Chapter 1: TEACHER CASE NOTE
Wal-Mart in Germany:
The US Corporate Formula Does Not Fit the German Culture
TEACHING NOTE
Purpose
This case shows students multiple reasons why Wal-Mart’s international expansion strategies have
not turned out well, specifically in Germany. Students should be able to point out areas for strategy
improvement from an intercultural communications perspective.
Problems
Wal-Mart’s attempt to apply its US success formula in Germany proved to be a failure. They
faced several challenges that negatively impacted Wal-Mart Germany’s competitiveness and
profitability. As a result, they have had to withdraw from the country and rethink their global
strategy.
Summary of Issues
1. Wal-Mart did not foresee intense competition that exists in the German market. It entered
2. Wal-Mart did not have the logistical advantage over competitors that they enjoy in the US.
This increased costs and eroded margins. For instance, suppliers delivering products to the
3. Wal-Mart assumed their American business model would also work well in Germany.
Logistical issues such as supply chain caused them to purchase fresh foods locally. Also,
4. Culturally, Wal-Mart assumed it could use the same approach as in North American stores
by employing grocery baggers and greeters at the door, forcing employees to smile and
participate in Wal-Mart cheers. The company formally discouraged interoffice romances.
(Wal-Mart implemented its Statement of Ethics, which restricted relationships between
5. Germans differ in the way they buy their goods. They do not often drive to store, and as a
result, do not buy as much. Wal-Mart underestimated the importance of location since
Solutions & Implications
It is unlikely that Wal-Mart will be able to successfully re-enter the German market after this
disaster. But in the future, the company should do research on specific cultures and tendencies
Cultural Factors
A primary reason that Wal-Mart failed in Germany was that they tried to enter the market
strictly using their American model. Wal-Mart has “Three Basic Beliefs” that they carried over
into Germany: (1) respect for the individual, (2) service to our customers, and (3) strive for
excellence.
In trying to put these beliefs into practice, simple policies, like requiring employees to smile at
customers, did not translate in German culture. In Germany, these smiles were interpreted as
invitations for unwanted social advances because smiles are typically only exchanged between
management (Gerhard & Hahn, 2005, Table 4).
Many of Wal-Mart’s core values, which are successful in the US, directly clashed with German
culture and contributed to Wal-Mart’s failure in Germany:
• German employees and customers did not appreciate Wal-Mart’s Cheer, the Ten Foot
Rule, and the method of expressing gratitude to customers.
• After entering the German market, Wal-Mart store managers introduced the morning
cheer but German employees did not join in, nor did they ever join in leading the cheer.
German employees and customers did not accept additional elements of Wal–Mart’s culture
either. Philanthropy and corporate social responsibility are very important selling points in the
US retail space, but Germans rejected the notion. The German public places little importance
on whether or not corporations try to make a difference in their communities, thus Wal-Mart
wasted additional resources trying to replicate their American business model in an unreceptive
market.
When it comes to uncertainty, Germans have a rather low tolerance, when compared to the US
and Wal-Mart, who more readily take risks. Wal-Mart’s motto is, “Let’s do it.” They implement
new plans very quickly, throughout the company. Instead, Germans tend toward problem–
oriented action, which prevents them from taking any swift action. This low tolerance for
The most important intercultural difference between the US and Germany in Wal-Mart’s
situation is their everyday communication styles. Americans are not high on the indirect
communication scale but they do rank higher than Germany. German associates prefer a more
direct communication style and appreciate frankness and precise instructions. Relatively
References