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The first Wal-Mart store was established by Sam Walton in 1962 in Rogers Arkansas. His
business was defined and the policy still continues by three Basic Beliefs (Wal-Mart,
2008). The first one is respecting the individuals, which means to push Wal-Marts employees
to excel in what they do. The second belief is service to our customer, where the stores
respect a pricing philosophy to always sell items as cheaply as they can, while they provide
excellent customer service. And the third belief is striving for excellence that is to expand the
stores, innovate, be creative and reach further into new markets. At first expansion was steady
with 24 stores by 1967. The initial focus for Wal-Mart operations was small town, rural
America. The company grew to 276 stores by 1980 and the Wal-Mart empire reached 670
stores by 1984. The company currently has around 4100 stores in USA and by 2003 it was the
worlds largest retailer, 3 times as large as it s near rival Carrefour. It was also the worlds
largest employer with 1.9 million employed worldwide in 2007. The success of Walmart was
.based on 4 factors
a) Low prices
b) Focus on Customer service
c)
IT driven logistics and inventory management involving large centralised
warehouses.
d) A strong corporate culture and employee commitment
A number of actors influenced Walmart management to expand outside USA. The company
had perhaps reached the limits of expansion in USA. There was strong competition from
Target and K-Mart. Furthermore management believed that the success formula of the US
.operation could be replicated elsewhere
The first international store was operated in 1991 in the suburb of Mexico city and the
company developed rapidly in both Mexico and in Canada. Mexico remains Wal-Marts
biggest international operation with over 900 stores. The company also opened stores in
Puerto Rico, Argentina, Brazil, Japan, South Korea and Indonesia and in Europe in Germany
.and in UK
Some analyst believed that Wal-Marts decision to expand into Europe via Germany instead
of UK was a strong decision given the cultural links between USA and UK. However the
German market was attractive as the worlds 3rd largest economy with 80 million people who
were Europes largest retail spenders. Furthermore, management saw Germany ideally
located at the heart of Europe and an important member of EU. Unlike UK Germany was part
of Eurozone. The Germany country side was littered with carcasses of other retailers,
therefore Wal-Mart knew that its non brand named items, service and low prices would
.succeed
Walmart entered the German market at the end of 1997 with the purchase of 21 stores from
Wertkauf and added to this in 1998 with a purchase of 74 Interspar stores from the French
company Intermarche. After only 4 years of operation in Germany it was clear that Walmart
was struggling with estimated losses of around 1 billion although only estimates were
available because the company published no accounts. The estimated losses continued at the
same rate and by 2005 the company had cancelled its expansion plans, closed 2 stores and
laid off 1350 staff. The failure was not unique to Germany. In Indonesia and South Korea all
Walmart stores has been either closed or sold. The company was not doing well in Japan and
.Brazil, countries were it had large number of stores
Wal-Mart started its global operations in the early 1990s when it opened its first inter-national
store in Mexico. To be successful, the Wal-Mart's decision to go global supposed a
commitment of the company to work on its understanding of different kind of non-US
culture. When Wal-Mart entered the German market in 1997, assumption has been made that
all the techniques that made Wal-Mart the US #1 retailer would be as efficient everywhere.
The facts prove that it's not necessarily true: in 2006, after a decade of loss, Wal-Mart
announced its decision to leave the German market. Two months before, Wal-Mart was
...deciding to retreat from South-Korea for the same reason
If economic and marketing factors have to be taken into account, a general misunderstanding
of the German culture was a major reason in Wal-mart's failure to take over the re-tail market
of Germany. Such errors are not limited to a lack of research in delimiting the local
.consumer's behaviour but involve incomprehension of the German work culture too
:Organizational behaviour challenges for Wal-Mart
:I) Within the organization