WALMART OVERSEAS ENTRY

Question 1: Determine and discuss the entry mode in Walmart used in the following countries:

Germany. With the need to expand its business operations internationally, Walmart decided to

enter the German retail industry in 1997 using acquisition as its mode of entry. The company

acquired 21 Karlsruhe-based Wertkauf hypermarket chains, which is one of the profitable

hypermarket chains in the country. After a year later, Walmart then acquired the 74 unprofitable

Interspar chains (Jui, 2011).

The strategy of Walmart includes refurbishing the appearance and layout of the acquired stores

and anchor its competitive advantage by maintaining cost leadership as what they did in the U.S.

market. Further, overhauling the supply chain systems, incorporating new technology in

operations, adapting a centralized distribution, and providing high quality services are the key

strategies that will make the American firm successful in penetrating the German market.

However, the strategy of Walmart did not prosper. Nine years after conducting its business in

Germany and investing huge amount of capital, the firm withdrew from the retail market and
sold its stores to Metro, a German rival retailer with an expected billion-dollar loss from its

failed business operations (Zimmerman & Nelson, 2006).

The reasons why the entry and acquisition of Walmart in Germany failed are threefold: First, the

culture of German shoppers is different from U.S. consumers. The philosophy of Walmart,

“EveryDay Low Price” is not aligned with German’s consumer behavior since they believe in a

direct relationship between product value and price (Landler, 2006). Therefore, the key strength

of Walmart compared to its competitors is not applicable for the local consumers. Second, the

food and retail industry in Germany is already matured with key players dominating the market.

German consumers already established loyalty and relationship with German-owned stores.

Lastly, the government in Germany is bureaucratic where intervention is made to protect local

businesses. Price floor regulations are enforced to ensure local competition is not eliminated in

the market and opening hour regulations are strict (Jackson, 2017)