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Team Case Analysis Walmart Can’t Conquer All Countries Walmart is one

Team Case Analysis Walmart Can’t Conquer All Countries Walmart is one of the world’s most successful retailers. In the United States, its formula of everyday low prices,tight cost controls, nonunion employees, and superb inventory management helped propelthe company toretailing dominance. By the mid-1990s, with the U.S. market starting to look saturatedWalmart began to turn itsattention to other country markets. Walmart certainly has had successes outside theUnited States, most notablyin Mexico, the United Kingdom, China, and parts of South America. Overall, Walmarthas some 6,400 storesglobally in 27 countries outside the United States and employs about 800,000 workers atthese stores.However, Walmart has slipped up in some nations. Countries such as Germany, SouthKorea, Russia, and Indiahave been very difficult for Walmart. Germany, in particular, proved to be a particularlytough market forWalmart to address in its early quest to go international. After 10 difficult years inGermany, during which timeit never turned a profit, Walmart exited Germany in 2007. Walmart followed its Frenchrival, Carrefour, andwithdrew from South Korea in 2006, floundering in an economy with some of the world’smost demandingcustomers. Understanding the cultural taste of South Koreans was one of the reasons forWalmart’s failure in thecountry. Going at it alone turned out to be a failed strategy in Russia; now Walmart iseyeing the possibility ofobtaining a foothold in Russia, likely via a purchase of an existing player or some form ofcollaboration.Walmart has been trying to engage in the Indian market since 2007 without muchsuccess, recently trying again via wholesale stores in select locations.But back to the German example. Germany can serve as an illustration of the differencesin culture that Walmarthad to take into account (or did not take into account effectively in the case of Germany).Walmart enteredGermany by purchasing two German retailers. In 1997, the company acquired Wertkauf,a profitable chain of 21stores. In 1998, Walmart acquired the Spar chain, which had 74 hypermarkets and wasperhaps the weakest of Germany’s major retailers. Right from the start, Walmart made a number of missteps. Thefirst German CEO,Ron Tiarks, was a U.S. citizen who had previously supervised 200 U.S. supercenters fromthe company’sheadquarters in Bentonville, Arkansas. Tiarks brought a number of U.S. managers withhim. He did not speakGerman and made no attempt to learn the language. Instead, he decreed that Englishwould be the officiallanguage for Walmart in Germany at the management level. If this act of hubris(excessive pride or selfconfidence)wasn’t enough, Tiarks reportedly displayed a high degree of ignorance concerning thecomplexitiesof retailing in Germany. This was particularly obvious with regard to the different legaland institutionalframeworks for doing business in the country. Culturally, he also did not understand thenuances of howshopping behavior and culture differed in Germany vis–vis the United States. Heignored strategic advicepresented to him by former Werkauf executives, encouraging three of the top six businessexecutives from theold Wertkauf company to leave Walmart within six months.After a rocky tenure by Ron Tiarks, an Englishman, Allan Leighton, replaced Tiarks.Leighton also spoke noGerman, and elected to run the German operations from his office in the UnitedKingdom. Not surprisingly, thistoo did not work. After another six months, a German, Volker Barth, replaced Leighton.Barth and his Germansuccessor, Kay Hafner, who took over in 2001, continued the pattern of struggling tomake the Germanoperations profitable. Interestingly, they were also hamstrung by the Walmart way ofdoing things. Whether thisis ultimately a Walmart way of doing things or perhaps even an American or Arkansasway of doing things, thecultural disconnect between Walmart’s U.S. operations and those in Germany becamequite obvious. Now Aldiand Lidl, Germany’s toughest discount food retailers, are entering the U.S. marketinstead!At the Walmart management level, there was widespread dissatisfaction with therelatively low base pay atWalmart and the practice of transferring managers after one or two yearssomething thatis not normal inGermany. German managers also complained about the company’s frugal regulations forbusiness trips, in particular, the decree that executives had to share rooms, a practice unheard of in anyother major Germancompany. Also, Walmart failed to understand the strength of the German union. In fact,Walmart refused toacknowledge the outcome of a sector-specific, centralized, wage-bargaining processbetween unions andretailers and was then surprised when the union organized a walkout at 30 Walmartstores. This not only resultedin lost sales but also tarnished Walmart with an image of union bashing, something thatseverely hurt thecompany with many of its customers.A number of customers perceived Walmart to be offering low-value, low-priced products.Some rivals tookadvantage of this sentiment and even characterized Walmart’s products as Americanjunk. This mattered verymuch in a culture where quality is valued heavily, and where the most successful Germanretailer, Aldi, had areputation for offering low-priced but high-quality products. Nor did the Germanshoppers like the Walmartgreeters, a staple feature of Walmart in the United States. Germans typically do not greetstrangers and soonshoppers started complaining about being harassed by greeters. Similarly, cultureproblems became an issue even in Walmart’s bagging service. As it turns out, Germanshoppers do not want strangers handling theirgroceries and products.The cultural differences continued to come through in lots of activities and operatingpractices as well. Forexample, when checkout clerks followed company orders and smiled at shoppers, malecustomers took it as aturn-on. Walmart employees also found the practice of starting their shifts by engaging inthe Walmart chant,and stretching exercises, to be embarrassing and silly. Another culturally specificexample involved Walmart’sethics code at the time. It cautioned employees from engaging in supervisorsubordinatedating relationships.While this might seem reasonable to an American trained in Arkansas on Americanethical guidelines on sexualharassment, Germans interpreted the ethics guidelines as a ban on interoffice romance bypuritanical Americansand an invitation to rat on coworkers. SourcesA. Knorr and A. Arndt, Why Did Walmart Fail in Germany?, Institute for WorldEconomics and InternationalManagement, University of Bremen, 2003; K. Norton, Walmart’s German Retreat,BusinessWeek, July 28,2006; D. Macaray, Why Did Walmart Leave Germany?, Huffington Post, August 29,2011; S. Berfield,Where Walmart Isn’t: Four Countries the Retailer Can’t Conquer, BloombergBusinessweek, October 10, 2013. Case Discussion Questions1. Why do you think that Germany, South Korea, Russia, and India were attractivemarkets for Walmart?Should Walmart spend more time on one or a few of these markets to be successful?2. Recently, Walmart is trying to engage some of these markets (and others) via jointventures or mergersand acquisitions; is this an appropriate strategy given Walmart’s historical problems inculturaldifferences? Explain.3. Some companies like IKEA (which is very Swedish in management operations) cansucceed by beingculturally tied to their home country even in international operations. Why do you thinkWalmart wasunsuccessful in being American in Germany (and South Korea, Russia, and India)? PurposeTo assess your ability to apply the concepts of international business to a casescenario. OverviewThis is a team assignment. You are expected to work as a team to create a caseanalysis. Each team member is expected to contribute fully to the efforts of theteam. Action Items1. Work as a team to analyze the case that was assigned to the team. Theteam is to demonstrate that they examined the case from multiple perspectives. 2. Work as a team to write a 4- to 5-page case analysis that addresses thequestions at the end of the case. Include at least five credible sources to supportyour position. Be sure to demonstrate that the team has examined the case frommultiple perspectives. 3. Select one team member to submit the team’s case analysisto turnitin.com.

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