Wal-Mart is the world’s largest retailer. Wal-Mart had achieved 12% lower prices on
average than its competitors. 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. Wal-Mart failed to take into account Germany’s cultural attitudes, especially
with regard to such matters as labor law and the role of unions. While the company’s anti–
union stance has been core to its US success in holding down costs and thus its ability
to offer discount pricing, Germans generally see a closer link between labor unions and
democracy.
Wal-Mart’s initial strategy was to refurbish the stores to improve appearance and maintain
price leadership through cost leadership as they had done in the US market. They would
overhaul the supply chain systems, and incorporate new scanning systems, centralized
distribution, and high quality customer service. By doing so, Wal-Mart had created a fierce
price war in Germany.
As of 2003, the Store Closing Law limits store hours to a 6:30 pm closing on weeknights
and 8 pm on Saturdays. Stores could not open at all on Sundays with exceptions granted
by state government or if they provided ‘essential’ functions: pharmaceutical drugs and
tobacco. It was instituted to protect domestic retailers from larger competitors who could
afford to keep their stores open longer with lower expenses. 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. The shortened working hours have resulted in higher wages per worker for
retailers. For instance, full-time floor staff workers in Germany demanded a 19% premium
compared to UK workers on average
Most of the Global mergers and acquisitions failed to produce any benefit for the
shareholders or reduced value, which was mainly due to the lack of intercultural
competence. Lack of sensitivity and understanding of language barriers, local traditions,
consumer behavior, merchandising, and employment practices irreversibly damaged
Wal-Mart’s image in Germany. One of the main reasons that failed Wal-Mart in Germany
is when it attempted to transport the company’s unique culture and retailing concept to
the new country. The top management refused to even acknowledge the differences in
customer behavior and culture in Germany when compared to its US customers, and the
top management failed to listen to the feedback from its employees. Not every new cross–
border retailer can be a retail giant outer its home. The mistake of exporting its culture
wholesale, rather than adapting to local market, leads Wal-Mart failed in Germany market
Following are the main two factors that contributed to the Wal-Mart’s Failure in Germany;
1) Specific Difference in German Consumer behavior and Culture in comparison with US
consumers:
The biggest mistake of Wal-Mart was to ignore the local culture, local buying habits and
impose an American boss on its German operations. Wal-Mart stores are designed for
customers who are willing to spend lot of time shopping. But in Germany, the shopping
hours are shorter: Shops close by 5 PM on weekdays, and no shopping on Sundays. This
