Businesses are capitalizing on high growth rates, growing middle class and weaknesses of localretailers to storm other countries with their businesses (Bianchi & Ostale 2004). Harrison (2011)views these ideas of internationalization as based on a primary decision, which is motivated bythe mission and objectives of international firms. This of course seems acceptable, and for that Ibelieve will set out for processes and strategies in achieving the objective. Firms go internationalfor a number of reasons. Diallo (2012) identifies common ones to be the desire for internationalopportunities for growth. Other firms would desire to create new opportunities for existingleaders, the quest for greater economies of scale and the need to diversify risk (Corstjens & Lal2012). Alexander (1990) and Incandela et al (1999) also identify that, more firms internationalizeas a result of saturation in their local market and high level of competition. Gielens & Dekimpe(2007) suggest that companies need to expand and grow in their business activities to boostrevenues, and also increase profitability. Terpstra & Sarathy (2001) also state that,internationalization is one of the opportunities that many companies are looking at to achievefurther growth. Many retailers are going global (Yip 2002), and for that matter, Diallo (2012)sees it to be prudent to think about such, considering retail strategy. Buckley & Ghauri (1999),and many researchers note that, for retail firms, it is a source of profitability. Nonetheless,Bianchi & Ostale (2004) postulate that, not all the attempts that are made become successful.International expansion is mostly difficult for retail firms since many have experiencedfrustration (Bianchi & Ostale 2004).Wal-Mart Inc. was founded in 1962 by Sam Walton in Rogers, Arkansas (Knorr & Arndt 2003).The famous shopping center in America, Wal-Mart, a multinational retail firm has made its wayinto many foreign markets (Christopherson 2007; Gordon 2014) such as Mexico, Canada, Chile,Brazil, Argentina and many more (Knorr & Arndt 2003; Kim 2008). Wal-Mart has a base ofselling at “lowest prices anytime, anywhere”. The focus on making a difference in the lives oftheir customers, and helping customers and communities save money and live better (Knorr &Arndt 2003; Gordon 2014; Wal-Mart 2016). Wal-Mart supersedes its competitors with about11,530 stores, and 2.3 million employees worldwide (Wal-Mart 2016). Cost leadership,sophisticated logistics, inventory management techniques (Knorr & Arndt 2003), greatereconomies of scale and scope has been Wal-Mart’s strength for many years (Annual Report2016).
According to the literature, Wal-Mart struggled in Germany for about ten years, from 1996through to 2006 (Christopherson 2007; Gordon 2014; Knorr& Arndt 2003). It was a surprise tomany, probably due to its size, sale, and experience in international activities of the retail market(Christopherson 2007). Wal-Mart in 1997 entered into the German market by acquiring the Wertkauf chain 21 stores andthe unprofitable Spar chain 74 stores (Christopherson 2007; Gordon 2014; Knorr & Arndt 2003).After a decade of struggle, they lost hundreds of millions of dollars and sold their assets to theirGerman competitor Metro, and quit (Gordon 2014). Wal-Mart to say, entered German marketwith direct investments as in acquisition (Gordon 2014) which Terpstra & Sarathy (2001) claimis the highest risk of strategy to enter into a new market, but probably because of quick access tosettle. Gordon (2014) identifies two best entry strategies for international retailers. He notes thatit is either on a lower scale or at a very large scale. Nonetheless, Gienlens & Dekimpe (2007)argue that many firms would like to start by investing minimum resources and further commitsubstantial resources for expansion when they see the green light. Wal-Mart started with 95stores which of course could earn it high economies of scale, they had initial strategy toredecorate the stores to look more attractive and implement a price leadership as their usual stylein the US, but Gordon (2014) views it to be too large to start building a reputation. Additionally, in direct investment, Knorr & Arndt (2003) postulates that there is full ownershipsince the international firm arranges to make direct investment in the production unit in theforeign market. In the case of Wal-Mart, it took over those stores completely, and designed to itstaste. Much analysis from Pwc (2017) indicate that, to retailers, German’s environment has ahigh risk for any country to thread on without intensive research, and to be taken for granted.Gordon (2014) argues that Wal-Mart would have succeeded if they had entered through a jointventure as it is suggested by many researchers that firms should select an entry strategy thataccurately fit in with the firm’s values (Gienlens & Dekimpe 2007; Knorr & Arndt 2003). Forexample, Tesco entered the Korean market by a joint venture with another giant local partner andit was quite successful (Kim 2008). Research on international retailing requires diligent work on the host country and adaptingaccordingly. It is still not doubtful that, every country has its institutional ‘dos and don’ts’ that noother country is above. The decision to make a move abroad will require a thorough evaluation
and analysis on the new environment (Alexander 1990; Knorr & Arndt 2003), due to differencesin political and economic scenarios, new competition, new laws and regulation and above allcultural differences (Harrison et al 2000; Burkley & Ghauri 1999). Gordon (2014) and manyresearchers have discovered that, success in the home country does not guarantee successinternationally (Gordon 2014; Knorr& Arndt 2003). The fact that Wal-Mart has great potential togrow locally and internationally, does not give it the mandate to ignore such analysis on the hostnation. Burt et al (2002) recorded that M&S withdrew from Canada and US market, Home Depotfailed in Chile, and many others. It is advisable to stress that, every country has a set of normsthat are valued and to be successful in that market, one needs to simple adopt. Country analysis comprises of a wide range of specialized information on governmentdepartments, international institutions such as the UN and OECD which address the economic,social and environmental issue (OECD 2008). Pwc (2017) also states that some crucialinformation can be provided by consultants, and some online services can be of great help to theinternational company to equip itself to the challenges and risk of taking a venture. With all thesedata, Wal-Mart would have gone loaded with what would not have been surprises to theinternational company. Moreover, Germany is one country that has a flexible term of seekinginformation. Pwc (2017) stated that information in Germany is always available, from corporateand labour law to finance, regulation and tax. Wal-Mart became victim to many of these laws.Twarowska & Kakol (2013) have said that, companies must have a successful global strategy byfirst of all understanding the nature of global industries and the dynamics of global competition.Knorr & Arndt (2003) go further to explain the consequences of ignoring such suggestion. Thereare some strategies in the literature that will be useful for firms to succeed in standardizing oradopting their products to foreign markets. According to Twarowska & Kakol (2013), thesestrategies give MNCs the glue to operate just like the way the host company behaves with lessattention to the home company. On this note, Alexander (1997) believes will call for higher levelof adaptation to the local business environment. Yib (2002) also supports the notion that,companies that want to internationalize should make room for strategies for the localenvironment. The German tax policy and economic development incentives in combination with limited landuse controls, do not favour large scale, space extensive that will encourage large scale retailers
who offer many goods at low price. The policies in Germany were not too favourable to bigretailers like Wal-Mart to penetrate easily. Germans had some land-use relations that neededattention. Stores are not to size 800m2 in locations not designed for retailing. They haveinfluential and stronger unions than US have (Gordon 2014). Retail shops close at 6.00pm anddon’t open on Sundays (Pwc 2017; Gordon 2014). Germans have price regulations that preventany retailer to sell below a certain cost. One can attest from the above that, successful strategicentrance approach used in US did not match with Germans. Economically, Germany retailmarket is big, with two trillion Euros as its GNP, and competitive and this, in a way wasattractive to Wal-Mart but Senge (2004) notes that German market was already saturated.Moreover, there is the need to establish new operations, distribution networks, and the necessityto learn and implement appropriate marketing strategies to be able to compete with rivals in anew market. Lack of legitimacy and support from the relevant local, social and commercial actors is anotherfactor that can drive away international firms, says Blanchi & Ostale (2004). International firmsshould establish political connections that will aid in expanding its operation and further guidethis expansion in global market. For example the literature explains that it is likely due tocompetition that a foreign firm is bound to have negative actions from rivals, community groups,unions, law suits from employees and environmental groups. Gordon (2014) advises that,practices such as international firms getting much involved in community events and offeringsponsorship to benefit the community, will do much good than harm to foreign businesses. Wal-Mart had issues with employees, consumers and even suppliers such that they lost even thebargaining power to buy goods from suppliers at low cost, which has been something that theyenjoy most at home market (Gordon 2014). Gienlens & Deekimpe (2007) suggest that, knowledge of the potential customers is essential tohelp the international retailer, and Blanchi & Ostale further explain that, the taste of preferenceof every country differ from country to country. For example Gordon (2014) noted that, Germancustomers are mostly loyal and committed to their home shops, particularly in the retailingindustry and so, possibly in spite of the lower price given by Wal-Mart, they would want to stillkeep on buying at Metro Group, Shwarz, Edeka Group, Aldi and Rewe (Pwc 2017). Germanswould prefer their daily walk-in shopping to weekly drive in bulky purchase (Pwc 2017).
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