The Mistakes that Wal-Mart made when Entering the German Market

The Mistakes that Wal-Mart made when Entering the German Market Wal-Mart Introduction This report is drafted in order to point out some of the great mistakes made by Wal-Mart as it entered the German market. These mistakes resulted in huge loses (estimated to range between $200 and $300 million) which were experienced by this company for consecutive five years. The first Wal-Mart store was opened in Arkansas, USA in 1962, and went global in 1990.

However, even after tireless efforts to look for international markets, Wal-Mart still experienced severe competition from K-mart which had expansion strategies that were aggressive.

Strategic Problem Statement The greatest mistake made by Wal-Mart in Germany was the acquisition of the Wertkauf and the Interspar stores. These stores were not popular and had bad image over their great losses experienced during their existence. Wal-Mart had a great task of cleaning the image.

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Tactical Problem Statement Wal-Mart did not put much consideration to the issues of competition, cultures as well as the legislative environment. This is why they went ahead and purchased companies that had tarnished their image. This led to a series of problems especially with the regulatory authorities in Germany (Subhadra, 2004).

Issues Analysis 

Competition from German retailers – Wal-Mart’s efforts in providing products at a low

price did not yield any fruits because German retailers such as Edeka and Lidl lowered their prices every time Wal-Mart did. This created a tough ground for Wal-Mart. 

Weak vendor relations – Wal-Mart had an efficient supply chain which was contributed

by its centralized strategy. German suppliers were not accustomed to this system. 

Inventory problems – Wal-Mart did not have sufficient stockrooms, and they adopted a

strategy of stacking products in one stockroom. 

Difficulty in hiring employees – The low wages offered by Wal-Mart turned away people

searching for jobs. Wal-Mart suffered from shortage of workers which in turn delayed the movement of products. 

Employee unrest – Wal-Mart was accused of providing low wages as well as unfavorable

working conditions. Wal-Mart did not have clear understanding of the German work culture. 

Problem with German unions – Wal-Mart faced a lot of trouble when it decided to lay off

its employees. This was a move by Wal-Mart to reduce personnel costs.

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Cultural problems – Wal-Mart found it difficult to incorporate the two companies it had

acquired (Subhadra, 2004). Interspar operated in a decentralized system while Wertkauf had a centralized system. 

Language barrier – Since its first entry to Germany, the Wal-Mart top management from

the US had difficulties in learning German. This forced Wal-Mart to make English the official language in the company; a move that affected employee morale.

Alternative Solution Proposals 1 Competition from German retailers can be solved through Wal-Mart’s efforts in providing quality products. The issue of vendor relations can be solved if Wal-Mart changes its system of operation to a decentralized system. This would make it easier for Wal-Mart to establish good relationship with the German suppliers. Since Wal-Mart is a multinational company, it has resources to establish a number of stockrooms. They should add a number of stockrooms to accommodate the stacked products. Wal-Mart should try and increase employee wages so as to deal with the issue of hiring. Good wages will attract effective workers. Employee unrest can be dealt with through introduction of favorable working conditions as well as pay which is above average. Wal-Mart should try as much as possible to learn and digest the German work culture. In order to avoid troubles with German unions, Wal-Mart should stop the issue of laying-off its employees for no reasons. If it is the issue of cutting costs, Wal-Mart should try and find other means to do so. It would be easier to deal with cultural problems if Wal-Mart changes the system of operation in its two new acquired companies. Language barrier can be solved if the officials enroll and take German classes.

Alternative Solution Proposals 2

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Wal-Mart should be more consistent as regards their prices. They should not just reduce prices when their competitors do. Wal-Mart can solve this issue of vendor relationship by switching to new vendors. However, this would be an expensive move. Wal-Mart should reduce the quantity of their acquisitions and purchase products whenever necessary in order to deal with inventory issues. In order to deal with the issue of hiring, Wal-Mart should introduce activities that will attract people who are looking for jobs. However, this can only be possible if the working conditions and the package are favorable. Wal-Mart should try as much as possible to understand the issue concerning the employees. The responsible team should be accessible every time to offer help to the employee. In order to avoid union problems, Wal-Mart should maintain its employees and provide them with disciplinary actions. Wal-Mart should sell one company which does not have the same system of operation system as it has so as to solve cultural problems. The other option to deal with language barrier is by establishing another basic language.

Recommendations I would recommend alternative solutions proposal 1 because they can implemented easily. The first alternative is the best because it disposes the right expertise as well as resources.

I believe the major concern that should be focused by Wal-Mart is the issue of customer and employee satisfaction. These are the major elements that determine the growth of any business.

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Subhadra, K. (2004). Wal-Mart’s German adventure. Hyderabad, India: ICFAI Center for Management Research.