Table of Contents
A business start-up is very tricky and requires effective strategies and endurance from the entrepreneur. Once the company enters the market, it needs promotion tactics. After full establishment, the management is expected to expand its operations over the world. Such process in other areas requires thoughtfully engineered and drafted strategies (Babatunde & Adebisi 2012). The latter should include ways of dealing with culture differences, language barriers, and entry strategies in the offshore industry and much more (Cavusgil, Knight, Riesenberger, Rammal & Rose 2014). Wal-Mart is a successful company, especially in the United States market, due to its strategic tactics for survival. It entered the Mexican market, merged with some businesses and had successful business operations. However, upon entering the German market in Europe, it had some assumptions that it would succeed and receive high revenues and competitive advantage. The management also assumed that with its everyday low price (EDLP), it would attract customers in the German market. However, these assumptions made it lose 200-300 million per annum and 5% of negative growth yearly. Therefore, such corporations as Wal-Mart must carry out a proper and thorough market analysis to succeed in a foreign country.
Statement of Tactic and Strategic Problems
Various problems face corporations upon the initiation of stores in Germany. Wal-Mart had to deal with the following strategic issues:
- Scanning the environment: the management of the company did not scan both the internal and external environment well to know its requirements.
- Losing more than 200 million dollars and experiencing negative growth by 5% yearly (Dutta & Subhadra 2004).
- Failing to comply with the German laws of pricing and the disclosure of financial statements, since the company did not study its EDLP before implementing it.
Tactical problems are daily issues affecting the progress of the business. The Wal-Mart company had to solve the next challenges resulting from tactical drawbacks:
- A decrease in employees’ wages making their work insufficient.
- Poor communication caused by making English an official language in its stalls.
- The acquisition of two companies in the German market with a bad public image (Dutta & Subhadra 2004).
Issues Identification and Analysis
Scanning the environment is a very crucial aspect since it requires an organization to decide on placement strategies and ways of entering the new industry. Moreover, the company should determine which marketing strategies to implement, like pricing, placing, promotion, products and much more. Wal-Mart used the same strategies it undertook in Mexico, Canada, and other American companies to enter the German market.
Due to the management failure, company losses were more than 200 million dollars yearly and indicated 5% of negative growth in the German market. These were the main issues of concern. If corporation does not perform well in the industry, it requires a change in management and structure.
There were numerous violations of the laws governing the German industry, namely, actions of price control and the disclosure of financial statements for corporate tax purposes. A failure to manage these issues made the company face a lot of problems, including legal proceedings and sanctions. Other players in the industry sued Wal-Mart for its EDLP.
Due to decreased prices charged for its products, the company paid employees very low wages. These actions make people perform poorly in their jobs without more commitment where required. One of the sources of employees’ motivation is better wages, and paying small salaries was one of the mistakes Wal-Mart did.
As a developed nation, Germany uses German as its official and national language. Therefore, forcing English in its workplaces in the same way as it was in other areas like Canada, Argentina, or Brazil, was not an appropriate decision made by the management. Employees felt neglected and out of place because there was the lack of proper communication and belonging in the working environment.
Wal-Mart acquired two companies in the German market that had bad reputation from the client and the public perspectives. They included Wertkauf and Interspa. These actions showed some irresponsible behaviour by Wal-Mart partnering with companies not adored by the German public. This action also became opposite to the German culture of associating with firms having better reputation and actions.
The theory of open systems introduces the concept of the environment and its impacts on the success of the organization. Ragsdell, West, and Wilby (2012) argue that different environments present different demands and opportunities for businesses. Wal-Mart’s external environment has many challenges, especially cultural and legal issues, which have hampered its success.
Generation of Solutions and Alternatives
To overcome tactical and strategic challenges, Wal-Mart should use the following solutions:
- Before undertaking any business in Germany, the company would have conducted a special scan both of the internal and external environment. This action would have let the management be aware of the best entry strategies and prices to prevent losses and negative growth (Babatunde & Adebisi 2012). As another alternative, Wal-Mart would have hired managers who know the German market well to advise it on the best ways to follow. These actions would have prevented the corporation from losing a huge amount of money and experiencing negative growth in the new industry. However, the company would need to spend more on research and development.
- For a business to survive in a foreign market, it should comply with the local rules and regulations (Cavusgil et al. 2014). These include companies’ acts and rules that govern them. It would be wise for Wal-Mart to hire legal advisors to educate them on the German Company Act. Alternatively, the company should have a German lawyer. This action is advantaageous for Wal-Mart enabling it to escape most legal accusations. In the case of the price floor and ceiling, such lawyers will advise the company on what to do while sued. They will also inform the management of the best salaries to set for employees. However, the main disadvantage of such a strategy is loyalty of lawyers to their nation, which will make them not side with Wal-Mart.
- Language cohesion is a tactical approach that enables the management to interact with employees effectively (Cavusgil et al. 2014). Wal-Mart should not have had English as an official language in the workplace to communicate with employees. The best alternative is German. The advantage of this action is that strategic managers will interact well and cooperate with the local workers. They will get to know their needs and meet them urgently and perfectly. The disadvantage is that the process takes time, and managers will not start working immediately. It may be also a waste of resources since managers may undergo a transfer to other countries.
- Before acquiring Wertkauf and Interspa, Wal-Mart would have enquired from the experts about companies’ reputation. These actions would have protected the public interest of such companies. Its advantage is that the company will enter into a merger with organizations having better reputation and serving its interests (Cavusgil et al. 2014). However, the disadvantage is that the company may appear incompetent in making even the right decisions.
The following recommendations include the best strategic and tactical solutions:
- Wal-Mart should adopt research and technology techniques to scan the environment before a start-up of business in a different environment.
- It should introduce research on shopping habits and cultural practices of consumers. This action will enable the company to understand the consumer behaviour of Germans. This process of scanning the environment will also allow Wal-Mart managers to learn the German language since it is an official language of the country.
- Wal-Mart should also hire advisory experts in legal and business matters. Legal advisors will help the company to avoid unnecessary legal costs. Consultants in corporate matters will advise Wal-Mart on investing only in profitable ventures.
- Managers should employ the open systems theory and study the external environment of the business with the aim of coming up with strategies for dealing with the challenges indicated above (Ragsdell, West, & Wilby 2012).
Wal-Mart has faced many issues that include poor integration in the German culture, regulatory problems with German laws and regulations, poor understanding of consumer behaviours and poor investment decisions. The company needs to conduct an extensive environmental assessment before entering new markets, especially if new segments are established in areas with entirely different cultural practices. It also needs to hire advisors in legal matters to avoid unnecessary costs associated with inappropriate decisions.