Walmart Debacle of Germany

2078 Words9 Pages
Wal-Mart in Europe

Table of Contents

Executive Summary 2 Wal-Mart Background 2 Wal-Mart’s Culture 2 Wal-Mart’s Strategy 3 Problems/Criticism faced by Wal-Mart 3 Wal-Mart in Germany 4 Key Issue: Wal-Mart’s Failure in Germany 4 Situation Analysis 5 Porter’s 5 Forces Model 5 Wal-Mart: Germany vs. Britain 6 Challenges in Germany 7 Evaluation of Alternatives 10 Recommendations 10

Executive Summary
The world economy has undergone a drastic revolution in the last three decades through globalization. This has made the world economy more efficient and competitive, by enhancing product quality, increasing the product variety and lowering price. With successful expansion in locations like Mexico and Canada, in
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Key Issue: Wal-Mart’s Failure in Germany
Wal-Mart’s strategy to replicate the successful U.S. formula of Everyday Low Price (EDLP) guarantee, efficient inventory control and distribution system resulted in significant cross-cultural issues with Germans consumers and suppliers. Moreover, the top management failed to anticipate the cultural differences between the German culture and the Wal-Mart culture.
The key issues faced by Wal-Mart were: * Unable to recognize the German consumer behaviour and culture in comparison with US * Entry to German market by acquisition strategy * Laws and regulations – zoning and limited stores hours * Failure to deliver on its legendary “every-day low prices” and “excellent service” value proposition. * Underdeveloped supply chain relationship * Absence of local brand name * Poor relationship with suppliers

Situation Analysis

Porter’s 5 Forces Model

Bargaining Power of Customers – Very High * German customers not accustomed to friendly atmosphere * Presence of strong German competitors * Low cost from competitors

Bargaining Power of Suppliers – Very High * Poor suppliers network * Centralized distribution system not accepted by German suppliers * Suppliers with strong connection to local players * Low switching cost due to abundance of retail companies

Competitive Rivalry – High * Huge competition from local players like Metro, Aldi etc. *

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