germany, people tend to work in clusters to achieve goals, but the American strategy of the
distance of power through the approach to making copyright decisions makes employees strain
when working in Wal-Mart stores in Germany. In addition, an organization with a greater differ-
ence in power reflects the current inequality between managers and subordinates, which ulti-
mately leads to a lack of coordination between the organizational hierarchy. Similarly, a Wal-
Mart employee suffers, forcing him to practice the guidelines of his superiors, who completely
ignore the likes and dislikes of a working subordinate.
Finally, wide wage differences between high and low rises are another attribute of an or-
ganization with large differences in power. The same was reflected in Wal-Mart Germany, where

labor did not find Wal-Mart an attractive employer because of the very low wages compared to
the UK market. Consequently, these are reasoning elements in terms of distance of power that
make Wal-Mart suffer from problems such as high staff turnover and employee demotivation.
Individualism. According to table 2, the German nobility is inclined to work with the
team in terms of achieving goals and objectives. Consequently, the Wal-Mart environment in
Germany does not support a team-building environment due to numerous obstacles. Firstly, Wal-
Mart employees were forced to use English as the official language in the store, which leads to a
gap in communication within the hierarchy and even with customers, which ultimately hinders
the formation of teams in stores.
In addition, the feedback from subordinates was completely ignored by senior manage-
ment in terms of suggestions for improving the organization, which ultimately led to a serious
demotivating effect on workers and a high level of employment in Wal-Mart, Germany.
Finally, the individualistic approach in the workplace most likely cannot bring together
the entire workforce along with some of the latest adapters that will not be taken care of and left
behind, which ultimately will not be able to make perfect use of the existing workforce. In the
same way as in the case of Wal-Mart, Germany, where no attention was paid to the unfamiliarity
of the workforce with the installation of the American work culture, and ultimately this could not
make the actual result accessible labor. Therefore, this is a noticeable individualistic approach,
which leads to the low efficiency of this international retail giant in the German market.
Factors that led to Wal-Mart's failure in Germany include a diverse corporate culture, po-
litical influence, fierce competition, and ineffective management and marketing strategies. First,
David Wilde, CEO of Wal-Mart in 2004, believed that the cultural differences between Ameri-
can and German consumers were serious problems for Wal-Mart. Debbie, CEO in 2006, con-
cluded that German shoppers are used to shopping at small discount stores such as Aldi and
Netto, which offer a limited range of products with special offers every week and without cus-
tomer service, unlike US customers. In addition to another corporate culture, competition be-
tween Wal-Mart and domestic retailers is gradually increasing. The difference in price is so re-
duced that sometimes even Wal-Mart had a higher price than its competitors. Consequently, con-
sumers had few incentives to visit Wal-Mart Germany due to the lack of an obvious price ad-
vantage.
Some of the other factors that led to the failure of Wal-Mart in Germany were that their
strategy of acquiring a major competitor did not work, as the German government did everything
possible to ensure the welfare of domestic players. In addition, due to wage restrictions, Wal-
Mart could not practice wage negotiations, as it was in the United States; these were huge, unu-
sual expenses for the company. His American strategy of restricting the freedom of workers and
forcing them to work overtime caused problems of high staff turnover and a negative image of
the employer. Wal-Mart failed to achieve effective top-level management. Its CEO changes

every year, which obviously affects the effectiveness of the company. Wal-Mart constantly ig-
nored the strictness of German laws, and heavy fines were imposed on this. One of the hardest
things for Wal-Mart is capturing market share. According to German law, it was illegal to sell
goods below cost, which is why Wal-Mart could never get the label "Low Price Leader”.
It is not possible to freely manage an organization unless there is cooperation between
employees and the employer. Wal-Mart faced serious labor unrest that interfered with its brand
image. Kay Hafner, Wal-Mart's CEO, cut wages to cut costs, which negatively impacted individ-
ual behavior as an anti-union solution. According to Arndt and Knorr, the firm needs to under-
stand the specifications when they are engaged in global expansion. Of all the CEOs, only David
Wilde felt cultural differences. It really led to changes based on this understanding, which
yielded some positive results, but not so profitable as to impress investors for future investments.
In addition, according to German law, these were some specific laws related to retail
trade, for example, limited legal working hours (80 hours per week), which were much shorter
than in other European countries and had strict rules governing closure on Sundays and holidays.
Wal-Mart repeatedly violated German laws but was able to do away with it mainly because of its
global presence and influence on the US government, which played an important role in world
politics. Some of the cases when a company violated several laws and was able to hide are listed
below:
2. In Germany, the practice of "unfair trade" was prohibited, such as selling goods at
cost, but it was found that Wal-Mart violates these laws, as some goods are sold at
random at cost.
3. German law required the company to disclose financial statements annually; Wal-
Mart rarely did so and was deprived of any fines or legal proceedings in a number of
cases.
4. In addition, German politics did not facilitate the entry of large retailers into the coun-
try. The number of maximum hours allowed per week was one of the lowest in the
world. In addition, there was a very strict policy against price reductions. Retailers
were not allowed to sell goods below cost. It was also difficult to obtain a license to
enter the country's retail trade. There were various regulations that made Wal-Mart's
economies of scale and worthless in Germany useless.
5. The Mandatory Deposit Regulation Act stipulated that a retailer must provide a re-
turn-deposit system for several products, such as metal drinks, cans, etc. But Wal-
Mart never followed this law.
Thus, from the above cases, it can be concluded that Wal-Mart used its global influence
to refrain from some German laws.

However, due to the fact that the German culture is very different from the American one
and due to the lack of knowledge of the legislation, Wal-Mart will find it difficult to properly
make marketing and promotion. And in fact, these difficulties have been proven in Wal-Mart
Germany. Therefore, instead of choosing Germany as the gateway to Europe, after almost two
years of work in Germany, it entered Great Britain. Although the UK is not located in the euro-
zone and its geographical position is less favorable than in Germany, it has a similar culture and
legal environment in the United States, which facilitates the management of the company's busi-
ness and strategies. It has significant success in the UK market, which is called the Wal-Mart
Ready Market. Thus, the lessons learned from Wal-Mart's failure in Germany proved to be bene-
ficial for the UK.

Suggestions and Recommendations
Cross-border, cross-cultural business is a problem even for the largest companies. Com-
panies must be attentive to local cultures and adapt their offerings to the local market. In order to
localize their offerings, Wal-Mart and other companies representing global companies must con-
duct a cultural assessment of the country's citizens before acquiring. All of their corporate busi-
ness and communication strategies should be based on this cultural assessment. This will help
companies measure the effectiveness of their localization efforts and make appropriate changes
to local strategies and tactics as necessary. Considering the following steps will help Wal-Mart
or any other company when they are in search of a global alliance or business.
1. Political, Social, Economic and Cultural Analysis of the Country
Before expanding its activities in a new country, the Company must deeply understand the politi-
cal, social, economic and cultural aspects of the country. In the Wal-Mart case, Germany was
chosen primarily because of its location in central Europe and the economic attractiveness of the
Wertkauf acquisition. But serious research would show that Germany has strong national values
that are resilient to change; arguably the most deeply rooted retail tradition in Western Europe.
This could have avoided either the choice of Wal-Mart Capital or the strategies adopted in Ger-
many.
2. Go global and think they are local
After conducting an in-depth study of the prevailing trends in the client’s country, the Company
should be ready to change its personality in accordance with cultural differences, without com-
promising its corporate mission. This step will also force organizations to clearly define the goals
of globalization. Wal-Mart placed the company name in many German stores before it was fully
established. Immediately after the launched stores left an impression on consumers who formed a
negative impression of the name Wal-Mart.
3. Employment of Cross-Cultural Management approaches
Using the Hofsted's cultural dimension or the HT & T Analysis will help companies understand
the smallest cultural differences between countries. For example, Communitarianism over Indi-
vidualism.
The Germans have a higher degree of communitarianism because the Germans prefer to
participate in the team. Most Germans see business as a group of related people working to-
gether. But most Americans see in their company a set of functions, tasks, people, machines, and
payments in which people compete.
This cultural difference between the two countries led to internal conflict between work-
ers, which also led to the resignation of effective German leaders from Wal-Mart after integra-
tion.

Understanding the cultural aspects of the country through proven cross-cultural models
will always help the company to develop a special approach that will stimulate team spirit and
joy in the global team.
4. Continuous Updation of Strategies to successfully withstand the local competi-
tion
It is very important for a global company to constantly analyze the impact of its various strate-
gies on the local market. Understand the flaws and change them to serve the local market much
better than competitors. It is always best to carefully study their strategies with a group of local
experts, as they will better understand local consumer behavior and culture. Perception is im-
portant, so surveys to find out what customers think about the company will also help them
change their strategies accordingly.

Conclusion
Wal-Mart, a retail giant, has successfully crossed the border, including Chile, Brazil,
Canada, China, and India. Nevertheless, during the period of massive expansion, Wal-Mart suf-
fered a number of defeats, among them there was a notable Germany. Rich theoretical founda-
tions were used to analyze Wal-Mart's failure factors in Germany. The mismanagement of cul-
tural diversity and the adaptation of inappropriate leadership styles are factors identified for this
gigantic failure. Wal-Mart’s leadership in Germany should use the Pakanovsky and O'Donnell
Trujillo organizational culture model, Levin’s change management model, and transformational
leadership to avoid this defeat, as this will deeply affect the management of cultural diversity and
assist managers in identifying policies that can successfully to overcome the problems of differ-
ent national cultures and would help encourage people to work in teams besides different cul-
tures.
The joint venture would significantly reduce the risk profile during a raid in Germany and
provide Wal-Mart with a better platform for analyzing the German market, which is significantly
different from the UK market, despite their close proximity. Risks of working with a partner may
include a partner’s study of Wal-Mart’s core competencies and their implementation outside the
framework of a joint venture project to capture a dominant foothold in the market. However, as
seen from the case study, this was already the case when Wal-Mart entered the market. Competi-
tors quickly adapted and adjusted their infrastructure to incorporate certain strengths that Wal-
Mart demonstrated, such as good inventory control with advanced scanning systems. In addition,
Wal-Mart does not have to provide its German partner with all the internal workings of the IT
technology that controls Wal-Mart's logistics. An American retailer can simply integrate this
technology into the store so that the business can benefit, but at the same time prevent its partner
from easily mimicking the intellectual property behind Wal-Mart's logistics.
Unfortunately, Wal-Mart decided that its successful track record in the United States,
Mexico and the UK would serve as a sufficient prerequisite for entering Germany through acqui-
sition. In addition, it was assumed that its country-specific advantages could be transferred, for
example, to relations with suppliers and knowledge of the consumer market. As a result, the
stores of the German company are faced with a decrease in margin and, as a result, low profita-
bility. Nevertheless, Wal-Mart has several options to solve this dilemma: 1) to continue expan-
sion in Germany through acquisitions / organic growth to achieve economies of scale, 2) to sus-
pend expansion, but try to adapt its current assets to the industry landscape in Germany. and 3)
deprive German assets.
Given the fact that he has already spent a significant amount of time, effort and money in
Germany, Wal-Mart may continue to expand in Germany in the hope of economies of scale.
These investments should be seen as sunken costs and therefore should not affect decision mak-
ing.

Wal-Mart has already demonstrated that they destroy shareholder value by acquiring Ger-
man retailers and hope to change them. Therefore, investing in additional capital in the hope of
wrapping up existing German retailers should not be wise. An organic expansion plan will not
work in Germany, given the current stringent regulatory environment. If Wal-Mart strives for or-
ganic growth, Wal-Mart will have to go through a lengthy and potentially costly process to get
approval from local governments, state governments, and state governments. This is very un-
likely, given the alleged detrimental impact that Wal-Mart is creating more supercenters in Ger-
many. One of the problems may be that large stores if built outside of urban areas, can draw peo-
ple close to the store and thus create voids for the population in urban areas. The empty old
buildings in some urban areas still remind the Germans of this opportunity. Thus, Wal-Mart can-
not achieve the same economies of scale in Germany as it does in the United States, and should
not implement this expansion option.
Another more passive approach could be to preserve the remaining assets and adjust in
accordance with the industry dynamics in Germany. However, Wal-Mart rivals, which have es-
tablished relationships with suppliers and unions and have a reputation as a low-cost supplier of
goods, have already adopted technologies such as RFID, new logistics and new scanning systems
to increase efficiency and reduce costs. Even if Wal-Mart reduces customer service and stores to
help minimize costs, Wal-Mart has few opportunities to create competitive advantage because its
competitors have already taken proactive actions. They learned from Wal-Mart and implemented
the necessary infrastructure to prevent Wal-Mart from becoming a huge competitive threat in
Germany.
The latest option for Wal-Mart is to transfer assets to an internal retailer to reduce losses
in Germany. This would be most feasible given its current limited profitability with growing
competition filled with proactive anti-Wal-Mart competitors and regulatory protocols that im-
peded Wal-Mart's development in Germany.
The feasibility of implementation was confirmed in 2006. In 2006, Wal-Mart decided to
leave the German market by selling its retail stores to the German retailer Metro. The exact terms
of the agreement have not been made public; however, as a result, Wal-Mart’s resignation deci-
sion caused a loss of $ 1 billion.

Questions
1. Why Wal-Mart decided to open it retail store in Germany?

2. Why Wal-Mart failed in Germany and South Korea?
3. What are the measures that Wal-Mart can take in consideration to adapt in different cultures?

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The Failure of Walmart in Germany

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The Failure of Walmart

Mbongeni Zuma and Esenzhanov Kubanychbek

CASE STUDY & ANALYSIS 1

CASE STUDY & ANALYSIS 2

CASE STUDY & ANALYSIS 3

CASE STUDY & ANALYSIS 4

CASE STUDY & ANALYSIS 5

CASE STUDY & ANALYSIS 6

CASE STUDY & ANALYSIS 7

Wal-Mart United States $469.1B 9.8% 2.7%

Carrefour France $112.6B 7.7% 3.2%

Tesco U.K $96.8B 10.5% 5.9%

Metro Germany $90.5B 7.4% 1.6%

CASE STUDY & ANALYSIS 8

SWOT ANALYSIS OF WAL-MART IN 2018:

CASE STUDY & ANALYSIS 9

• Scale of operations. The strong market po-

CASE STUDY & ANALYSIS 10

CASE STUDY & ANALYSIS 11

FACTORS THAT INFLUENCE WAL-MART’S MANAGEMENT

CASE STUDY & ANALYSIS 12

CASE STUDY & ANALYSIS 13

CASE STUDY & ANALYSIS 14

CASE STUDY & ANALYSIS 15

CASE STUDY & ANALYSIS 16

CASE STUDY & ANALYSIS 17

CASE STUDY & ANALYSIS 18

CASE STUDY & ANALYSIS 19

CASE STUDY & ANALYSIS 20

CASE STUDY & ANALYSIS 21

CASE STUDY & ANALYSIS 22

CASE STUDY & ANALYSIS 23

CASE STUDY & ANALYSIS 24

CASE STUDY & ANALYSIS 25

CASE STUDY & ANALYSIS 26

Uk 00.00 – 24.00 00.00 – 24.00 00.00 – 24.00 168

Netherlands 06.00 – 22.00 06.00 – 22.00 Closed 96

Spain 00.00 – 24.00 00.00 – Closed 144

France 00.00 – 24.00 00.00 – 24.00 Open* 144 (Mnimum)

Germany 06.00 – 20.00 06.00 – 16.00 Closed 80

CASE STUDY & ANALYSIS 27

CASE STUDY & ANALYSIS 28

CASE STUDY & ANALYSIS 29

CASE STUDY & ANALYSIS 30

CASE STUDY & ANALYSIS 31

CASE STUDY & ANALYSIS 32

CASE STUDY & ANALYSIS 33

CASE STUDY & ANALYSIS 34

CASE STUDY & ANALYSIS 35

CASE STUDY & ANALYSIS 36

CASE STUDY & ANALYSIS 37

CASE STUDY & ANALYSIS 38

1. Why Wal-Mart decided to open it retail store in Germany?

CASE STUDY & ANALYSIS 39

Boulton. J. How Not to Expand // 2007. – Available through: http://www.jeffboul-

Clark. A. Wal-Mart pulls out of Germany. – 2006. – through: https://www.theguardian.com/busi-

CASE STUDY & ANALYSIS 40

CASE STUDY & ANALYSIS 41

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