International PR (Aug2014 Intake): Assignment 1

Word count: 803

Company: Wal-mart Stores, Inc.

An epitome of how humble beginnings bear great things, Wal-mart Stores, Inc., otherwise known as Walmart by avid grocery store patrons, has had a progressive success story of over 52 years. Founded by Sam Walton in 1962, today the company boasts with over 11,000 retail units in 27 countries under a total of 71 different names, acquiring a substantial degree of international coverage and emerging as the world’s largest retailer (Wal-mart Stores, Inc. 2014).

In spite of Walmart’s considerable successes within the foreign market, the company still grapples with a number of setbacks, particularly in Germany (Landler and Barbaro 2006). Unlike its profitable operations in UK, Asia and Latin America, Walmart Germany had occupied the tail end of the financial spectrum with a “turnover of £2.9 billion, […] a stagnating share of just 1.1 percent, […] [and] accumulated losses of more than £1 billion,” (Knorr and Arndt 2003, p.9). Resultantly, the company had no choice but to call off its German operations and sell all 85 of its hypermarkets in 2006 to German retail giant, Metro AG (The Economist 2006).

With much inquisition over Walmart’s withdrawal from the lucrative $370 billion German retail market, there certainly has been no shortage of explanations either. Most of which seem to suggest that the company’s downfall in Germany was a result of “a fundamentally flawed internationalization strategy” and an “incredible degree of ignorance of the specific features of the extremely competitive German retail market” (The Tim Channel 2012). The following recounts several of such instances.

In the wake of its initial presence, Walmart Germany’s organizational management operated on the basis of cultural hubris. Such is noted when US citizen and former Walmart, Inc. senior vice president, Rob Tiarks was appointed as Walmart Germany’s first CEO (Knorr and Arndt 2003). Tiarks at the helm was not to employees’ liking however, as he did not speak German and was unwilling to learn the language. By the same token, Tiarks had also exhibited a rather startling degree of ignorance over the complexities along with the legal and institutional framework of the German retail market, and insisted that all business operations be communicated via English (Knorr and Arndt 2003). Such display of pride and insensitivity calls to question Walmart’s internationalization and one-size-fits-all strategy; as it “expose[s] [a] profound lack of intercultural competence and management skills” by the executive, himself (Knorr and Arndt 2003, p.20).

Apart from the former are the occasional instances of cultural clashes between Walmart’s dominant culture and that of the Germans that emerged as another determinant for its downfall. Stemming from the company’s failure in identifying the differences in behavior and communication styles, several employee practices that were unsuited to the German context were absentmindedly culminated. For instance, Walmart’s chanting exercises that insisted upon employees to begin their shifts engaging in group chants of “WALMART! WALMART! WALMART!” (Kwintessential n.d.).  Such “corporate boosterism did not go over particularly well with the Germans,” as employees found it embarrassing, oddly aggressive and too reminiscent even of Germany’s infamous Nuremberg Rallies – extensive propaganda events that were carried out amidst the Second World War (Macaray 2011).

In a similar manner is Walmart’s smiling service, requiring all cashiers at checkout desks “to flash smiles at customers after bagging their purchases” (Macaray 2011). Oddly enough, Germans do not usually smile at strangers and if any attempt was made to elicit a response, it was one of agitation and bewilderment simply because “Germans […] don’t behave that way,” Verdi union secretary Hans-Martin Poschmann points out (Landler and Barbaro 2006). The simple American gesture of smiling may indicate friendliness to most but in highly conservative Germany smiling to a stranger may come off as being simple-minded and is usually frowned upon (Helm 2000).

In as much as Walmart’s cultural shortcomings had taken a severe blow to the company’s pocketbook and pride, premeditated steps in reference to Gudykunst’s (2003) Anxiety/Uncertainty Management Theory could have been initiated to prevent such weighty repercussions. Adequate uncertainty management could have materialized if Walmart had taken the effort in carrying out cultural assessments of the German market and its idiosyncrasies before and after its acquisition of the foreign operations. On the other hand, Walmart Germany’s executive Tiarks should also have been conscious of his incompetence in embracing the German culture and in turn indicated a willingness to learn both the language and culture, as part of the company’s notion of being mindful.

With all things considered, the analogy of Wal-mart Stores, Inc. aptly presents a clear reminder that even the most successful retail operations will not be exempted from failure, as cross-cultural blunders will inevitably have its way of impinging on a company’s success and its retail market’s receptivity. As such, the company should reassess its current internationalization strategy if it wishes to secure a promising forecast in its future foreign investments.

Reference List:

1.     Gudykunst, W.B. 2003. Understanding Must Precede Criticism: A Response to Yoshitake’s Critique of Anxiety/Uncertainty Management Theory. Intercultural Communication Studies, [online]. Available at: <http://www.uri.edu/iaics/content/2003v12n1/03%20William%20B.%20Gudykunst.pdf> [Accessed 24 September 2014].

2.     Helm, T. 2000. Service with a smile frowned on by Germans. The Telegraph, [online]. Available at: <http://www.telegraph.co.uk/news/worldnews/europe/germany/1372243/Service-with-a-smile-frowned-on-by-Germans.html> [Accessed 24 September 2014].

3.     Knorr, A. and Arndt, A. 2003. Why did Wal-mart fail in Germany? Materials Science of Gravity Globalization of the World Economy, [online]. Available at: <http://www.iwim.uni-bremen.de/publikationen/pdf/w024.pdf> [Accessed 23 September 2014].

4.     Kwintessential, n.d. Walmart in Germany: Cultural Problems. [online] Kwintessential. Available at: < http://www.kwintessential.co.uk/resources/walmart-germany-cultural-problems.html> [Accessed 25 September 2014].

5.     Landler, M. and Barbaro, M. 2006. Wal-mart Finds That Its Formula Doesn’t Fit Every Culture. The New York Times, [online]. Available at: <http://www.nytimes.com/2006/08/02/business/worldbusiness/02walmart.html?pagewanted=all&_r=1&> [Accessed 23 September 2014].

6.     Macaray, D. 2011. Why Did Walmart Leave Germany? The Huffington Post, [online]. Available at: <http://www.huffingtonpost.com/david-macaray/why-did-walmart-leave-ger_b_940542.html> [Accessed 23 September 2014].

7.     The Economist, 2006. Heading for the exit. The Economist, [online]. Available at: <http://www.economist.com/node/7253227> [Accessed 24 September 2014].

8.     The Tim Channel. (2012). Why Walmart Failed in Germany. [online]. 18 November 2012. Available from: wordpress.com http://thetimchannel.wordpress.com/2012/11/18/why-walmart-failed-in-germany/. [Accessed 23 September 2014].

9.     Wal-mart Stores, Inc. 2014. Our Locations. [online] Wal-mart Stores, Inc. Available at: <http://corporate.walmart.com/our-story/our-business/locations/> [Accessed 23 September 2014].