Wal-Mart in Europe

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CASE STUDY

‘Wal-Mart in Europe’

Submitted by: Fateem Ahmed

Lecturer: Mr. Valenti Camps

INTRODUCTION: 

In this case study, we are going to be looking at the giants of the retail industry, Wal-Mart and about them stepping into Germany’s retail market space which lead the company to face quite a few challenges.

Founded in the year 1962 by Sam Walton, Wal-Mart went onto becoming the largest retailer in the world in today’s time. One can understand that the business is on the right track if it gives a massive sale of about $700k in its first year itself. Even during the 70’s and 80’s era where there was a significant struggle among other retailers due to inflation, Wal-Mart was the only company which was unaffected by the market situations and continued with its steady growth. By the year 2003, they had net sales of $244.5 Billion and almost 5000 stores worldwide.

The company was founded in United States of America and expanded its business all across the country to an extent that it was somewhere given credit for the increase in overall productivity of USA during late 90’s.

After such a successful expansion and progress all across USA, Wal-Mart realized that it’s a good time to spread the business beyond borders and eventually went onto opening stores in Mexico, Brazil, UK, etc., during the early 2000’s. This move too, turned out to be in their favour and led to increase in international sales. By this phase, Wal-Mart had 1288 international stores.

KEY STRATEGIES:

Sam Walton had recognized that selling for less, meant selling more, which would lead to making more. Therefore, Wal-Mart differentiated itself through its Everyday Low Prices (EDLP) strategy, which it would achieve through aggressive bargaining with local suppliers.

Sam Walton had 3 major principles which were followed and practiced through the success story of Wal-Mart. They were: To respect the individual; To provide superior customer service and to strive for excellence.

Apart from that, Wal-Mart possessed an efficient logistics system, especially with the help of ‘Retail Link’ computer system which enabled them to manage their inventories at a greater scale. With the help of Retail Link, Wal-Mart managers and suppliers could track products through a 65-week rolling inventory.

Wal-Mart’s Entry in Europe:

Wal-Mart had a successful run in most of the international markets once they started expanding into other countries. Germany in particular, was a challenging experience for the retail giants.

Wal-Mart entered the German retail market back in 1997 by acquiring a retail chain named Wertkauf, which at the time wasn’t doing such good business. They started off with strategies quite similar to what they were practicing back in U.S market. These included renovating the stores, adding new scanning systems, high quality customer service and other such services. Due to their process of EDLP, they managed to create a tight market which had price wars at its peak.

What went wrong if something went wrong?

On the other hand, Germany with its retail market was a place full of regulations, quite contrary to what Wal-Mart had experienced or come across when compared to other international markets.

Firstly, the price setting of Wal-Mart was not in the same line with Germany’s Federal Cartel office and had conflicts with them on a regular basis. Wal-Mart also had a policy guarantee that promised to refund the price difference if the competitor’s price was found to be cheaper.

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