Case Study On Wal Mart's Poor Operating Performance In Germany With Respect To International Management

3555 words - 14 pages

1.0 IntroductionWal-Mart is a retailing company founded by Sam Walton and his brother in 1962 (Deresky, 2006). With its first store in Arkansas (Deresky, 2006), focusing "... on the small-town backwaters of America" (Slater, 2003, p.5), Wal-Mart has now grown into a billion-dollar international enterprise (Slater, 2003).However, being successful in the Mexican, Canadian, Argentinean and Brazilian markets (Deresky, 2006) did not help Wal-Mart's venture into the German market. Since their initial entry in 1997 through the acquisition of two other German hypermarkets, Wal-Mart has been making losses annually (Deresky, 2006). They now hope to penetrate the East European retail market, and have selected Hungary as the initial country of entry.The purpose of this report is thus to analyse Wal-Mart's sub-optimal operating performance in Germany, then, making use of the experience gained there, recommend a best way and strategy of making a successful impact in Hungary, and subsequently, other parts of the East European market.With this objective in mind, Wal-Mart's analysis of their "misadventure" in Germany will have to focus on the cultural differences, both market-wise and people-wise. The same kind of research also needs to be done on the Hungary retail market, to find out the preferences and likes or dislikes of Hungarian consumers, as well as the operating styles and procedures of all parties involved in the retail industry.2.0 Culture IssuesOne of the most significant factors that resulted in Wal-Mart's sub-optimal performance in Germany was a lack of understanding for Germany's retailing culture (Deresky, 2006), which involves a complex set of interrelating beliefs and ways of living" (Bennett, 1996, p.27). Germany's retail industry has different characteristics, styles and preferences from those of the United States (US), due to the differences in the two country's culture (Deresky, 2006). Because of this, some of the things that contributed to the success of Wal-Mart in other countries could not be implemented in Germany (Deresky, 2006), and that reduced their success rate in the German retail industry.2.1 Supplier RelationsIn the US, Wal-Mart used a centralised distribution system with its suppliers, where they could control the price of the goods. They "... relied on inputs from suppliers to decide on [product] assortments" (Deresky, 2006, p.477), which they sold to Wal-Mart shoppers accordingly. But for such a way to work out well, the relationship between Wal-Mart and its suppliers needed to be strong and mature.Unfortunately, the suppliers in Germany were not sued to the centralised distribution system, and thus were not comfortable using it (Deresky, 2006). Moreover, being a price-sensitive market (Deresky, 2006), the suppliers would not be willing to let Wal-Mart be able to control the prices of the goods either, especially when Wal-Mart is a discount retailer that sold their products at low profit margins (Slater, 2003). Such discount...

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