Introduction to Business Winter 2006

An Approach to Case Analysis Winter 2006

What is a Case Study? A case study is a description of an actual administrative situation involving a decision to be made or a problem to be solved. It can a real situation that actually happened just as described, or portions have been disguised for reasons of privacy. Most case studies are written in such a way that the reader takes the place of the manager whose responsibility is to make decisions to help solve the problem. In almost all case studies, a decision must be made, although that decision might be to leave the situation as it is and do nothing. The Case Method as a Learning Tool The case method of analysis is a learning tool in which students and Instructors participate in direct discussion of case studies, as opposed to the lecture method, where the Instructor speaks and students listen and take notes. In the case method, students teach themselves, with the Instructor being an active guide, rather than just a talking head delivering content. The focus is on students learning through their joint, co-operative effort. Assigned cases are first prepared by students, and this preparation forms the basis for class discussion under the direction of the Instructor. Students learn, often unconsciously, how to evaluate a problem, how to make decisions, and how to orally argue a point of view. Using this method, they also learn how to think in terms of the problems faced by an administrator. In courses that use the case method extensively, a significant part of the student's evaluation may rest with classroom participation in case discussions, with another substantial portion resting on written case analyses. For these reasons, using the case method tends to be very intensive for both students and Instructor. Case studies are used extensively thoughout most business programs at the university level, and The F.C. Manning School of Business Administration is no exception. As you will be using case studies in many of the courses over the next four years, it is important that you get off to a good start by learning the proper way to approach and complete them. How to do a Case Study While there is no one definitive "Case Method" or approach, there are common steps that most approaches recommend be followed in tackling a case study. It is inevitable that different Instructors will tell you to do things differently, this is part of life and will also be part of working for others. This variety is beneficial since it will show you different ways of approaching decision making. What follows is intended to be a rather general approach, portions of which have been taken from an excellent book entitled, Learning with Cases, by Erskine, Leenders, & MauffetteLeenders, published by the Richard Ivey School of Business, The University of Western Ontario, 1997.

Beforehand (usually a week before), you will get: 1. the case study, 2. (often) some guiding questions that will need to be answered, and 3. (sometimes) some reading assignments that have some relevance to the case subject. Your work in completing the case can be divided up into three components: 1. what you do to prepare before the class discussion, 2. what takes place in the class discussion of the case, and 3. anything required after the class discussion has taken place. For maximum effectiveness, it is essential that you do all three components. Here are the subcomponents, in order. We will discuss them in more detail shortly. 1. Before the class discussion: 1. Read the reading assignments (if any) 2. Use the Short Cycle Process to familiarize yourself with the case. 3. Use the Long Cycle Process to analyze the case 4. Usually there will be group meetings to discuss your ideas. 5. Write up the case (if required) 2. In the class discussion: 1. Someone will start the discussion, usually at the prompting of the Instructor. 2. Listen carefully and take notes. Pay close attention to assumptions. Insist that they are clearly stated. 3. Take part in the discussion. Your contribution is important, and is likely a part of your evaluation for the course. 3. After the class discussion: 1. Review ASAP after the class. Note what the key concept was and how the case fits into the course. Top of page Preparing A Case Study It helps to have a system when sitting down to prepare a case study as the amount of information and issues to be resolved can initially seem quite overwhelming. The following is a good way to start. Step 1: The Short Cycle Process 1. Quickly read the case. If it is a long case, at this stage you may want to read only the first few and last paragraphs. You should then be able to 2. Answer the following questions: 1. Who is the decision maker in this case, and what is their position and responsibilities?

2. What appears to be the issue (of concern, problem, challenge, or opportunity) and its significance for the organization? 3. Why has the issue arisen and why is the decision maker involved now? 4. When does the decision maker have to decide, resolve, act or dispose of the issue? What is the urgency to the situation? 3. Take a look at the Exhibits to see what numbers have been provided. 4. Review the case subtitles to see what areas are covered in more depth. 5. Review the case questions if they have been provided. This may give you some clues are what the main issues are to be resolved. You should now be familiar with what the case study is about, and are ready to begin the process of analyzing it. You are not done yet! Many students mistakenly believe that this is all the preparation needed for a class discussion of a case study. If this was the extent of your preparation, your ability to contribute to the discussion would likely be limited to the first one quarter of the class time allotted. You need to go further to prepare the case, using the next step. One of the primary reasons for doing the short cycle process is to give you an indication of how much work will need to be done to prepare the case study properly. Step 2: The Long Cycle Process At this point, the task consists of two parts: 1. A detailed reading of the case, and then 2. Analyzing the case. When you are doing the detailed reading of the case study, look for the following sections: 1. Opening paragraph: introduces the situation. 2. Background information: industry, organization, products, history, competition, financial information, and anything else of significance. 3. Specific (functional) area of interest: marketing, finance, operations, human resources, or integrated. 4. The specific problem or decision(s) to be made. 5. Alternatives open to the decision maker, which may or may not be stated in the case. 6. Conclusion: sets up the task, any constraints or limitations, and the urgency of the situation. Most, but not all case studies will follow this format. The purpose here is to thoroughly understand the situation and the decisions that will need to be made. Take your time, make notes, and keep focussed on your objectives. Analyzing the case should take the following steps: 1. 2. 3. 4. Defining the issue(s) Analyzing the case data Generating alternatives Selecting decision criteria

5. Analyzing and evaluating alternatives 6. Selecting the preferred alternative 7. Developing an action/implementation plan Defining the issue(s)/Problem Statement The problem statement should be a clear, concise statement of exactly what needs to be addressed. This is not easy to write! The work that you did in the short cycle process answered the basic questions. Now it is time to decide what the main issues to be addressed are going to be in much more detail. Asking yourself the following questions may help: 1. What appears to be the problem(s) here? 2. How do I know that this is a problem? Note that by asking this question, you will be helping to differentiate the symptoms of the problem from the problem itself. Example: while declining sales or unhappy employees are a problem to most companies, they are in fact, symptoms of underlying problems which need to addressed. 3. What are the immediate issues that need to be addressed? This helps to differentiate between issues that can be resolved within the context of the case, and those that are bigger issues that needed to addressed at a another time (preferably by someone else!). 4. Differentiate between importance and urgency for the issues identified. Some issues may appear to be urgent, but upon closer examination are relatively unimportant, while others may be far more important (relative to solving our problem) than urgent. You want to deal with important issues in order of urgency to keep focussed on your objective. Important issues are those that have a significant effect on: 1. profitability, 2. strategic direction of the company, 3. source of competitive advantage, 4. morale of the company's employees, and/or 5. customer satisfaction. The problem statement may be framed as a question, eg: What should Joe do? or How can Mr Smith improve market share? Usually the problem statement has to be re-written several times during the analysis of a case, as you peel back the layers of symptoms or causation. Analyzing Case Data In analyzing the case data, you are trying to answer the following: 1. Why or how did these issues arise? You are trying to determine cause and effect for the problems identified. You cannot solve a problem that you cannot determine the cause of! It may be helpful to think of the organization in question as consisting of the following components: 1. resources, such as materials, equipment, or supplies, and 2. people who transform these resources using 3. processes, which creates something of greater value.

Now, where are the problems being caused within this framework, and why? 2. Who is affected most by this issues? You are trying to identify who are the relevant stakeholders to the situation, and who will be affected by the decisions to be made. 3. What are the constraints and opportunities implicit to this situation? It is very rare that resources are not a constraint, and allocations must be made on the assumption that not enough will be available to please everyone. 4. What do the numbers tell you? You need to take a look at the numbers given in the case study and make a judgement as to their relevance to the problem identified. Not all numbers will be immediately useful or relevant, but you need to be careful not to overlook anything. When deciding to analyze numbers, keep in mind why you are doing it, and what you intend to do with the result. Use common sense and comparisons to industry standards when making judgements as to the meaning of your answers to avoid jumping to conclusions. Generating Alternatives This section deals with different ways in which the problem can be resolved. Typically, there are many (the joke is at least three), and being creative at this stage helps. Things to remember at this stage are: 1. Be realistic! While you might be able to find a dozen alternatives, keep in mind that they should be realistic and fit within the constraints of the situation. 2. The alternatives should be mutually exclusive, that is, they cannot happen at the same time. 3. Not making a decision pending further investigation is not an acceptable decision for any case study that you will analyze. A manager can always delay making a decision to gather more information, which is not managing at all! The whole point to this exercise is to learn how to make good decisions, and having imperfect information is normal for most business decisions, not the exception. 4. Doing nothing as in not changing your strategy can be a viable alternative, provided it is being recommended for the correct reasons, as will be discussed below. 5. Avoid the meat sandwich method of providing only two other clearly undesirable alternatives to make one reasonable alternative look better by comparison. This will be painfully obvious to the reader, and just shows laziness on your part in not being able to come up with more than one decent alternative. 6. Keep in mind that any alternative chosen will need to be implemented at some point, and if serious obstacles exist to successfully doing this, then you are the one who will look bad for suggesting it. Once the alternatives have been identified, a method of evaluating them and selecting the most appropriate one needs to be used to arrive at a decision. Top of page Key Decision Criteria

A very important concept to understand, they answer the question of how you are going to decide which alternative is the best one to choose. Other than choosing randomly, we will always employ some criteria in making any decision. Think about the last time that you make a purchase decision for an article of clothing. Why did you choose the article that you did? The criteria that you may have used could have been: 1. 2. 3. 4. 5. 6. fit price fashion colour approval of friend/family availability

Note that any one of these criteria could appropriately finish the sentence, the brand/style that I choose to purchase must.... These criteria are also how you will define or determine that a successful purchase decision has been made. For a business situation, the key decision criteria are those things that are important to the organization making the decision, and they will be used to evaluate the suitability of each alternative recommended. Key decision criteria should be: 1. Brief, preferably in point form, such as 1. improve (or at least maintain) profitability, 2. increase sales, market share, or return on investment, 3. maintain customer satisfaction, corporate image, 4. be consistent with the corporate mission or strategy, 5. within our present (or future) resources and capabilities, 6. within acceptable risk parameters, 7. ease or speed of implementation, 8. employee morale, safety, or turnover, 9. retain flexibility, and/or 10. minimize environmental impact. 2. Measurable, at least to the point of comparison, such as alternative A will improve profitability more that alternative B. 3. Be related to your problem statement, and alternatives. If you find that you are talking about something else, that is a sign of a missing alternative or key decision criteria, or a poorly formed problem statement. Students tend to find the concept of key decision criteria very confusing, so you will probably find that you re-write them several times as you analyze the case. They are similar to constraints or limitations, but are used to evaluate alternatives. Evaluation of Alternatives If you have done the above properly, this should be straightforward. You measure the alternatives against each key decision criteria. Often you can set up a simple table with key decision criteria as

columns and alternatives as rows, and write this section based on the table. Each alternative must be compared to each criteria and its suitability ranked in some way, such as met/not met, or in relation to the other alternatives, such as better than, or highest. This will be important to selecting an alternative. Another method that can be used is to list the advantages and disadvantages (pros/cons) of each alternative, and then discussing the short and long term implications of choosing each. Note that this implies that you have already predicted the most likely outcome of each of the alternatives. Some students find it helpful to consider three different levels of outcome, such as best, worst, and most likely, as another way of evaluating alternatives. Recommendation You must have one! Business people are decision-makers; this is your opportunity to practice making decisions. Give a justification for your decision (use the KDC's). Check to make sure that it is one (and only one) of your Alternatives and that it does resolve what you defined as the Problem.

Structure of the Written Report Different Instructors will require different formats for case reports, but they should all have roughly the same general content. For this course, the report should have the following sections in this order: 1. Title page 2. Table of contents 3. Executive summary 4. Problem (Issue) statement 5. Data analysis 6. Key Decision Criteria 7. Alternatives analysis 8. Recommendations 9. Action and Implementation Plan 10. Exhibits Notes on Written Reports: Always remember that you will be judged by the quality of your work, which includes your written work such as case study reports. Sloppy, dis-organized, poor quality work will say more about you than you probably want said! To ensure the quality of your written work, keep the following in mind when writing your report: 1. Proof-read your work! Not just on the screen while you write it, but the hard copy after it is printed. Fix the errors before submitting. 2. Use spell checker to eliminate spelling errors 3. Use grammar checking to avoid common grammatical errors such as run on sentences.

4. Note that restating of case facts is not included in the format of the case report, nor is it considered part of analysis. Anyone reading your report will be familiar with the case, and you need only to mention facts that are relevant to (and support) your analysis or recommendation as you need them. 5. If you are going to include exhibits (particularly numbers) in your report, you will need to refer to them within the body of your report, not just tack them on at the end! This reference should be in the form of supporting conclusions that you are making in your analysis. The reader should not have to guess why particular exhibits have been included, nor what they mean. If you do not plan to refer to them, then leave them out. 6. Write in a formal manner suitable for scholarly work, rather than a letter to a friend. 7. Common sense and logical thinking can do wonders for your evaluation! 8. You should expect that the computer lab's printer will not be functioning in the twelve hours prior to your deadline for submission. Plan for it! 9. Proof-read your work! Have someone else read it too! (particularly if english is not your first language) This second pair of eyes will give you an objective opinion of how well your report holds together. Top of page

Lessons from Wal-Mart in Germany Corporate Communications Case Study Lessons from Wal-Mart in Germany: Importance of Integrating Corporate Values and National Culture Case Objective Discount retailing became a major international industry with the triumph of global capitalism at the end of the 20th century. This case will illustrate that researching and implementing effective cross-cultural communication strategies is critical for global success. Organizations must understand how national culture impacts corporate values and adapt constituent communications appropriately. When leadership can understand their international constituents and constituents can understand their parent company, cultural gaps diminish. This is a win-win situation for all parties. The bottom line: good communication means good business. Executive Summary In 1997, Wal-Mart continued a strategy of global expansion and purchased two German retail

chains for $1.6 billion (Edelsen and Drier). Eight unprofitable years and 85 stores later, WalMart backed out of Germany in July 2006 and sold the entire lot to Metro AG at a garage sale price. With worldwide success in locations like Mexico, Brazil, and Canada Wal-Mart was not prepared for this fiasco. Wal-Mart entered the German market with existing competition and a gloomy economic environment in 1997. The failure to recognize cultural differences and communicate properly with their German employee, supplier, and customer constituencies contributed to Wal-Marts poor image and inability to gain sufficient market share for profitability. Background Humble Beginnings In 1945 with $20,000 in borrowed money, Sam Walton purchased a Ben Franklin five and dime franchise in Newport, Arkansas (Slater 25). Six years later Walton wanted to expand,

but his wife refused to live outside a small town. He opened the first Walton 5 and 10 in the small town of Bentonville, Arkansas. Eleven years later in 1962, the future of modern discount retailing was born as Kmart, Target, and the first Wal-Mart Discount City all opened their doors for business. Sam Walton found his market niche in small towns catering to the needs of rural and suburban families. Lessons from Wal-Mart in Germany 2 Lacking capital, Wal-Mart grew slowly, opening only fifteen stores in the next eight years. In 1970, Wal-Mart stock was offered on the New York Stock Exchange. By 1980, 276 stores were spread across eleven states. The rest, as they say, is history. Business was booming for Wal-Mart during the 1980s and Wal-Mart dominated the market with 1400 stores. Going Global Shortly before Sam Waltons death in 1992, Wal-Mart began an aggressive globalization effort. Wal-Marts strategy epitomizes the capitalistic attitude towards global expansion. Having saturated United States markets, the company felt pressure to explore other opportunities. Investors and employee shareholders expected sales and profits to continue increasing. CEO David Glass commented in 1990, You constantly have to consider what youre going to be doing five years out. I think the stock market pressure has driven us to plan further out so that there will be some consistency next year, and the year after not only to our profitability but to our operating sales, our gross margins, and those sorts of things (Slater 95). Discount retailing had become highly competitive internationally due to favorable conditions like reduced trade barriers and advances in information technology. In addition, new markets with less disposable income were ripe for discount retailers (Govindarajan and Gupta). Wal-Mart opened the first international store in Mexico in 1991. Wal-Mart Today With 1200 discount, 2000 combination discount and grocery, and 565 warehouse stores worldwide (Hoovers), Wal-Mart is the largest retailer in the world. The numbers tell the story of this reigning global retail king. In fiscal year ending January 31, 2006, sales were $312 billion. 176 million customers in Asia, Europe, South America, and North America visit

Wal-Mart each week. With 1.8 million associates worldwide (WalmartFacts.com), Wal-Mart is the largest employer in Mexico and largest private employer in Canada. Wal-Marts almost unstoppable international success sets a high standard for the future of global retailing. In his autobiography Made in America, Sam Walton writes I believe our way of looking at things is going to come into its own in this decade and the next century. The way business is conducted worldwide is going to be different, and a lot of that difference is going to reflect what we egotistically think of as the Wal-Mart way (qtd. in Dicker 33). Today, Waltons statement regarding Wal-Marts impact on international business seems prophetic. After his death, Wal-Marts leadership made a commitment to keep the customer-focused corporate culture developed by founder Sam Walton. These principles represent the core of Wal-Marts identity. Among these ideals are the Three Basic Beliefs: Respect the Individual, Service to our Customers, and Strive for Excellence (Wal-Mart Stores). Sam Walton also firmly believed that excellent employer-employee relationships were essential to creating an enthusiastic store atmosphere. In turn, this would result in a positive shopping experience for the customer. Welcome to Germany Wal-Mart purchased the 21 store Wertkauf hypermarket chain in December 1997 and the 74 unit Interspar hypermarket chain in January 1998. Together, the acquisitions gave Wal-Mart Lessons from Wal-Mart in Germany 3 95 stores in Germany. Hypermarkets are large European discount retailers, selling food and nonfood merchandise. Why Germany? Thats the question Wal-Mart executives found themselves revisiting eight years later. With 80 million people, Germany represented Europes largest economy. Translation: lots of customers. In addition, the country is educated, wealthy, and technologically advanced. However, for two years Wal-Mart had been looking to enter the European market, and the purchase of Wertkauf and Interspar simply presented a good opportunity. According to Martina Menz, spokeswoman for Wal-Mart Germany, Theres no special reason why [Wal-Mart entered the market in+ Germany and not the U.K. or France,

she adds. The *German+ market was interesting, so when the opportunity came up to buy the Wertkauf stores, we took it (Andrews). Germany immediately presented economic and marketing difficulties for Wal-Mart. The discount retail industry in Europe was already mature with a number of successful players. Wal-Mart underestimated the tough competition from existing hypermarket chains like Aldi, which offered high quality goods at very low prices. German discounters were extremely no frills, similar to American warehouse stores like Costco and BJs. Big stores with cheap prices werent a new idea. Aldi had 4000 stores and a 19% market share (Ewing). For Aldi, location provided consumer convenience. Wal-Mart simply did not have enough stores in enough locations in an already crowded marketplace. 95 stores only represented between two and four percent of the market (Liang). Backed by the confidence of international success in Mexico (807 stores), Brazil (293 stores), United Kingdom (322 stores) and Canada (278 stores), Wal-Mart stayed in Germany until 2006 (Wal-Mart Facts) despite the absence of a positive cash flow. Problem Statement Wal-Marts strategy to export the successful, packaged corporate formula resulted in significant cross-cultural communication issues with constituents in Germany. Executive management failed to anticipate the clash of cultural differences between German traditions and the Wal-Mart way. Key Issues Wal-Mart, and other retailers considering globalization, must develop strategies for incorporating their corporate culture and identity into an international culture. Cultural Differences 101 Companies and executives doing business overseas benefit from learning the basics of business culture in their destination. Resources for this are plentiful, including websites, books, and consultants. However, Wal-Mart believed that the legendary focus on enthusiastic customer service and displays of employee devotion would win over Germans. After all, these elements were all

part of the corporate identity that had been well-received elsewhere in international locations. Executive Don Soderquist commented on worldwide acceptance of Wal-Mart culture, and confidently stated his belief that all customers were looking for the same thing Frankly, we find that customers want the same thingThe most amazing fact is that our associates around the world embrace and protect this culture that they have built over the last thirty-five Lessons from Wal-Mart in Germany 4 years (qtd. in Slater 133). The first president of Wal-Mart Germany, American executive Ron Tiarks, said The customers will be our guides as we build on Wertkaufs many strengths and begin introducing Wal-Marts culture, traditions, and support (Wal-Mart Facts-Newsdesk). Tiarks, who didnt even speak German (The Economist) and two subsequent American executives were later replaced by German Kay Hafner as president and managing director. Wal-Mart proudly implemented trademark customer service like grocery baggers. German customers, however, didnt like strangers handling their food. Store clerks, like their American counterparts, were trained to smile at customers. Greeters welcomed customers into the store. German males interpreted this as flirtatious and found it offensive (Norton). The Harvard Management Communications Letter discusses Germanys cultural nuances in a 2000 article. First and foremost, Germans are reserved. This is reflected in greetings (Newton and Bierck). Germany was described as the ultimate nonservice culture by Stephen Arnold, professor at the School of Business at Queens University, Kingston, Canada (Thorne). The German publics reservations about the arrival of Wal-Mart were reinforced by these actions. Customers quickly developed a negative image of Wal-Mart as out of touch with their customs and traditions. Hans-Joachim Koerber, chief executive of the Metro chain that eventually purchased the German Wal-Mart stores shares his bottom line opinion: The companys culture does not travel, and Wal-Mart does not understand the German customer (Hall, Bawden and Butler). The Paid Constituents: Employees Employees, like the reserved customers, didnt care for Wal-Marts public displays of corporate moral such as the morning cheer (Edelson and Drier). Wal-Mart also angered

German employees over policy and language in the newly translated ethics manual, distributed in 2005. According to German press, employees were told to follow the guide or lose their jobs. The policies reflected the conservative leadership of the American corporation. Employees were forbidden take gifts from suppliers, forbidden to have romantic relationships between employees and superiors, and required to report co-workers who didnt comply with the code (DW World). In Germany, the ethics code was seen as an intrusion into private lives and encouraging spying on co-workers. The German court in Wuppertal ruled that parts of the employee code of conduct were void and in breach of worker rights (Hall, Bawden and Butler). Part of the problem probably came from translation issues. In addition, German employees, unaccustomed to workplace restrictions, were quick to take offense to the new regulations. Seven years after opening in Germany, Wal-Mart officials once again failed to appropriately consider local response to one of their communications. This time it was the American code of conduct. Simply put by Ulrich Salibor, an official from the ver di service-workers union representing all German employees, They have to communicate better (Ewing). In Germany, unions are extremely active, and frequently are involved in corporate decisions involving working conditions. Union representatives said that Wal-Mart ignored these codetermination rules, and didnt keep employees adequately informed about decisions like store closings (Ewing). Hans-Martin Poschmann, secretary of the Verdi union said They didnt understand that in Germany, companies and unions are closely connected (Landler and Barbaro). Wal-Mart had a long-standing history of avoiding organized labor. Sam Walton himself believed unions were a threat and would increase costs. He refused to allow anyone to unionize a store (Slater 33). Lessons from Wal-Mart in Germany 5 German employees were not used to Wal-Marts aggressive style in integrating and consolidating acquisitions. Office closures and relocations, though a mainstay of U.S. WalMart culture, annoyed Germans. When Wal-Mart shut-down the Wertkauf corporate headquarters, executives quit rather than move 180 miles north to the Interspar office (Chain Store Age).

The Supply Chain Lack of mature vendor relationships, the bread and butter for retail stores, also contributed to cross-cultural problems for Wal-Mart. Each of the chains used different distribution schemes. Suppliers became confused by Wal-Mart orders, frequently resulting in no available stock (Liang). Wal-Mart was not familiar with German merchandising tastes, and often ended up with products that were unwanted by customers. For example, Wal-Mart sold pre-packaged meat, although Germans prefer to purchase meat from a butcher (Landler and Barbaro). Go Global, Think Their Local Wal-Marts expectation that German constituents would quickly adapt to the corporations culture proved disastrous. Management made a mistake by not anticipating the extent of cultural differences before opening shop in Germany. Lack of sensitivity and understanding of language barriers, local traditions, consumer behavior, merchandising, and employment practices irreversibly damaged Wal-Marts image in Germany. Even as early as the 1970s, researchers analyzed the connection between cultural awareness and global retailing. In 1989, well-known national and organizational cultures expert Geert Hofstede stated Cultural awareness is one of the subtle factors of competition on world markets, and firms which are better at it have a distinctive advantage over their competition(qtd. in Gerhard and Hahn). Recent research also confirms that cultural differences in consumer behavior will not decrease even as retail globalization continues. In fact, another study by de Mooij and Hofstede reports that cultural values become even stronger as consumer spending becomes global, and that retailing strategies for one country cannot be extended to other countries without adaptation. Their study also notes that values and traditions are often rooted in history and resistant to change (2002). This statement certainly applies to German culture. According to communications expert Paul Argenti, corporate communication strategies involve several variables: defining the organizations overall strategy for the communication, analyzing relevant constituencies, and delivering the messages

appropriately (35). He further emphasizes that an organization must analyze constituency responses to communications. The frequency and number of cultural missteps in Germany implies that Wal-Marts communication strategy appeared to disregard the importance of these concepts (see table 1). Potential Resolution A Six Step Strategy Giving consideration to the documented impact of national culture on retail globalization, Wal-Mart and other companies should implement a plan for cultural communication analysis to avoid similar scenarios. The main idea is to prevent problems rather than just responding. A six step strategy, suggested below, will decrease the extent of culturally based communications problems between the parent organization and an overseas local unit (see fig. 1). Lessons from Wal-Mart in Germany Step One: Location Analysis Overseas location scouting should take place over an extended period of time, and carefully explore the political, social, and cultural climate. When expanding internationally, retailers should not minimize how well the organization will assimilate into the new culture. In WalMarts case, Germany was selected primarily because of a central European location and economic attractiveness of the Wertkauf acquisition. Superficial research would have shown that Germany had strong national values resistant to change; possibly the most deeply rooted retail traditions in Western Europe. Step Two: Identify and Analyze Potential Constituents Significant advance research should take place regarding potential constituents. Using both existing studies and original investigation, organizations should identify all possible groups including but not limited to consumers, suppliers, employees, unions, politicians, and the media. Step Three: Develop Constituent Relationships After identifying constituent groups, actively cultivate relationships with representatives prior to opening doors for business. Wal-Marts merchandising problems were partially due to immature relationships with local suppliers and buyers. Advance meetings with labor leaders would have been helpful to establish expectations between Wal-Mart executives and 6

union members. Step Four: Align Corporate Values and Local Culture Use feedback gathered from location analysis, constituency analysis, and constituent relationships to conduct a detailed comparison of corporate values and national culture. Which aspects of identity need to be modified for cultural acceptance without sacrificing the overall corporate mission? Include a review of employee manuals, advertising, merchandising, work ethics, and other materials. This step will also force organizations to clearly define globalization goals. For example, is the bottom line dollars and cents? If so, then perhaps it is not necessary to use visual embodiments of identity in the new location. Wal-Mart put the company name on many German stores before being fully established. Immediately, the run down stores left an impression on consumers who formed a negative image of the Wal-Mart name. Step Five: Review Plan with Local Subject Matter Experts Assemble a team of corporate and local experts to review communications prior to distribution or other action. Ensure sure that reviewers check for any cultural gaps affecting constituent needs, values, or attitudes. Make necessary corrections. If required, revisit Step Four and continue through the process. Step Six On-going An effective cross- cultural communications strategy doesnt stop when business begins. Corporations have a responsibility to continue on-going analysis of their communications and constituent responses. Elements of the six step strategy should be revisited to evaluate problems before they escalate and cause irreparable image, reputation, and economic damage. Wal-Mart Response In their defense, Wal-Mart did attempt to resolve some of the issues in Germany by using aspects of the above strategy. The difference: Wal-Mart only acted responsively rather than proactively. Morning cheers were stopped, and greeters were eliminated. Stores were Lessons from Wal-Mart in Germany 7 remodeled and local brands were stocked. Perhaps the most entertaining attempt at developing customer loyalty was the Singles Shopping campaign which ran for over a year

at all German stores. For two hours on Friday evenings, hundreds of singles each week were given a big red bow to attach to their cart. flirting points were set-up throughout the stores complete with romantic merchandise (Bhatnagar). However, these attempts were too little, too late. Wal-Mart admits that Germany taught the company tough but valuable lessons about the corporate globalization strategy. With greater focus on strategic communication concerning constituents and the retail culture in Germany, Wal-Mart would have increased their chances of success. For example, maintaining Wal-Marts domestic identity abroad isnt necessarily in the best interest of Wal-Mart International or the local community. Britains Asda chain, Japans Seiyu, and Brazils Bompreo and other non-Wal-Mart names contribute 70% of international sales (Landler and Barbaro). The company learned to use local management who understand the customers. Wal-Mart now treats acquisitions with greater sensitivity and is careful with consolidations. Questions for Discussion 1. What would Sam Walton have thought about the cross cultural communication problems caused by the implementation of the Wal-Mart culture in Germany? 2. How could Wal-Mart have maintained corporate identity, in particular outstanding customer service, without offending German customers? 3. Assuming that a company follows the six steps, how would the organization determine if the differences were too substantial to attempt alignment of corporate values and national culture? What, if any, are examples of insurmountable differences? 4. What methods can an organization use to develop positive constituent relationships prior to opening for business overseas? 5. What lessons from the Wal-Mart experience and the six step strategy can be applied to improving communication during domestic expansion? Lessons from Wal-Mart in Germany 8 Table 1: Wal-Mart Germany: Constituency Communication Analysis

Constituency Corporate Policy or Communication Constituent Response Underlying Cultural Value Customers Grocery bagging service Smiling Greeters Selling pre-packaged meat Prematurely renaming local stores to Wal-Mart Selling U.S. size pillowcases Customers offended and didnt want their food touched Males viewed action as flirtations and negative Didnt buy meat Stores seemed old and uninteresting Didnt purchase because product wouldnt fit any German pillows Not a service oriented culture Germans are reserved, especially in public situations Fresh meat usually purchased at butchers Cautious about change Employees Wal-Mart Cheer Ethics manual translation Closing Wertkauf headquarters and consolidating with Interspar building

No flirting Dating discouraged between employee & superior Exclude employee rep from working condition decisions American president Increased working hours Not interested and resented obligation to participated; criticized in press Anger German executives quit because relocations were expected Anger; considered policy invasion of privacy Same as above Anger; felt American management was infringing on rights Perceived that management unable to relate to local issues Felt pressured and threatened by negative American-style work habits Germans are reserved. Not a service oriented culture Literal translation may have

contained insensitive wording subject to misinterpretation Germans dont aggressively consolidate operations and expect relocations during acquisitions Germans dont have a restrictive workplace environment, especially concerning personal matters; legal issue Same as above Workers traditionally included in discussions that concern working conditions; lack of understanding company/union relationships in Germany Need German-speaking local management to understand needs Lack of understanding German work ethic Suppliers Distribution from two locations rather than one American president Confused; lost respect for Wal-Mart management

Frustration; didnt understand German merchandising Need local buyers and merchandising experts Need German-speaking local management Sources: Compiled from Chain Store Age, Edelson and Drier, Gerhard and Hahn, Landler and Barbaro, Schaefer, The Economist, Thorne, Lessons from Wal-Mart in Germany 9 Fig. 1: Six Step Strategy to Improve Cross-Cultural Communications during Corporate Globalization Lessons from Wal-Mart in Germany Works Cited Argenti, Paul A. Corporate Communications. 4 th ed. New York: McGraw Hill, 2007. Bhatnagr, Parija. Lookin for a cheap date? Try Wal-Mart. CNNMoney.com. 15 Apr. 2005. 26 January 2007 <http://cnnmoney.com>. Dicker, John. The United States of Wal-Mart. New York: Penguin, 2005. de Mooij, Marieke and Geert Hofstede. Convergence and Divergence in Consumer Behavior: Implications for International Retailing. Journal of Retailing 78. 1(2002) 61-69. 3 Feb. 2007. ScienceDirect.com http://www.sciencedirect.com.libdb.njit.edu. Doldrms in Deutschland. Chain Store Age June 2001. Business Source Premier. EBSCO. NJIT Lib.5 Feb. 2007 <http://web.ebscohost.com.libdb.njit.edu>. Edelson, Sharon and Melissa Drier. Wal-Mart Exiting Germany. Womens Wear Daily 31 July 2006. Business Source Premier. NJIT Lib. 23 Jan. 2007. 10

<http://web.ebsco.com/libidb.njit.edu>. Ewing, Jack. Wal-Mart: Struggling in Germany. BusinessWeekonline. 11 Apr. 2005. 4 Feb. 2007 <http://www.businessweek.com/>. Gerhard, Ulrike, and Barbara Hahn. Wal-Mart and Aldi: Two Retail Giants in Germany. GeoJournal 62(2005) 15-26. 30 Jan.2007 <http://www.springerlink.com.libdb.njit.edu>. Geert Hofstede-Cultural Dimensions. 11 Feb. 2007 <http://www.Gerrthofstede.com>. Govindarajan, Vijay nd Anil K. Gupa. Taking Wal-Mart Global: Lessons From Retailings Giant. Strategy and Business. 4 th Quarter 1999. 1 Feb. 2007 < http://www.strategy business.com/press/16635507/13866?tid=230&pg=all>. Hall, Allan, Tom Bawden, and Sarah Butler. Wal-Mart Pulls Out of Germany at Cost of $1b. Timesonline. 29 July 2006. 30 Jan. 2007 <http://business.timesonline.com/uk/artce/0,,13129-2290398,,00.html>. Lessons from Wal-Mart in Germany 11 International Operations Data Sheet July 2006. Wal-Mart Facts.com. 11 July 2006. 26 Jan. 2007 <http://www.walmartfacts.com/_resources>. Kim, Lucian. Crossing the Rhine. U.S. News & World Report. 14 Aug. 2000. EBSCO. NJIT. 30 Jan. 2007 <http://web.ebscohost.com.libdb.njit.edu>. Landler, Mark and Michael Barbaro. Germany: Wal-Mart Find That Its Formula Doesnt Work in All Cultures. The New York Times. 1 Aug. 2006. CorpWatch. 26 Jan. 2007 <http://www.warprofiteers.com/article.php?id+13969&printsafe=1>. Liang, David. The Big Store Goes Global. Stern Business Spring/Summer 2003. 4 Feb. 2007 <http://wwww.stern.nyu.edu/Sternbusiness/spring_summer_2003/bigstore.ht

ml>. .Montopoli, Brian. Wal-Marts German Flop. CBS News 2 Aug. 2006. 2 Feb. 2007 <http://www.cbsnews.com/stories/2006/08/02/business/printable1860028.sht ml>. Newton, David, and Richard Bierck. Communicating in Germany. Harvard Management Communications Letter Oct. 1999. EBSCO . NJIT. 2 Feb. 2007 Norton, Kate. Wal-Marts German RetreatBusinessWeek.Com. 28 July 2006. 30 Jan. 2007 <http://www.businessweek.com/globaliz/content/jul2006/gb20060728_5947 52.htm?chan=top+news+top+news>. Ron Tiarks Named President of Wal-Mart Germany:. Wal-Mart Facts.com. 12 Jan. 1998. 26 Jan. 2007 <http://www.walmartfacts.com/_resources>. Schaefer, Louisa. Worlds Biggest Retailer Wal-Mart Closes Up Shop in Germany. Deutsche Welle. 2 Feb. 2007. <http://www.dwworld.de/popups/popup_printcontent /0,,2112746,00.html>. Slater, Robert. The Wal-Mart Triumph. New York: Portfolio, 2003. Thorne, Susan. Wal-Mart Offers Lessons, Challenges to European Retail. Shopping Centers Today May 1999. 4 Feb. 2007 <http://www.icsc.org/srch/sct/current/sct9905/02.php> Trouble at Till: Global Retailing. The Economist 4 November 2006. Lexis-Nexis. NJIT. 5 February 2007 <http://lexisnexis.com.libdb.njit.edu:8888/universe/printdoc>. Wal-Mart Announces Sale of German Business. Wal-Mart Facts.com. 27 July 2006. 26 Jan. 2007 http://www.walmartfacts.com/_resources/. Lessons from Wal-Mart in Germany 12 Wal-Mart Ethics Code Angers Germans DW-World.DE Deutsche Welle. 15 Mar. 2005. 26 Jan. 2007 <http://www.dwworld.de/dw/article/0,1564,1519102,00.html> Wal-Marts International Division: Global Strategy, Local Focus:. WalMartstores.com. 26 Jan. 2007

<http://www.walmartstores.com/international>. Wal-Mart Stores, Inc.. Hoovers Company Records. 2007. Lexis-Nexis. NJIT. 30 Jan. 2007 <http://web.lexis-nexis.com.libdb.njit.edu>. Wal-Mart Store Three Basic Beliefs Walmartstores.com 9 Feb. 2007. <http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg:252>.

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