Why Walmart Is Failed in Germany

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Wal-Mart Stores, Inc. is the largest retailer in the world, the world’s second-largest company and the nation’s largest nongovernmental employer. Wal-Mart Stores, Inc. operates retail stores in various retailing formats in all 50 states in the United States. The Company’s mass merchandising operations serve its customers primarily through the operation of three segments. The Wal-Mart Stores segment includes its discount stores, Supercenters, and Neighborhood Markets in the United States. The Sam’s club segment includes the warehouse membership clubs in the United States. The Company’s subsidiary, McLane Company, Inc. provides products and distribution services to retail industry and institutional foodservice customers. Wal-Mart serves customers and members more than 200 million times per week at more than 8,416 retail units under 53 different banners in 15 countries. With fiscal year 2010 sales of $405 billion, Wal-Mart employs more than 2.1 million associates worldwide. Nearly 75% of its stores are in the United States (“Wal-Mart International Operations”, 2004), but Wal-Mart is expanding internationally. The Group is engaged in the operations of retail stores located in all 50 states of the United States, Argentina, Brazil, Canada, Japan, Puerto Rico and the United Kingdom, Central America, Chile, Mexico,India and China Wal-Mart’s entry and operation in Germany

Wal-Mart’s initial entry into German market was through the acquisitions of renowned 21 store Wertkauf chain for an estimated $1.04 billion in December 1997.It was followed one year later by the acquisition of In-terspar’s 74 hypermarkets from Spar Handels AG, the German unit of the French Intermarché Group , for €560 million. Thus Wal-Mart immediately became the country’s fourth biggest operator of hypermarkets. However, with a turnover of around €2.9 billion, and a stagnating market share of just 1.1 per cent, the US giant still was a negligible one in the German retail market. Even worse, with estimated accumulated losses of more than € 1 billion, it is literally drowning in red ink although, according to Wal-Mart Germany’s CEO, Kay Hafner, its non food assortment, which accounts for around 50 per cent of its revenues, is profitable.. Instead of expanding its network of stores by 50 units by early 2001, as originally planned, the company has been forced to close two big outlets, while at the same time it was only able to fully remodel three locations into its flagship Super center format. Due to its problems the company also had to lay off around 1.000 staff. On July 2006,Wal-Mart announced its official defeat in Germany and would sell its 85 German stores to the rival supermarket chain Metro and would book a pre-tax loss of about $1 billion (£536million) on the failed venture. A Critical Analysis of Reasons for Wal-Mart’s failure in Germany: There were several factors that contributed to Germany’s unsuccessful business ride. Amazing management blunders have plagued Wal-Mart’s German operation from the very start. Wal-Mart’s major mistakes on the German market may be summarized as follows. • Cultural Insensitivity was the major reason of failure

• Entry to German market by acquisition strategy,
• Failure to deliver on its legendary “every-day low prices” and “excellent service” value proposition. • Bad Publicity about the company due to breaking of some prevailing German law and regulations. In January 1997, Wal-Mart had first entry in Europe market with the acquisition of Wertkauf hypermarkets in Germany. Later in that year, Wal-Mart also acquired Interspar, another German hypermarket chain.. While its first move – the 1997 takeover of the 21 Wertkaufstores was indeed a shrewd one, given that company’s excellent earnings, its competitive locations, and its very capable management. Wal-Mart’s 1998 follow-updeal with Spar for 74 hypermarkets was widely judged an ill-informed, ill-advised act, for several reasons: Spar is considered to be the...
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