Case Study Of Cultural Issues Faced By Wal Mart In Germany

Introduction

The integration of foreign business has started to play a significant role in social, economical, and political level in the last two decades. The transformation of distinct foreign companies means that it implies bringing cultural organizational factors, socio-cultural variables, attitudes and behavior of individual or group of employees to nation where it operates. In order to manage all these dissimilarities in cultures, there is a need for suitable manager with leadership and management skills along with creative thinking ability to handle the cultural distinctions. In cross-cultural management the manager either will accept the current culture of the workers of particular country or will bring its own individual culture to the workplace and it will play a very imperative role. In the world there are numerous cultures and one cannot precisely specify the exact distinct management style from particular country. It differentiates how particular management style is fitting for specific country and organization. Revolution of an organization to another country brings with itself the new way of thinking. So in accordance with cross-cultural management, the Wal-Mart’s case in Germany will be explored with regards to it’s inappropriate leadership approach.

Wal-Mart is a large US based retail corporation. Sam Walton opened the original retail store in Rogers, Ark in the year 1962. With his mind set on his values, Sam Walton erected what is now the largest retailer with a vision that pioneered various innovative business practices, and afforded Sam and his family plethora of success (Success Story, 2013). Sam had one vision for his establishment at the time of its birth: lowest prices In the market with best customer service. Within the first fiscal year, this store saw 45% rise in the number of sales. This growth only continued as Walmart embarked on the national market in just 8 years of its opening (1970) and was listed in the New York Stock Exchange with $78 million in sales under its belts. This growth was accompanied by the expansion of the retail giant into various markets, such as jewelry, grocery, pharmacy, and more. This American retail giant than enters the most developed European market (Germany) in 1997. It faced most discussible failure of the century. Due to Poor financial performance, Walmart never officially announced the losses during its course in Germany. Wal-Mart fails in Germany and cultural factors plays substantial role in this massive decline. Wal-Mart was facing various cultural issues for e.g. they failed to address the differences between US and German culture, local customer market, lack of cultural engagement capability and lastly the poor employee management practices which in return lead to employee demotivation. Walmart’s managers in Germany could not manage to motivate it employees but also failed in having effective communication. They ran the organization in Germany as per American culture and failed to understand German’s in every aspect. S o this report will specifically highlight issues of inappropriate leadership approach with relevant cross-cultural management style and various theories will used here, such as Hofstede, and GLOBE Project in cross-culture management will be applied to Walmart’s catastrophe in German market.

Cross-Cultural Analysis

Beginning of the 19th century nationalism ideologies started to play and important role in the foundation of state nation. Development in ideology led to creation and enhancement of state culture in order to be different from each other. As the cultural characteristics developed the area of management developed as well, which created to mark the management styles within corporations. All these improvements led countries to embrace different cultures in organization.

Cross-Cultural Communication

Both US and Germany are among the most successful countries and cultures in the world. The Germans are not exactly an unintelligent, unreflective, insensitive people, instead they consider direct communication to be honest, transparent, efficient and also respectful because they do not want people to misunderstand them. Germans want to be understand and understood. As for Americans their communication culture is different, they approach important topics cautiously. They use euphemisms to transmit awkward messages. They consider indirect communications to be polite, sophisticated and effective.

Culture and Organization Culture:

Culture is that complex whole which includes knowledge, belief, art, law, morals, custom, and any other capabilities and habits acquired by man as a member of society. According to Tylor’s statement we can identify that each variable is influencing the conduct of human behavior which will affect the management style in future. It also draws attention to factors like knowledge, belief, and habits which will change management capabilities of human. Belief and knowledge can be considered as theoretical part whereas habits as practical side of management. Organizational culture is also a part of culture which is followed by every member of the organization, however national culture plays important role in managing the operations of the company. Hofstede definition of organization culture is: 'Culture is the collective programming of the mind that distinguishes the members of one group or category of people from others'. From his point of view, we can study that organizational culture is important and diverge on practical level. Also national culture is one of the variable that figures the hierarchical culture.

Hofstede’s Cultural Dimensions

In a globalized world where innovation is growing quick and it influences the working condition, for example, various individuals with various societies started to convey and work with one another. From one point it is positive to work in different habitat, society, cultures but it also has negative impact as all managers and organization cannot deal with different cultures of different countries. This is where organization culture plays a vital role in handling or managing the cultural clashes within organization. Cultural differences theories conducted by Hofstede in 1960 has six cultural dimensions. This dimensions will help to analyze Wal-Mart’s misadventure in Germany from cultural approach. The six dimensions are as following Power Distance, Individualism, Masculinity, uncertainty Avoidance, Pragmatism, Indulgence. The US and German culture dose not differ much in power distance; the German’s are 35 where US is just 40. In Germany co-determination rights are similarly broad and are taken into consideration by management. Direct communication and participative style is common, and controlling is disliked.

As for US power distance defines as the level of person who is capable and have the skills have the right over person who is not that skilled. Thus they do not give equal right to person who is less skilled than them. From all these attributes we can figure that in Wal-Mart case the company faced all above mentioned problems. Communication was not direct and American manager power was seen on employees. They faced issues internally as well as externally due to cultural differences and for not adopting the German culture.

Individualism: German society is individualist society with score of (67) and US with (91). For German individual private successes and moralities are important. German’s strongly believe in the ideal of self-actualization. The Loyalty for German’s is based on personal preferences for people as well as a sense of duty and responsibility. Communication is ideal to be “honest, even if it hurts”. As for American organization, hierarchy is convenience and manager rely on individual employees. Communication is informal. By this we can seek that Wal-Mart required more individual work, and German employees in Wal-Mart did not get this opportunity which affected the performance and behavior of the employees. Due to this reason there was gap between managers and employees of Walmart, and employees felt like outsider or foreigner in their own country.

The third dimension of Hofstede is Masculinity: Germany is considered a Masculine society with score of (66), whereas US with score of (62) and this shows that its typical American behaviour. Both countries are seen at same level on masculinity which means that in both countries success, competition and status is shown and it determines the society. Wal-Mart did not face any issue in this dimension; however, the clashes of other cultural dimensions affected the masculinity dimension.

The Fourth dimension is uncertainty avoidance: Figure shows that Germany scored (65) and US (46). As Germany is on high end there is a marginal preference for uncertainty avoidance, as details for every work or project is well thought out. In Composition with low power distance, where the reliability for own decision is not covered by huge responsibility of manager. As US scores below average in uncertainty avoidance they have acceptance for new ideas, innovative products and a willingness to try something new or different. Germans rely on instructions, regulations and protocols. So according to this Walmart did not consider high uncertainty avoidance of Germany and therefore the actions embraced by American manager was not suitable for German employees. Employee’s motivation was affected by the internal changes and this did not allow employees to form unions and they did not have any employee representative.

The Fifth dimension is Pragmatism: There is a huge difference between this dimension between Germany (83) and US (26). In such pragmatism society individuals believe that reality differs particularly on setting, system and time. Germans exhibit ability to change practices and measure their working on a short-extend source, which drives characters to an attempt for quick results inside the organization. The reason for loss is not taking German culture in consideration, where Walmart thought they can make fast money without following cultural dimension of the country. The Sixth dimension is indulgence where Germany scores 40 and US 68 as shown in figure. Countries with less indulgence rely on social norms, and controls the desires. As US indulgence is higher than Germany this showed that Walmart desired to make fast profit in short time span, however they did not consider that Germans can control desire and will not adopt any culture fast.

According to House R.J (2004) Global Leadership and Organizational Behavior Effectiveness (GLOBE) is organized for long run project in order to “conceptualize, operationalize, trust and validate a cross level integrated theory of the relationship between culture and societal, organization and leadership effectiveness”. Leaders determine values, cultures, changes tolerance and employee motivation. They shape institutional strategies including their execution and effectiveness. They influence those around them in order to reap maximum benefit from the organization’s resources, including its most vital and expensive: its people. As to House (2004) there are six leadership styles: performance-oriented style, team-oriented style, participative style, humane style, autonomous style and self-protective style. Walmart manager in Germany was not based on performance-oriented style as according to case study Walmart in Germany did not gave much importance to managers and employees by changing the working environment. Walmart Germany did not match it concern with the German national and social cultural variables. This largely affected the performance of employees. In team orientation style Walmart could manage to transfer its goals and purpose to employees due to language issues. Both Americans managers in Walmart and German employees were struggling to communicate with each other. In term of participative style Walmart did not involve his employees to be part of decision making for external factor for the benefit of its company, more over they were asked to do morning exercise, and chanting WALMART within the company premises. Walmart was been seen as annoyance for German worker because they were asked to do things which was not part of their culture and it was unusual practice for them. German culture apposes giving goodbye smiles to customers. Hence these are some incidents reported and it completely affected the performance of the employees as they were forced to work against part of their culture in particular (Knorr and Arndt, 2003). Walmart did not consider humane style as to be supportive for well being of its employees. For e.g. the wages for the Walmart workers was not compatible with working hours. Hence Ver.di, the largest union filed a case against Walmart Germany for not revealing the actual figures. Walmart acted in autonomous style, they were more classical and self-centric in their leadership approach and were rigid in applying their traditional strategies of Walmart in German venture without seeking any advice from employees and working committee of the organization. Walmart in Germany did not try to understand the culture and people, they also did not value their opinion and failed to understand them in personal level. They also made English as the official language to be spoken in organization. They pressured German executives to implement American style of management practices in workplace like colleagues were not allowed to date each other or flirt within organization. However, nothing worked out and eventually resulted in loads of internal and external consequences. According to House R.J. (2004) USA and Germany are culturally performance oriented, however they could not properly implement it due to lack of communication problems between Walmart manager and employees. Language also played one of the important role which affected the communication. Walmart in Germany valued itself and strategies at first than employees and other cultural factors.

Conclusion

Walmart managed successful across border entries which includes many foreign countries, however it could not survive German market. Walmart operated in well cultured and communicated culture. It was necessary for them to have concrete plan in regards to gain trust of employees and moreover they should have hired someone from German native who could communicate and understand people and take them along with the growth of organization. Employees were not given rights to work task which strongly demotivated them. It was necessary to transfer American culture to German culture which could have made easy for employees to understand task fully and organize strategies accordingly. Employee involvement was essential because it would have improved manager employee involvement. The right motivation would have also been effective which could have help managers to know employee’s abilities.

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