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Why did Wal-Mart invest in Germany?

Scenario-

You are a middle-level manager with a company that markets a line of personal and fabric care products. The American market for soap and detergent has always been dominated by name brand manufacturers, such as Procter & Gamble (TideTM), Colgate-Palmolive (AjaxTM) and CloroxTM. In fact, your market research shows that the American market is saturated with these products. You are convinced that, if your company is to grow in the future, it must aggressively seek international markets.

The company will be sending representatives to a trade conference in Hong Kong in several weeks. You see the conference as an opportunity for your company to expand into the rapidly growing Southeast Asia market. At the very least you hope to be able to identify the countries that have adopted policies that make them receptive to foreign trade and investment; with a little luck, you may even be able to find a good location for a detergent plant that your company wants to build in the region.

In addition, your company is considering plans to purchase an interest in retail store chains in one or more of the European Union (EU) nations. But before senior managers are prepared to consider the investment, they would like to look at how other American companies have fared when buying European retail chains.

You asked senior management to allow you to assume the role of international marketing strategist and they granted your request. Now, you need to research, analyze and present international marketing opportunities for your company.

Task needing assistant -

Your company is considering plans to purchase an interest in drug store chains in Germany and the UK. But before senior managers are prepared to consider the investment, they would like to look at how other American companies have fared when buying European retail chains.
In December 1997, Wal-Mart took over 21 Wertkauf stores in Germany followed by 74 Interspar stores in 1998. In the U.K. Wal-Mart has purchased ASDA, a supermarket/discount chain that now advertises itself as "part of the Wal-Mart family."

Investigate the recent FDI by Wal-Mart into the United Kingdom and Germany. Gather press releases, articles in the business press, and search the Library and the Internet for published sources of information.

Describe why Wal-Mart undertook the investment, why the British and German governments allowed it, and the extent of its success or failure.
Identify the types of management decisions that needed to be made.
Identify any political or cultural problems that have occurred.
Would it have been better for Wal-Mart to build a subsidiary "from the ground up" rather than buying existing chains? If so, why didn't Wal-Mart pursue this option?
Cite at least three sources

Solution Preview

Describe why Wal-Mart undertook the investment, why the British and German governments allowed it, and the extent of its success or failure.

The reason for investment via acquisition in Germany was obviously to expand the global presence of Walmart. Germany is Europe's biggest economy and Walmart wanted to replicate its success in Germany as well.

However, as of today, Walmart has pulled out of Germany. The foray into the German market via the acquisition of existing chains has proved to be big failure for Walmart. Walmart's lack of understanding about the German market proved costly for the company.

In UK, Walmart operates under the brand name of ASDA chain of stores. As a subsidiary of Walmart, With its 'strategy of consolidation', copied directly from Wal-Mart, ASDA pursued an aggressive takeover policy of small towns, wiping out local competition and local jobs. ASDA is currently one of the major supermarket chains in UK. The experience of Walmart in UK has been sweet, unlike its bitter experience in Germany where it completely failed.

The British and German government allows organizations like Walmart to foray into their market to attract the huge Foreign Direct Investments that these large firms bring into the country.

Identify the types of management decisions that needed to be made.

Large global corporations like Walmart have to make key strategic decisions when they try to establish themselves in foreign markets. For example, Walmart's foray into Germany would have been ...

Solution Summary

This solution describes why Wal-Mart undertook the investment, why the British and German governments allowed it, and the extent of its success or failure in 992 words.

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