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8/2/2019 Walmart in Germany

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Case Study: Wal-Mart in Germany

- Ashwin Joseph


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Objectives of the Case

This case will illustrate that researching and

implementing effective cross-cultural communication

strategies is critical for global success.

Organizations must understand how national cultureimpacts corporate values and adapt constituent

communications appropriately.

When leadership can understand their international

constituents and constituents can understand their

parent company, cultural gaps diminish.


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Summary of the Case

In 1997, Wal-Mart continued a strategy of globalexpansion and purchased two German retail chainsfor $1.6 billion.

Eight unprofitable years and 85 stores later, Wal-

Mart backed out of Germany in July 2006 and soldthe entire lot to Metro AG at a garage sale price.

The failure to recognize cultural differences andcommunicate properly with their German employee,

supplier, and customer constituencies contributed toWal-Marts poor image and inability to gain sufficientmarket share for profitability.


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Wal-Mart Enters Germany Wal-Mart purchased the 21 store Wertkauf hypermarket

chain in December 1997 and the 74 unit Intersparhypermarket chain in January 1998.

With 80 million people, Germany represented Europeslargest economy - lots of customers.

The discount retail industry in Europe was alreadymature with a number of successful players.

German discounters were extremely no frills, similar toAmerican warehouse stores like Costco and BJs. Big

stores with cheap prices werent a new idea. Aldi had4000 stores and a 19% market share.

For Aldi, location provided consumer convenience.


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The trouble starts. Wal-Mart proudly implemented trademark customer service

like grocery baggers. German customers, however, didnt like

strangers handling their food.

Store clerks, like their American counterparts, were trained to

smile at customers. Greeters welcomed customers into the

store. German males interpreted this as flirtatious and foundit offensive.

Germany was described as the ultimate non-service culture

by Stephen Arnold, professor at the School of Business at

Queens University, Kingston, Canada. Customers quickly developed a negative image of Wal-Mart as

out of touch with their customs and traditions.


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Issues with the Employees Employees, like the reserved customers, didnt care for Wal-

Marts public displays of corporate moral such as the morningcheer.

Wal-Mart also angered German employees over policy andlanguage in the newly translated ethics manual, distributed in2005. According to German press, employees were told tofollow the guide or lose their jobs.

Employees were forbidden take gifts from suppliers,forbidden to have romantic relationships between employeesand superiors, and required to report co-workers who didnt

comply with the code. In Germany, the ethics code was seen as an intrusion into

private lives and encouraging spying on co-workers.


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Issues with the Employeescontd In Germany, unions are extremely active, and frequently are

involved in corporate decisions involving working conditions.

Hans-Martin Poschmann, secretary of the Verdi union said They

didnt understand that in Germany, companies and unions are

closely connected

Wal-Mart initially refused to have labor unions and as a result forwhich they faced huge strikes and eventually had to relent.

Complete lack of understanding of German language and culture

from the top leadership of Wal-Mart who were mostly American.

Office closures and relocations, though a mainstay of U.S. Wal-Mart

culture, annoyed Germans. When Wal-Mart shut-down the

Wertkauf corporate headquarters, executives quit rather than move

180 miles north to the Interspar office


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A Review of Hofstede

PDI - Power distance is defined as the extent to which the less

powerful members of institutions and organizations within acountry expect and accept that power is distributed unequally.

IDV - The fundamental issue addressed by this dimension is thedegree of interdependence a society maintains among itsmembers.

MAS - The fundamental issue here is what motivates people,wanting to be the best (masculine) or liking what you do(feminine).

UAI - The extent to which the members of a culture feel threatenedby ambiguous or unknown situations and have created beliefs and

institutions that try to avoid these. LTO - The extent to which a society shows a pragmatic future-

oriented perspective rather than a conventional historical short-term point of view.


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Communication Styles


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Cognitive Styles

BASIC Germans Americans

OUTLOOK tend to be more cautious, conceptual tend to be more optimistic, pragmatic

OPENING Do we really need? Can we have?

QUESTION

ACQUIRING Structured way of knowing Hypothesis, testing way of knowingKNOWLEDGE Want solid theories, coherence Speculate with probabilities, risk taking

Deductive: acting on the basis of ones Inductive: understanding a situation through

thorough understanding of the situation experimentation

Declarative thinking: focusing on Procedural thinking: focusing on how to get

description and explanation of situation things done

Gather information from experts, logical Active experimentation: learn from peers,

analysis of ideas brainstorming, think out of the box

Importance of background information Importance of measurement data, and facts

(historical context, Zeitgeist:, sociology) (how tall, how much, statistics, etc.)

APPLYING Development of strategic analysis Ability to get things done

KNOWLEDGE Systematic planning Trial and error, learn by doing, can doDecisions are binding Decisions are guidelines


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Project Management

Germans Americans Americans Germans

tend to. tend to think tend to. tend to think

PROJECT ...collect Why are they chat informally Why arent they

IDEA information doing this? about an idea doing anything?

PROJECT get down to They are cold and begin with small They are wasting

MEETINGS business unfriendly. talk time.

present detailed How can they begin with They are not

plans discuss the details brainstorming prepared for theat this stage? meeting.

express criticism They dont like be enthusiastic They are not

openly each other. about all the ideas sincere.

PROJECT work individually They dont hold frequent They are too

PROCESS on the tasks communicate or meetings; change many meetings; we

assigned to them work as a team. tasks as circum- cant get our workstances change done.

believe clearly believe continuous

defined milestones contact guarantees

guarantee success coordination


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Basic German Values1. Strong sense of group welfare: Sozialmarktwirtschaft

2. Confidence to do the job right due to thorough training3. Extremely fair towards others; have vision what is right and

wrong

4. A serious and factual attitude toward life

5. Excellent listeners

6. Meticulous about deadlines and appointments

7. Perfectionism: very neat and orderly, pay attention to details

8. Precise execution of activities and products; brilliantorganizers

9. Hchste Leistung bringen: obsession for high performancewith passionate intensity

10. Durchsetzungsvermgen: very thorough and effective inwork


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Basic American Values1. Very proud of political system and the American way of life

2. High self-confidence; rely on own strength and capability3. Volunteerism: very engaged in community services

4. Trust in people; relaxed friendliness and spontaneity

5. A can-do optimism: openness to improvement and change

6. Anti-authoritarian attitude: dont bow to a higher authority7. Equality and the rule of law: every person is equal before the

law

8. Individualism: everyone has the right to self-actualize

9. Restlessness and impatience: desire to move up the social

ladder10. Pragmatism: prefer the concrete over aesthetic and

conceptual


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Other Aspects that led to Wal-Marts

demise in Germany

Unable to compete with location based strategy of smaller retailers

like Aldi.

Repetitive brushes with the German law and Labor authorities.

American quality standards looked upon as inferior.

Lack of mature vendor relationships.

Wal-Mart was not familiar with German merchandising tastes, and

often ended up with products that were unwanted by customers.

For example, Wal-Mart sold pre-packaged meat, although Germans

prefer to purchase meat from a butcher. The yield returns in Germany are less than 2 percent, often even

only at 1.5 percent. Against this backdrop, presenting German

consumers with unfamiliar U.S. brands was doomed to failure.


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Thank You

Download - Walmart in Germany

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