Why Walmart Failed in Germany | Reasons for Fall of Walmart | MBA Case Study Analysis with Solution

Wal-Mart Finds That Its Formula Doesn’t Fit Every Culture:

Walmart entered in Europe via Germany in 1997 through acquisition of Spar Handel and Wertkauf stores. Walmart changed all the stores of these companies into Walmart stores. Wal- mart hoped to replicate its US success in Europe using the same strengths of Everyday low prices (EDLP), efficient operations, strong organizational culture and good customer service. Lot of analysts believed that the domestic retail players would not be able to compete with the North American giant and that the domestic retail industry would suffer. However, this was not to happen. The company was not able to replicate its success in Europe. In fact, they had to exit Germany in 2006 and has not achieved leadership position in England.

The world’s largest retailer, Wal-Mart, has made a rare admission of failure by selling its hypermarket chain in Germany at a loss of $1bn after failing to convert the country’s shoppers and regulators to its low-price, American-style trading.

Wal-Mart's German arm employs 11,000 people and generated sales of $2bn.

Shortly after its arrival in Germany, Wal-Mart faced accusations that it was using short-term predatory pricing to put small shopkeepers out of business. Regulators ordered it to raise the price of basic foods such as milk, flour and butter.

It faced broader challenges in Germany's particularly competitive, low-margin high street environment, where more established operators ran similarly large discount warehouses for products such as clothes and household goods.

Critics in Germany suggested that there were also cultural issues, with local shoppers reluctant to embrace Wal-Mart's emphasis on customer service with hearty greetings from staff and packers at every check-out.

The buyer of Wal-Mart's German stores, Metro, is already the country's biggest retailer and is likely to re-badge the chain under its Real Hypermarkets brand.

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[mbacasestudy]

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[darkredvan]

This video merely scratches the surface of the reasons behind. In fact Walmarts „behavior“ in Germany was much worse. Only one additional reason: due to being late on the field (the market was nearly saturated by competitors) Walmart could not get premium conditions (low prices) from producers. They had to buy at the same or higher prices than their competitors. And no, it had nothing to do with „Anti Americanism“, it was just the free market, same rules for everybody. It resulted in two things: Walmart’s cheap(er than competitors) items were of very low quality, just crap. Items of regular or good quality were more expensive than at the competitors. They did know absolutely nothing about the German retail market, and did not even learn / change. They got a bloody nose, and because conditions did not improve they left Germany, tails between their legs. P.S.: part of it being overestimating themselves and their abilities. The American management did not even listen to their (German) lawyers or (German) junior managers.

[TMTMmmmy]

The creator didn't understand Germans and German law either.