Case “Wal-Mart in Europe”

Case “Wal-Mart in Europe”

The main challenges faced by Wal-Mart in Germany are:

* Germany has a strict planning and zoning regulation designed to protect traditional retailers. This planning legislation prohibited the construction of stores with more than 800m2 sales area in locations not designated for retailing

* The Law prohibited any retailer from selling a product more than 5 percent below its posted price, only that policy would be legal if Wal-Mart lowered the cost of the product for everyone at the time of the first claim.

* Germany has no legal minimum wage. Wage levels are set instead through a process of "coordinated" bargaining, in which state-level retail unions negotiate with employers' associations over the terms of employment contracts. Retailers who are members of the employers' associations are bound to the negotiated wages.

* Store Closing Law that limited store hours to a 6:30pm closing on weeknights and a 2pm closing on Saturdays. Stores could not open at all on Sundays, although each state was allowed to grant four exceptions each year. The law was designed to protect workers for exploitative working hours. It also had the effect of protecting traditional retailers from larger competitors, who could afford to keep their stores open longer with lower expenses.

* Wal-Mart's German competitors possessed greater penetration within Germany and utilized "zone pricing strategies," matching Wal-Mart's prices in areas where it was a direct competitor. One study found that certain products sold at Wal-Mart in Germany were 11%- 25% more expensive than those of its competitors.

* Unlike many of its German rivals, Wal-Mart offered credit card payment and free bags for goods purchased, improved store interiors, and friendly customer service. At first, it appeared that German consumers responded positively, though they were also skeptical. German shoppers quickly complained of a stranger approaching them when they entered the...