! MASTERARBEIT / MASTER’S THESIS Titel der Masterarbeit / Title of the Master’s Thesis “Walmart’s Withdrawal from the German Market” verfasst von / submitted by Ameli Mayr Angestrebter akademischer Grad / in partial fulfilment of the requirements for the degree of Master of Science (MSc) Wien, 2015 / Vienna 2015 Studienkennzahl lt. Studienblatt / A 066914 degree program code as it appears on the student record sheet: Studienrichtung lt. Studienblatt / Master in International Management degree programm as it appears on the student record sheet: Betreut von / Supervisor: Univ.-Prof. Mag. Dr. Josef Windsperger ! ! Abstract The American multinational company Walmart has been very successful in its country of origin as well as in other international markets for many years. However, in the late 1990’s, the retailer decided to conquer overseas markets in order to also set foot in Europe by firstly targeting Germany and then the United Kingdom. In 1997, Walmart acquired 21 Wertkauf stores and in the following year 74 Interspar supermarkets. Without much research and, therefore, knowledge about the German market, Walmart used the same revolutionary strategy, which had proven to be so successful in its own and other markets, without much modification to enter this particular country. Once Walmart entered Germany, it was not able to attract and satisfy the customers, as it was doing in the United States of America and other markets like Mexico and China. German consumers would rather stay loyal to and continue purchasing at local chains like Aldi, Lidl, and Edeka before experiencing something completely different to their habits at Walmart. As a consequence, the corporation announced its withdrawal from the German market in 2006, having suffered heavy losses of approximately $1 billion. Research has shown that the reason for Walmart’s failure to successfully establish itself in its first European market is mostly due to an essentially faulty internationalization strategy. Furthermore, Walmart’s ignorance of the particular features of the highly competitive German retail market also contributed to this withdrawal. ! Table of Content ! Table of Content Abstract ....................................................................................................................................... I Table of Content ....................................................................................................................... III List of Tables ............................................................................................................................. V List of Graphs ........................................................................................................................... VI List of Abbreviations .............................................................................................................. VII 1. Introduction ......................................................................................................................... 1 1.1. Research Question ........................................................................................................ 1 1.2. Structure of the Thesis .................................................................................................. 2 2. Preliminary Considerations ................................................................................................. 3 2.1. Internationalization and Globalization .......................................................................... 3 2.2. Global and Local Retail Industry .................................................................................. 3 2.2.1. Retail Internationalization ...................................................................................... 6 2.2.2. Retail Industry in Europe ....................................................................................... 7 2.2.3. Retailing Industry in Germany ............................................................................. 11 2.3. Macro-Environmental Factors .................................................................................... 16 3. The Importance of Culture for Global Enterprises ............................................................ 20 3.1. Elements of Culture .................................................................................................... 23 3.2. Geert Hofstede’s Cultural Dimensions ....................................................................... 24 3.2.1. Power Distance .................................................................................................... 25 3.2.2. Uncertainty Avoidance ........................................................................................ 27 3.2.3. Individualism vs. Collectivism ............................................................................ 30 3.2.4. Masculinity vs. Feminism .................................................................................... 32 3.2.5. Time Perspective .................................................................................................. 33 3.3. Edward T. Hall’s Cultural Dimensions ....................................................................... 35 3.3.1. Context ................................................................................................................. 35 3.3.2. Space .................................................................................................................... 36 3.3.3. Time ..................................................................................................................... 38 4. Walmart ............................................................................................................................. 40 4.1. History ........................................................................................................................ 40 4.2. International Operations ............................................................................................. 47 III Table of Content 4.2.1. North and South America – Mexico, Brazil, and Argentina ................................ 50 4.2.2. Asia – China, Indonesia, and South Korea .......................................................... 51 4.2.3. Europe – United Kingdom ................................................................................... 53 5. Walmart Germany ............................................................................................................. 54 5.1. Preview ....................................................................................................................... 54 5.2. Entry into Germany .................................................................................................... 55 5.3. Reasons for Failure ..................................................................................................... 58 5.3.1. Cultural Differences ................................................................................................. 58 5.3.2. Economical and Legal Differences .......................................................................... 66 5.3.3. Managerial Differences ............................................................................................ 74 6. Metro Group’s Acquisition of Walmart Germany ............................................................ 86 7. Conclusion ......................................................................................................................... 89 Table of References ................................................................................................................... A Literature ............................................................................................................................... A Online References ................................................................................................................. B Appendix ................................................................................................................................... O IV ! List of Tables ! List of Tables Table 1: Proactive and Reactive Motives ................................................................................... 4 Table 2: Barriers and Risks ........................................................................................................ 5 Table 3: Top 10 European Grocery Retailers (2007) ............................................................... 10 Table 4: Change in Market Share According to Sales (2000 – 2013) ...................................... 15 Table 5: National Statistics on Grocery Industry (1994 – 2006) ............................................. 45 Table 6: World's Top Retailers (1996, 2000, 2006, 2012) ....................................................... 47 Table 7: Walmart's Expansion (1991 – 2000) .......................................................................... 48 Table 8: Top 10 Global Retailers (2007) .................................................................................. 50 Table 9: Germany's Top Retailers (2002) ................................................................................ 56 Table 10: Germany's Store Opening Hours (1996, 2003, 2014) .............................................. 69 Table 11: Germany’s Top Retailers – Customer Satisfaction (2003) ...................................... 80 V List of Graphs List of Graphs Graph 1: Retail Sales per Square Meter and German Citizen (1990 – 2010) .......................... 11 Graph 2: Sales in the German Retailing