Wal Mart in Europe Case study

Document Type:Case Study

Subject Area:Management

Document 1

While other retailers continued to make losses and struggled to overcome the effects of inflation, Walmart continued to grow amid many challenges, and by 1980, Wal-Mart became the first youngest retailer to exceed the one billion dollar sales level. Wal-Mart started to expand into the international spheres in the 1980s thus pushing other retailers out of the industry or reducing their market share. Walmart engaged in diversification by venturing into various segments such as Sam’s Clubs, more conventional grocery/ pharmacy stores known as Neighborhood Markets. Finally, Walmart established supercenters with a wide range of consumer goods all under one roof and by 1991, Wal-Mart became the world’s largest retailer. Since their establishment, Walmart has been successful in several markets and countries such as the United States and Mexico through the application of their EveryDay Low Price strategy, but the company failed to succeed in Germany for several reasons.

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According to Porter, an entity may position themselves against losing the market share by applying the supply-side economics or the demand-side economics (Porter). For the supply side economics, the organization may deter other entrants from coming into the industry on a large scale or forcing them to accept a cost disadvantage. For the case of Wal-Mart, for Wal-Mart to have survived the competition, it would have either bought all the stores of the existing retailers, which was impossible because of Germany’s restrictive laws or accept to franchise their products. On the side of the demand-side economics, an organization should ensure that the shifting cost of a consumer from one organization to another is high to bar competitors from taking a share of their target consumers.

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In this case, Wal-Mart’s entry and success into Germany was made difficult because of the restrictive government policy on the number of stores an organization can own, the limited number of operating hours, and land ownership policies. In a market where there are numerous entities, competition is expected to intensify, especially if the exit barriers are very high, and that a competitor is unaware of the rival’s moves. Wal-Mart had applied all tactics to try to remain competitive in the Germany market through their EDLP strategy and even through acquisitions, but the competitive conditions would not allow them to operate in Germany until they had to exit in 2006. According to Porter, a zero-sum competition occurs when one firm losses while another firm in the same industry gains (Porter).

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