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Wall Mart: Organizational Behaviour

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Wal-Mart case:

Wal-Mart started its global operations in the early 1990s when it opened its first inter-national store in Mexico. To be successful, the Wal-Mart's decision to go global supposed a commitment of the company to work on its understanding of different kind of non-US culture. The case shows us that when Wal-Mart entered the German market in 1997, assumption has been made that all the techniques that made Wal-Mart the US #1 retailer would be as efficient everywhere. The facts prove that it's not necessarily true: in 2006, after a decade of loss, Wal-Mart announced its decision to leave the German market. Two months before, Wal-Mart was deciding to retreat from South-Korea for the same reason...

A cultural mismatch:

If economic and marketing factors have to be taken into account, a general misunder-standing of the German culture was a major reason in Wal-mart's failure to take over the re-tail market of Germany. And this story reveals that such errors are not limited to a lack of research in delimiting the local consumer's behavior but involve an incomprehension of the German work culture too.

The OB theory that the most important challenge for manager is the cultural diversity tends to be confirmed by this case.

Organizational behavior challenges for Wal-Mart:

I) Within the organization:

a) Relationship with employee:

OB for company is used to improve relationship of collaborator in order to provide effective-ness for the organization. Directed from the Bentonville (USA) headquarter, Wal-Mart Ger-many has faced several problems trying to integrate non-American employees to Wal-Mart's corporate culture. The company initially installed American executives, who had little feel for the German way of working. The result wasn't convincing:


When Wal-Mart entered Germany, US managers didn't want to learn German. They simply decided that English would become the official language of the company in Germany. This obviously resulted in several communication problems for the German employees. Ac-cording to the document: "making English the official language affected employee morale, with employees starting to feel like outsiders and getting increasingly frustrated."

-The Wal-Mart ethic, rules and regulations:

Too many rules of Wal-Mart weren't adapted to German work culture.

For example: the day Wal-Mart translated its internal ethic code in German was a bad day for the management. A caution against supervisor-employee relationships was seen as a puritani-cal ban on interoffice romance, while a call to report improper behavior was taken as an invi-tation to rat on co-workers by employees. It created anger among workers and unions.

The German management of the company explained that the choice to addopt this american code was made after increasing requests by their American counterparts to do so. Employee's rights expert Manfred Confurius told the Financial Times Deutschland that US employees face more concrete and stronger restrictions, something that doesn't always trans-fer well to German work culture. On the same level, executives from acquired German firms were shocked to learn that they should henceforth share rooms during business trip, which is unconceivable to the German culture.

Wal-Mart's work regulation suffered only small adaptation like the end of the famous morning Wal-Mart chant by staff members, which was really out of the German culture. Some other improvements were made with years of experimentation, but those was oriented to obtain customer satisfaction and will be described below.

As a result, Wal-Mart, already known for paying low wages, was accused of not pro-viding good working conditions.

-Shortage of workers:

The bad relationship with employees leaded to a bad reputation for Wal-Mart as em-ployer. It caused problem to the retailer when it needed to hire workers for its stockroom. Due to the low wages it was offering, Wal-Mart was unable to stop a shortage of workers that de-layed the movement of goods, leading to excessive stockpiling. Those stocks eroded the mar-gin of the US firm, helping it to propose competitive prices.

Relationship with unions:

There are many differences in relationship with unions between the US and the EU. Wal-Mart didn't understand these differences quickly enough. The company never established comfortable relations with its German labor unions.

The first problem was that the retailer tried to discourage the formation of unions as it do in US. For the German market, such policy is impossible to implement, unions there have strong relationship with company and are important in the eyes of the workers. "They didn't under-stand that in Germany, companies and unions are closely connected," said a representative for a union in Wal-Mart to the New York Time. "Bentonville didn't want to have anything to do with unions. They thought we were communists." The company also rarely consulted the elected representatives of its employees.

Such attitude explains that Wal-Mart refused in 2002 the centralized wage-bargaining process, accepted in the whole German retail industry. The company even announced in the same time employees lay-offs and store closures for cost efficiency. Because of this attitude, Wal-Mart employees went on strike and organized a walk-out from Wal-Mart stores. Not ex-actly something that could give a good image of the company.

The best example to show Wal-Mart's misunderstanding of the German situation was a suit in the state court filed by the trade unions. Wal-Mart was reluctant to give them access to financial data such as balance sheet and profit and loss account statements on its operations in Germany. Such infraction is unforgivable for unions, which have the legal right (and the duty) to have those informations.

b) Integration of two companies:

Integrate Wertkauf and Interspar to Wal-Mart's structure was a major problem for the US retailer. John Menzer, head of Wal-Mart International, said, "The challenge of putting the two chains together was more than we thought."

The Wal-Mart's decision to shut down the headquarters of one of the chains



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