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Executive Summary

Even by American standards, Wal-Mart must be considered as a success story without precedent. Founded by Sam Walton in 1962 in Bentonville, Arkansas, Wal-Mart stores offered customers a broad range of goods. In its first year, Wal-Mart Stores garnered $700,000 in sales, which increased to $5.4 million insales volume by 1974. In fiscal 1980, Wal-Mart became the youngestU.S. retail company, and the only regional retailer, to exceed $1 billion in net sales.In 2002, Wal-Mart s revenue equaled 2.3% of U.S. gross domesticproduct.Wal-Mart s key strategy lay in its Every Day Low Prices (EDLP) which it achieved through aggressive bargaining with suppliers, its efficient distribution system and inventory control as well as its unique culture. Wal-Mart was a relative latecomer to international retailing. The move overseas was driven in part by flagging domestic growth. By 1997, Wal-Mart possessed 41 Wal-Mart and Sam s Club stores within Mexico and also had 89retail outlets (under various names) within its control.During the next few years, Wal-Martexpanded into Puerto Rico and Canada.It developed its presence in Argentina , Brazil , China and the United Kingdom 1999). In Britain, Wal-Mart was able to successfully transplant their US strategy after acquiring ASDA. Wal-Mart s superior processes in supply chain and IT have ensured that it was able to provide the customers with 7 % lower prices than its competitors. During that same time, its competitors had also begun expanding into new markets. Clearly dominating the US retail market, Wal-Mart expanded into Germany (and Europe) in late 1997. Wal-Mart s 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. Upon closer inspection, the circumstances of the company s failure to establish itself in Germany give reason to believe that it pursued a fundamentally flawed internationalization strategy due to an incredible degree of ignorance of the specific features of the extremely competitive German retail market. Moreover, instead of attracting consumers with an innovative approach to retailing, as it has done in the USA, in Germany the company does not seem to be able to offer customers any compelling value proposition in comparison with its local competitors. Further, Germany had limited store hours, price regulations (prohibiting retailers from selling below costs), and stringent zoning requirements. Also, Unions were more influential than their US counterparts. This caused many problems for Wal-Mart in Germany. The report below details Wal-Mart s strategy that transformed it into a success story in US and other regions, reasons why it entered the German market followed by the issues it faced while operating in Germany. We then present strategic options that Wal-Mart can opt for to increase their chancesof success