Walmart German Misadventure

Wal-mart history

The WALMART is the largest company in the world, taking into account revenue, and one of the largest private employers. As an emporium backwoods became the largest and most influential company in the world? The answer is Sam Walton. Shopping and - why not? - Lunch or a coffee, revealing photos, go the pharmacy and supply the car. Solve everything in one place is easy for those attending WALMART.

A brand that should be admired worldwide. But it is not. Your cannibalism, market leading companies traditional bankruptcy due to their fierce and relentless competition, made the WALMART was hated in many cities of the world. However, WALMART is any angle you look at it, a phenomenon of overwhelming dimensions. It is more than a business venture. It's almost a religion whose principle is profit, much and always. A corporation that bring awe, astonishment and fear. It’s the price of success.

Source: Walmart 2013 annual report. Available in: http://stock.walmart.com/annual-reports. Downloaded in 11/07/2013

Walmart in Germany

Walmart started its operations in Germany in 1997, with the acquisition of 21 stores of Wertkauf (German hypermarket chain). In 1998, acquired 74 stores of Interspar, expanding the volume to 95 establishments. For a number of reasons that we will explain during this seminar, the German adventure of Walmart was not successful. In 2006, the group decided to finish its activities in the country, with the sale of 85 stores to Metro group (one of its biggest competitors in the country). There is an estimated study, that the Walmart’s retreat had losses around USD 1 billion (794 million euros,) during the nine years of this endeavor.

Source: Article “World's Biggest Retailer Wal-Mart Closes Up Shop in Germany”, by Louisa Schaefer to DW portal(Deutsche Welle group) in 28/07/2006 - http://www.dw.de/worlds-biggest-retailer-wal-mart-closes-up-shop-in-germany/a-2112746

Problems in external environment

What’s happened?

In order to implement their differentiated market concepts, which were so successful in other parts of the world, especially in the United States, Walmart faced several problems on the legal front: * Section IV – 2: “Act against Restraints of Competition By the law, companies with superior market power are forbidden of lower your prices and engage in price wars with small and medium-size companies.

This pratical can occur only after providing justification for the lower prices. Walmart was the first retail to reduce prices of some commodities (sugar, milk and margarine), lower than the cost price. As a snow ball, Walmart competitors (Aldi and Lidl) also lowered their prices. So, German Federal Cartel Office (FCO) ordered all retailers to stop selling these products below the price, in defense of a fair competition. After call on an Appeals Court and win (Walmart wasn’t consider a big player in Germany), the case was directed by FCO to German’s Supreme Court. In a final decision, Walmart was forced to abandon its pricing strategies. * Section 335ª: “Comercial act”

The companies need to publish financial data such as balance sheet and P&L reports on its operations in Germany. The trade unions went to the state court, alleged lack of access of this informations.

Walmart was forced to publish this informations and the senior executives were fined. So, Walmart went to a German Supreme Court alleging that limited partnerships don’t need to divulgate this dates, and requesting a delay of the State Court’s decision, until European Court of Justice came out with its decision on disclosure provision by foreigners companies. Walmart lost this dispute, but remained reluctant to provide this informations, probably to prevent outsiders and investor to take a true view of a problematic situation of the company in Germany.

What could have been done differently? Walmart has shown that the entry strategy in Germany did not draw correctly, trying to impose successful ideas in the United States, but forgetting to respect cultural, legal and political differences between the countries.

The creation of less aggressive plan to conquer the market, with results to be achieved in a longer period of time, could contribute to a fair entry strategy in Germany, avoiding the need for such aggressive practices which culminated in violations of antitrust laws, problems with unions and loss of brand credibility among consumers. In addition, an aligned marketing strategy with the profile of the German consumer, which is very sensitive to price dispute, but has on trust and relationship with the brand a very important point for the purchasing decision, could contribute to the building of a friendly image.

Another point to be considered is the lack of transparency in the management of the company. Aiming to disrupt trade unions in wage negotiations and prevent the reduction of investments on behalf of the poor operating results, the company managed to create a mark rejection, both by consumers and employees, who was crucial to obtain results below the expectations of US headquarter.

Support http://www.nytimes.com/2006/08/02/business/worldbusiness/02walmart.html?pagewanted=all&_r=0 http://www.businessweek.com/stories/2005-04-10/wal-mart-struggling-in-germany http://www.cbsnews.com/2100-500395_162-1860028.html

http://www.nbcnews.com/id/14073098/ns/business-world_business/t/wal-mart-selling-its-stores-germany/ http://www.guardian.co.uk/business/2006/jul/28/retail.money http://www.foxnews.com/story/0,2933,206100,00.html Videos http://www.youtube.com/watch?v=jjBukIEQlRA http://www.morningstar.com/advisor/v/44496466/what-s-in-store-for-wal-mart.htm (first 2 min)

Bullets to ppt: Wal-mart Co. * the largest company in the world, taking into account revenue; * one of the largest private employers * Stories: US - 4625 / Intl - 6148 * Revenue: US – USD 319.8mm / Intl – USD 127.1mm Walmart in Germany * started operations in 1997; * In 1998, acquired 74 stores of Interspar, expanding the volume to 95 establishments; * finish operations in 2004, with losses around USD 1 billion (794 million euros).

Problems in external environment * Section IV – 2: “Act against Restraints of Competition * Section 335ª: “Comercial act”

What could have been done differently?