The impact of Wal-Mart's entry into the German and UK grocery markets

Abstract

Wal-Mart is the world's largest retailer with sales of $285.3 billion in 2004–2005; 20% of these sales are generated from international markets and it is two of these markets, Germany and the UK, that are the focus of the paper. The paper charts the entry of Wal-Mart into Europe within the context of increased competition in international markets among the “elite” group of transnational corporations which have the capability of disrupting the structure of foreign markets which they enter. Using a mixture of primary and secondary data sources, the purpose of the paper is to evaluate the success or otherwise of the implementation of the “Wal-Mart way” of doing business in Germany and the UK and to assess its impact on both markets. The results show that the German acquisitions have not been particularly successful because of the problems in integrating two disparate chains with different organizational cultures and a heterogeneous portfolio of stores. The highly competitive German grocery market has precluded Wal-Mart from realizing a key element of its global strategy—Every Day Low Prices (EDLP). Discounters, especially Aldi, are the price leaders in Germany. By contrast, the Asda acquisition in the UK has been much more successful. Asda was a good strategic fit for Wal-Mart and had already embraced aspects of the Wal-Martian retail proposition and corporate culture prior to the acquisition in 1999. The entry of Wal-Mart has led to a restructuring of the UK grocery market with low prices and value for money becoming key store choice attributes for UK consumers. [EconLit citations: F010, F230, L810]. © 2006 Wiley Periodicals, Inc. Agribusiness 22: 247–266, 2006.