Cultural values have a great impact on all aspects of the society, and their roots can be traced in many spheres, sometimes quite unexpected ones. Any activities that take place internationally should be necessarily adjusted to local cultures and traditions within every country. The purpose of this paper is to consider Walmart difficulties with entering international markets and to discuss general failures which took place during this process.
Walmart Stores Inc. is a multinational corporation, with its headquarters located in Bentonville, Arkansas (Brunn, 2006). Walmart was rated as the public corporation with largest revenue by Forbes Global 2000 (Brunn, 2006). The corporation is a giant retailer and its current strategy is to penetrate foreign markets, since the US market has already been saturated with different Walmart stores. With more than 8500 stores and departments located in 15 countries, Walmart is a very serious player in retail sphere, and it managed to become quite successful in several countries. However, it is experiencing a number of problems entering foreign markets, especially in those countries where the differences with American culture and perceptions are very significant. This paper considers Walmart experience in Germany, South Korea and Japan, and is aimed to address the major weak points and the ways of improving the situation.
Walmart International Problems
Walmart is sometimes called the world 14th economy (Schaefer, 2005); indeed, the corporation can be considered a separate economic power. However, it is often overestimating its power and is trying to impose its major working style everywhere, without paying attention to cultural differences. These attempts might lead to a failure, especially for countries where the whole lifestyle is totally unlike American. For example, Walmart was pulled out of Germany and South Korea in 2006 (Schaefer, 2005). The reasons of these failures are mostly in the inability of Walmart to adjust to different environment and to become flexible. The corporation is trying to impose US-like style of work and sales into other cultures, driven by its low-cost approach. However, even the core principles of Walmart may not work in some countries, where customers have other priorities.
In Germany, the outgoing approach of Walmart workers and the strict policy for the employees (e.g. prohibition of workplace romance etc.) were unacceptable for German culture, and in South Korea Walmart lost because of the style of stores and merchandise assortment (Schaefer, 2005). Although these reasons seem quite different, the cause behind them is the same – the inability of the retail giant to accept other culture, study it and respect the values of another nation. Instead, Walmart is trying to impose its values and needs through influencing legislation and governments with its economic power. For example, in the UK the corporation pushed the government to edit their planning policy statement and to remove the “needs test” (Holstein, 2007), which required to place retail development in the town centers, and not to place them in the suburbs if there was no clear need. In a similar way, Walmart is trying to lobby its interests in many countries. However, such strategy often results in a very bad attitude of the population, like it was in Germany.
A very characteristic failure of Walmart happened during 2005-2007 in Japan, and took place already after the events in Germany and South Korea (Holstein, 2007). In 2005 Walmart took control of Japanese superstore Seiyu (Holstein, 2007), and invested significant resources into the Seiyu chain. However, currently it is very close to failure in Japan, due to many reasons. Japanese culture is very different from American, and this is especially true about Japanese business culture. In Japan, the attitude to employees is family-like, and management is based on training and promotion, rather than firing. However, in 2004 Walmart demanded to fire 25% of Seiyu employees, which was about 1500 managers and other employees (Holstein, 2007). The negative resonance already started playing against Walmart. Secondly, Japanese consumer tastes also greatly differ from American: Japanese people prefer high quality for high price, and they tend to believe that cheap products are of low quality (which is partly true). As a result, the policy of Walmart to offer cheaper products is quite unpopular among the Japanese. Thirdly, Walmart preferred to appoint senior management of British and American origin, while in Japan there is very high level of distrust to businesses controlled by non-Japanese management. Finally, Walmart’s large superstores often go against the country’s space regulations (Holstein, 2007), and Walmart is trying to persuade the authorities to edit these regulations in order to open more superstores. For Japan, a country with very limited space and a special attitude to space, such actions cause a negative resonance. As a result of all the above-mentioned factors, Walmart’s Seiyu chain is experiencing heavy competition and a large level of distrust.
Walmart has made several critical mistakes in launching its departments in Japan and in many other countries. It is most likely that in Japan and in Germany, the retailer will not be able to gain back the trust of the community, at least in near future. However, in order to avoid such mistakes in future, the corporation needs to outline several important steps for entering a new market. First of all, it is necessary to analyze business environment and core values in this country. Secondly, these values and traditions have to be compared with general Walmart working style, and the elements which go against the generally accepted in this country norms and values should be adapted or even eliminated. Thirdly, in any country it would be wise to select the majority of senior management employees from native citizens. This will help the company to gain more trust and will also aid in adjusting to the new culture.
In case of Japan, Walmart should appoint Japanese to all senior positions, and should reconsider its low-cost approach; in Japan, it will be more profitable to focus on quality and freshness of the products rather than on cost. In general, Walmart needs to adopt a more attentive and respectful approach to cultural values of other countries in order to avoid failures in future.