Wal-Mart's Departure from Germany.

Wal-Mart the most successful and biggest retail chain in the world, started with an objective to provide products to the customers at the lowest possible prices, starting its first retail outlet in Rogers, Arkansas(AK), in 1962 by Sam Walton, where the city had only 6000 residents living.   Lately Wal-mart has started its presence all over the world which is very much famous in starting its outlets with 100,000-200,000 square foot Super centers.  

The strategy behind the growth goal is to,

1. expanding into new markets with multiple formats;
2. opening new stores in existing markets; and
3. increasing sales at existing international stores

What are the Reason for Walmart to enter Germany market?

Germany is the biggest market in Europe and located centrally, strategically thinking that it can expand into other markets in Europe from Germany off late. The enter was by acquiring 21 Wertkauf hypermarkets, which was in need of renovation for new start up and the retail outlets were wholly owned subsidiary of the parent company.

Mistakes/Blunders done by Wal-mart which has forced them to shut down/ closure of its retail stored in Germany. 

Ownership: The company had complete ownership and had the flexibility in implementing its own approach for carrying the operations, but it failed to use the best out of it, for example.,

making delays in changing the name of the stores to Wal-Mart.

missed renovating the stores immediately, which has further lead to poor Wal-mart brand image( got an image of run-down stores)

No product/service differentiation maintained compared with competitors.

Lack of awareness of Germany legal system, and fell in a trap of strict zoning laws, thus delayed in opening new stores.

Wal-Mart’s failure to achieve price leadership and because of low profit margins sales forced not to reduce the prices. Further it is illegal to sell below the buying price in country like Germany.

Another major challenge faced by Wal-mart was the cultural differences between American and German consumers, where the customization was not carried properly to the need of the German market making a huge hindrance in the company's success.

Consumer Buying behavior: The consumer buying pattern was not properly assessed for its decisions, for example German people buy items esp.,food in low quantity, but not in bulk. Whereas the walmart stores were carrying huge share of food, which has reduced the operating margins.

Internal Problem: Cultural difference in the internally existed, where the german workforce is asked to follow the American management style practices, which forced the workers to resist the management’s demands.

External Environment/Legal Issues: Not scanning the environmental issues has made walmart to pay a huge price for exploiting the local labor laws which directly impacted by increasing Wal-Mart’s labour costs.

Merchandise Issues: Last but not the least, though the stores were carrying millions of dollar worth goods but couldn't meet the German customers need, as those products were not desired by them.

Wal-Mart has never became a well-recognized brand name in Germany, because of above reason and usually made fun saying in Wal-Mart’s shopping bags were free compared to other stores in Germany. Company departed the country with a small loss.  
FYI: Walmart has failed to make its presence in Germany and South Korea.

Read More

Samsung Hybrid Management System?

Samsung, a well known International brand of  Korean origin, mainly into Consumer Electronics goods is the one which has managed to build a strong internal management system for its operations with an blend of Traditional Japanese system and Modern Western system.


It the recent past the strategies of the companies are being revamped and come with new latest management strategy.  Few of the strategies are,


Diversification Strategy:
In this competitive world one has to keep diversifying to mitigate the risk as the technology related market is very dynamic in nature. But Samsung built an focus strategy where the Diversification was made within the businesses.


Penetration Strategy:
Thanks to globalization, helped the company not to get dependent only in internal market, but to tap both internal and external capital markets. 


Innovation Strategy:
The Focus of Continuous improvement and applied Research and Development(R&D) but also on innovation, marketing and design and establish brand and premium pricing models are being applied with price competition being aware.


Supplier Relationship Strategy:
Long term relationship with suppliers are built and contingent relationships with them based on market pricing with a level of some competition.


Human Resources Strategy: 
Interweaving of internal workforce not limiting to internal labor market dependence which has resulted in long term relationship but also with external labor market attracting by the market competition.  Entry level recruitment are kept open every year with an limit and open recruitment system is followed by samsung for experience specialists.  The company has a co-existence of seniority based and merit based promotion and compensation as well as mostly standardized and individualized incentive system.

Read More

The Balanced Scorecard, Competitive Strategy, and Performance

The objective of this summary is to explain the different types of indicators and various types of groups who give emphasizes on these perspective indicators in balanced scorecard for the purpose of formulating competitive strategy.

The Balanced scorecard (BSC) takes both financial and Non-financial performance indicators for the purpose of measuring the performance for an accurate decision making.  The major indicators/management control perspectives considered by the BSC are Customer perspective, internal business perspective, Innovation and learning perspective, and financial perspective.  Taking these things will allow the business to tailor its strategy, communicate those objectives to all, and seek for feedback.

In product-market strategy under competitive environment, four person are said to be involved, namely Prospectors, is a person who constantly tries to innovate new product and look for new market opportunities.  Defenders, who heavily try to create an efficient production for the purpose of creating a stable set of products and customer base.  Defenders can be further be classified into two, Low-cost defenders and Differentiated defenders. Analyzers, are the ones who tries to maximize the opportunity for the profit, they closely follow prospectors to respond quickly.  The fourth and final is Reactor, who does not respond to any product or market problems.

In a study conducted among many firms to find out the competitive strategy type adopted by them, and the emphasis placed by them on different dimension in the balanced scorecard.  Further all the archetypes are further divided in High performer and Low performers for better analysis which say, High and Low performing Prospectors are giving almost equal importance on the Innovation and growth perspective, however high performing prospectors give more emphasis on Financial and Customer Perspective than low performing prospectors. High performing Analyzers gives more emphasis on all perspective than low performing Analyzers.  A low cost defender has given lesser emphasis on Customer perspective and the innovation and growth perspective as these things will quest for efficiency. Finally, the High performing differentiated defenders are more of maintaining a greater relationship with customer, and should keep on working to server better for them. So it can be said that they give more emphasize on Customer and Innovation perspective as expected.

In can be concluded that, Irrespective of any type of group it can be said that the emphasize has given more on Customer Perspective compared to other perspective, which will further gives birth to the concept of Customer Relationship Management (CRM) principle, for a better management and further it can be said that there is no need to place equal weight for all the four perspective, but only to those which it needed based on the type of the group it falls under and only those which are considered as major contributors for business success.  But, the firm must also improve it bottom-line for satisfying its investors and maintain their confidence, so the emphasis has to be done even on Internal Business Perspective.

Which means it can be said that a fairly balanced approach of perspective has to be marked in the Balance scorecard and should achieve it not only for company’s growth but also for gaining a competitive advantage. 

Read More