We have learned that moving internationally is always risky for the company. By looking at Germany for instance, we can claim that it is a developed market with strong customer potential.
The problem is that some companies focus on the size of the market, not taking cultural, political nor environmental issues for deeper analysis in order to better understand the other countries. Through focusing on Walmart case we would like to present why such approach is harmful to the company and may lead to a failure in the end.
Knowing that America and Europe share similar political and cultural background, Walmart assumed that it could succeed in Germany as well. However, several differences not taken into consideration why entering German market made it impossible. Consequently, Walmart was forced to sell off all of its stores there and leave Germany in 2006. But how did that happen?
Cultural and value system differences
One of the main reasons of their failure was the lack of understanding of the local culture.
Walmart tried to implement US model into German market which differs in some aspects. Great example for that would be popular in US concept of chanting or “greeters” – people who are greeting customers when they enter the store, usually smiling when approached. Germans are not used to such behavior and perceived it as strange and even irritating, making them not want to revisit the store again.
Secondly, the corporate philosophy of Walmart – back in 1997 Walmart not only encouraged its employees to report any misconduct of other coworkers but also strictly forbade having closer relationships between each other.
This kind of ethic code did not go well with Germans who represent pro-labor culture.
Thirdly, Germany is said to be more environmentally friendly than America. The amount of plastic bags and plastic junk was unacceptable for Germans and make them dislike the Walmart even more. Also, in Germany people have more concern about food, e.g. GMO is not allowed and certain ingredients are banned. In the US the approach is – as long as it will not cause any harm to a customer, you can sell it. If somebody sues you – you just pay them the money and continue your business.
Additionally, an external factor that made it hard to successfully enter the german market was high unemployment rate at that time, which lead to overall weak consumer spending.
Last but not least, Walmart offered smaller selection of products than its competitors and people would rather buy at the local shops or discount supermarket chains that they are familiar with (e.g. Spar, Edeka, Rewe, Aldi) and are sure about their quality.
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