Walmart Failed in Korea-- Brazil--Germany -Japan Once Again Highlights Wal-Mart’s International Problems-

Walmart Failed in Korea Because of a Lack of Walking Around


Y'know, you can read all the case studies you want. It's hard to fully understand international business without going to different countries and walking around.
So, let's talk business and walking around. I was in Seoul, South Korea for a month last summer.
I came to like Korean culture a lot. Koreans are some of the strongest, proudest people I've come across. They manage to combine a strong warrior culture with the utmost civility, order, cleanliness, and quality of life.
It's pretty incredible, actually. Many societies with a strong militant, warrior feeling about them descend into kind of a barbaric police state sort of vibe, constant terror in the air.
Korea? Nope. The men are proud, masculine, patriot, somewhat militant, but in a good way. There's a mix of strong, expansive, traditional values, along with a large minority undercurrent of modernity. It's really good - it's the best of all possible worlds. There's problems - the blatant racism and xenophobia kind of sucks, but I don't mind it so much. Nowhere's perfect.
Let's talk Walmart. We'll get back to Korea in a moment.
Walmart has really, really low prices. There's a few reasons for this - the company is one of the best in the world at logistics, so they manage to have fast turnover of inventory without keeping too much onhand at any given store. I'd love to see how their logistics division runs sometime - I remember reading that they've got some of the most sophistication about predicting and automatically changing stock at stores based on factors like the weather changing that are hard to pin down.
So they've got sophisticated logistics and forecasting, which means they order, ship, and sell goods quickly. That's important - the less time an item spends on the shelves unsold, the more money a retailer makes. The less time there's an empty spot on the shelves, the more money a retailer makes. Walmart keeps the shelves not empty most of the time while moving goods quickly.
This means they can charge less. And because they're so big, they've got a lot of bargaining power with their suppliers. There's over 4,000 Walmart-owned stores in the USA doing over $258 billion in sales.
Let's talk 1998. Population of South Korea in 1998 is around 46 million. American economy 1998 is in extremely good shape. Population of South Korea is just a bit under 50 million people. The fundamentals of the South Korean economy were excellent, but the Asian Financial Crisis had just destroyed the exchange value of the Korean won.
Walmart sees all of this and thinks something like, "Hey. Growing economy with good fundamentals. Just had a financial crash, so their currency is trading artificially low. We've got a strong domestic economy. Let's expand into South Korea."
That was, y'know, almost correct. This was a, "Hey! This is a fantastically good opportunity to buy!" type buy on Walmart's part.
And they got it all right. Everything. Except one little thing - Koreans weren't interested in going to Walmart.
Yup, the stars were all aligned, the U.S. dollar was artificially high, the South Korean won was artificially low, Walmart had been experiencing great domestic growth, and the South Korean economy looked like it would be in pretty good shape after the financial crisis shook itself out.
But Koreans weren't interested in the Walmart model.

To explain why, I'll say - you gotta go walk around South Korea. I can explain it and it'll make sense, but it's the kind of thing that wouldn't really resonate unless you go to Korea.
Korea's got the longest work hours in the developed world, and it's not even really close.
According to the OECD's 2004 report, Korean average work hours per year comes in at 2390. Japan, internationally renowned workaholic land? Only 1828. USA? 1777.
Now, I could show you stats all day, but what really drove it home for me was when I was walking back from a bar to where I was staying. I left the bar around midnight, and stopped to have a chicken sandwich and fries, maybe 12:30AM. There was some screwup in the kitchen of the fast food joint, so I wound up having to wait - after having already paid - for about 20 minutes. That's probably a rare occurrence in Korea, but it worked out well because I had a good chat with a Korean guy who works in the marketing/sales side of an animation studio.
He was in a full suit with tie, but his tie was loosened a bit. He looked worn out. After we got our food, we sat and chatted another 30 minutes or so. I ask him what he was doing - some kind of formal party?
Nope. He was just on a break from work. He wasn't even done yet. He started work around the regular time - 9AM or so - and was still working after midnight. He was going to work another hour or two before sleeping for a few hours, and then working some more.
He explained that this is a bit more hours than he normally puts in, but not that much more.
Wow.
So, Koreans work a lot. A whole lot. A lot, a lot, a lot.
When they're not working, they're not interested in lower quality experiences for less money.
Damn near everything in Seoul is really, really nice. All the restaurants, the food, the transit and trains, the buildings, everything. It's clean and prestigious and high quality and upscale. The whole country. It's like Japan in that regard.
So, Walmart rumbles in, gets a good price on the currency, and opens 16 spartan Walmart stores with low prices.
Things don't sell.
Now, I could again explain and explain, but I'll just say - you had to be there. The Korean chain Emart's parent company eventually bought the scraps off the Walmart Korea heap, Walmart losing $800 million in the process.
Emart and Walmart are night and day different. Emart is closer to a spa than a warehouse. As you walk through the isles, there's samples of fresh juice, fresh coffee, fresh grilled meat, fresh hot and iced teas... I'd just gone in to buy some tuna and fruit, and I walked out (1) having eaten effectively a whole lunch worth of little samples, and (2) with about five times more groceries than I intended to buy. There must've been 40 plus samples in there, all managed by different friendly, smiling staff.
Added to that, Walmart only opened 16 stores, and you see they lose their edge in the logistics system and being able to squeeze suppliers. Really bad combination - none of the economies of scale and established network/market intelligence, plus not understanding local tastes. Thus, their prices aren't that low compared to American Walmart vs. American Walmart's competition. And, Koreans aren't interested in their somewhat low prices. They're working themselves to the bone constantly, everyone's under crazy amounts of pressure (even the kids), and thus, they want every moment they're not working/studying/homemaking to be a full-featured luxurious prestigious life experience.
It speaks to not walking around enough. It's the kind of thing you could read in a case study plenty, but not "really get it" until you see it in real life. The numbers all worked for Walmart - growing economy, good price on currency, and local incumbents a bit weak due to financial situation. If the country rebounded quickly, they'd have gotten in on their real estate and capital investment cheaply. If the economy stagnated or deteriorated, they'd be in the kind of competitive environment that discount retailers thrive in.
But they didn't walk around enough. Koreans work, work, work, work, work. When Koreans aren't working, they want the best. Not the best price. The best. Combine that with a bit of a nationalist sentiment that favors local companies, and you've got an $800 million loss on your hands.
Y'know, getting into Korea with the American discounting model still might've been worth a try. But after some walking around, it seems like the kind of place you'd need a strong fallback plan if Koreans don't buy into discounting. Either a contingency plan to revamp the stores to Korean standards, or start negotiation in advance on licensing/partnering with a Korean company, something like that.
Numbers are good, but you can't just trust the numbers. Gotta walk around too.
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February 23, 2010 9:00 AM

Why Wal-Mart Failed in Brazil

By
Stacy Blackman
Columbia Business School professor Nelson Fraiman, who was born in Uruguay and played a significant role in designing the school's new Entrepreneurship and Competitiveness in Latin America (ECLA) program has some advice for North American companies hoping to succeed in Latin America.

"Firms in North America are getting better, but still aren't very good at learning about local cultures," Fraiman said during our recent conversation. "Large firms like Wal-Mart have gone to countries like Brazil and failed -- the same way they've gone to countries like Korea and failed, the same way they've gone to countries like Germany and failed -- mainly because of not understanding the local culture. The U.S. can become better at learning about the people and working together as equals, rather than imposing a series of systems and procedures that work here, but don't necessarily work there.

"Little details do matter," Fraiman continues. "If a country like Germany doesn't like to smile, then don't smile when you say have a good day. Little details are what usually kills American companies that forget to pay attention."
Columbia b-school students had a chance to observe the little details about their Latin American colleagues firsthand when the group of 37 inaugural ECLA participants attended two weeks of core classes in January. They will cover a lot of ground before the program concludes in January 2011.

"A lot of these entrepreneurs grow locally, and they're not aware of what it means to compete globally. If you want to get better, you have to shape up in your processes before you can think of going global. That's the integral part of the program," explains Fraiman.

For the next seven months, the entrepreneurs will work remotely on improving a process of their choice and measuring its impact. "When we meet in Argentina in August, they're going to tell us how well they've done. And if they pass that piece, we'll teach them how to put together a growth plan," Fraiman says.

While the program is designed to help Latin American entrepreneurs compete globally, there are also inherent benefits for North America when we take an interest in helping Latin American businesses.

"We're part of the same region, and I think it's important for the U.S. to have successful businesses in those countries, so the countries don't go the way of, say, Venezuela with the instability," says Fraiman. "If you include most of the people in the well being of the country, then it will be a stable country. That's what you want for your neighbors in South America, from a U.S. perspective. It brings stability to the region if the region becomes successful."
© 2010 CBS Interactive Inc.. All Rights Reserved. ========================================================================

Tuesday, July 10, 2007


Walmart Failed in Germany

Wal-Mart gives up Germany

By Mark Landler The New York Times
SATURDAY, JULY 29, 2006

FRANKFURT Wal-Mart Stores, admitting defeat in Germany's giant but cutthroat retail market, announced Friday that it would sell its 85 stores here to a German retailer, incurring a loss of $1 billion.

The decision to sell out to the Metro Group came two months after Wal- Mart sold its stores in South Korea and amounts to a rare retreat by the world's largest retailer from its breakneck global expansion.

In Germany, analysts say, Wal-Mart never got traction in a market characterized by unrelenting price competition, well-established discounters and the cultural resistance of German shoppers to hypermarkets, which sell fresh vegetables a few aisles away from lawn mowers.

"They walked into a triple-witching hour in Germany," said James Bacos, the director of the retail and consumer goods practice at Mercer Management Consulting in Munich. "They got into Germany at a time when the whole market was shifting away from their model."

Wal-Mart does not break down its results by country, but analysts estimate that it has lost money for most of the eight and a half years it has operated here, sometimes hundreds of millions of dollars a year.

Wal-Mart and Metro did not disclose the terms of the sale, but Wal-Mart said it would record a pretax charge of about $1 billion in the second quarter of fiscal 2007 to write off its German investment.

"We put a good effort into the country," a spokeswoman, Beth Keck, said. "But as we looked at our competitive environment here, we realized it was going to be hard to achieve the results we expect."

Wal-Mart, based in Bentonville, Arkansas, made a similar calculation in South Korea, selling 16 stores to a local retailer, Shinsegae, for $882 million. As in Germany, Wal-Mart did not appeal sufficiently to local tastes, and it struggled to compete with aggressive Korean discounters.

Despite these setbacks, Keck said, Wal-Mart continues to thrive in many countries outside the United States, with particularly robust markets in Mexico, Canada, Brazil and Britain. Wal-Mart had international net sales of $7.6 billion in June, a 29.5 percent increase over June 2005, though nearly two-thirds of that gain came from acquisitions.

Metro, one of the largest German retail conglomerates, said it planned to fold the 85 stores into its chain, Real, which is bigger than Wal-Mart but also ailing. Wal-Mart's German stores employ 11,000 people and generate €2 billion, or $2.5 billion, a year in sales, according to Metro.

By adding those stores to Real's 550 supermarkets and hypermarkets, Metro said it could fortify its purchasing power in what is the world's third- largest retail market. The company said it was committed to hypermarkets.

Some of Wal-Mart's troubles stem from the way it broke into the German market in 1998, according to analysts. By acquiring the outlets of two second- tier retailers, Wertkauf and Interspar, Wal-Mart wound up with a hodgepodge of stores, geographically dispersed and often in poor locations.

The company initially installed American managers, who made some well-intentioned cultural gaffes, like offering to bag groceries for customers (Germans prefer to bag their own groceries) or instructing clerks to smile at customers (Germans, used to brusque service, were put off).

Wal-Mart later went through German managers, before appointing David Wild, a former executive at Tesco, the British chain. He tried to win over customers by selling organic meat and produce.

"They found they had some things to learn about the German market, and they did change, but maybe too late," Bacos said.

Other problems, however, were largely outside Wal-Mart's control. Two German discounters, Aldi and Lidl, dominate the grocery business, with smaller shops that feature cut- rate, though still good-quality, food. Aldi also heavily promotes one-week sales, featuring deeply discounted merchandise, ranging from wine to garden hoses, which draw customers back.

While Wal-Mart's vast size gives it enormous leverage in purchasing clothing and other goods, it must buy much of the food for its German stores locally. And there, it lacks the muscle of Aldi, which has 4,100 shops and a presence in nearly every town in the country.

"Germany is the home of the discounter," said Mark Josefson, a retail analyst at Kepler Securities in Frankfurt. "Wal-Mart is not competing on price, and that is one of its main attributes in its home market."

Beyond these competitive pressures, there is the reality of the German consumer - one of the most parsimonious and price-conscious in Europe. While consumer confidence has picked up recently, Bacos said the proportion of household income that Germans spend on retail purchases continues to decline. Profit margins in German retailing are the lowest in Europe.

"Wal-Mart has tried, for the better part of a decade, to adapt to this market," he said. "I think they've looked at the situation and come to the conclusion, 'How long is it going to take?'"
-Sunyoung-
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Walmart fails to crack New York City

New York City has rebuffed attempts by Walmart to open a store, making it one of the last remaining large US cities that the supermarket giant has failed to crack.

Dark clouds loom over the skyline of New York on Saturday
Opposition to Walmart has always been strong in New York City Photo: AP
With more than 4,000 stores across the US, it may seem like there is a Walmart in every town and city in the country. But the company has consistently failed to get a foothold in the Big Apple.
The company had earmarked a new shopping centre being built in Brooklyn as the site to open its first New York City store.
But opposition to Walmart has always been strong in the country's largest city and amid mounting protests, they withdrew from the project last week.
Opposition to Walmart in the city is driven by what protesters say is the chain's history of low wages and poor employee benefits. There are also fears from unions that the company's low prices will hurt the profit margins of other shops, endangering the jobs of its members.
Other large cities have similar opposition groups but Walmart opened its first store in downtown Chicago in 2009 and was this year granted permission to build its first two in Washington DC. Although Mayor Michael Bloomberg came out of favour of the chain coming to New York City in April, that first store remains elusive.
Previously the chain proposed opening stores in the Queens and Staten Island boroughs of the city, but was again met by opposition.
In 2007, exasperated by the opposition, the company's then chief executive appeared to signal that he had abandoned all hope of opening a store in New York City.
"I don't care if we are ever here," Harold Lee Scott Jr said, adding: "I don't think it's worth the effort."
Since then however Mr Scott has left the company and Walmart has renewed its efforts.
The latest plan was to open a store in Gateway II, a shopping centre being built in East New York, a district of Brooklyn.
Building a stand-alone store is particularly difficult as it requires approval from the City Council and many council members rely on union support.
However opening in a shopping centre is much less troublesome as the mall already had building approval and the council has no control over who its tenants are.
The plan led to opponents accusing Walmart of trying to get into New York City "through the back door".
But even that has not been simple and it now looks as though the space earmarked will be occupied by ShopRite, another supermarket chain.
Walmart said the issue was financial and they had been unable to come to a deal with Related Companies, the group behind the Gateway II project. Nonetheless, opposition groups claimed a victory.
Stephanie Yazgi, a spokesman for Walmart Free NYC, told the New York Times: "Walmart's withdrawal from Gateway II shows that when New Yorkers join arms, even the world's richest retailer is no match for them."
Patrick Purcell, spokesman of the United Food and Commercial Workers Union, said:"Walmart's corporate practices create an atmosphere, where they are able to bottom out prices, where they hurt the community and workers.
"We believe their corporate practices are irresponsible to the point where they deserve this type of response. They are the only store we've ever done this with."
However Walmart have not accepted defeat.
"We remain committed to bringing new economic development and shopping options to New York City, especially in the neighbourhoods that need them most."
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Wal-Mart failed to grasp the consumer and retail environment in Japan

Wal-Mart’s Entry Into Japan

Case Study: “Wal-Mart’s Rising Sun? A Case on Wal-Mart’s Entry Into Japan
This information was taken from the book Global Marketing Management (Kotabe & Helsen, 2010). This is a case write-up meant to introduce and provide examples of basic concepts involving international business, global marketing and globalization in the real world. The following is a summary of the business situation and what I learned after reading.
About Wal-Mart
Wal-Mart is a retailer of consumer goods founded in 1962 by Sam Walton. The company obtains profits through volume, with a low-cost strategy. It’s “Every Day Low Prices” business plan is supported by aggressive pricing policies,  a state-of-the-art  retail and supply chain distribution system, advanced inventory management systems, and little promotion and advertising efforts. The large success of the company led to global expansion that began in the early 1990′s.
Global Expansion:
Wal-Mart, the second largest retailer in the world, entered Japan in 2002.
It used its usual foreign strategy of forming a joint-venture (used to help with economic and political challenges). The company enters foreign markets by purchasing large stakes in similar retailers and takes gradual control of ownership by increasing investment through time. Historically these acquisitions are gradual, and have been met with both success and failure.
The retailing giant has operations in 28 countries under 60 different banners. Examples of failed and abandoned markets include South Korea, Germany and Indonesia. Expansions that have proven largely profitable are Mexico and Canada. A struggling market similar to that of Japan is the United Kingdom. Judging from these varying country performances, one can see that its formula for success has not yet been perfected.
Summary of  Strategy & Performance: Wal-Mart in Japan
1999- 
  • Talks begin with struggling Japanese retailer Seiyu. Seiyu had 400 retail units across Japan
2002-
  • Wal-Mart purchases 6.1% stake in Seiyu, beginning expansion
2003-
  • Seiyu begins reorganizing structure; implements point-of-sale and SMART inventory tracking systems across 53 stores. Store efficiencies increase by capturing consumer trends
  • Wal-Mart acquires 34% stake in company, becoming the Seiyu’s biggest shareholder
  • Net income fell to lowest level between 2002-2007, with a loss of $772 million
  • 9 new locations open
2004-
  • Wal-Mart opens its first pilot superstore, Japanese are not familiar with the “supercenter” concept
  • The company implements its supply-chain and distribution management system, Retail Link, in half of its locations
  • Company lays off  1500 (25%) of headquarters  staff, resulting in bad PR
  • Reduces advertising
  • Seiyu manages to cut costs by 6.1%
  • Reports annual loss of $66 million
2005-
  • Seiyu announces loss of $118 million
  • CEO Masao Kiuchi takes blame and resigns
  • Wal-Mart increases ownership to 42%
2006-
  • Wal-Mart built and opened U.S.-style distribution center
  • Some individual store sales turned positive
  • Company reports loss of $151 million
  • Wal-Mart ends year with 54% stake in Seiyu
2007-
  • Wal-Mart implements SMART system in more than 75% of its stores to help better meet customer needs, enhance product selection, hopes to increase sales
  • Seiyu reports loss of $469 million
2008-
  • Wal-Mart completely acquires Seiyu for $875 million, taking 100% ownership of the company
  • Makes Seiyu a subsidiary of the company
  • Introduces new activities including merchandising, distribution and logistics
  • Closes 20 outlets and cut 6 percent of its workforce
Business Challenges and Suggestions: 
So, where did Wal-Mart go wrong? The company’s global marketing strategy had many flaws. Read below to find an explanation of these challenges and what could have been done to prevent or control them.
Cultural misunderstanding:
Wal-Mart failed to grasp the consumer and retail environment in Japan. With a population of 127 million, the highest per capita income and the second largest economy in the world, Japan is a very attractive market for retailers. The opportunity exists, but there is much more research and planning that needed to be done before expansion began. Instead of adapting business operations to the Japanese culture, the company essentially assumed the Japanese would readily adapt to Wal-Mart’s. This was not the case. For example, in Japan there is a much larger need for local store customization. Consumer buyer behavior is much different than in the United States, with purchasing patterns and product selection varying greatly between regions. They have a tendency to buy smaller quantities in regular intervals rather than the more American idea of “stocking up.” Similarly, the concept of large retail stores is foreign. Retailers with the highest growth rate are small specialty stores; quite the opposite of Wal-Mart. The culture tends to buy more fresh produce than pre-packaged goods as well (something Wal-Mart does not usually specialize in). Lastly, the Japanese view high price as equaling high quality. This mentality causes them to purchase 40% of the world’s luxury goods annually. Packaging and appearance of goods play a huge role in their purchasing decisions. When looking at Wal-Marts product selection, it is obvious they do not usually cater to luxury-brand customers. All of these cultural misunderstandings lead Wal-Mart away from success in Japan. Perhaps more research into their cultural values and patterns could have helped avoid some of these mishaps.
Inability to carry out a low cost strategy
Given the above facts, it is obvious that the idea of  ”Every Day Low Prices” does not appeal to the Japanese market in the same way it does in the American, Mexican and Canadian markets. This is a very different culture and population to cater to. Wal-Mart’s low cost marketing strategy may not be as effective globally as it is domestically. They earn their profits through high volume sales over differentiation, and this approach is just not as successful in Japan.
Supply chain inefficiencies
In Japan there are strong and close-knit supplier webs that provide retailers with their goods. This country puts a higher value on close, local relationships, making it very difficult for foreign firms to enter the industry. With so many changes in products due to local store specifications, it forces firms to deal with many different suppliers. This is not favorable to large retailers, as they don’t have the time or national presence to make the necessary relationships to do business. Wal-Mart is not used to this high level of supplier power. Their value usually comes from cutting costs with suppliers enough to pass onto their customers while using synergy to increase efficiencies. Difficulties managing their supply chain are another substantial reason Wal-Mart is struggling in Japan.
Pressure from competition:
The types of competition in Japan include both domestic and international players. It’s biggest Japanese competitors are 7-Eleven Japan Co. Ltd., Aeon Co. Ltd., and Ito-Yokado Co. Ltd. As of 2008, all of these companies drastically outperformed Seiyu Ltd. (Wal-Mart). Although all of these companies have different strategies, much of their success can be credited to their experience in understanding how their country buyers and sellers interact. Two main international competitors are Carrefour from France and Tesco from the United Kingdom. These firms had similar challenges to Wal-Mart with their international expansions, but each faced them differently. While Carrefour had complications so complex that it exited the market in 2004, Tesco was able to gradually expand and prosper. Tesco made large investments in market research that allowed them to build stores that better met the Japanese consumer’s needs. Their cautious expansion and well thought out plans have helped them succeed in the Japanese retail industry. It is imperative for Seiyu and Wal-Mart to recognize their competition’s advantages and formulate better ways to respond.
Seiyu’s pre-Wal-Mart conditions:
Lastly, it is necessary to examine Seiyu’s business situation before Wal-Mart took over the company. Formed in 1956, Seiyu was successful until the 1990′s when Japan experienced an economic recession. During this time the company acquired a large amount of debt that totaled $7.46 billion at the start of the millennium. Although the company was in trouble, they did not receive assistance from its larger owner, Saison Group, because they too were experiencing the financial crisis.  This situation is important to consider when evaluating Wal-Mart’s performance. Although it was predicted that Wal-Mart could save the Japanese retailer, their debt and economic troubles may have been too much to reverse. Looking back, Seiyu may not have been the best company for Wal-Mart to begin their expansion with.
Summary/What next?: As of 2008, Wal-Mart had invested over $3 billion dollars in its expansion into Japan. The question is, will it be worth it in the long run? They have made many mistakes in the past, but as of 2011, Wal-Mart is still operating in Japan under the same brand name, Seiyu. According to their most recent annual financial report, they claim profits are growing as the Japanese become more favorable towards the Every Day Low Price strategy and as their operational efficiencies increase. Despite these claims, the firm closed 23 additional stores by the end of their 2009 fiscal year, and net investment now totals $5.7 billion. I believe the root cause Seiyu and Wal-Mart’s failure can be traced back to their initial global marketing strategy. A better understanding of Japan’s culture and how it affects supplier-relations and the competitive landscape could have prevented many of the companies problems. Will their low-cost strategy ever actually turn a profit for the company? My guess is not any time soon, but only time will tell.

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Japan Once Again Highlights Wal-Mart’s International Problems

Posted on July 27, 2007 by webteam
In an article out today Fortune highlighted many of the problems Wal-Mart is having in Japan, a topic we investigated in our report Wal-Mart in Crisis. Wal-Mart is having major issues with its Seiyu subsidiary largely because Wal-Mart is treating Japan like everywhere else and failing to adapt to the highly-developed, culturally-sensitive and retail-rich environment that Japan has been for decades.  As a result of Wal-Mart’s lack of cultural and business sensitivity, Seiyu has once again reported worse than expected losses
Wal-Mart has tried to do in Japan what it tried to do in Germany and South Korea, a strategy that lead to the company’s failure in those two markets:
1. Use an anti-employee management style that is typical of Bentonville, but culturally incongruent with local business practices.
In Germany, Wal-Mart used several techniques that not only violated German law but also ran foul with German culture and created discontent among employees (the company ran an employee “tip” line that was used as an employee snitch line, and forbade dating among colleagues.) Wal-Mart set itself on a similar path in Japan right from the onset, sowing the seeds of domestic employee discontent.
From the Fortune Magazine Article:

First, even before it took full control, Wal-Mart persuaded Seiyu’s management in 2004 to dismiss 25 percent of headquarters staff, including 1,500 employees and managers. That kind of mass firing happens rarely in Japan, which places a premium on social harmony. And when the firing is done at the behest of foreigners, it takes on added negative connotations. 

2. Use of British, Canadian and American Executives to run a quintessentially foreign retail operation that relies heavily on understanding local culture.
Like it did in Germany, Wal-Mart is using English-speaking executives to run a retail operation that heavily depends on a detailed understanding of domestic culture.  As in Germany, success in Japan depends on understanding local culture, but cultural differences are amplified in Japan.  Japanese business culture is significantly different; as the Fortune article points out, Japanese business culture is highly suspicious of foreign-controlled businesses within Japan, and Japanese consumer preferences are significantly different than every other market Wal-Mart runs in.  The American companies that have succeeded in Japan have done so by using Japanese executives and allowing a significant amount of autonomy.  Wal-Mart however seems to be making the same mistake it did in Germany, relying to much on American executives, and not enough on local control. 
Fortune:

One basic question is whether Wal-Mart has the right management in place. Most U.S. companies that have succeeded in Japan, such as McDonald’s, have installed senior Japanese executives to head up operations and allowed them a measure of autonomy. In contrast, Wal-Mart is relying on a team of outsiders, including Brits and Canadians.
Kolodzieski doesn’t speak Japanese. He started his career at Kash n’ Karry Food Stores in Florida, working his way up from store manager to senior vice president of operations. As part of an environmental project, he met with Seiyu executives and visited Japan. But there is little in his background to suggest Japanese savvy. After Kash n’ Karry, he worked at regional supermarkets in the Mid-Atlantic states. Wal-Mart tapped him in 2000 for his supermarket experience. He clearly clicked in Wal-Mart’s culture, because he emerged as chief operating officer of Wal-Mart International.
In his current role he reports to Wal-Mart vice chairman Michael Duke, who heads up Wal-Mart International from headquarters in Bentonville, Ark. Duke, a veteran of 23 years at Federated Department Stores and May Department Stores, also lacks significant international experience, but he seems to call the shots in Japan. According to outsiders and retail analysts, Wal-Mart’s decision-making regarding Japan is centralized in Bentonville.
3. Pushes for global standardized sourcing when the market has domestic loyalties and tastes.
Wal-Mart in Korea failed to understand the atmosphere and taste that shoppers demanded in the country. Wal-Mart in Germany failed to grasp German customs and the particular products Germans have in their households.  In Japan, Wal-Mart is making almost identical mistakes in product selection and customer perceptions.

In addition, Wal-Mart has tried to push its monolithic “Always Low Prices” moniker on the Japanese market without fully understanding that Japanese consumers actually associate lower prices with lower quality, and are often willing to pay a premium for high-quality domestically produced products.  In an affluent but space conscious society, higher quality merchandise is valued over inexpensive items that may break.  Add on top of that Japan’s traditional distrust of foriegn manufactured goods, especially cheaply-made merchandize, and it begins to become clear why Wal-Mart is struggling in Japan. 
Japan, like both Korea and Germany, has very selective consumers, and often product preferences will greatly vary from region to region. Local produce and other locally-produced products are valued significantly.
Fortune:

They are frequently quoted in Japanese media complaining about Wal-Mart’s efforts to instill an American operating model in Japan. The company says it is being flexible, but the carping persists: Wal-Mart is moving too aggressively to cut out distribution middlemen; it is making life difficult for managers by mandating that stores remain open for 24 hours; it is introducing products from China and elsewhere that don’t meet Japanese tastes or standards of quality.
“Seiyu became a completely different store after it came under Wal-Mart management,” the magazine Nikkei Business quoted one store manager as saying. “National-brand food product prices have definitely come down, but high-quality merchandise has disappeared from the shelves, and customers have left.”
The heart of the problem, the naysayers argue, is that Wal-Mart’s model of “always low prices” may work in developing, under-retailed markets such as China and Mexico, but it doesn’t work in a country like Japan, where consumers are willing to pay top prices for exclusive goods of the highest quality.
In addition to all these problems, Wal-Mart is probably singularly responsible for the US bullying Japan via the WTO to change Japanese land use policies so as to allow for big box store development.  Pushing away local control and land use laws so Wal-Mart can implement its monolithic big box policy in Japan is not a way to gain favor in the Japanese market.  Much like the UK, Wal-Mart’s inability to adapt to the market pushed the company to try and force change; to make another country be more like America and ignore local character for the sake of big box sprawl. 
It is no wonder the Japanese are not buying into a Wal-Mart-run Seiyu.  When all is said and done, Wal-Mart’s poor corporate citizenship actually runs afoul of Japanese business culture and Japanese society.  In a country where social harmony and a distaste of foreign control are heavily ingrained in the social and business fabric, the highly-centralized company based in Bentonville, Arkansas, is a world away from ever being successful in Japan. 
Wal-Mart Watch Report: Wal-Mart in Crisis

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