Deadly Sins of International Business Blog

If approved by UK authorities, Asda, Wal-Mart’s British arm will be acquiring almost 200 UK stores of the Danish Netto chain for an alleged amount in excess of 1 billion US$. Acquiring smaller stores seems like a good move for Wal-Mart in Europe. First, shopping habits in many regions seem to change in a way that (an aging population of) shoppers start to develop a preference for more frequent shopping of smaller quantities in convenient locations. Second, zoning regulations prevent retailers from opening new locations. However, the usual caveats apply: first, Wal-Mart hasn’t done too well in a number of international markets, including European ones (just think of the disaster in Germany). Most recently Asda’s sales dropped inthe UK and it has been loosing market share to its competitors. Second, cultural differences. In addition to differences between national cultures that Wal-Mart sometimes has troubles with, there’s also the fact that Wal-Mart’s pervasive business model isn’t something that travels easily into other contexts. Looks like there’s some homework to do before the post-acquisition integration pains start.

Wal-Mart’s Lee Scott recently stepped down as CEO of Wal-Mart. He will be followed by Mike Duke. Duke, president of Wal-Mart International has been driving Wal-Mart’s global expansion over the past years. Choosing Duke over Castro-Wright, Wal-Mart’s head of US operations, seems to be a strong signal of increased commitment to international markets.

Chinese media has recently reported that Wal-Mart may add yet another country to it’s growing list of international failures. In 2008 Wal-Mart has 208 stores throughout China. Within the past 12 years of trying, Wal-Mart has not only failed to become profitable, but it even had to accept a loss in market share.  According to data from the Chinese Department of Trade, it has dropped from rank 17 in 2004/2005 to rank 30 this year. Before the background of previous failures, e. g. the one in Germany, it’s time to think about the reasons for Wal-Mart’s repeated problems in foreign markets. Could it be that their business model doesn’t fly in other countries? Is Wal-Mart entering the wrong markets?