Our company, Walmart, failed first in Germany for various reasons we had yet to consider while establishing it there. One of the reasons is that we needed to conduct better market research before we launched our company there. We had to reduce our margins significantly to maintain prices at a point where they could be competitive since the retailers’ company in Germany offered relatively low prices, which increased competition, thus losing our market share to them. Organizational practices are another reason why we failed in that new market. For instance, we did not allow employees to have union representation, thus causing the German employees to protest when the company entered their country.
The other reason was based on salary and wages because Walmart usually offers employees’ wages based on how much they sell and offer incentives like bonus pay and commissions which were in contrast to what German employees are used to since they are used to working for long hours for a higher fixed minimum wage. They are not used to bonuses and overtime pay. Being environmentally conscious, German consumers prefer using eco-friendly bags they can reuse before disposing of them. Still, we were using plastic bags, and therefore they saw us as people who did not conserve the environment, thus contributing to a bad reputation for our company. Lastly, our company was selling American brands, which could have resonated better with German consumers since they prefer their local brands, giving them a sense of security. Our private labels were not popular in Germany.
I have a new strategy, and the areas I plan to expand into are; Berlin, Frankfurt, Hamburg, and Munich. I plan to expand into these cities because they are significant cities in German. Therefore, they are busy, and according to my research, they have more marketing options, a wide variety of potential customers, and increased foot traffic in these areas. Therefore, the company will be able to market our products to potential customers in these areas. The locations are easily accessible; thus, there is a potential for business growth and more excellent networking opportunities on a larger scale which is an added advantage to the company.
I will ensure that I appeal to the local consumer by considering their culture and providing that we use environmentally friendly packaging bags since the Germans are ecologically conscious and prefer to use environmentally friendly bags that they can reuse. We will also ensure we offer the local brands they are used to and later introduce the American brands slowly while marketing them effectively until they penetrate the German market. We will also provide a wide variety of products from local brands to ensure that the consumers have a wide range of types they can choose from when shopping in our stores. We will also ensure that our products are priced lower to appeal to the customers. There are legal factors that should be taken into account when building my strategy, and they include the governing laws concerning businesses; because we will be hiring German employees, we have to make sure that the laws of their own country protect the filing and employees’ obligations. Tax laws are another legal factor to be considered since we will be required to pay taxes to that nation because we are operating in it.
Localization of terms and data protection is the other factor to be considered since terms have to be localized legally and translated into their local language. Data protection laws must be identified and followed. There are also local political factors that should be considered and are; foreign policies, politics, and relations since they differ for different nations; therefore, we will have to understand and keep updated on the information regarding these policies, politics, and relations. Since we are planning to expand our company to the major cities in this country, the geographical challenge that we need to be part of our strategy is that we are likely to experience higher labor costs, rent and utilities, and greater competition since most companies are located there. The geographical opportunities that we need to include in our strategy include; there is a larger potential labor market, we will be closer to more consumers, and we will have easy access to crucial infrastructures. Being in these cities, we will also be close to the media. Therefore, advertising and promoting our products will be easy. We will also have easy access to essential supplies and services because most companies and skilled people are located in cities.
The competition in the areas we are planning to expand to is very high since several companies offer the same products and services that Walmart offers, such as Aldi, Rew, and Lidl, and they have a better understanding of the market there. To differentiate ourselves from our competitors, we will ensure we promote and market the local brands. After having our market share, we introduce the American brands slowly as we effectively market them and offer them at a discounted price, thus attracting German consumers while providing them with a wide variety of products to choose from while shopping. We also employ price discrimination to expand our company’s reach when competing with other companies. We will also launch a system whereby we can listen to our customers’ and employees’ feedback.
The supply chain challenges include; keeping the transportation costs down since shipping costs are relatively high, keeping up with the customer/industry demands, and keeping up with the latest technology solutions since technologies keep emerging. The customers expect the company to always keep up with them. Order and on-time pickup and delivery performance as most customers expect faster deliveries and sourcing a consistent, reliable carrier capacity to deliver goods to our company and to the consumers who prefer online shopping. Even though these supply chain challenges are a more significant disadvantage to us, there are local resources that help offset some of them. Hiring a local expert in supply chain management and employing local transportation means will likely mitigate these challenges.
In conclusion, during the project, I was surprised to learn that ignoring issues that seem insignificant such as culture, is likely to cause the failure of a significant company that is expanding internationally. For instance, Walmart ignored the local culture of the consumers, whereby they spend short hours shopping. They prefer to avoid being assisted by store assistants since they prefer doing their search for bargains. They needed to understand how German consumers are environmentally conscious since they liked using eco-friendly bags that could be reused before disposal. This led to them losing customers, thus contributing to their downfall in Germany. What surprised me most was that even spending without a limit when expanding a company in a foreign nation may cause a bad reputation for the company, thus contributing to its failure in that nation.
References
https://www.google.com/amp/s/www.mbaknol.com/management-case-studies/case-study-wal-marts-failure-in-germany/%3famp
https://resources.coyote.com/source/supply-chain-challenges
https://www.quora.com/What-are-the-advantages-and-disavantages-of-starting-a-business-in-a-big-city?top_ans=81677077
write