Save:
Favorite
Share:
Calculator Allowed: No

Question

Answer

Transcription of this question: Wal-MartWal-Mart, a major global retailer has decided to sell its 85 German stores to after 8loss-making years in which it tried to break into a market dominated by discount stores.Michael Duke, Wal-Mart vice-chairman said Germany’s business environment made it “difficult toobtain the scale we desired” _ The sale Of these stores to Metro, Germany’s largest retailer,marks Wal-Mart’s most significant international withdrawal. Wal-Mart continues to expand profitablyin Latin America and China where the external environment is much more favourable.Wal-Mart entered Germany in 1998 but struggled from the beginning with:• intense competition from domestic discount stores, which have increased their share Of theGerman grocery market to 40%. German consumers remain loyal to national brands• strong trade unions* that oppose many Of the new working practices implemented by Wal-Mart ati ts German stores• consumer resistance due to cultural differences in retailing practices• an unfavourable German external environment with low levels Of economic growth.National rival, Metro, hopes to use the Wal-Mart deal to increase its market share with over640 stores across Germany. It intends to increase profitability through significant internal economiesOf scale, rationalisation and cost-cutting measures. Metro is waiting for approval from thegovernment department that sanctions takeovers and mergers. Several stakeholder groups haveexpressed concern about the proposed sale, believing that Metwv will have too much power in theretail sector.Retail analysts suggest that Wal-Mart should have stayed in Germany, especially as the sale resultedin a loss Of S 1 billion. They believe that this withdrawal will negatively affect Wal-Mart’s brandimage in Europe and globally. They argue that Wal-Mart should have looked at alternative marketingstrategies and joint-ventures with German domestic retailers.[Source: adapted from “Wal-Mart packs its bags after Germans pack theirs”, Gerrit Wieseman, The Australian, 31 July 20061* trade uniom an association that represents the interests of employees in the workplace(b)(c)(i) Define the term economies of scale.(ii) Explain two types Of internal economies Of scale that Metro may benefitfrom after buying Wal-Mart’s stores.Explain why several stakeholder groups are concerned about the proposed saleOf Wal-Mart stores to Metro.Evaluate Wal-MartS decision to withdraw from the German market.[2 marks][4 marks][4 marks][l O marks]

Leave a Reply