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Wal-Mart\'s German Misadventure


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Project report on why Wal-mart closed German operations

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Wal-Mart\'s German Misadventure

  1. 1.
  2. 2. Objective<br />Wal-Mart’s Failure in Germany<br /><ul><li>Wal-Mart going global
  3. 3. To understand the business model of Wal-Mart in Germany
  4. 4. The underlying reasons for its failure, and
  5. 5. Our suggestions</li></li></ul><li>Introduction<br />Industry Retailing<br />Founded Rogers, Arkansas (1962)<br />Founders Sam Walton<br />HeadquartersBentonville, Arkansas<br />Area Served Worldwide<br />Products Discount Stores<br />Supercenters<br />Neighborhood Markets<br />Revenue US$ 408.21 billion (2009)<br />Operating Income US$ 23.95 billion (2009)<br />Total AssetsUS$ 170.70 billion (2009)<br />Employees 2,100,000 (2009)<br />Website<br />
  6. 6. Business Model<br />
  7. 7. Going Global<br />
  8. 8. Why Germany?<br />Robust consumer spending<br />Third largest economy of the world<br />$370 billion German retail market was hugely lucrative<br />Good transportation infrastructure, easy stock replenishment<br />Centralized location of Germany to expand business into Europe<br />Germany was price sensitive and perfect for Wal-Mart’s EDLP (Every Day Low Pricing)<br />
  9. 9. Setting Up<br />Setup a centralized distribution system<br />Top management from US, hired rest from Germany<br />Acquired 21 stores of Wertkauf and 74 Interspar stores<br />Interspar and Wertkauf controlled 19% of the German retail market<br />Reconstructed Interspar’s stores, initial investment of US$150 million<br />German govt. denied licenses for food and grocery retailing so they had to enter through an acquisition<br />
  10. 10. Reasons for Failure<br />
  11. 11. Cultural Issues<br /><ul><li> Corporate culture of Wal-Mart and staff expectations
  12. 12. Amalgamating 2 stores and 3 corporate cultures
  13. 13. Sharing of rooms during meetings
  14. 14. English being made the official language
  15. 15. USA versus German cultures particularly public versus private space explaining:</li></ul> ‐ German resistance to baggers and greeters<br /> ‐ German issues of company control over private life of employees<br />
  16. 16. Institutional Issues<br /><ul><li> Liberal market economy meets coordinated market economy
  17. 17. Govt. restrictions limited Wal-Mart to acquisition option
  18. 18. Prevention of Greenfield site development
  19. 19. Employee representation in Germany not understood by Wal-Mart
  20. 20. Legal limitations on operational hours
  21. 21. Violation for German laws</li></li></ul><li>Other Issues<br /><ul><li>Acquisition of weak brands in poor locations
  22. 22. Long established competition operated with similar goals
  23. 23. Low market share and less ability to complete on price
  24. 24. Poor management decisions
  25. 25. Entry during recession
  26. 26. Lack of research and preparation</li></ul>German Retail Market Share<br />
  27. 27. Our Ideas<br />
  28. 28. “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money some where else.” <br />-Sam Walton<br />
  29. 29. References<br />
  30. 30. THANK YOU<br /> Presenters (Group 6)<br />AlokMishraAnuragYadavHimanshu Chopra Manu V Nikhil Kumar SinhaSahil Goel<br /> Vidur Pandit<br />