In this report we will analyze the reasons behind Wal-Mart going global and focus on the following queries:
-Wal-Mart's decision to enter the German market, was it appropriate?
-What were the problems faced by Wal-Mart in the German market?
-Can the performance of the group in Germany be improved?
In 1962, Sam Walton opened the first Wal-Mart store in Rogers, Arkansas. Following a year of operations, the store registered sales exceeding one million U.S. dollars; this success provided the momentum for the supermarket chain to develop at a rapid pace in the following years.
In 1967, there were already 24 stores present in eleven American States and the total annual sales accounted to 12.6 million U.S. dollars. In 1980, the total annual sales with respect to 276 Wal-Mart stores were 1.4 billion U.S. dollars and this growth continued over the years, leading up to the group's globalization in the 1990s.
In 2003, Wal-Mart had 4,688 stores (3,400 in the U.S. and 1288 overseas) and its total annual sales accounted to 244 billion U.S. dollars [1]. In comparison, Carrefour's total annual sales were 79 billion euros in the same year.
This rapid expansion at the national level was made possible by the accumulation of skills and innovations. Wal-Mart chose to develop in small and medium sized U.S. cities, where the competition was particularly low and this helped the group to build customer loyalty and generate profits that propelled the development of the group in case of finances.
Tags: Wal-Mart in Germany, German corporate culture,Wal-Mart shares in the retail sector
[...] To lower the costs Benefits of international expansion Step 1 of global expansion: Canada, Mexico, Brazil, Argentina Reasons for Canada Mexico Brazil Argentina expansion Low X X X X geographical distance Similarities X X in lifestyles and consumption "Similar way X X of doing business" NAFTA X X Economic Alliance High X X economic growth rates: Emerging markets Low cost X X X labor Reasons behind Wal-Mart's establishment in Germany Wal-Mart decided to enter the German market in 1997. Some points justify this decision while others suggest that the strategy used was not appropriate . [...]
[...] Reasons for the failure of Wal-Mart in Germany The inability of the group to apply its economic model and create value with respect to the domestic market: Mode of entry: - Entering the German market through the acquisition of two supermarket chains (Wertkauf and Interspar), which represents a significant investment and returns. - Both chains purchased were not popular in Germany. - Location of supermarkets in urban areas where the consumer focuses on groceries. - Inability to manage the meeting of two corporate cultures Suppliers - Poorrelationship with suppliers - Difficulty of setting up the automated distribution system (inventories) - Less bargaining power Stocks: - There was delay in the process of storage due to lack of motivation of employees (as a result of low wages) Employees: - Wal-Mart imposed its culture that was inappropriate to the local norms - There was no communication effort between employers and employees (language barrier) ? [...]
[...] Wal-Mart, at the time of globalization, realized that many companies have opened their markets abroad and there is fierce competition with respect to the emerging markets. 1993: Wal-Mart International Division was created. Decision take by Wal-Mart to Global” The group wanted to seize opportunities in the new markets by setting up stores overseas with a comprehensive strategy that allowed them to expand its economic model without any modification to the specific markets. - A single market - The same for all products at satisfactory prices. [...]
[...] The solution would be to implement a strategy of multinational flexibility: To think global and act local to which the W-M model should be adapted.This would imply a change in its economic model by adapting its services to the needs of German customers.Therefore, the creation of the present value would no longer be generated by its economic model. While Wal-Mart decided to review its strategy and adapt its model for local presence in Germany, its image, for both consumers and employees, was too deteriorated to inspire the market. [...]
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