Wal-Mart in Europe – Case Solution

This "Wal-Mart in Europe" case study looks into the factors which affected the failure of Wal-Mart in Germany.

​Louisa Neissa; Gunnar Trumbull
Harvard Business Review (704027-PDF-ENG)
April 14, 2004

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Case answers for Wal-Mart in Europe

Wal-Mart in Europe

Q1. Why did Wal-Mart fail in Europe, specifically Germany?

The operations of Wal-Mart in Europe, specifically Germany, failed due to some factors.  First of all, Wal-Mart had a wrong entry strategy. It acquired 74 Interspar’s stores. Before the acquisition, the company was already the weakest player in the market.

The Interspar’s stores were situated in a less rich region, and within the industry, it had the lowest returns and highest logistics costs. Customers in these regions opted for general grocery chains. The purchase of Interspar is regarded as an over-priced since the same chain of stores purchased by its former company two years ago at a cost seven times lower than the amount Wal-Mart paid.

Another reason for the failure of Wal-Mart was the cultural conflict between the company’s American CEOs and the Germany employees. The executives seemingly ignored Germany’s culture and laws. It was not easy to assimilate the two firms that it acquired (Interspar and Wertkauf) (Hunt, Watts, & Bryant, 2018). These two organizations had opposing cultures. The activities at Interspar were decentralized with independent regional units, but the Wertkauf had a centralized structure with a head office which is responsible for decision making.

The morale of the employees of Wal-Mart was seriously affected by alterations in the internal rules and regulations that Wal-Mart Germany constructed. The company’s first CEO’s in Germany were not willing to learn the German language, ignored the framework of the retail market in Germany, and also ignored the strategic advice that former Wertkauf executives offered them (Hunt, Watts, & Bryant, 2018).

Wal-Mart also did keep its promise of reducing its prices to compete with other bigger discount stores in the country such as Aldi. Most of the buyers in Germany had been driven away by the concept of “greeters” which is often considered a good customer service in America. However, in countries whose people are used to self-service, it is considered a form of harassment. It does not also provide 24/7 convenience like the American store counterparts because of the restrictive shopping hours in Germany.

Lastly, Wal-Mart Germany was accused of continually infringing on the laws and regulations of Germany such as the Anti-trust Act that required all companies to disclose their financial information. It has failed to achieve the financial benchmark it had set for its first European venture.

Q2. Hindsight has 20-20 vision. Write a one-page memo to Mike Duke, President & CEO, International Division, Wal-Mart, that summarizes what marketing insights Wal-Mart should have learned from its German misadventure. Duke was in charge of all Wal-Mart international operations in 2006 when Wal-Mart decided to leave Germany.

Memo

To: Mike Duke, President and CEO, International Division, Wal-Mart

Subject: Marketing Insights from Germany Misadventure

Hello Duke, I am much more concerned with the failure of Wal-Mart in Germany. There are several lessons from Germany misadventure that the company should take into consideration. As you noticed, one of the reasons for the company’s failure in Germany was…