In the United States, Wal$-$Mart customers are greeted with a smile, escorted to

the item they$$re looking for, and watch their purchases being bagged by an

employee. These aspects of Wal$-$Mart$$s culture were a complete failure in

Germany, however, when the company expanded there in $1997.$ Wal$-$Mart

also failed on other counts, such as recognizing the status of unions in Germany

and the importance of store location. What eventually happened to Wal$-$Mart

inGermany, and howcould it have been prevented?What didWal$-$Mart learn?

This case examines the cultural mishaps of America$$s largest discount retailer.

Introduction

Wal$-$Mart has become a household name in the United States, and in some

parts of the world outside the United States. With low prices and a large array

of products, Wal$-$Mart superstores have become the chosen $$one$-$stop shop$$

for many consumers.

Germans, however, don$$t view Wal$-$Mart in the same way. In late $1997,$

Wal$-$Mart decided to expand into Germany by first acquiring two retailers for

a total of $95$ store locations. But Wal$-$Mart soon learned that its American

model simply did not work there. On so many levels and in so many ways, it

was an abject failure.

Brief Overview of Wal$-$Mart Sam Walton and his brother opened the first Wal$-$Mart store in Rogers, Arkansas in $1962,$ generating more than $$1$ million in sales during the first year of operations. Wal$-$Mart expanded quickly and, by $1967,$ the brothers owned

$24$ stores with sales over $$12\mathrm{.}6$ million. The company incorporated in $1969$

and was listed on the New York Stock Exchange two years later. Focusing

operations in small towns, in $1977,$ the company expanded into Michigan and

Illinois and by $1980$ there were $276$ Wal$-$Mart stores across the United States

Wal$-$Mart in Germany

Corporate Formula Does Not Fit the

German Culture$1$

Today the company has expanded internationally and has more than

$8,400$ retail stores in $15$ different countries and employs over $2\mathrm{.}1$ million

employees across the world.

Wal$-$Mart opened with the intention of helping people save money on

household goods and by doing so$,$ helping to improve lives. Today the

company continues to offer the lowest prices in most markets, relying on

buying power with their strong supply chain. Recently, Wal$-$Mart focused

domestic growth on the creation of supercenters, which has proved wildly

successful. Additionally, the company has made significant strides toward

becoming a leader in sustainability and corporate philanthropy, despite past

criticism about labor practices and exploitation of suppliers.

International Development

$$All around the world we save people money, so they can live better. That$$s

good news$$in any language.$$Wal$-$Mart Stores, Inc. $($Arunmaba$13,2011).$

In the United States, Wal$-$Mart customers cite low prices as the most

important reason for shopping there. Its lean business model, plus the ability to

reach historically high economies of scale, allow the company to dominate

supplier networks.

Because of Wal$-$Mart$$s market power in the United States and its domination

of supplier networks, it can continuously drive down product

prices. In addition, Wal$-$Mart sells a full range of household products and

groceries, allowing customers the increasingly ubiquitous one$-$stop shopping

experience.

In the early $1990$s Wal$-$Mart announced plans to take their operations

global due to tough competition in the U$.$S$.$ markets and the opportunities

available in new markets across the world. The company realized that the

United States contained only $4$ percent of the world$$s population and that

confining sales to the United States would significantly limit their ability to

grow and dominate the market $($ICMR$,2004).$

To fulfill their global expansion goals, the company created Wal$-$Mart

International which has grown into a $$63$ billion business and is the fastestgrowing

part of the company $($Landler & Barbaro, $2006).$ Most of Wal$-$Mart$$s

international growth comes from acquisitions, differing from their domestic

strategy of building new stores. This has allowed them to penetrate new

markets quickly and easily. Wal$-$Mart international operates in $15$ markets,

with a similar goal throughout$$to maintain low prices by controlling cost

procedures.

There are wholly owned operations in Argentina, Brazil, Canada, Puerto

Rico, and the United Kingdom. In addition to its wholly owned international

operations, Wal$-$Mart has joint ventures in China and several majorityowned

subsidiaries. Wal$-$Mart$$s majority$-$owned subsidiary in Mexico is

Walmex. In Japan, Wal$-$Mart owns about $53$ percent of Seiyu. In Central

America,Wal$-$Mart owns $51$ percent of the Central AmericanRetail Holding

$26$ Wal$-$Mart in Germany

Company $($CARHCO$),$ consisting of more than $360$ supermarkets and other

stores in Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica

Expansion into Germany Most U$.$S$.$

Written Project Outline

$1.$ Introduction

$2.$ Case Summary

$3$ Analyzing the Problem what mistakes have the key decision makers in

the case made?