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DIFFERENCES IN ECONOMIC AND SOCIAL SYSTEM THROUGH WALMART’S FAILURE IN GERMANY Part - Overview of Walmart History of Walmart In 1962, Sam Walton established Walmart in Rogers, Arkansas, with a concentration on rural areas for its first expansion The full name of Walmart, Inc., formerly known as Wal-Mart Stores, Inc., is an American discount retailer that was once one of the biggest firms in the world with more than 11,500 locations across 28 nations The company's main office is in Bentonville, Arkansas, and is a family-run enterprise It launched in Mexico, Canada, China, Germany, and the United Kingdom After Walton passed away in 1992, the company saw a drop in sales, but it soon recovered after the launch of the house brand Great Value in 1993 Walmart and golden milestones Walmart has consistently held the top spot because of its effectiveness, solid supply chain management, and great logistics Walmart is listed as the largest company by revenue on the Fortune Global 500 list Due to its planned investment of up to $1 billion in Flipkart, an Indian e-commerce business, Walmart intends to expand its operations globally and maintain its position as the top retailer 1983: Sam'club first opened in April in the Midwest, Oklahoma 1988: Walmart's first Supercenter is located in Washington DC 1990: Walmart becomes the #1 retailer in the US 1992: Walmart begins to enter foreign markets in Puerto Rico 1993: Walmart International Division is established with Bobby Martin as president 1996: Walmart enters the Chinese market through a joint venture compromise 1997: Walmart becomes the company with the largest number of employees in the US 1998: Walmart entered the potential Korean market, stepping up in the potential Asian market 2006: The company begins to attack the Central American retail market Strengths of Walmart Low and Reasonable Prices - Walmart frequently offers its products at prices that are far cheaper than those of other retail establishments Variety of Products at a Single Destination – there is nothing that one cannot find at Walmart Abundant employment opportunities- in addition to helping the country's economy advance, it also provides jobs for a sizable number of unskilled and skilled workers A draw for neighboring businesses - Walmart has grown to be so significant that it is comparable to a tourist destination Diverse Business Models - Walmart has expanded across national borders and is now present in numerous other nations, each with a unique business model Part - Analyze the differences between the German and US market 2.1Differences in economic aspects a The characteristics of the German and the USA market Distribution system Products are sold in America through a range of outlets, including periodicals, department shops, discount windows, markets, supermarkets, hypermarkets, and shopping centers Whereas bargain shops, supermarkets, and department stores are the main retail outlets in this country However, Germany's retail chain was expanding at an alarmingly slow rate at the time The average retail growth rate in Germany at the time Walmart entered the market was around 0.3% annually For Walmart, this presents a significant barrier to entry into the domestic market Differences in the type of market Germany USA focus on niche markets focus on mass market and quantity ( A niche market is a ( a market for goods produced on a focused, target-able portion of a large scale for a significant number of end market ) consumers.) Everything from food and apparel to car components and gardening equipment is available at Walmart Germans, on the other hand, like to buy at businesses that specialize in a certain product => Walmart didn't economically profit from the German market Price taxation and competition As for Taxation Walmart can sell goods at low prices in the US because of tax incentives, while German has higher taxes for foreign goods Next, Price competition Both countries are mixed economies which allows interference from the government German: allow interference from the government (The government tries to strike a compromise between business and social priorities) >< USA: characterized by minimal interference from the government To avoid local chain stores from being destroyed by oversea companies, the German government forbids enterprises from using this tactic of lowering prices to compete with neighborhood shops Walmart was accused by the German government of dumping This approach is regarded as inexpensive Companies using this tactic start out with low pricing then raise them after they have a solid client base and start to compete with competing businesses Walmart has been requested by the government to increase the cost of its goods b The consumers Shopping habits in the US vs German market US people care more about prices As mentioned before, America and Germany differ in the level of interference with authority Germany tries to strike a compromise between business and social priorities It means that how much you benefit from the government depends on the degree of your contribution Therefore, Germans don't care much about the price They prefer the quality However, in America, the Govt invests more in military science (500B dollars), people are left to figure out their own lives Overall, poor support for the middle class, the majority of US citizens (they exploited and underpaid) According to an article on the Street, Most Americans Prefer to Buy Cheap Rather than American-Made Goods, the author wrote: “Data came from an online poll of 1,076 adults, where researchers asked whether respondents would choose to pay $85 for an American-made pair of pants versus paying $50 for the same item made outside the US An astounding 67% said they would go for the cheaper product with there being no difference in responses based on a participant's income.” 1076 adults voted: 67% pay 50$ for pair of pants, 23% pay 85$ Take an excerpt from the article “German consumers willing to pay more for quality produce”, to back up this point Germans are becoming increasingly ready to pay for quality, with 58 percent stating that they are prepared to spend more "It's becoming increasingly important for consumers to get the best possible results for their money – this means a good price/performance ratio," stated Fred Hogen, Director of Retailer Services at Nielsen Germany Even when buying private-label products, consumers are unwilling to compromise on quality Among, those who were asked 58% were prepared to spend more 2 Differences in social aspect The cross-cultural differences between the two nations are obvious in the ways of living and work ethics With non-German managers that were unfamiliar with German consumer habits and expectations, certain decisions were made without considering the cultural background of the German people Take customer service as an example When it comes to shopping, Germans are known to be efficient Therefore, having staff the bagging lengthened the shopping experience, which the Germans not fancy a bit Moreover, German staff found it awkward to smile at consumers at checkouts Even though it is a common practice in America, smiling culture is not something most Germans are accustomed to It might seem odd, if not annoying to German shoppers Similarly, Walmart employees in America are required to the stretching and group chanting before their shifts to boost morale and unite the team Unfortunately, the Germans were not very fond of this corporate motivational thing They thought it was embarrassing, unnecessary, and simply served to intimidate the staff To them, a person's loyalty to a corporation should emerge from within, rather than through cliché coercion The difference in dating policy is another thing While it is widely known in the US that workplace romance is forbidden in order to avoid gossip and distractions, this is not the norm in Germany Not only prohibiting staff from dating colleagues, Walmart even forced them to spy on their coworkers This ethics code is regarded as a massive intrusion into a person's life and infuriated the employees so much that it was later ruled against by the local court in 2005 Next to mention is the incompatibility when it comes to protecting workers’ rights in the two countries Unions received widespread support from the government, society, and even corporations in Germany where they were an integral part of the culture Needless to say, labor unions there were quite strong and the German workforce was used to negotiating their pay with their union Whereas in the US, Walmart was notorious for paying low wages and suppressing unions Conflicts between the workforce and the employer were intensified by this anti-union attitude Thus, it is no surprise that the employee's union went on strike when Walmart declined to participate in Germany's regional wage negotiating system Part - Evaluation of Walmart's performance in the German market Germany, which is Europe's largest economy, made up over 15% of Europe's yearly retail market in 2001 By acquiring the German retail chain Wertkauf, which was established in 1957 and specialized in selling food, clothing, and miscellaneous merchandise, Walmart entered the German market in 1997 When Walmart acquired Wertkauf in 1997, it had 377 branches, 24 of which employed around 14,000 employees It also owned the unsuccessful Interspar brand which occupied 74 stores Only 3% of the market was made up of the two chains It's important to remember that the establishments Interspar acquired were in poor locations and required repairs due to their poor condition During this time, Wal-Mart had to contend with fierce rivalry from established local retailers like the Metro group and Rewe group After trying to enter the German market for almost ten years, Walmart kept failing, losing hope of becoming a place to satisfy all shopping needs, like in the US, and was finally forced to leave in 2006, firing more than 11,000 staff members and selling offchain stores at a loss of more than one billion dollars Part - Lessons and recommendations a Lessons Walmart's failure in Germany gives many valuable lessons for businesses looking to enter a new market The first lesson for businesses is that “Quality” and “advantage” are defined differently in different markets Never be under the illusion of strength and neglect to understand customers in new markets and new circumstances When doing market research, find the insight of the target market, willing to change business strategy to adapt to the market, which may not fit their advantages Walmart did not learn carefully about the target market, and customers, especially the buying habits and psychology of Germans Having non-Germans as managers is also the reason why Walmart does not easily understand consumer psychology It can be said that this is a complete failure of Walmart in market penetration research With a model that has been successful in most of the countries it comes to, Walmart thinks it can make a difference in Germany Second, avoid compromising what is considered an employee's workplace culture It is the work that affects the normal life of Walmart employees in Germany that is one of the reasons why it failed The ban on workplace dating got Walmart sued because this so-called code of ethics was seen as a massive intrusion into a person's life and angered employees so much that it later was ruled by a local court in 2005 b Recommendations Even the largest companies find doing business across borders and cultures difficult Businesses must take cultural sensitivity seriously and cater their products to the local market Walmart or any other company looking for a global alliance or business should take into account the following steps Employment of Cross-Cultural Management approaches Companies may be able to comprehend the subtle cultural variations between countries with the aid of Hofstede's Culture Dimensions Political, Social, Economic, and Cultural Analysis of the Country The company should have a thorough understanding of the Political, Social, Economic, and Cultural aspects of the country before extending its business activities there Updating strategies constantly to successfully fend off local competitors A global company must constantly assess how its varied initiatives are affecting the local market Recognize the weaknesses and change them so that you can serve the local market far better than the rivals Go worldwide while acting locally Businesses need to deeply understand the culture of the country, even changing their identity to suit the new market DIFFERENCES IN ECONOMIC AND SOCIAL SYSTEM THROUGH WALMART’S FAILURE IN GERMANY Part - Overview of Walmart History of Walmart In 1962, Sam Walton established Walmart in Rogers, Arkansas, with a concentration on rural areas for its first expansion The full name of Walmart, Inc., formerly known as Wal-Mart Stores, Inc., is an American discount retailer that was once one of the biggest firms in the world with more than 11,500 locations across 28 nations The company's main office is in Bentonville, Arkansas, and is a family-run enterprise It launched in Mexico, Canada, China, Germany, and the United Kingdom After Walton passed away in 1992, the company saw a drop in sales, but it soon recovered after the launch of the house brand Great Value in 1993 Walmart and golden milestones Walmart has consistently held the top spot because of its effectiveness, solid supply chain management, and great logistics Walmart is listed as the largest company by revenue on the Fortune Global 500 list Due to its planned investment of up to $1 billion in Flipkart, an Indian e-commerce business, Walmart intends to expand its operations globally and maintain its position as the top retailer 1983: Sam'club first opened in April in the Midwest, Oklahoma 1988: Walmart's first Supercenter is located in Washington DC 1990: Walmart becomes the #1 retailer in the US 1992: Walmart begins to enter foreign markets in Puerto Rico 1993: Walmart International Division is established with Bobby Martin as president 1996: Walmart enters the Chinese market through a joint venture compromise 1997: Walmart becomes the company with the largest number of employees in the US 1998: Walmart entered the potential Korean market, stepping up in the potential Asian market 2006: The company begins to attack the Central American retail market Strengths of Walmart Low and Reasonable Prices - Walmart frequently offers its products at prices that are far cheaper than those of other retail establishments Variety of Products at a Single Destination – there is nothing that one cannot find at Walmart Abundant employment opportunities- in addition to helping the country's economy advance, it also provides jobs for a sizable number of unskilled and skilled workers A draw for neighboring businesses - Walmart has grown to be so significant that it is comparable to a tourist destination Diverse Business Models - Walmart has expanded across national borders and is now present in numerous other nations, each with a unique business model Part - Analyze the differences between the German and US market 2.1Differences in economic aspects c The characteristics of the German and the USA market Distribution system Products are sold in America through a range of outlets, including periodicals, department shops, discount windows, markets, supermarkets, hypermarkets, and shopping centers Whereas bargain shops, supermarkets, and department stores are the main retail outlets in this country However, Germany's retail chain was expanding at an alarmingly slow rate at the time The average retail growth rate in Germany at the time Walmart entered the market was around 0.3% annually For Walmart, this presents a significant barrier to entry into the domestic market Differences in the type of market Germany USA focus on niche markets focus on mass market and quantity ( A niche market is a ( a market for goods produced on a focused, target-able portion of a large scale for a significant number of end market ) consumers.) Everything from food and apparel to car components and gardening equipment is available at Walmart Germans, on the other hand, like to buy at businesses that specialize in a certain product => Walmart didn't economically profit from the German market Price taxation and competition As for Taxation Walmart can sell goods at low prices in the US because of tax incentives, while German has higher taxes for foreign goods Next, Price competition Both countries are mixed economies which allows interference from the government German: allow interference from the government (The government tries to strike a compromise between business and social priorities) >< USA: characterized by minimal interference from the government To avoid local chain stores from being destroyed by oversea companies, the German government forbids enterprises from using this tactic of lowering prices to compete with neighborhood shops Walmart was accused by the German government of dumping This approach is regarded as inexpensive Companies using this tactic start out with low pricing then raise them after they have a solid client base and start to compete with competing businesses Walmart has been requested by the government to increase the cost of its goods d The consumers Shopping habits in the US vs German market US people care more about prices As mentioned before, America and Germany differ in the level of interference with authority Germany tries to strike a compromise between business and social priorities It means that how much you benefit from the government depends on the degree of your contribution Therefore, Germans don't care much about the price They prefer the quality However, in America, the Govt invests more in military science (500B dollars), people are left to figure out their own lives Overall, poor support for the middle class, the majority of US citizens (they exploited and underpaid) According to an article on the Street, Most Americans Prefer to Buy Cheap Rather than American-Made Goods, the author wrote: “Data came from an online poll of 1,076 adults, where researchers asked whether respondents would choose to pay $85 for an American-made pair of pants versus paying $50 for the same item made outside the US An astounding 67% said they would go for the cheaper product with there being no difference in responses based on a participant's income.” 1076 adults voted: 67% pay 50$ for pair of pants, 23% pay 85$ Take an excerpt from the article “German consumers willing to pay more for quality produce”, to back up this point Germans are becoming increasingly ready to pay for quality, with 58 percent stating that they are prepared to spend more "It's becoming increasingly important for consumers to get the best possible results for their money – this means a good price/performance ratio," stated Fred Hogen, Director of Retailer Services at Nielsen Germany Even when buying private-label products, consumers are unwilling to compromise on quality Among, those who were asked 58% were prepared to spend more 2 Differences in social aspect The cross-cultural differences between the two nations are obvious in the ways of living and work ethics With non-German managers that were unfamiliar with German consumer habits and expectations, certain decisions were made without considering the cultural background of the German people Take customer service as an example When it comes to shopping, Germans are known to be efficient Therefore, having staff the bagging lengthened the shopping experience, which the Germans not fancy a bit Moreover, German staff found it awkward to smile at consumers at checkouts Even though it is a common practice in America, smiling culture is not something most Germans are accustomed to It might seem odd, if not annoying to German shoppers Similarly, Walmart employees in America are required to the stretching and group chanting before their shifts to boost morale and unite the team Unfortunately, the Germans were not very fond of this corporate motivational thing They thought it was embarrassing, unnecessary, and simply served to intimidate the staff To them, a person's loyalty to a corporation should emerge from within, rather than through cliché coercion The difference in dating policy is another thing While it is widely known in the US that workplace romance is forbidden in order to avoid gossip and distractions, this is not the norm in Germany Not only prohibiting staff from dating colleagues, Walmart even forced them to spy on their coworkers This ethics code is regarded as a massive intrusion into a person's life and infuriated the employees so much that it was later ruled against by the local court in 2005 Next to mention is the incompatibility when it comes to protecting workers’ rights in the two countries Unions received widespread support from the government, society, and even corporations in Germany where they were an integral part of the culture Needless to say, labor unions there were quite strong and the German workforce was used to negotiating their pay with their union Whereas in the US, Walmart was notorious for paying low wages and suppressing unions Conflicts between the workforce and the employer were intensified by this anti-union attitude Thus, it is no surprise that the employee's union went on strike when Walmart declined to participate in Germany's regional wage negotiating system Part - Evaluation of Walmart's performance in the German market Germany, which is Europe's largest economy, made up over 15% of Europe's yearly retail market in 2001 By acquiring the German retail chain Wertkauf, which was established in 1957 and specialized in selling food, clothing, and miscellaneous merchandise, Walmart entered the German market in 1997 When Walmart acquired Wertkauf in 1997, it had 377 branches, 24 of which employed around 14,000 employees It also owned the unsuccessful Interspar brand which occupied 74 stores Only 3% of the market was made up of the two chains It's important to remember that the establishments Interspar acquired were in poor locations and required repairs due to their poor condition During this time, Wal-Mart had to contend with fierce rivalry from established local retailers like the Metro group and Rewe group After trying to enter the German market for almost ten years, Walmart kept failing, losing hope of becoming a place to satisfy all shopping needs, like in the US, and was finally forced to leave in 2006, firing more than 11,000 staff members and selling offchain stores at a loss of more than one billion dollars Part - Lessons and recommendations c Lessons Walmart's failure in Germany gives many valuable lessons for businesses looking to enter a new market The first lesson for businesses is that “Quality” and “advantage” are defined differently in different markets Never be under the illusion of strength and neglect to understand customers in new markets and new circumstances When doing market research, find the insight of the target market, willing to change business strategy to adapt to the market, which may not fit their advantages Walmart did not learn carefully about the target market, and customers, especially the buying habits and psychology of Germans Having non-Germans as managers is also the reason why Walmart does not easily understand consumer psychology It can be said that this is a complete failure of Walmart in market penetration research With a model that has been successful in most of the countries it comes to, Walmart thinks it can make a difference in Germany Second, avoid compromising what is considered an employee's workplace culture It is the work that affects the normal life of Walmart employees in Germany that is one of the reasons why it failed The ban on workplace dating got Walmart sued because this so-called code of ethics was seen as a massive intrusion into a person's life and angered employees so much that it later was ruled by a local court in 2005 d Recommendations Even the largest companies find doing business across borders and cultures difficult Businesses must take cultural sensitivity seriously and cater their products to the local market Walmart or any other company looking for a global alliance or business should take into account the following steps Employment of Cross-Cultural Management approaches Companies may be able to comprehend the subtle cultural variations between countries with the aid of Hofstede's Culture Dimensions Political, Social, Economic, and Cultural Analysis of the Country The company should have a thorough understanding of the Political, Social, Economic, and Cultural aspects of the country before extending its business activities there Updating strategies constantly to successfully fend off local competitors A global company must constantly assess how its varied initiatives are affecting the local market Recognize the weaknesses and change them so that you can serve the local market far better than the rivals Go worldwide while acting locally Businesses need to deeply understand the culture of the country, even changing their identity to suit the new market ... country, even changing their identity to suit the new market DIFFERENCES IN ECONOMIC AND SOCIAL SYSTEM THROUGH WALMART’S FAILURE IN GERMANY Part - Overview of Walmart History of Walmart In 1962, Sam... hypermarkets, and shopping centers Whereas bargain shops, supermarkets, and department stores are the main retail outlets in this country However, Germany' s retail chain was expanding at an alarmingly... hypermarkets, and shopping centers Whereas bargain shops, supermarkets, and department stores are the main retail outlets in this country However, Germany' s retail chain was expanding at an alarmingly
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