Walmart in Germany
How a global retailer’s acquisition-led entry failed when its US formula met German customers, competitors, unions and law.
- Sector
- Discount retail
- Source
- Week 7 tutorial Case Study 1 (video case), with detail from the Kelley reading
The case in brief
Walmart entered Germany in 1997 by buying two existing retail chains, Wertkauf and Interspar, to gain an immediate presence. It tried for nearly a decade to win German shoppers but left in 2006, selling its 85 stores to the German retailer Metro, with losses of over $1 billion.
The stores it bought were poorly located for Germans who rely on public transport. Germany already had Europe’s lowest grocery prices and strong discounters such as Aldi and Lidl with established supplier relationships. When Walmart cut prices, the government accused it of selling below cost and forced prices up.
Cultural and people mistakes made things worse: Walmart initially put American executives in charge, staff had to smile at and greet customers, morning cheers were imposed, own-brand products and prepacked meat were stocked for customers who preferred other brands and the butcher, relations with trade unions stayed poor, and parts of Walmart’s ethics code were struck down as breaching German employment law.
Key facts
- Entry
- 1997, by acquiring the Wertkauf and Interspar chains
- Exit
- 2006; 85 stores sold to Metro
- Losses
- Over $1 billion
- Main local rivals
- Aldi and Lidl
Analysis through module theory
PESTEL
Social: greeting and smiling norms, meat bought from the butcher, dislike of the own-brand range. Legal: action against below-cost pricing and employment law that struck down parts of the ethics code. Economic: a low-price, fiercely competitive discount market. Political: government intervention in pricing.
Entry modes (direct acquisition)
Acquisition delivered speed but locked Walmart into stores it would not have chosen. Limited local expertise and cultural clash — listed drawbacks of a wholly owned subsidiary — dominated its decade in Germany.
Uppsala model (psychic distance)
Walmart treated Germany as if it were close to the USA and transferred its home formula unchanged instead of building market knowledge first.
Network theory
Walmart lacked the supplier relationships of its German rivals and never built a working relationship with German unions.
Discussion questions
- 1.What were the main reasons behind Walmart’s failure?
- 2.In which area of the PESTEL analysis did Walmart get it wrong?
- 3.Reflect on your learning on market entry strategies and explain how you would have approached the German market.
Takeaways
- A formula that works at home does not automatically work abroad.
- Buying a presence quickly means inheriting its weaknesses.
- Social and legal factors can undo a strategy built on price.