This article will look at the before and after effects of Wal-Mart’s attempt to build a strong presence in Germany. Wal-Mart has done very well in North America, and many of Wal-Mart’s leaders thought they could use exactly the 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 achieve success 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 must be considered to give the business a fighting chance. Possibly the most important issue is avoiding ethnocentrism, which is the “belief that one culture is superior to others” (Angell, 2007, p. 352). Wal-Mart failed to disregard 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 American market, but one of the biggest differences is the way people of 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 a bargain price and will shop around for 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 a lot of different stores to get everything on their list and 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 for Americans, but it is an ethnocentric point of view and should be avoided.

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

One of Wal-Mart’s first business decisions in Germany was to buy several retail chains and redesign the outlets to fit the Wal-Mart style. This gave managers the impression that Wal-Mart was going to do business in its own way, whether the Germans liked it or not. In addition, Wal-Mart has the practice of forcing its suppliers to supply the first shipment of merchandise on credit and then Wal-Mart would not pay them until they had shipped another load or had 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 purchasing on credit upset Wal-Mart’s suppliers in Germany and led to a revolt against Wal-Mart.

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

Wal-Mart has no excuse for the many mistakes they made when they branched out in Germany, particularly when so many companies have succeeded in Germany before them. Wal-Mart executives were overconfident in the success they had achieved in North America, and this confidence, while relevant in North America, did not suit them when they expanded into Germany. If the executives had stepped back and thought about the situation they were launching into and ignored their previous success, they would have been better able to see the cultural differences that eventually led to Wal-Mart’s huge financial loss in Germany. The mistakes made by Wal-Mart were basic but had great effects.

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

One of the most surprising mistakes made by Wal-Mart is that American bosses located in Germany could not speak German (Angell, 2007, p. 28). Failing to communicate fully immediately put strain on Wal-Mart’s German relationships. Also, pressuring 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 the outlets to fit the Wal-Mart model, the Wal-Mart managers should have spoken with the German managers to find out the strengths and weaknesses of the current outlets. Then Wal-Mart could have made an informed decision about whether or not it was appropriate to redesign the layout of the buildings. Communication on a personal level would have gone a long way to 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 lowered the prices of 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 must stop adhering to its ethnocentric viewpoint and start listening to the ideas of its managers. Once again, personal communication with German managers and suppliers will be the key to Wal-Mart’s success. They have already ruined their relationships enough that the only way to repair those relationships is for Wal-Mart to take the first step and begin 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. Possibly, it will 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 the German people were used to. Furthermore, Wal-Mart did not give German managers the courtesy of speaking German to them while they were in Germany. Finally, Wal-Mart was not prepared to deal with the German government and the price restrictions they imposed 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 progresses in other countries in the future.