Walmart is today considered as the largest retail store in the world, both by its magnitude of business as well as the physical spread of its stores across the world. Walmart was founded by Sam Walton and opened the first store in 1962 in Rogers, Ark (Walmart Stores Inc, 2013, para 2). Over the years, the retail store has recorded significant market growth expanding its presence throughout the USA to emerge as the largest brand in the country. Thus, the USA remains as Walmart’s traditional market from where its home culture is based. The first global branch was opened in Mexico City in 1991 following the firm’s move to initiate a combined venture with a local retailer, Cifra (Walmart Stores Inc., 2013, para 6). Presently, the retailer has a presence in 27 countries including the UK, Canada, China, India, and South Africa, among other countries. It runs over 10,000 stores in total, which serve 200 million buyers every week (Walmart Stores Inc., 2013, para 10). One important aspect that requires constant consideration is culture as Walmart continues to expand its operations and venture into additional foreign markets. Culture represents the common practices, beliefs, and norms shared uniquely among a people bound by national or regional boundaries. As such, the corporate strategy adopted by Walmart must consider integrating these specific cultures to effectively fit into these societies. This report highlights the intercultural issues that Walmart has encountered during its internationalisation process.
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Wamart’s Failure in Germany
Walmart’s extensive globalisation strategy saw it venture into the German market in 1997 and 1998 after it succeeded to acquire local players Wertkauf and Interspar. However, the company failed to conduct an accurate market analysis that would have provided it with adequate insight about the German market culture. Walmart requires its front shop employees to always smile to customers as part of its integral practise. The corporate culture has been significant in enabling the company to register magnanimous results in the USA. Thus, the company exported its culture to Germany hoping that it would replicate the same results in this new market (Needle, 2010, p. 160).
German shoppers, however, do not consider it as a normal behaviour for people to smile at strangers. The cashiers manning the checkout desks were instructed to maintain a constant smile to customers as a way of sustaining the company’s culture. This did not augur well with the local cashiers as it always felt uncomfortable for them whenever they attempted to smile at the customers. As the cashiers struggled to uphold the habit, it never appeared sincere even if they eventually managed to smile to their customers. Customers did not interpret it positively as they felt that the company was not appearing genuine to them.
Walmart also adopted a store merchandising that was wrong in the German context, although it had been successful in America. In arranging and displaying the products that it offered to the market, the retailer chose to place all the premium products in strategic locations where they could easily be spotted by buyers (Needle, 2010, p. 160). On the other hand, the discount products were placed at points where they could not be easily located, such as top and bottom shelves. To the German customers, this did not augur well as it gave a different interpretation about the retailer. It appeared like a trick aimed at forcing buyers to consider the premium products at the expense of the discount products.
Another critical cultural blunder that Walmart committed in Germany entailed its ethical code, which mainly caused frustrations among the local members of staff. Among the practices that the company exported from its traditional homeland required workers to spy on each other and report to the management in case they noticed any misconduct. This practise bore a lot of fruits in the US as it enabled the company to put an adequate check on the manner in which its large workforce conducted itself. On the contrary, the German workers did not find the practise to be kind to them. The German history in the post-war era during 1940s highlights the reason why most Germans would not consider spying on others or being spied as a welcome practise. In essence, this practise by the Walmart did not motivate the workers.
The cumulative effect of these activities and actions that mainly failed to recognise and incorporate German’s cultural practices eventually forced the company out of the German market (Watkins, 2009, p. 274). In particular, the company’s employees were frustrated by the corporate rules that were totally alien to them. Walmart’s problems in Germany were further compounded by its decision to rely on American executives, rather than employ local executives. It meant that the decisions made by the company considered the American context even though the operations were being undertaken in a foreign country. This was also exhibited by the local buyers who visited the brand’s stores. The cultural practices that had been incorporated into the retail store affected their shopping experiences, forcing them to consider other rival players as the most appropriate. While these cultural practices had succeeded in enhancing Walmart’s performance and general operations in the US, what the retailer’s management failed to consider is the fact that Germany and America are two different countries with very unique cultural practices.
The Store-Model Failure in China
Walmart’s traditional culture involves establishing large superstores from where customers can conduct their shopping. In the US, Walmart has ensured that its stores are housed in large superstores that also house other business entities apart from the retail store (Howard, 2010, p. 67). This culture is useful in sustaining Walmart’s low cost business strategy, where the hypermarkets virtually stock everything that buyers would wish to acquire from the store. In America, buyers visit such hypermarkets on very few occasions to purchase large volumes of products that are capable of sustaining them for longer periods.
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Walmart decided to transplant this culture to the foreign land as it expanded its operations to venture into the lucrative Chinese market in 1996. It mainly focused on the wealthy Chinese cities, including Shanghai and Beijing where hypermarkets were located at strategic locations. However, this store model failed to capture the market like it had succeeded in the USA (Chuang et al. 2011, p. 443). In particular, Chinese consumers do not feel comfortable shopping in the western-styled big-box retail setup. Shoppers in China prefer buying products in small quantities, but make frequent trips to their local stores because the small quantities of stock also get depleted after a short period.
Throughout China, the local retail stores are relatively smaller in size. They are also located within the neighbourhoods to make them easily accessible to the buyers. The aisles in the stores are overcrowded and even dusty in certain instances. Boxes and other containers storing discounted goods are often spread all over the store floors to make it easy for the buyers to spot them and make subsequent purchases (Howard, 2010, p. 67). Generally, Chinese shoppers do not consider their shopping as an official activity that needs to be carried out in very special and complex environments. This is contrary to the case with most western cultures such as the USA. Chinese shoppers would even prefer shopping in wet markets where there is a presence of live fowl and dish. They can tolerate more chaotic atmospheres where there are loud noises to be their shopping areas.
This difference in store models and general shopping atmospheres between the Chinese and Americans, where Walmart originates from, has been critical in limiting market shares of the company in China. In comparison, local Chinese retail chains that are less elaborate compared to Walmart have continuously trounced the gigantic firm in terms of market shares and profits. These local retailers have established many stores within the neighbourhoods, but they have maintained their small sizes because this is what is more appealing among the buyers (Howard, 2010, p. 67).
Failure of the Froze Food in South Korea
Like in the case of Germany and China, Walmart also considered it prudent to expand its operations by venturing into the South Korean market. This move was implemented in 1998, just at the time when the retailer had perfected the internationalisation focus and strategy. In the USA, Walmart is known for stocking frozen foods, such as fish and other types of vegetables (Needle, 2010, p. 160). This does not cause any challenges to the company because buyers in this native market do not consider this practise to be abnormal.
One of the cultures that the company exported from the USA included stocking frozen foods as it established its initial stores in this new market. However, unlike the Americans, South Koreans are very particular about the foods that they eat. The local population prefers acquiring foods in their natural state, especially vegetables and other food types like fish. Cooking is done continuously, where no excess foods are stored in refrigerators for consumption at a later time.
Packed and frozen meat is a total demoralizer for any South Korean. The natives associate food with great body health and shape. It is a generally held belief among the South Koreans that eating food that is not fresh affects the body negatively and could be reason for poor health among individuals. Thus, the sight of frozen food commodities expected to be consumed while still fresh gave the local consumers a bad image and impression about the retailer. The simple error of failing to determine what South Koreans value most in their foods led to buyers shunning the company. The locals considered other retail players for their shopping.
The “Every Day Low Prices” (EDLP) policy of Walmart also failed to augur well with the local buyers. In the USA, Walmart is renowned for its low prices that have generally helped it to build a significant competitive edge over other market rivals. The US consumers see nothing wrong in a business adopting relatively competitive rates as a means of winning clients. In fact, most of Walmart’s business strategies and practices focus on adopting measures that would enable the company to continuously sustain the low pricing. The famous ‘Just-In-Time’ delivery pioneered by the company mainly aims at ensuring that it eliminates stock-holding costs that are often passed onto consumers in the form of higher prices.
In South Korea, however, consumers took this EDLP policy in a negative way (Moon, 2010, p. 17). They immediately associated the policy with low quality products and services. The sight of frozen food in Walmart stores already appeared as a sign of low quality food being offered by the firm. Thus, the more Walmart insisted on popularising its EDLP call, the more buyers were kept at bay (Moon, 2010, p. 17). The experience of the Walmart in the South Korean market was harrowing for the firm. The company was eventually forced to close shop and vacate the country altogether because it had failed completely to win over the market.
The main blunder committed by the Walmart’s management mainly bordered on poor interpretation of culture. The firm virtually lifted a combination of American cultures and attempted to force the cultures on South Koreans without recognising the latter’s cultural values at all. It is easy for anyone to imagine that a low price focus is definitely appropriate for any buyer having several options. However, as it was proven in the case of Walmart in South Korea, what Americans consider as good is not necessarily viewed in the same cultural context by South Koreans. The South Koreans read malice in this policy and quickly linked the low price policy with the stocking of frozen foods to substantiate their claims and actions of shunning Walmart.
Walmart is a model company that many other firms emulate as they anticipate growth and expansion in their operations. The American firm has registered admirable results in the many years that it has been in operation, capturing both the national and the international markets. Walmart considered venturing into the foreign markets and replicating its success stories once it had completely conquered its domestic market. However, this produced mixed results. The overall performance of the firm has remained pleasing in some foreign countries where Walmart has a presence, including in the UK, Canada, and Mexico.
However, the company has registered dismal performance in foreign markets such as Germany, South Korea, and China, which has seen it exit the markets altogether in some instances. The biggest problem behind Walmart’s woes in Germany, South Korea, and China was the blunder of transplanting its traditional American cultures and forcing them on the local populations. In Germany, Walmart insisted on employing American executives who, in turn, implemented cultural practices of the firm that had proved successful back home. This involved demanding front row employees to maintain a continuous smile with their customers, while requiring workers to spy on each other. In South Korea, Walmart exported its culture of stocking frozen food and its insistence on the “Every Day Low Prices” policy. This did not produce results as South Koreans strictly prefer consuming fresh foods. The hyper store model also failed in China as the local buyers preferred smaller stores located within their neighbourhoods. Walmart should take great considerations in studying a people’s culture and shopping preferences before venturing into foreign markets. Exporting the American culture and expecting that it will replicate the results in foreign markets is an erroneous management thinking that will only subject the company into further failure.
Chuang, M-L, Donegan, JJ, Ganon, MW, & Wei, K 2011, ‘Walmart and Carrefour experiences in China: resolving the structural paradox’, Cross Cultural Management, vol. 18, no. 4, pp. 443-463.
Howard, E 2010, The changing face of retailing in the Asia pacific, Routledge, Oxon, OX
Moon, H 2010, Global business strategy: Asian perspective, World Scientific Publication, Danvers, MA
Needle, D 2010, Business in context: an introduction to business and its environment, Cengage Learning, Hampshire, UK
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Watkins, TA 2009, Moving beyond storytelling: Emerging research in microfinance, Emerald Group, Bingley, UK