A Critical Analysis on Wal-Mart's Failure in Germany.

2730 Words Sep 10th, 2010 11 Pages
A Report of



Submitted to the
Teesside University

For fulfillment of the Assignment on
Cross-Culture Management

Student Number: J9185582


Wal-Mart, the biggest retailer in the world, started its globalization with nine countries in Asia, Europe and South America. With its attempt to penetrate hypermarket culture in every country which it enters, many severe problems come into picture. In 1997 Wal-Mart continued its strategy of globalization, and acquired two German retail chains for $1.6 billion. After eight unprofitable years, Wal-Mart backed out of Germany in July 2006 and sold the entire retails outlets to Metro AG.After dominating the US
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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,