External Environment Assessment Failure

External Environment Assessment Failure

Businesses can fail in new locations if they fail to assess the external environment and make correct interpretations. One such business that failed due to poor external environment assessment is Walmart’s conglomerate in Germany. In 1997, Walmart entered the German market by acquiring the German retailer Wertkauf. Walmart has been highly successful in the US due to its guaranteed low prices, inventory control, and efficient distribution. The mistake committed by Walmart is that the retailer applied their proven successful formula in the US to a German environment, hence failing to offer customers relative to local competition.

One aspect of the external environment that Walmart failed to assess is customer behavior. German consumers prefer to purchase from local consumers rather than large global brands (Pearson, n.d.). Such a behavioral pattern is partly attributed to most German consumers being environmentally conscious. Besides, German culture emphasizes quality over reputation, hence the decision to purchase products they are familiar with only. In the age of globalization, it is crucial to understand how culture impacts buyer behavior (Hitt, 2017). Walmart would have avoided the issue had the company undertaken sufficient market assessment.

Another area where Walmart could have assessed more elaborately is government policies surrounding compensation. For instance, Walmart used to pay its American employees minimum wage, and they probably wanted to transfer the practice to Germany (Pearson, n.d.). The company pays its employees minimum wage as part of its low-cost strategy. However, the German public criticized the company’s strategy, terming it exploitative. Marketing becomes extremely difficult if the general public turns against a company (Hitt, 2017). Walmart would have assessed Germany’s compensation culture and implemented an effective strategy.

To avoid the problems it encountered in Germany, Walmart should have studied customers’ cultural tendencies. For instance, Germans prefer personal space, which allows them to do their shopping independently without being assisted by assistants. Also, Walmart should have made shoppers their primary motivation while entering the German market. Instead of focusing on global standards, Walmart should have assessed their consumers’ needs and set a business model that aligns with these needs. Another key lesson from Walmart’s failure in Germany is that employees’ issues matter.

References

Hitt, M. A. (2017). Strategic Management: concepts and cases, competitiveness and globalization. Cengage Learning.

Pearson, B. (n.d.). German Lessons: What Walmart Could Have Learned From Lidl, And Vice Versa. Forbes. Retrieved January 16, 2023, from https://www.forbes.com/sites/bryanpearson/2018/02/05/german-lessons-what-walmart-could-have-learned-from-lidl-and-vice-versa/?sh=12b7afa0138c

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External Environment Assessment Failure

Describe a historical situation where a failure to assess and correctly interpret the external environment resulted in a business failure. What elements of the external environment were missed? How might the company have corrected this oversight? Cite any sources used to support your answer.