Wal-Mart’s German Misadventure

For the world’s largest retailing company, Wal-Mart, Inc., the German market was proving difficult to crack. By 2003, even after five years of having entered Germany, Wal-Mart was making losses of millions of dollars over the five-year period. When attempting to expand a business overseas there are several important areas that must be taken into account in order to give the business a fighting chance. Possibly the most important issue is to avoid ethnocentrism which is the "belief that one culture is superior to others". Wal-Mart failed at abandoning an ethnocentric viewpoint and this combined with other failures lead to their financial disaster in Germany. There were many cultural differences between the German and American markets, but one of the biggest differences was the way that people perceived low prices. Wal-Mart prided itself on its low prices and this was the primary reason for their success in the United States, where the Americans loved to buy goods at what they felt was a bargain price and shopped around in order to get the best deal. However, in Germany very low prices were often viewed as accompanying a poor quality product. This cultural difference could have a devastating affect on a company that prided itself on the lowest prices. One other was that Americans liked to buy everything in large quantities and got all of their shopping done at one location. But in Germany, people did not mind going to many different shops in order to get everything on their list and go to these shops every day to only purchase the amount that they needed for that one day. One of Wal-Mart's first business decisions in Germany was to buy out several retail chains then redesign the outlets in order to fit the Wal-Mart style. This gave the impression to the managers that Wal-Mart was going to do business in their own way whether or not the Germans liked it. Furthermore Wal-Mart had the practice of forcing its vendors to supply the first shipment of goods on credit and