Brand Failure

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Study of Company Operations Closure from International Market due to Misinterpretation of

Cultural Preferences

Prathimareddy Edula – GM22NS043

Ashish Shilare – GM22NS012

Ishan Niket – GM22NS010

Piyush Pawan Verma – GM22NS006

Thu Anh Dang – GM21CMM009


Example 1: Walmart - Germany

Walmart’s entry into the German market in 1997 propelled Walmart to become the 4 th largest operator
of retail stores in Germany. However, the retail giant’s failure to capture the interest of Germans was
evident based on its failure to crack the top 10 in terms of sales and market share (Talaulicar, 2009).
Two primary social factors that led to Walmart’s demise in Germany, which are listed as follows:

1. Failure to meet labor union expectations: Unionization may be discouraged by Walmart in


America but is considered a common practice in Germany. Failure to appoint a labor union head
not well versed in German led to a communication gap between the workforce and the
executive management. The management further alienated the workforce by adopting decision-
making strategies without consulting the labor workforce (Ryu & Simpson, 2011).
2. Lack of research on customer service expectations: Cultural sentiments can often skew the
perception of what may be considered acceptable vs unacceptable customer service. Beaming
smiles offered by the Walmart workers due to the global code of ethics were often met by
questionable glances or stern ignorance by the Germans who considered such behavior
flirtatious or a social faux pas. Additionally, the concept of workers bagging the groceries was
something Germans were not used to and found difficult to accept.
3. Pressure to meet worker demands: Flawed engagement of the workforce led to a decline in the
number of workers. The reduced supply of workers resulted in higher wage demand that drove
the operational costs higher rendering profit margins negligible due to reduced sales (Cheddar,
2019).

Example 2: Home Depot - China

Home Depot entered the Chinese market in 2006 with the idea that the DIY or do-it-yourself approach
would be welcomed by the Chinese consumers. The move would turn out to be a massive failure as
Home Depot shut down its operations in 7 cities by the end of 2012 (Zheng, 2017). The failure is
primarily due to Home Depot misreading the expectations of the Chinese consumer which are discussed
below:

1. Poor marketing strategy: The idea to market the goods as DIY did not sit well with the Chinese
consumers who unlike their American counterparts expected to receive the goods in a pre-
assembled state.
2. Unwillingness to adapt: Consumers were unwilling to accept Home Depot as it was a new and
alien brand for them, and they were content with the already existing alternatives. The Chinese
consumers also tended to purchase homes as an investment opportunity rather than a place of
residence.
3. Product pricing: Consumers in China were willing to compromise on quality over a pocket-
friendly alternative. This mindset was culturally different from the average American consumer.
4. “Guanxi” or Social Relationships: The management failed to forge strong social relationships
with the local officials, which affected their ability to be able to access marketing opportunities
and improve market share.
References:

Talaulicar, T. (2009). Global retailers and their corporate codes of ethics: The case of Wal-Mart in
Germany. The Service Industries Journal, 29(1), 47-58. https://search-ebscohost-
com.spjain.idm.oclc.org/login.aspx?direct=true&db=bth&AN=36188718&site=ehost-live

Ryu, J. S., & Simpson, J. J. (2011). Retail internationalization: Lessons from" Big Three" global retailers'
failure cases. Journal of Business and Retail management research, 6(1).
https://jbrmr.com/cdn/article_file/i-14_c-108.pdf

Zheng, S. (2017). The Failure of Home Depot in China-A Case Study. Business and Management Studies,
3(4), 54-58. https://core.ac.uk/download/pdf/270225558.pdf

Cheddar. (2019, May 18). Why Walmart Failed in Germany - Cheddar Examines [Video]. YouTube.
https://www.youtube.com/watch?v=PxtXI0K4YJs

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