What problems did Wal-Mart encountered in Germany?

Wal-Mart entered into Germany in 1997 and faced number of problems which
are listed below:

Wal-Mart was not able to understand the culture of Germany and their

taste and preferences.

Competition from local players like K-Mart and Target.
In Germany the cost of hiring labor was high and also degree of

uncertainty in doing business was also high.

The acquisitions made by Wal-Mart i.e. Wertkauf and Interspar were not so
popular in Germany. In fact, Interspar was a loss making company and to

integrate operations of both the companies was difficult.

Interspar did not have the store layout and design as per Wal-Mart
Standardized stores, so Wal-Mart had to change the layout and incur

expenses on the same.

Strict government licensing policy for entering in German Market.
Lack of Strong Communication Network and relationship across Germany
lead to poor distribution of goods and services as Germans were not able

to digest the Centralized system of Wal-Mart.

It was not able to maintain its Employee as it was offering low wages and
restricting employees from forming union which led to lack of staff for

managing inventory.
A bad word of Mouth for Wal-Mart was created by the employees which

affected its sales too.

Wal-Mart was accused of breaking various laws and the firms goodwill was
badly hurt.

Categorization of Problems:
External Environment(PEST)

Factors
Government support to local players
was a threat to Wal-Mart.
Also various laws were imposed on

Political

Wal-Mart and it was accused under

various sections.
High cost of hiring Labor, High real
estate cost, uncertainty in business

Economical

environment.
It was a price sensitive economy
Cultural Mismatch of Germany and
U.S. Culture.
Germans had
Socio- Cultural

preference

different
and

taste

altogether

and
a

different perspective of looking at

things.
Lacked in Understanding employees.
The systems used by Germans were
different than the U.S as they used

Technological

Centralized system which was not

very desirable by Germans.

Which

Category

did

Wal-Mart

encounter

the

most

problems? Why do you think this is?

According to me, the category which encounters most problems is SocioCultural. This is because of the Cultural difference that exists in the U.S and
Germany. Wal-Mart failed to understand the needs of local market i.e.

German Market and Failed to adapt itself with the same which lead to a huge
loss in terms of profit and in terms of Brand image. When a Company goes
international it has to comply with the norms, Culture, rules and regulations
of the host country which was not done by Wal-Mart. It stick to its traditional
method of working which proved a disadvantage to them.