Global Communication according to

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Global Communication according to
Or how NOT to do business in Germany
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Presentation Outline

• Background
• Industry Characteristics
• Company History
• Company Overview
• Article Summary
• Where Wal-Mart Went Wrong
• German Competitors
• Problem Resolution
• Marketing Implications
• Overview

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Background

• Industry Characteristics Retail
• Financial Success is uncommon
• No strong barriers of entry
• No strong power over customers and suppliers
• High competition
• Unfavorable labor pool

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Background

• Company History
• American public corporation founded by Sam Walton
  in 1962 in Rogers, Ark
• Largest Retailer in the World, second largest
  corporation
• Jan 2006 net income 11.2 bill, out of 316 bill
  sales

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Background

• Company Overview
• Wal-Mart Stores Division U.S. largest
• Wal-Mart Discount Stores
• Wal-Mart Supercenter
• Wal-Mart Neighborhood Market
• SAM'S CLUB

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Background

• Company Overview
• Wal-Mart International
• 2,700 stores in14 countries
• WOFEs - Argentina, Brazil, Canada, South Korea,
  Puerto Rico and the United Kingdom
• Joint venture China
• Majority own subsidiaries Mexico, Japan

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Background

• Company Overview
• Criticism
• Use of Foreign Labor
• Health Care and Employee Benefits
• Employee and labor relations

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Article Summary

• Wal-Marts German Retreat
• After nine years of trying to make a go at doing
  business in Germany Wal-Mart decided to sell its
  85 stores to German rival Metro. The retreat is
  hardly surprising considering Wal-Marts numerous
  missteps such as misjudging the German consumer
  and business culture, failing to adopt local
  business practices, underestimating the
  competition and miscalculating the market size.

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Where Wal-Mart Went Wrong

• Misjudged local consumer and business culture.
• For example, Wal-Mart adopted the policy of
  bagging groceries, which many Germans find
  distasteful because they dislike strangers
  handling their food.

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Where Wal-Mart Went Wrong

• Attempted to import U.S. company ethic.
• A code discouraging interoffice romances
• Repeated clashes with unions

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Where Wal-Mart Went Wrong

• Underestimated competition and miscalculated the
  market.
• Wal-Mart is known for their low prices in the
  U.S., but they were often undercut but German
  companies.

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German Competitors

• Metro

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Wal-Mart V.S. Metro

• Worlds largest retailer
• Over 25,000 different products offered
• Over 6300 stores
• - discount stores super centers
• (Sams Club Walmart Supercenters)

• Germanys largest retailer
• Over 15,000 different products offered
• 2100 stores
• - hypermarkets supermarkets
• (Real Extra)
• - wholesale, department electronic stores
• (Metro Cash Carry, Gakeria Kaufhof Saturn)

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Wal-Mart Sells 85 Stores to Rival

• Why?
• The funds
• Real hypermarkets- combination of department
  store and supermarket
• Saturn Electronics Stores

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German Competitors

• Aldi

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Wal-Mart V.S. Aldi

• Worlds largest retailer
• Over 25,000 different products offered
• About 20 different private labels
• Over 6300 stores worldwide

• One of the Worlds biggest grocery chains
• About 700 food items offered
• 800 plus private labels
• About 7500 stores worldwide

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Aldi often undercut Wal-Marts prices

• Why?
• More private labels and stores
• Own 40 of Germanys grocery market share
• Buy cheap land and warehouses
• Keep a tiny staff
• Display on pallets rather than shelves

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Problem Resolution

• Wal-Mart should have. . .
• Researched Germanys business culture and used
  adaptation in company ethic areas
• Use more if not all self checkout registers
• Been more cooperative and humble with German
  unions

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Problem Resolution

• Wal-Mart should have. . .
• Researched it local rivals in depth
• Chose which company to compete with first Metro
  or Aldi
• If Metro, work to build competing hypermarkets
• If Aldi, not use shelves, save money with lower
  staff count

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Marketing Implications

• What does this mean for us, as global marketing
  practitioners?

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Marketing Implications

• 4 Ps Adaptation vs. Standardization
• Ethnocentrism
• They wanted to impose their own culture.

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What Could Wal-Mart have Done Better?

• Research
• Study the culture and social norms
• Market Entry
• Local partnerships / Joint Ventures
• Global Localization
• Think globally, act locally

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What Could Wal-Mart have Done Better?

• Goal of Marketing
• Surpass the competition by creating perceived
  value for customers
• Competitive Advantage

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Overview

• Background
• Industry Characteristics
• Company History
• Company Overview
• Article Summary
• Where Wal-Mart Went Wrong
• German Competitors
• Problem Resolution
• Marketing Implications

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Questions, Comments, Feedback??