PAMANTASAN NG LUNGSOD NG MARIKINA

College of Management and Technology

Case Study # 2 in THC103 Tourism and Hospitality Marketing

Submitted by:
Tabinas, Ma.Gay B.
2BSHM3D

Submitted to:
Angelica V. Diones MBA
Instructor III
 I. Wal Mart’s German Misadventure

II. Brief Summary

The case focuses on the retailing giant Wal-Mart and its experience in Germany. The

case explains in detail the reasons for Wal-Marts decision to go global in the early

1990s, and its decision to enter the European market through Germany – the most

difficult market in Europe. The case discusses the problems faced by the company in

Germany due to its lack of understanding of the German retailing and regulatory

environment. The case discusses in detail the various problems faced by Wal-Marts in

Germany entry strategy problems, problems in the operational environment, regulatory

problems and cultural problems

III. Time Context

 1967, Wal-Mart had 24 stores with sales of 1.4 Billion

 1980, Wal-Mart had 276 stores with annual sales of 1.4 Billion

 1988, Walton appointed David Glass as CEO

 2000, Wal-Mart announced that it will go global ranked.

 2002, Wal-Mart ranked No.1 in the fortune 500 list. After thanksgiving Wal-Mart

reported sales in 1.43 Billion

 2003, Wal-Mart was the world’s largest retailer with a total of 4688 stores. It has

a report sale of 244.5 Billion for year with a net income of 8.3 Billion.

IV. Statement of the Problem

 International Operations - It failed to make an impact in Europe’s most price

sensitive market

 German had high labor cost high real estate prices.

aggressive expansion strategies and started eating into Wal-Mart’s market share.

 Problems in the Operating Environment- The lack of strong vendor relations also

affected Wal-Marts operations in Germany

 A number of inventory problems, shortage of workers delayed the movements of

food and the employee unrest.

 German retailing industry was experiencing slow growth rates and retailers were

indulging in price works which eroded margins badly.

 The main reason for Wal-Marts losses was its failure to understand German

culture and shopping habits of German.

V. Areas of Consideration (S.W.O.T)

Strength

 Global expansion

 Strong market power and over suppliers

 Brand recognition

 Global supply chain and Vendor relationship/Logistic system

 Global presence

Weaknesses

 Thin profit margins

 Employee treatment

 A number of inventory problem

 Large span of control

Opportunities

 Improving quality products

 Enhancing human resource

 Strategic alliances

 Expansion to other market

 Globalization and Liberation

Threats

 Technical issues in website

 Central target of competition

 Small scale online ecommerce companies

 Rising commodity product prices.

VI. Implications

(Language and Culture)

Walmart Company did not prioritize the issue of language and Culture regarding to their

business. Like what happen to the problem on German cultures, they do not consider

on having some research or some information about cultures, they open up to the

German traditions, they were accused.

VII. Course of Action

 Understanding German
 They should conduct more research and information to German Cultures for them to

be familiarize and not to have losses on the company.

 Employee Unrest

Walmart should consider also about their manpower, to the issue regarding to their

workers, because they we’re the keys to the company’s productivity.

 Company Expansion

Walmart should consider to have an action/solution to this, for their business

expansion for more production and popularization.

 Price Strategies

Walmart should consider also the flow of their business price, for them to recreate

some new ideas, implementing strategies to better improve and have a strong profit

margin in their company.

VIII. Strategy Formulation, Implementation

Walmart business strategy is based on ‘everyday low prices’ philosophy of the

company. In other words, Walmart pursues cost leadership business strategy

enabled by the economies of scale derived by the company in a significant

extent. An efficient utilization of online sales channel contributes to the level of

cost-efficiency of retail operations and about 75 percent of walmart.com sales

come from non-store inventory.

Constant improvements of assortment, price and access are basis of Walmart

business strategy. In simple terms, Walmart strives to offer the widest choice of
 products for the cheapest price, along with giving customers the opportunity of

choosing the most convenient channel to facilitate the purchase.

Wall Mart competitive advantage relies on cost leadership. Moreover, the

strategic level management consistently aim to associate Wall Mart competitive

advantage with price, access, assortment and experience. Since his appointment

as CEO in February 2014, Doug McMillion introduced important changes in

Walmart business strategy in the following three directions:

 Increasing focus on customer services. the company announced a USD1

billion investment in U.S. hourly associates to provide higher wages, more

training and increased opportunities to build a career with Walmart.

 Improving groceries. Due to increasing level of health-consciousness of

consumers, Walmart is attempting to increase its range of organic options and

fresh produce. This change is more evident in the US market and it is being

actively integrated into marketing communication message of the brand.

 Enhancing the flexibility of the shopping experience. It has been noted that

“Wal-Mart is working to integrate its physical stores with the digital business”. For

example, thanks to the latest changes, customers are able to collect their online

orders from stores and they can also get text reminders from the pharmacy.

Generally, Walmart competitive advantage can be sustained in the global

marketplace in long-term perspective. ‘We Operate for Less’ and ‘We Buy for

Less’ programs saving us USD150 million in China. The company can replicate

this strategy to other markets in order to gain and sustain its cost advantage.
IX. Recommendation

 Competitors competing for the lowest prices

Wal-Mart competitors such as Target, Safeway, and Costco have been slowly

becoming clones of each other, wherein the differences between they goods they

sell are disappearing. Target is the main competitor that Wal-Mart has, and with

Target’s prices catching up with Wal-Mart’s prices, it won’t be long before customers

of both will decide which one is better to shop on.

 Resistance of communities

Secondly, Wal-Mart has been going through legal issues and negative feedback from its

employees. This is bad publicity for Wal-Mart. This can cause a negative trend towards

product demand on their products.

 Popularity of membership discount retail

Lastly, stores like Safeway or Costco –Wal-Mart’s competitors offer membership

discount retail or membership only benefits. Wal-Mart does not offer these

benefits. While Wal-Mart has very cheap prices, it doesn’t really give the

customers the power to “choose” their own price. If Wal-Mart started membership

cards, their customers will be more faithful

 Providing a gift card is less valuable than cash. Gift cards force your respondent

to shop at your store while preventing them from using it in potentially more

desirable ways such as putting it into their savings account or shopping at other

stores.
 Addressing the controversial issues

As quickly as possible. Walmart needs to enhance its online selling website and

include only authentic products to prevent further public criticisms.

 Upgrading its online e-commerce sites.

Walmart needs to resolve technical issues that hinder the websites progress and

offer a satisfying shopping experience for the customers.

 Boosting marketing and promotional activities

It will help the company to enhance its brand image and attract new customers.

 Walmart should also play an active role in environmentally sustainable practices

to create a positive image in the industry.

 Survey

The Wal-Mart Survey consists of fundamental questions about the following:

 quality of service

 variety of products

 overall satisfaction of the Walmart store

 satisfaction with the price

 cleanliness

 satisfaction with the staff and its behavior

 other related issues and problems during the visit.