Executive Summary

Even by American standards, Wal-Mart must be considered as a success story without

precedent.Founded by Sam Walton in 1962 in Bentonville, Arkansas, Wal-Mart stores
offered customers abroad range of goods. In its first year, Wal-Mart Stores garnered
$700,000 in sales, which increasedto $5.4 million insales volume by 1974. In fiscal
1980, Wal-Mart became the youngestU.S. retailcompany, and the only regional
retailer, to exceed $1 billion in net sales.In 2002, Wal-Marts revenueequaled 2.3%
of U.S. gross domesticproduct.Wal-Marts key strategy lay in its Every Day Low
Prices(EDLP) which it achieved through aggressive bargaining with suppliers, its
efficient distributionsystem and inventory control as well as its unique culture.WalMart was a relative latecomer to international retailing. The move overseas was driven
in part byflagging domestic growth. By 1997, Wal-Mart possessed 41 Wal-Mart and
Sams Club stores withinMexico and also had 89retail outlets (under various names)
within its control.During the next fewyears, Wal-Martexpanded into Puerto Rico and
Canada.It developed its presence in Argentina , Brazil ,China and the United Kingdom
1999). In Britain, Wal-Mart was able to successfully transplant theirUS strategy after
acquiring ASDA. Wal-Marts superior processes in supply chain and IT have
ensuredthat it was able to provide the customers with 7 % lower prices than its
competitors. During thatsame time, its competitors had also begun expanding into new
markets.Clearly dominating the US retail market, Wal-Mart expanded into Germany
(and Europe) in late1997. Wal-Marts strategy to export the successful, packaged
corporate formula resulted insignificant cross-cultural communication issues with
constituents in Germany. Executivemanagement failed to anticipate the clash of
cultural differences between German traditions andthe Wal-Mart way.Upon closer
inspection, the circumstances of the companys failure to establish itself in
Germanygive reason to believe that it pursued a fundamentally flawed
internationalization strategy due to anincredible degree of ignorance of the specific
features of the extremely competitive German retailmarket. Moreover, instead of
attracting consumers with an innovative approach to retailing, as it hasdone in
the USA, in Germany the company does not seem to be able to offer customers
anycompelling value proposition in comparison with its local competitors. Further,

Germany had limitedstore hours, price regulations (prohibiting retailers from selling
below costs), and stringent zoningrequirements. Also, Unions were more influential
than their US counterparts. This caused manyproblems for Wal-Mart in Germany.The
report below details Wal-Marts strategy that transformed it into a success story in
US and otherregions, reasons why it entered the German market followed by the
issues it faced while operatingin Germany. We then present strategic options that WalMart can opt for to increase their chancesof success