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Wal-Mart goes to Germany

Wal-Mart goes to Germany

This article will look at the before and after effects of Wal-Mart’s attempt to gain a foothold in Germany. Wal-Mart has done very well in North America, and many of Wal-Mart’s leaders thought they could use the exact same formula for success in Germany; However, that was not the case. There were several factors that contributed to Wal-Mart’s initial failure in Germany, including language barriers, government, and cultural differences. Wal-Mart’s failed attempt to succeed in Germany resulted in the loss of millions of dollars and the offense of many German companies.

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When trying to expand a business abroad, there are several important areas that need to be considered to give the business a fighting chance. Possibly the most important issue is to avoid ethnocentrism, which is the “belief that one culture is superior to others” (Angell, 2007, p. 352). Wal-Mart failed to eschew an ethnocentric point of view and this, combined with other failures, led to its financial disaster in Germany.

1. Do you think there are cultural differences between the German market and the US market? What could they be?

There are many cultural differences between the German market and the US market, but one of the biggest differences is how people in each culture perceive low prices. Wal-Mart prides itself on its low prices, and this is the main reason why it has done so well in the United States. Americans love to buy products at what they consider to be a bargain price and will shop around to get the best deal. However, in Germany very low prices are often seen as accompanying a poor quality product. This cultural difference can have a devastating effect on a company that prides itself on having the lowest prices. Another cultural difference is that Americans like to buy everything in bulk and do all their shopping in one place, but in Germany people don’t mind going to many different stores to get everything on their shopping list. they will go to these stores every day and only buy the amount they need for that day. This may seem like a waste of time to Americans, but it is an ethnocentric point of view and should be avoided.

2. Why would German managers and salespeople rebel against American business practices?

One of Wal-Mart’s first business decisions in Germany was to buy several retail chains and redesign outlets to fit Wal-Mart’s style. This gave managers the impression that Wal-Mart was going to do business its way, whether the Germans liked it or not. In addition, Wal-Mart has a practice of forcing its suppliers to supply the first shipment of merchandise on credit and then not being paid by Wal-Mart until they have shipped another load or have terminated their business relationship with Wal-Mart. By receiving the first shipment on credit, Wal-Mart can keep large amounts of money under its control. This method of buying on credit upset Wal-Mart salespeople in Germany and led to a revolt against Wal-Mart.

3. Why do you think the Wal-Mart executives did not think intrapersonally in the context in which they were communicating?

Wal-Mart has no excuse for the many mistakes it made when it expanded into Germany, particularly when so many companies have succeeded in Germany before them. Wal-Mart executives were overly confident in their success in North America, and this confidence, while relevant in North America, did not follow them well when they expanded into Germany. If the executives had stood back and thought about the situation they were getting into and ignored their earlier success, they would have been better able to see the cultural differences that eventually led to Wal-Mart’s huge financial loss in Germany. Wal-Mart’s mistakes were basic but had big effects.

4. What specific communication skills should Wal-Mart managers have used to start off on better terms with German managers and suppliers?

One of the most surprising mistakes made by Wal-Mart is that the American managers located in Germany did not know how to speak German (Angell, 2007, p. 28). The inability to fully communicate immediately strained Wal-Mart’s German relations. Also, putting pressure on German managers by expecting them to speak English gave a clearer idea of ​​how much Wal-Mart had thought about adapting to the German community. Before rebuilding outlets to fit Wal-Mart’s model, Wal-Mart managers should have talked to German managers to find out the strengths and weaknesses of current outlets. Then Wal-Mart could have made an informed decision about whether or not it was appropriate to redesign the design of the buildings. Communication on a personal level would have been a great help in ensuring the success of Wal-Mart in Germany.

5. How should Wal-Mart address the problems it faces and begin to collaborate productively with the German people?

The German government has set minimum prices on many products that Wal-Mart sells, and this directly undermines its ability to be the low-price leader. Wal-Mart needs to partially redefine its position in the German market. In addition to redefining its position, Wal-Mart needs to stop adhering to its ethnocentric point of view and start listening to the ideas of its managers. Once again, communication on a personal level with German managers and suppliers will be the key to Wal-Mart’s success. They have already screwed up their relationships enough that the only way to repair those relationships is for Wal-Mart to take the first step and start deconstructing its German branch of the company to realistically address the cultural needs of the German people. Once Germans see that Wal-Mart is making a serious attempt to change the way they do business, they will start shopping there more often. It may be necessary for the younger German generation to change the cultural norm and start buying in bulk at the lowest price.

Conclusion:

Wal-Mart made a lot of mistakes when it expanded into Germany. His main mistake was falling into an ethnocentric view and assuming that his formula for success would automatically succeed in all other nations. By failing to properly research German culture, Wal-Mart failed to realize that selling in bulk and cheaply was not what Germans were used to. Wal-Mart also did not give the German managers the courtesy of speaking to them in German while they were in Germany. Lastly, Wal-Mart was not prepared to deal with the German government and the price restrictions they placed on certain products. Looking at the results of Wal-Mart’s expansion in Germany, the term disastrous comes to mind and it will be interesting to see how Wal-Mart proceeds in other countries in the future.

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