Walmart entered the German market by means of two major acquisitions. The first, the Werkauf chain, was an inspired strategic move. Werkauf had prime locations, good sales and a capable management team. The later acquisition of a number of hypermarkets from Spar Handels AG, on the other hand, was anything but a shrewd move. Spar's stores were mainly situated in less well-off inner city areas and the majority were desperately in need of upgrading. Furthermore, most of the stores acquired were on a leasehold basis so Walmart did not even gain the real estate. Even worse for Walmart was the fact that turnover per square metre was amongst the worst in the German retail market.

'An authoritative report by the University of Bremen highlighted the problems caused by the blinkered attitude of Walmart's US managers that they refer to as 'hubris and clash of cultures'. Walmart's American senior executives who were assigned to manage the operation in Germany had little or no knowledge of German business culture, refused to learn German and ignored the advice of the German senior managers they had taken on board as part of their acquisition process.

Walmart quickly lost large numbers of their German store managers and supervisory staff who took jobs elsewhere because they were unhappy with the American company's management style. These key staff cited low wages and alleged poor quality produce as their primary reasons for leaving. Managers were also unhappy with the US practice of moving managers on to another store every year or two.

The approach by which Walmart had achieved success in the United States and elsewhere did not fit in with the culture of Germany. Industry and commerce in Germany, like much of continental Europe, is highly-unionised. German trades unions exercise enormous power both in the workplace and in the political sphere. However, Walmart, in common with many American companies, is a strictly non-union employer.

When faced with mounting employee costs in Germany Walmart's answer, as it would be in the US, was to start laying-off staff. However, they were taken by surprise by the heavy cost of making employees redundant in the highly-regulated German economy and their financial difficulties were exacerbated.

A strategy of ruthlessly undercutting competitors with their 'everyday low prices' guarantee had worked for Walmart in every other market. To the company's consternation the strategy back-fired in Germany. Walmart's major German competitors, such as Aldi and Lidl, hit back and cut their own prices even more drastically. Furthermore, a number of German newspapers and consumer organisations analysed Walmart's 'everyday low prices' promise and publicly concluded that it was meaningless.

German consumers did not like Walmart's US-style approach to customer service either. They found the in-store 'greeters' and staff constantly approaching customers to guide them far more intrusive than they were used to. Walmart found that their usual customer service approach was ineffective in Germany and was very expensive in terms of staffing costs.
Walmart had succeeded in the US by being one of the first retailers to offer customers a 24/7 retail experience. With legislative restrictions on opening hours, however, they could not launch this strategy into the German market.

'An authoritative report by the University of Bremen highlighted the problems caused by the blinkered attitude of Walmart's US managers that they refer to as 'hubris and clash of cultures'. Walmart's American senior executives who were assigned to manage the operation in Germany had little or no knowledge of German business culture, refused to learn German and ignored the advice of the German senior managers they had taken on board as part of their acquisition process.

Walmart quickly lost large numbers of their German store managers and supervisory staff who took jobs elsewhere because they were unhappy with the American company's management style. These key staff cited low wages and alleged poor quality produce as their primary reasons for leaving. Managers were also unhappy with the US practice of moving managers on to another store every year or two.

The approach by which Walmart had achieved success in the United States and elsewhere did not fit in with the culture of Germany. Industry and commerce in Germany, like much of continental Europe, is highly-unionised. German trades unions exercise enormous power both in the workplace and in the political sphere. However, Walmart, in common with many American companies, is a strictly non-union employer.

When faced with mounting employee costs in Germany Walmart's answer, as it would be in the US, was to start laying-off staff. However, they were taken by surprise by the heavy cost of making employees redundant in the highly-regulated German economy and their financial difficulties were exacerbated.

Walmart wilfully failed to comply with a number of rules and regulations of Germany's highly-regulated retail market. This was largely because of the company's unwillingness to adapt to German culture and their refusal to consider abandoning strategies that had been so successful elsewhere. The result of these repeated infringements was a continuing cycle of heavy fines and negative publicity. Amongst the areas of legislation where Walmart fell foul were:
Breaches of German antitrust legislation through their discounting strategy;
Failures to comply with the requirements to publish financial information; and
Failure to institute a deposit/refund strategy for the plastic and metal drinks containers on sale in their stores.

By failing to follow the kind of basic, common-sense rules for doing business in Germany, the ones that we have discussed in this piece, Walmart entered the new millennium with mounting year-on-year losses in their German operation. In July 2006 they conceded defeat by selling-off their 85 German hypermarkets to a local competitor, Metro. In doing so they sustained a loss of nearly one billion dollars. Walmart are an efficient, highly successful multi-national company. However, by failing to take account of the nature of the German market (or German business culture), they came badly unstuck in that country. ©howtogermany