Walmart's International Ventures: Mexico's Success, Germany's Failure

This report provides a comprehensive analysis of Walmart's global expansion, specifically contrasting its successful ventures in Mexico with its failure in Germany. The report begins by establishing Walmart's market structure and then delves into the core of the analysis, which includes PESTLE analyses for both Mexico and Germany, Porter's Five Forces model to assess competitive dynamics, and an examination of Walmart's entry modes in Mexico. The report highlights the differing political, economic, social, technological, legal, and environmental factors that influenced Walmart's performance in each country. It explores the reasons behind Walmart's success in Mexico, such as favorable political and economic conditions, and contrasts these with the challenges faced in Germany, including cultural integration issues and competitive pressures. Furthermore, the report discusses the Ansoff Matrix and offers strategic recommendations for future international business ventures, providing valuable insights into the complexities of global market entry and expansion.

Global and Transnational
Business

Table of Contents
INTRODUCTION...........................................................................................................................3
WALMART IN GERMANY – THE FAILURE STORY...............................................................3
WALMART IN MEXICO ..............................................................................................................4
MEXICO PESTLE ANALYSIS..................................................................................................4
MEXICO 5 PORTER MODEL...................................................................................................4
ENTRY MODE IN MEXICO.....................................................................................................6
CHANGES EXPERIENCED BY WALMART IN GERMANY....................................................8
GERMANY PESTLE ANALYSIS.............................................................................................8
GERMANY 5 PORTER MODEL...............................................................................................9
THE WAY FORWARD................................................................................................................13
ANSOFF MATRIX ..................................................................................................................13
RECOMMENDATION.................................................................................................................13
REFERENCE.................................................................................................................................15

INTRODUCTION
Market structure of Walmart is Oligopoly as it is characterized by only few numbers of
suppliers and many more number of demand-able customers(Brown, 2016). Walmart tried to
expand its business in Mexico as well as Germany but due to certain factors, Walmart success in
Mexico but failed in Germany (Moore, 2016). Due to differences between economic, social,
environment, political, technological and legal factors of both countries, Walmart succeed in one
and failed in another (Banerjee, 2015).
This report will be focusing on the success of Walmart in Mexico and failure in
Germany. This Report will highlight on the market structure, entry mode, failure in Germany and
recommendations.
WALMART IN GERMANY – THE FAILURE STORY
The acquisition strategy adopted by Walmart was done in wrong way and was not
properly studied and analyses by Walmart before the acquisition (Chatterjee, 2017). Also, Stores
were established in poor places and there was no co-ordination in operations of Walmart. Also,
Walmart bore a lot of cost due to fast expansion. And to earn profit, the company was not able to
get the minimum sales volume which make business unsuccessful (Burke, 2017).
The lack of cultural integration is the biggest reason for failure and that is what happened
with Walmart in Germany. Many employees left Walmart after the acquisition and there was a
conflict between new management and existing employees (Steigenberger, 2017). Walmart
forced the use of English as the official language in the company and the new management did
not make any effort to retain existing employees, which made employees unhappy. Also, low
pay in the company were not worth for the quality of the products they sell. Walmart was not
able to keep employees in Germany easily, as in Mexico (Machleidt, 2019).
The main reason behind Walmart's success is most markets has been effectively captured
by their effective low-cost strategy, where they underestimate competitors and gain market share
(Farzin, Yaghubipoor and Nekoui, 2017). However, prices in Germany were cut by competitors
and Walmart was unable to provide goods at reasonable prices. In addition, the goods provided
were not on high discounts and also regulations of Germany were not allowed Walmart to sell
their products at lower price. Thus, Walmart was unable to get the cost, sale volume and profit
(OKOCHA and ELETU, 2016).

From the above chart, it has been illustrated that the number of stores in Mexico were
640 in year 2004. This has been increased by 2,442 stores, out of which 2,279 were retail stores
and 163 were wholesale stores (Number of Walmart stores in Mexico, 2019).
(Illustration 1: Number of Stores
Source: Wall-to-Wall Wal-Mart, 2004)

WALMART IN MEXICO
MEXICO PESTLE ANALYSIS
Political Factors – Mexico's policy and rules are in favor of Walmart growth. Walmart
got permission from the Mexican government to set up in-store branches in Mexico (Nandonde,
2019). Also, Mexico's political conditions are stable which make Walmart success in there
(Onyusheva and Seenalasataporn, 2018).
Economic Factors – Mexico bank rate is low which lead Walmart to pay low interest with
principal amount which positively impact the company's profitability(Liu, Zhu and Zhang,
2018). Due to low price of products and services of Walmart in Mexico, Mexican disposable
Illustration 2: Factors of Pestle Analysis
Source: Scanning the Environment: PESTEL Analysis, 2019.

income is remained high which improve their life style and wealth (O'brien, 2019). Also,
Mexico's economic stability helps company to grow more and enhance its profitability.
Sociology-Culture Factors – Company's ethical policy matches with Mexico (Zhuplev,
Stefl and Rohm, 2018). Mexican are friendly as compared to German (Aalto 2016). When
employees do smile at Mexican, they also do well behave with them (Goodman and Hawkins,
2015).
Technology Factors – In Mexico, RFID technology helped company to gain more profits
(Ross and Segal, 2015). This technology uses electromagnetic waves to identify and track the
tags which is attached to the products. This help Walmart to get to know about the sales analysis
(Capon and Go, 2016).
Legal Factors – In Mexico, tax rates is low as compared to Germany, which makes
company to more profits (Calcaterra and et.al., 2016). Hence, employment laws in Mexico has
mentioned the mandatory rest beaks. Therefore, in this employee can voluntary agree on this
mandatory off. Henceforth, the Mexican legal authorities is committed to enhance foreign direct
investment inflows in key sector by reduction corruption and improvement in competition.
Environmental Factors - Mexican uses plastics which makes business successful in
Mexico (Felix and Braunsberger, 2016). Company focus on various environmental factors of
Mexico such as waste management, energy consumption, packaging as well as several other
related areas which help company to grow in Mexico (Kumar, Anand and Song, 2017).
MEXICO 5 PORTER MODEL
Threat to new entrants
The company has developed a strong product identification in Mexico which prevents the
new entrants in catching customer attraction. Walmart has sufficient capacity to produce more in
order to lower the prices in Mexico which leads towards the development of sustainable business
(Picciotto & Mayne., Eds., 2016). Also, this company has strong brand identification and product
differentiation and customer loyalty. This organization has also has great access to distribution
channel which secure the distribution of the product and this is termed as one of the main
strategy.
Customer power
This model in the porter's five forces is focused towards the bargaining power of
customers (Mendoza-Velazquez, 2017). As this company deals with better quality of products in

low prices so intentional market of the firm is also focused towards the affordable prices that
result in low level of bargaining from the side of customer In Mexico.
Power of Suppliers
This is commonly considered as a bargaining power of suppliers. According to this factor
suppliers may exert their power by increasing the prices or reducing the quality. So as the
company is expanding the business in international market so they need to create a strategy
regarding the prices (Santos And et.al., 2018). In Mexico, company have to developed a strong
relationship with the suppliers. As the suppliers of the raw material in Mexico are limited so
company has developed a good connection with them so they supply a good quality of product in
reasonable prices.
Threat from substitute products
This factor of the Porter's five force is concerned with the substitute product and services.
At the time of establishing a new venture at international market, this retailing brand has also
expanded the variety of goods and services (Tulung, 2017). Along with the expansion of
operational capacity of the company, this firm provide various different range of services which
may act as a substitution to the product (Chen, Yang and Xiao, 2018).
Rivalry among the existing player
Due to the expansion for the business around the world, Walmart is also facing lot of
competitors in Mexico. Actually the main competitor retail market in Mexico are Kmart, sear
and target (Ang, Benischke and Doh, 2015). So in order to develop a sustainable company
internationally, Walmart have easily identified the strengths and weaknesses of the competitors.
In Mexico, the company have easily created the strategy for strengthening its sales.Hence, it has
been analyses that the market share of Mexico is at 23% that is about 2.5 % largest to the other
retailers. This firm has unique services so it can be cope up within the existing competition of
Mexico.
ENTRY MODE IN MEXICO
The entry mode of the Walmart in Mexico are mainly in favor of the industry as this
industry gained a sustainable development and achieved a great height of success (Mendoza-
Velazquez, 2017). These factors may be internal or external but the expansion of the business
activities may be depends on the market size, growth and government regulations in which are
completely has fulfilled its growth expectations in Mexico. As, the internationalization of the

business involves in participation of strategies which differ in degree of risk they present
(Muñoz, 2017). The entry modes of international business may be affected due to various types
of factors such as increasing cost of taxes and import duties and changing marketing needs of the
people living in different regions. Expansion of the business activities in foreign market can be
termed as internationalized business. On the other hand, various situations arises in terms and
growth of the globalized company in Germany. These factors may prevents the industry from
entering into the new business (Alexandros, & Metaxas, 2016). Walmart industry is private
organization which seeks to expand the business in Mexico.
Various entry modes factors are as follows:
Industry specific factors
Degree of internationalization: entry strategies of Walmart are mainly affected by the
differing the institutional context of USA (De Villa, Rajwani, & Lawton, 2015). With the
decision of expanding the Walmart business into foreign market, examining the degree of
Internationalization helps in accessing the market value of the stock present in the company and
book value of equity (O'brien, 2019). So basically, a valuation approach is used by Walmart in
Mexico in order to estimate the market value and book value. This approach may helps in
measuring both foreign revenues and assets overall all
Choice of entry mode by key competitors: There are two major types of market entry
mode that is equity and non-equity modes (Ofili, 2016). Equity mode mainly includes export and
various contractual agreement such as manufacturers, suppliers etc. Moreover, equity modes
consists of joint venture and fully owned subsidiaries. Walmart company have chooses equity
mode to establish international business in Mexico. This allows the company in expansion of the
business in the form of fully owned organization in foreign market. It increases the Risk factors.
Institutional
Government policies: Various political issues are involved with the entry of the business
into new foreign market of Mexico (Onyusheva and Seenalasataporn, 2018). This result in the
sustainable political environment of the firm. However, Government policies greatly influence
the growth and sustainability of the new Walmart business at Germany (Mathooko and Ogutu,
2015). Taxes and duties in export and import of the goods and products may be responsible for
the increased prices of the commodity and thus this may prevents the business to survive in this
competitive market of Germany.

Local distributor Availability : In this competitive world, most of the companies have
contracts with the local distributors (Atkin, Faber, and Gonzalez-Navarro, 2018). So in order
perform fast marketing access of the Walmart organization who have established a new venture
in Mexico, business manager have to find out the effective distributor among all (Pozzi and
Schivardi, 2016). Determining this factor may helps in approaching the effective entry mode in
expanding the business internationally In Mexico (Ofili, 2016). New ventures generally have
little control over distribution, sales and marketing of goods and services. However, Wrong
choice of distributor In Walmart Germany may leads to inadequate market feedback and thus it
may result in failure of Walmart in Germany.
Local infrastructure: As the choices and requirements of the customers may vary
according to the region and trend in which they are living. So Walmart company in Mexico has
clearly captured local infrastructure at the time of manufacturing if goods and services for the
people of same region (Iacovone and et.al., 2015). The level of development of physical
infrastructure such as roads, railways telecommunication, financial institutions and marketing
channels may effects the profitability of the firm.
Firm specific
Firm's degree of internationalization: Walmart company have to well expose to the
dynamics of international marketing environment that provides the easy accessibility of
international market of Mexico.
Marketing objectives: Approaching better advertising technique and marketing of the
Walmart product may helps in increasing the sales of the company (Iacovone and et.al., 2015).
Thus, it contributes towards the higher profitability.
Nature of product: It plays the important role in influencing the production and
manufacturing capacity of the Walmart (Picciotto, 2017). Company need to provide the goods
and services according to the marketing requirements of customers. So nature of goods and
services influences the buying decisions of the people and thus it affects the sales and
profitability of the firm.
Resources Availability : Venturing of the Walmart Company into international market of
Mexico requires the substantial commitment regarding the financial as well as human resources.
Therefore, the choice of the entry mode may depends upon the financial strengths of the

organization (Pozzi and Schivardi, 2016). Sound financial base of the Walmart allows them to
enter into the international market in the form of equity participation.
CHANGES EXPERIENCED BY WALMART IN GERMANY
GERMANY PESTLE ANALYSIS
Political Factors – The policies of Germany for big retailers is not in favorable. Also, in
Germany, working hours was low. There were various regulations that rendered the company's
resources and network. Also, there were hard and stringent policies for the retailers which
Walmart couldn't follow. These all factors make Walmart fail in Germany (Kuchinke, 2018).
Economic Factors – In Germany, company can't sell their products and services at a
lower price than a standard price just to beat the competition. While in Mexico, there is no
restriction for the price determination strategy. Walmart follows Cost-Leadership strategy in
which they sell high quality products and services at lower price. This strategy did not work in
Germany's economy and became a big factor in failure of the company in that nation.
(Sivalingam, 2018). Thus, Germany is 3rd largest energy importer. Therefore, service sector
contributes 70% of GDP. Hence, 29.1% agriculture backs 0.9%. Henceforth, the recent industrial
production growth rate is around 6.7%. Thus, domestic demand can be significant driver in the
economic growth of the country.
Socio-Culture Factors – Walmart has teaches his employees that while bagging the
products, they have to flash smiles at customers. In Germany, people don't smile at strangers.
When employees smile at German, this behavior doesn't impress them (Hackling, Chen and
Romain, 2017).
Technology Factors – Germany is a technologically advance country. Thus Walmart will
look after proper research and development under government. With an improvement in
infrastructure of retail firm and technologically hybrid distribution channel. It helsp in improving
technological capability and develop services as per National System of innovation for the
growth of enterprise(Tesch & Brillinger, 2019).
Legal Factors – The measures like Foreign Direct investment (FDI) and following of
different trade regulations will support in developing of effective incentive structure within
Walmart (Velásquez and Meunier, 2017). Other than this, suitable taxation measures and
employment laws are observed which will leads to hassle free performance of retail enterprise
(Fulbrook, 2019).

Environmental Factors – German follow green environmental policy in which they avoid
plastics stuffs such as plastic bags and plastic junk etc. Walmart uses plastics for the packaging
and bagging which didn't attract the German and they failed in Germany (Steger, 2015).
GERMANY 5 PORTER MODEL
Threat
Walmart have to consider various factors that are related with the new entrants of the
business but unable to match with new entrants who came up with new ideas into the market.
Due to increased in the number of competitor industries into the retailing business (Iacovone and
et.al., 2015). As, a result to the cost of product and its volume increases with the decrease in per
unit consumption. In order to prevent the high entry barriers for company, Walmart in Germany
have to adopt the updated technology that result in the successful development and sustainability
of the firm (Walmart Stores Inc in Retailing, 2017).
Illustration 3: Porter's five force
(Source:Walmart Stores Inc in Retailing, 2017 )

Customer power
Generally, Walmart industries in Germany fails to identify the needs and requirements of
customers living in Germany which result in lack of customer loyalty (LüttgeChen, B., Yang, H.
and Xiao, X., 2018ns and Diener, 2016). Due to the change in the culture of the country,
Walmart is unable to identify taste and preferences of the people which is one of the most
important reason for its failure.
Supplier power
As this organization buys the resources from more than 68000 suppliers for the
production of goods and services in the firm (Lüttgens and Diener, 2016). So in Germany,
Walmart cannot be able to build a strong interaction and often changes their suppliers in order to
get good quality of material. This is one of the main reason behind the failure of the company in
Germany.
Substitute product
As most of the businesses tried to imitate the successful business system of the Walmart
but cannot be able to acquire it (Onyusheva and Seenalasataporn, 2018). But due to the
availability of the substitute product, company is unable to meet the demands of the product and
hence the Walmart in Germany have to lose its loyal customers.
Rivalry among existing brands
As the industry is growing, the competition is increasing with rise in rivalry among firms
(credit and mack, 2016). this causes an impact on the market share of Walmart and affects the
approaches related to fixed cost of goods and services. Besides this, the corporate stakes of the
selected retail firm is also influenced affecting the performance.
MARKET DEMAND CHARACTERISTICS
Many factors that influence the demand of products and services of Walmart in Germany
and Mexico are as follows -
 Price – In Mexico, Price of products and services are low because Walmart uses cost
leadership strategy which makes price low. Low price lead to high demand. But, In
Germany, it was not possible because policies of Germany didn’t allow the company to
sell their products and service below the standard price. When, German get same
products and services by Germany company then they didn't choose Walmart because
their cost was high due to exchange rate (Chernev and Hamilton, 2018).