Wal-Mart Failure in Germany

Journal of Economic Geography 7 (2007) pp. 451–469 Advance Access Published on 14 May 2007

doi:10.1093/jeg/lbm010

Barriers to ‘US style’ lean retailing: the case of Wal-Mart’s failure in Germany

Susan ChristophersonÃ

Abstract

Wal-Mart’s exit from the German market in 2006 after 10 years of attempting to achieve sustainable competitive advantage contributes an interesting case to the small but expanding literature on ‘failure’ in international investment. The work on the disinvest decision in all its forms has been critical to a re-conceptualization of the international investment process as dynamic rather than static, linear and inexorable. An important segment of the work on investment and disinvestment as dynamic processes focuses on the environment in which investment and disinvestment decisions evolve. While the environment of the host country market has begun to be examined, the market environment of the country in which the retail transnational corporation (TNC) originates also affects the international disinvestment process. To explore this ‘home country effect’, I examine the resources Wal-Mart brought into the German market and their ability to use those resources in the German context. WalMart’s resources were shaped by the market governance regime in which the firm evolved, and not insignificantly, over which it had and has influence. Within this theoretical frame, Wal-Mart’s reliance on the resources of network dominance and autonomous action that made for its success in the USA contributed to unsuccessful strategies in the German retailing market. Keywords: lean retailing, Wal-Mart, Germany, corporate governance, globalization JEL classifications: D8, F23, L5, L81, P48 Date submitted: 3 December 2006 Date accepted: 3 March 2007

In July 2006, Wal-Mart Corporation announced that it would sell its holdings in Germany and end its 8-year effort to become a dominant player in Germany’s retail market. Wal-Mart’s failure in Germany had been...