Wal-Mart Corporation’s Fail in Germany
The New York Times article titled ‘Wal-Mart gives up Germany – Business’ was written by Mark Landler on July 28, 2006. The article presents major issues of interest and especially business affairs in German market. In the introduction section, it is evident that Wal-Mart stores acknowledged defeat by agreeing to sell 85 stores to the German retailer. The sale of these stores saw Wal-Mart incur losses of $1 billion, and this came after the retail sold its South Korean stores. Therefore, this discussion key area of focus is why Wal-Mart failed in Germany.
Germany analysts affirmed that Wal-Mart failed because the retail did not secure market traction in the region. This was accompanied by relentless price competition, well-organized discounters, and the cultural opposition of German shoppers to supermarkets, which sell garden-fresh vegetables. Another reason is that the company’s management team was not fully aware of how to deal with German consumers regarding shifting their eating and shopping habits. Although Wal-Mart applied suitable business strategies in the county, the retail failed because they expanded to Germany during a period when the entire market was moving away from such a model.
Over the past years, Wal-Mart has attained success in the U.S and other countries where it operates. However, its expansion to Germany was not a success as the company tried to apply their recognized U.S success concepts and formula using unmodified methods in this new market. While this formula has been effective and practical in the U.S and other markets worldwide, it was unsuccessful due to the nature of business performed in German. Similarly, the company’s business approach did not please or provide customers with any persuasive value proposition compared to the already established competitors.
The retail had previously faced similar business challenges in South Korea, which saw its 16 stores been sold to a local retailer. In the same case, the store endured the same problem in Germany by failing to appeal customers’ tastes and demands. The use of non-accommodating business strategies were insignificant in competing with the aggressive Germany discounters and the range of products in the market. It is worth noting that Wal-Mart’s failure story began in how it entered the German market in the early years. This was through obtaining stores of two-tier retailers, which were geographically isolated and located in local districts. The retail’s management and employees’ use of cultural gaffes such as providing groceries to consumers were not realistic.
There were several things that Wal-Mart management needed to learn about German market. First, although the management made significant efforts to adjust to the new market, it was already late. Their close rivals took the initiative to control the market through appropriate discounts and offering high-quality products. The retails vast size has been important in providing leverage to varied products. Nonetheless, its capacity in this market was not useful, and the store was forced to buy products from German stores, which again did not result in profits. Apart from the failed business formulas and concepts and leadership issues, the presence of competitive pressure was a clear reason for the failure. The German consumers are known as the stingiest and price-conscious in Europe, which affected the retails’ business strategies. The percentage of household income that many Germans spend on retails such as Wal-Mart was low compared to other countries, and this further explained why the store failed.