Corporate Strategy Case Study

Wal-Mart’s Exit from Germany

OR

Abstract:
The world’s largest retailer, Wal-Mart was growing at a rapid pace with more than 6100 stores world wide, with the net sales reached to more than US 312.4 billion for the year ended in Jan 31, 2006. Since 1990, Wal-Mart was pursuing aggressive international expansion, but the strategy was apparently failed in the country of Germany. Wal-Mart was about to take the reverse turn in July, 2006 by selling its underperforming German stores to the county’s leading retail chain Metro AG. Wal-Mart which used to operate 85 hypermarkets across Germany by, admitted that it would incur a roughly US $1 billion pretax loss on the deal of its 2007 fiscal year. Ever since entering the US retail giant had struggled to capture the cut-throat German retail market. Analysts perceived that US Model of business was not effective in Germany besides that they failed to understand the customer want, and also German labor law. Analysts also thought that limited critical mass, insufficient square meter productivity and too aggressive pricing policy and above all cut throat competition from the local competitors like Aldi, Metro AG might cause Wal-Mart’s downfall in Germany. This case deals with the detail analysis why Wal-Mart failed in Germany and its decision to exit from Germany was strategically correct or not.

Pedagogical Objectives:

• To understand the global retail market
• To discuss about Wal-Mart’s initiatives in Germany
• To analyse Wal-Mart’s failure in Germany
• To argue on its decision to exit from Germany

Keywords : Wal-Mart; Retailer; Hypermarket; Aldi; Metro AG; Wertkauf; Corporate Strategies Case Study; Interspar; Arkansas; Germany; Western Europe; Acquisition; Discount food retail; Pricing policy; German antitrust law; Every day low prices