All these factors influenced the Wal-Mart failure in Germany. This resulted in serious communication problems for the German employees. When going into the German Market, Wal-Mart did not take into consideration that it would need German executives and managers but instead brought in all the managers and executives from the USA who did not know the culture of the German Market. Another more passive approach could be to keep remaining assets and adjust according to the dynamics of the industry in Germany. Labour Relations The ethnocentric approach adopted by Wal-Mart in its endeavor to enter and succeed in the German market was also reflected in the labour relations.
Also, one of the elements that make a company successful is a problem solving and selection practices which were not seriously addressed by Wal-Mart in Germany. Subhadra mentions that the main problems that Wal-Mart faced in Germany were low wages, poor working conditions and top management lack of interest in learning their language.
InWal-Mart acquired Interspar's 74 hypermarket stores to raise the total number of Wal-Mart stores in Germany to Ewing, Jack.
- Walmart in europe
In this case, some things can motivate someone from the Germany that might not motivate someone from the USA. With the acquisition of Interspar's stores, Wal-Mart became the fourth largest hypermarket retailer in Germany. Rather than engaging in acquisitions as Wal-Mart has done to gain presence in Germany, Wal-Mart should have considered the other options prior to entry: Harvard Business School, 20 July Bloomberg, 11 Apr.
One concern could be that the large stores if built outside the urban areas could draw populations close to the store and thus create population voids in the urban areas.
This understanding would have helped them to avoid having an excessively high number of employees that later required them to terminate. Analysts were critical of this decision as the German retailing industry was experiencing slow growth rates and retailers were indulging in price wars which eroded margins badly.
Trumbull, Gunnar, and Louisa Gay. InWal-Mart decided to exit the German market by selling its retail stores to German retailer Metro. How should Wal-Mart have approached the venture into Germany? Entry Strategy Gone Wrong?
Also, Unions were more influential than their US counterparts. The joint venture would greatly reduce the risk profile of the foray into Germany and provide Wal-Mart a better platform on which to analyze the German market, which greatly differs from the UK market despite their metacognition and problem solving pdf proximity.
Wal-Mart’s failure in Germany Case Study
They have learned from Wal-Mart and implemented the necessary infrastructure to prevent Wal-Mart from business plan for travel agency ppt a huge competitive threat in Germany. Retail market growth rates had averaged at 0. Wal-Mart, however, decided to enter Germany first.
Besides, to provide health insurance, the workers have to be employed on a full time basis but Wal-Mart policy is to hire most of its workforce on a part-time basis. The last option for Wal-Mart would be to divest its assets to a domestic retailer case study walmart in germany cut its losses in Germany. Another more passive approach could be to keep remaining assets and adjust according to the dynamics of the industry in Germany.
Big competitors in the German market Big differences between the Wal-Mart culture and the German customer values Underestimation of the German regulatory policies With regard to the big competitors in the German market, it is possible to state that Wal-Mart was competing against very strong and well established retailers.
Wertkauf and Iterspar. In this sense it is possible to argue that some core values of the Wal-Mart culture did not work within the German market because customers did not appreciate that kind of approach.
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It acquired the hypermarket stores of Wertkauf in Also, it assumed that its country-dependent advantages would be able to transfer over such as supplier relationships and consumer market knowledge. This would have allowed Wal-Mart to have time to adjust to the steep learning curve associated with the German market. The Wertkauf stores offered both food and general merchandise to the customers.
Retailer Shift towards Globalization Wal-Mart was a relative latecomer to international retailing. The purpose of this paper is to examine the Human Resource practices of Wal-Mart in Germany and look into how these practices led to the failure of the company in the German market. In Germany, employees are used to have union acting on their behalf. At the same time, its failures in Germany were a good lesson for future endeavors the company intended to do in order to achieve success.
The final option would be to launch a joint venture with a local retailer. Vacant old buildings in certain urban areas still remain to remind Germans of this possibility.
Wal-Mart's International Operations
Hence, the organization provides health benefits to only a small part of its workforce instead of all of them Christopherson, This was also reinforced by religious factions who supported the importance of family time while the left side of the political spectrum believed that retailers working longer than other workers was inherently unfair. However, as seen in the case study, this has already been the case when Sample of a thesis summary entered the market.
K-Mart entered the European market in and began expanding. Bankruptcy filings were numerous. The retailer would be required to create a building use plan that would cover a comprehensive development concept that accounted for environmental, conservation, and private legal concerns. It started in by opening two stores through a joint venture in Mexico. In10, retail stores filed for bankruptcy.
This is highly unlikely given the perceived detrimental impact of allowing Wal-Mart to establish more Supercenters in Germany. In addition, to maintain good profits, Wal-Mart has most of its employees working part-time.
Labour Relations The ethnocentric approach adopted by Wal-Mart in its endeavor to enter and succeed in the German market was also reflected in the labour relations. Furthermore, Wal-Mart faced a language problem in Germany. From that time, Wal-Mart started increasing with enormous success, which led the business to be the largest retailer in the world in Subhadra Therefore, Wal-Mart cannot achieve the same economies of scale in Germany as experienced in the US and should not implement this expansion option.
Wal-mart in Europe.
Within a few weeks, English became the official language of the company. An example would be the new site could not sell products that would compete directly with stores in nearby towns.
Additionally, Germany had high labour costs, high real estate prices and a very inflexible business environment Refer Exhibit I Customers were also loyal to the domestic large players in the retailing industry including Metro, Aldi, and Rewe.
This would be extremely problematic for Wal-Mart because all of its stores in Germany were Supercenters. Wal-Mart sources said that Wertkauf stores would provide the necessary footage in the German market. Energy stores and transfers homework 1 addition, Wal-Mart had several operational and regulatory problems with the German law: For instance, Wal-Mart had to lay off employees who were taken on as greeters as the German public did not take to the idea; it also had to cut down the number of employees in many stores due to low sales.
Customers were also loyal to the domestic large players in the retailing industry including Metro, Aldi, and Rewe. During the s, Wal-Mart began to further expand and thus pushing some retailers to closing some of their regional stores. Greenfield investing would subject Wal-Mart to similar risks if not more risks associated with the acquisition of Wertkauf.
This ultimately led brought Wal-Mart to the negotiating table with Ver. Moreover, Wal-Mart started their business in Germany with a big number of employees. They did not provide health insurance to their employees because this would have generated extra costs for them. In the next chapters, some of these topics will be reviewed in depth in order to understand the German experience. Wal-Mart should have understood the German market and been aware of the approximate number of employees that it would require.
Thus, investing additional capital in hopes of turning around existing German retailers should not be reasonable. Considering the fact that it has already spent a considerable amount of time, effort, and money in Germany, Wal-Mart may continue expanding in Germany in hopes of gaining economies of scale.
These investments should be considered sunken costs and thus should not bias decision making. Korr, Andreas, and Andreas Arndt. Wal-Mart had demonstrated phenomenal success in the US by providing an Every Day Low Prices guarantee, inventory control, and efficient distribution.
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- Wal-Mart In Germany | Bizness Crew Blog
- The management should have understood the importance of having the local language and the official one which would have made the employees identify with the company and help them feel motivated to work.
- Wal-Mart's German Misadventure|Business Strategy|Case Study|Case Studies
The plan would need to be first approved by the town or city council and then regional planning boards at the state and national level. Michigan State University. The major consequences of these actions were to adopt a parochialism disposition reflected in the Wal-Mart HRM practices. This resulted in serious communication problems for the German employees.
Suppliers Wal-Mart experienced great difficulties in dealing with suppliers. However, after Wal-Mart entered, an increasing number of German retailers began utilizing advanced scanner systems and increased their pressure in dealing with suppliers to lower shelf prices.
Wal-Mart's German Misadventure
First, Wal-Mart is against Union formation and strongly discourages its employees to join them. Even if Wal-Mart reduces the quality of customer service and scales down the size of stores to help minimize costs, there is still little room for Wal-Mart to create a competitive advantage since its rivals have already taken pre-emptive action. This resulted in little to no success rate especially since the German government did not want retail businesses to pull away customers to outside of a town leaving old buildings and monuments in the city center vacant.
The management should have understood the importance of having the local language and the official one which would have made the employees identify with the company and help them feel motivated to work.
Both chains were unionized with elected personnel representatives in work force council Christopherson, In conclusion, best practice in performance and reward management was not a priority to Wal-Mart because they did not emphasize them in Germany.
Recruitment and Selection According to Meighanthere is a cultural bias working against American companies before they even show up and one of these countries is Germany. Apart from the Cultural issues, the author also looks at other factors that worked in conjunction with culture against Wal-Mart and making it unable to sustain its operations in Germany. Wal-Mart had been able to implement its Every Day Low Price strategy by focusing on 1 developing a sophisticated logistics system with heavy information technology investments, 2 efficient distribution system by placing retail stores close to distribution centers and using RFID technology, and 3 being a non-union employer.
- Considering the fact that it has already spent a considerable amount of time, effort, and money in Germany, Wal-Mart may continue expanding in Germany in hopes of gaining economies of scale.
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- However, as seen in the case study, this has already been the case when Wal-Mart entered the market.
One of the things that Wal-Mart should have focused on was the relationship between employees and management. The Wal-Mart German failure can be understood from different approaches: This caused Wal-Mart to have a shortage of workers due to the low wages that it offered and this ended up affecting other parts of its operations in like stock distribution.
By doing so, Wal-Mart had created a fierce price war in Germany. The high costs were attributed to heavy recruiting by Wal-Mart and misreading of the German retailing environment.
The most notable problem faced in Germany in the area of labour relations was concerning its anti-union position. Also, what should Wal-Mart do given the current circumstances?
Works Cited Barbaro, Michael. Tough Climate in Overseas Markets. In addition, Wal-Mart also paid low wages as previously discussed in this report. Additionally, Germany had high labour costs, high real estate prices and a very inflexible business environment Refer Exhibit I Zoning InGermany had enacted strict planning and zoning regulations designed to protect traditional retailers and thus prohibited construction of stores with more than m2 sales area in locations not designated for retailing.
Walmart’s Downfall in Germany: A Case Study | Journal of International Management
Wal-Mart Germany should have adopted a polycentric approach in recruiting top management employees who would have been more familiar with the German market and culture which would have facilitated a smoother entry into the market. When going into the German Market, Wal-Mart did not take into consideration that it would need German executives and managers but instead brought in all the managers and executives from the USA who did not know the culture of the German Market.
The Interspar stores were in poor repair and in poor locations. Opening a large retail store outside urban area was possible however require multiple steps. German workers were accustomed to full time employment with benefits.
Conclusion In this report, an analysis of the failures of Wal-Mart in Germany has been conducted.