Wal-Mart's Exit from South Korea and Germany: What Went Wrong - The Case Centre (2024)

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Wal-Mart's Exit from South Korea and Germany: What Went Wrong - The Case Centre? ›

Analysts perceived that the company failed to adapt its business model to both countries, failed to understand the customers of the respective countries and therefore struggled to grab a significant market share in the competitive German and South Korean retail market.

Wal-Mart failed in South Korea and Germany because they didn't adapt to the culture as well as they did with the Mexican culture. In addition, the products that Wal-Mart offered weren't up to the standards of South Korean and German culture.

Walmart didn't understand that in Germany, companies and unions are closely connected. Also, The German workforce is accustomed to negotiating their pay with their union. This caused friction between the workers and the company.

Walmart failed the endeavor because they attempted to apply their proven US success formula in an unmodified manner to the German market, and through the process, they failed to offer German customers any compelling value proposition in comparison with its local competitors.

Wal-Mart sold its 16 stores to Shinsegae for 825 billion won ($882 million), which constituted a considerable loss. WalMart was the second Western retailer to retreat from South Korea in less than a month.

Wal-Mart said that its decision to withdraw from South Korea was in keeping with its global growth strategy to expand in markets where they could realise the desired economies of scale.

Very simply put, Walmart's practice of selling below cost (loss leaders) was determined to be illegal in Germany. Without being able to have loss leaders bringing customers into the store, Walmart decided that their business model couldn't work here.

Walmart's exit from the German market was due, in part, to the fact that German shoppers could find lower prices at stores known as: adaptation of the marketing mix.

The retail sector is highly competitive and Wal-Mart is likely to face stiff competition from other indigenous and foreign-based retailers. The competition challenge is further compounded by the patronage issue, whereby local customers may prefer to shop at familiar and/or locally owned retail stores (Fox, 2011).

Walmart, in Germany, implemented a high-service/low-price business model in a market that did not appreciate the combination. Employees enthusiastically greeted shoppers at the door and offered help every 10 feet, which the unaccustomed Germans found annoying.

Why didn t Walmart work in South Korea? ›

Walmart's reliance on global supply chains and larger-sized packaging didn't align well with the preferences of South Korean shoppers. Additionally, strict regulations on opening new stores and limitations on retail operating hours posed challenges for Walmart's expansion plans.

Wal-Mart entered South Korea in late 1990s for its international expansion; however, IT had a major failure in this market and left Korea in 2005 as the American way of marketing did not translate well in Korea.

Walmart's "everyday low price" strategy, a hit in the U.S., confused Japanese consumers who prefer seeking out specific deals and sales. Japanese shoppers also favor fresh, locally-sourced foods, which Seiyu failed to offer.

German's were used to bagging their own groceries as it was not sanitary or normal for others to touch their items. Customers were not used to and did not like that Walmart employees would bag their groceries for them. Germans had their familiar discounted and walking distance stores they would go to.