Walmart Failure in Germany

Only available on StudyMode
  • Download(s) : 343
  • Published : August 29, 2011
Open Document
Text Preview
Many companies’ ambitions to position themselves (profitably) in foreign markets or to establish themselves as “global players” have been thwarted by their inability to fully understand and to adapt to the specific conditions of doing business in other countries, exposing their profound lack of intercultural competence and management skills.

This is exactly what happened to Wal-Mart Germany. To begin with, it appointed four CEOs during its first four years of operation. The first was Rob Tiarks, a US citizen and a Wal-Mart, Inc. senior vice president who had previously supervised around 200 US Supercenters from the company headquarters in Bentonville, Arkansas. Not only did he not speak any German. Due to his unwillingness to learn the language – a view shared by most of the other US managers that were redeployed to Germany to assist him –, English was soon decreed as the official company language at the management level. What is more, he displayed an astounding degree of ignorance with regard to the manifold complexities and the legal and institutional framework of the German retail market, ignoring any strategic advice presented to him by former Wertkauf executives – thereby encouraging the top three of them to leave within six months. After Wal-Mart’s 1998 acquisition of UK retailer ASDA, Tiarks was replaced by Englishman Allan Leighton. In terms of his specific market knowledge as well as linguistically as inexperienced as Tiarks, he preferred to head the company from his Leeds, UK, office and was replaced as little as six month later by Volker Barth.59 The first German ever to be entrusted with the top job, and one of the few remaining ex-Wertkauf managers still aboard, he too failed to integrate Spar – a rather loose organization of largely independent regional units – into Wertkauf – formerly a highly centralized owner-controlled firm – and to blend their vastly different corporate cultures with Wal-Mart’s. Since May 1st, 2001, Kay Hafner, supported by a group of native Germans, has been at the company’s helm. However, the jury is still out as to whether he is indeed the badly needed integrator.60

According to headhunters Wal-Mart Germany’s is widely considered to be a very unattractive employer, with around one third of its executives – from store managers upwards – actively seeking job offers from other companies. The underlying causes are said to include widespread dissatisfaction with their relatively low pay, Wal-Mart’s practice to transfer store managers after one or two years, and the (allegedly) “low American quality standards” of most merchandise currently in store.61 Others complained about the company’s frugal internal regulations for business trips, in particular the decree that executives have to share rooms – a rule unheard of in any other major German or European company (and, in our view, unenforceable were it ever imposed).

In the US, Wal-Mart is a strictly non-union employer; only 12 of its more than one million US employees – workers in the meat department of its Jacksonville, Texas, store – are known to be union members.62 In Germany, like in most other parts of Continental Europe however, unions, despite decreasing membership, still wield enormous influence – both in the political sphere and on the shop floor. The unions’ enthusiasm, prompted by Wal-Mart’s decision to hire more staff immediately after its entry in Germany to provide “excellent customer service”, quickly faded away. Soon faced with rapidly mounting losses, Wal-Mart’s management resorted to staff cuts and closures to reduce its above-average personnel costs. Due to strict worker protection regulations, however, making surplus workers redundant can be a complicated, lengthy and costly affair in Germany – a cumbersome fact of life for its German competitors, but, obviously, terra incognita for Wal-Mart Germany’s (mostly) American executives. What is more, the company refused to formally acknowledge the outcome of the...
tracking img