Wal-Mart is the world’s largest retailer.

Wal-Mart had achieved 12% lower prices on

average than its competitors.  Wal-Mart had been able to implement its Every Day Low
Price strategy by focusing on 1) developing a sophisticated logistics system with heavy
information technology investments, 2) efficient distribution system by placing retail
stores close to distribution centers and using RFID technology, and 3) being a non-
union employer. Wal-Mart failed to take into account Germany’s cultural attitudes,
especially with regard to such matters as labor law and the role of unions. While the
company’s anti-union stance has been core to its US success in holding down costs
and thus its ability to offer discount pricing, Germans generally see a closer link
between labor unions and democracy.

Wal-Mart’s initial strategy was to refurbish the stores to improve appearance and
maintain price leadership through cost leadership as they had done in the US market.
They would overhaul the supply chain systems, and incorporate new scanning systems,
centralized distribution, and high quality customer service. By doing so, Wal-Mart had
created a fierce price war in Germany.

As of 2003, the Store Closing Law limits store hours to a 6:30 pm closing on weeknights
and 8 pm on Saturdays. Stores could not open at all on Sundays with exceptions
granted by state government or if they provided ‘essential’ functions: pharmaceutical
drugs and tobacco. It was instituted to protect domestic retailers from larger competitors
who could afford to keep their stores open longer with lower expenses. This was also
reinforced by religious factions who supported the importance of family time while the
left side of the political spectrum believed that retailers working longer than other
workers was inherently unfair. The shortened working hours have resulted in higher
wages per worker for retailers. For instance, full-time floor staff workers in Germany
demanded a 19% premium compared to UK workers on average

Most of the Global mergers and acquisitions failed to produce any benefit for the
shareholders or reduced value, which was mainly due to the lack of intercultural
competence. Lack of sensitivity and understanding of language barriers, local traditions,
consumer behavior, merchandising, and employment practices irreversibly damaged
Wal-Mart’s image in Germany. One of the main reasons that failed Wal-Mart in
Germany is when it attempted to transport the company’s unique culture and retailing
concept to the new country. The top management refused to even acknowledge the
differences in customer behavior and culture in Germany when compared to its US
customers, and the top management failed to listen to the feedback from its employees.
Not every new cross- border retailer can be a retail giant outer its home.   The mistake
of exporting its culture wholesale, rather than adapting to local market, leads Wal-Mart
failed in Germany market

Following are the main two factors that contributed to the  Wal-Mart’s Failure in
Germany;

1) Specific Difference in German Consumer behavior and Culture in comparison with US

consumers:

The biggest mistake of Wal-Mart was to ignore the local culture, local buying habits and
impose an American boss on its German operations. Wal-Mart stores are designed for
customers who are willing to spend lot of time shopping. But in Germany, the shopping
hours are shorter: Shops close by 5 PM on weekdays, and no shopping on Sundays.
This meant that customers don’t have the habit of spending lots of time in a store –
wandering around for the things they need. Coupled with this problem, German
customers do not like to be assisted by Wal-Mart’s friendly store assistants. Germans
prefer to do their own search for bargains. Instead of understanding and adjusting to the
culture of its clients, Wal-Mart tried to impose their Culture on to the Customers, which
never worked out.

Germans like to see the advertised discount products upfront without having to ask the
store assistant. This implies that the discount products must be placed at the eye level.
Instead Wal-Mart chose to use its US style merchandise display strategy – where
premium priced products are kept at eye level and discount products are kept at higher
shelf or in the bottom racks. This irritated the German shoppers. Wal-Mart also got its
store inventory wrong, Wal-Mart stocked its store with clothes, hardware, electronics
and other non-food products were given much bigger floor space than food products, as
a result more than 50% of the revenue was from non-food products. But other German
retailers stock more of food products. For example for Metro, food products constitute
more than 75% of the revenue. Germans prefer to bag groceries themselves into
reusable carriers, or at least to pay a small fee for the avoidable sin of needing a plastic
bag.

German’s are introvert in nature and doesn’t like display of emotion in public, as they
always care for their private personal space. Employees, like the reserved customers,
didn’t care for Wal-Mart’s public displays of corporate moral such as the morning cheer.
The German Customer’s even didn’t liked to be accompanied by the Cheerful
employees either, as they would like to make choices by themselves. These are cultural
misunderstandings as well, but one could say the cultural philosophy of Wal-Mart could
not survive in the context of a German culture with a Happy Planet Index significantly
higher than America’s.

2) Inefficient Top Management which ignored the relevance of local Culture:

It was clear that the cultural insensitivity of Wal-Mart started right at the top
management. To begin with, it appointed four CEOs during its first four years of
operation. The first head of German operations was Rob Tiarks, an expat from the USA
– who did not understand Germany or its culture. He had previously supervised around
200 Supercenters in America. Not only did he not speak any German. Due to his
unwillingness to learn the language, English was soon decreed as the official company
language at the management level. He also ignores the complexities and the legal
framework of the German retail market, ignoring any strategic advice presented to him
by former Wertkauf executives. This has resulted in the resignation of top three
management executives from Wertkauf. His successors were also unsuccessful in
integrating German Outlets with the Wal-Mart’s Business model and culture.

Some of the American employee management practices couldn’t fit perfectly in the
German context for example each employee has to attend the morning exercise, it
shouldn’t be harmful but the uniqueness about that workout session was that they were
asked to chant WALMART! During exercise session which might be seen as a practice
of enhance loyalty and boost morale in America, but in Germany it was been took as
annoyance (Christopherson, 2007).

Secondly, the ethical code of Wal-Mart also pools in creating frustration amongst the
German employee gentry likely spying on your co-workers and reporting any
misconduct might be appreciated in US while in Germany this is not the case (Shurrab,
2014).

Moreover, In America, it’s not uncommon for retail assistants to get all chatty and friendly
with the customers. Walmart decided to train its German employees to do the same. the
check-out and check-in desk cashiers in Wal-Mart were ordered to always smile the
customers which make the cashiers uncomfortable as smiling to strangers was an
uncommon practice in German culture (Nazir, Shah and Zaman, 2014). Walmart’s
German customers found this behaviour very “non-German” and unauthentic.

Hence, this are some reported practices which makes Wal-Mart not an ideal place to
work in and have led Wal-Mart to face a high turn-over of employees and this never
allows the retail giant to hold the market ground firmly in the highly potential European
market (Jui, 2011).

the workers in Wal-Mart were forced to use English as the official language in the store
that results in the communication gap within the hierarchy and even with customers
which eventually prevent the forming of teams in the stores (Schmidt, 2014).

Also, the employees were not allowed to date or be romantically involved with each
other. Well, the chances of not developing feelings for someone who you work with 40
hours a week are pretty low. Maybe this was intended to save employees from office
politics. But this restriction by Walmart was simply over the top.

Walmart insistedly made English the official language of their stores in Germany which
excluded a wide range of employee and future employees. This was conveyed as lack of
expertise due to their lack of English

From customer’s perspectives, the merchandising of the stores was erroneous as it

places all the costly premium products on the eye catching shelves while all the
discounted products were being placed either at the bottom or the top of the shelves
which was a reason of irritation for the German customers (Landler and Barbaro, 2006)

Secondly, the habits of the average German customers weren’t being identified and
studied efficiently as the Page 210 German buyers are considered efficient and are not
habitual of spending loads of time in shopping. While, Wal-Mart were designed in a
such a way which makes the customers urged to spend more time in the outlets which
might be a good strategy of increasing sales but which results in annoyance to the
German buyers (Javid, 2015)

Lastly, the unpopularity of the brand in the German market due to its unfriendly
approach towards the environment, the reason lies in the concern of the German people
regarding the “Greenness” of Germany that’s why the plastic packaging and the plastic
bags of Wal-Mart aroused more annoyance than enjoying the shopping environment of
the Mega US store (Macaray, 2011).

Walmart tried to bring their best practice in the US regarding customer service
orientation, however it made German customers concern about how much they had to
pay for things they did not really want, such as greeters, aisle help and baggers.

Walmart utilizes their own trucks with coordinating their travel time to make sure they
are utilizing the shortest distanes. It’s important to the business success to have the
shortest distance traveled. They also have a delivery service to assist their customer’s
online purchases. Another important success from supply chain practice is information.
This includes collecting information from end users, linking them up with the proper
resources. They are able to process this through linked computers with the satellite
system to execute information optimally.

Walmart brought up with them the best practice in utilizing technology, including
integrating new scanning systems, analyzing customer’s purchasing behavior and stock
management decision making based upon data. Also, they built up a more centralized
distribution to manage their merchandise.