In 1997, with $100 billion in annual sales and 750,000 employees in 8 countries including the U.S., Wal-Mart decided to open 85 stores in Germany, a move Wall Street analysts applauded because it would pave the way for expansion into all of Europe. The retailer bought up a couple of smaller German store chains, and sent over an executive who had successfully run 200 U.S. Wal-Mart stores from headquarters in Bentonville, Ark., to manage the German operations. Nine years later, in July of 2006, Wal-Mart announced it would close down its German stores. The resulting loss: About $1 billion.
What went wrong?
Wal-Mart’s main mistake was blithely assuming that what worked in the U.S. would be just as effective in another country. First of all, that Bentonville executive in charge of Germany spoke no German, requiring all his direct reports to speak English at all times. (He turned out to be the German operations’ first of 4 CEOs in 4 years.) Worse, Wal-Mart (WMT, Fortune 500) exported its U.S. corporate culture wholesale — complete with a daily morning cheering session for store employees — and trained greeters and other staffers to ask customers “How are you today?” the way they do in U.S. stores.
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