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According to the Business News, Walmart is the biggest retailer in the world, and it has gained a lot of successful in US. Walmart has expanded their business oversea in markets like Brazil, China, Japan Germany and Korea etc. with 545 stores and 50.000 employees. Walmart is notorious for buying many retailers and suppliers which keeps them competitive by, lower prices and controlling inventory in foreign areas which helps Walmart’s International sales grow to 63 billion dollars (Phoebe, 2011). However, beside some successful venture in oversea, Walmart also faced some issues and forced to close some business in several countries because the company tried to use the same their success strategy and US management tactics into other cultures which did not get the same success.
For example, from the News on July 31 Walmart announced they will leave the German market after failing to try to access the market where they lost hundreds million dollars since 1998. Walmart did not understand the German consumer habits and their behaviours, failing to respect local traditions.
Walmart chose two big chain hyper markets Wertkauf and Interspar which located in unpopular area that was far from the city and close to sex shops and area that lacked infrastructure. This made it difficult for German consumers to visit the store and purchase products because of the location. German people like to go shopping around their community where it is near their home, they are also preferring to purchase food at German discount chains because it is a lot of cheaper. Mr. Kogel who is 54 yeas old said,” I never bought groceries at Walmart. Food is cheaper at German discount chains.” (Barbaro, 2006)
Furthermore, Walmart required their employees always show their smile, friendly emotion to their customers and wanted their employees sing in the morning. This traditional American style approach used to attract and impress customers did not attract German consumers and was in fact thought as weird, uncommon and did not like it. Hans- Martin Poschmann, the secretary of the Verdi Union said,” People found these things strange, German just don’t behave that way.” (Barbaro M. L., 2006) It was fit for American consumers, but it did not for German consumer.
Walmart also did not understand companies and unions are connected while Walmart did not want to deal with unions because they were thought to be communist. However, the big mistake the company failed in was lack of knowledge and Ignoring market needs and values because Walmart by placing an American executive to manage their business in Germany who did not have a lot of experiences and knowledge in German market and did not meet German consumer wants.This aided to the failure to operate their business and could not figure out new strategies to compete with big local competitors in Germany and Korea superstores like Aldi (4100 stores across Germany) and E-Mart which offers customer with lower price and high-quality products. For example, in Germany people like to buy a meat from butcher while Walmart tries to sell package meat and was viewed as gross and not a common practice.
In Korea Walmart had installed taller racks at first making it hard to reach for Korean consumers to shop. They had to use external equipment like ladders to reach higher products on the shelves. Exposed pipes and ceilings were weirdly vague and was not the traditional decorated ceilings the Koreans were used to. Koreans are thought to be as daily shoppers who shop at just more than a one stop for all super market. A Korean house wife states “They have stacks of goods in boxes, that may be good for an American, but why would you buy a box of shampoo bottles” said “Lee Jin Sook. Clearly, we see that Koreans and used to purchasing products only when it is needed in a short-term scope. Here we see that again Walmart lacks the awareness of consumer wants and needs again neglecting the in-depth market research.
In Germany they failed to do their due diligence and missed the consumers wants and needs by neglecting key German practices and marketing techniques. The German logistics and distribution system bought when acquiring Interspar made it difficult to turnover products put on shelves. With the already existing super market giant Aldi, it made it hard for Walmart to acquire more Superstores and suppliers, to keep their prices competitive and low.
Here are just some of the reasons why Walmart failed in foreign markets which resulted in huge economic losses for the company. Failure to respect common cultural practices and neglect in-depth market research. Had they done the proper research and opened their traditional approach to mimic their foreign competitors, things may have been different
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