Topic: Cultural and Institutional Frameworks. Case study: Walmart in Germany
Why did Walmart Fail in Germany
At the end of 2006, the world’s largest retailer Walmart admitted to selling its hypermarket chain in Germany after making continuous losses and failing to attract German shoppers and consumers, marking the end of its nine-year stay in the country. The decision was made after the company finalised its negotiations with Metro to sell its 85 German outlets to them. The official statement from the vice-chairman of Wal-Mart stores at the time was that the company had failed to the scale and results set for the German business market. This study is based on research conducted to determine the reasons why Walmart pulled out of the German retail market.
The American retail giant Walmart, ventured into the European markets in 1997 to expand its operations on an international scale. The company initially decided to promote its presence in the German retail market through acquisitions starting with the take over of the 21-store Wertkauf chain for an estimated $1.04 billion, followed by the addition of Interspar’s 74 chains in the subsequent year (Knorr and Arndt, 2003). In the wake of these acquisitions, Walmart was set to become the fourth largest retail outlet in Germany.
However, the company quickly began to face challenges over the profitability of its operations, capturing only a market share of 1.1 % within its full year of operations. After a few years, it became clear that the retail giant was experiencing difficulties in attracting and retaining customers in the German market. A closer inspection of Walmart’s failures in its internationalisation bid points out to failure by the company to address differences between American and German customers. Moreover, the company’s inferior employee management methods resulted in high employee turnovers, consequently negatively impacting the motivation levels of existing workers (Nizam, 2016). The high employee turnover can be attributed to the company’s hindsight and implementation of employee management strategies that were similar to those practised in the US failing to address the needs an unmodified set of employee the German working behaviour and practices. This approach contributed to a high level of stress within Walmart’s German workforce, hindering smooth operations within the company and contributing to poor performances.
Moreover, several of the employee management practices implemented by Walmart simply could not fit in the German context. For example, it is routine for American Walmart employees to attend morning exercises and workout sessions to promote bonding and loyalty to the company; however, to many German employees, this was a source of irritation and disdain. Also, the ethical code of Walmart created pools of frustration amongst German workers who were not accustomed to spying on co-workers or reporting misconduct to supervisors (Nizam, 2016). Punitive but straightforward requirements such as smiling to customers checking in or checking out was also a source of annoyance for German workers who are not accustomed to smiling to strangers. These practices which the German employees were unfamiliar with were a source of stress and anxiety contributing to the high level of employee turnover experienced by the company in the region.
German customers were also not so much drawn into buying products from Walmart as they viewed the company’s practices in contrast to those practised by other local giant retailers. Also, the merchandising of Walmart stores in the region was utterly unattractive as most of the expensive and premium products were placed on the eye-catching shelves. In contrast, the discounted products were placed far away in the bottom (Nizam, 2016). Furthermore, the company failed to thoroughly analyse and study German consumers who are efficient spenders, unlike American consumers who are known to buy products on impulse. Also, the company’s opposite approach to environmental awareness and conservation in the form of using plastic packaging was a source of annoyance to German consumers who are accustomed to paper packing and green shopping.
Topic: Strategy, leadership, and management.
Contingency or Situational Theories of Leadership
The contingency theories to leadership are based on the ideology that one single leadership style is not appropriate as leadership and management styles are dependent on several factors, including the number of followers. The contingency theory stipulates that there is no single universal way to lead as both internal and external environments vary or evolve by the day, and a leader should be able to adapt and change with time. Leaders are expected to be at the front line of implementing changes that suit different dynamics and environments. Contingency theories fall within a broad category of behavioural theories that challenge existing approaches to leadership by suggesting that there is no singular perfect approach to leadership (Nawaz and Khan, 2016). According to contingency theorists, the leaders are a critical factor in a leader-subordinate relationship and that subordinates play a vital role in shaping the relationship. The style of situational leadership proposes the view that leadership should be based on the maturity and level of understanding of the subordinates.
The situational variables developed from contingency theories include role characteristics, such as complexness and pressure, secondary characteristics comprising of experience and motivation, and leader-subordinate relationships, including shared goals and mutual trust. The most comprehensive contingency theory based on specific behaviours and situational variables is the multiple linkage model consisting of several ideas from contingency theories. The model comprises of responses to long-term efforts to change situations to make them suitable and ideal. The situational model leadership reiterates the view that there is no single universal style of leadership that is effective and the leaders need to adapt to situations and change their leadership styles to be able to accommodate different tasks and situations (Yukl et al., 2010). Contingency or situational theories of leadership are considered essential because they promote flexibility and adaptability to changing environments. More importantly, flexibility is deemed necessary as conditions are bound to change over time, and is vital when changing from one leadership role to another with different challenges and responsibilities. Being adaptive and flexible includes coming up with creative ways to handle challenges and opportunities; however, these types of actions and decisions warrant some valid form of leadership that can only be achieved through the development of an understanding of contingency theories.
Attribution theory of leadership
The attribution theory of leadership is based on the view that a leader’s view of his employees and workforce is impacted by a leader’s understanding of the reasons behind employees’ performance. The attribution theory is framed on the approach that a leader is primarily an information processor. Moreover, based on information derived about subordinates’ behaviours, the leader determines the causes of these behaviours and selects appropriate strategies to handle any poor performers (Masood et al., 2012). The attribution theory portrays how people develop explicit causal clarifications for practices and behaviours and results and how their causal explanations impact ensuing responses. Therefore, the attributional leadership model posits that leaders should evaluate the actions of their followers using classification schema, such as the two-dimensional models of Werner.
By determining the causal variables for follower’s performance, leaders are bound to take remedial measures towards the circumstance, particularly when performance issues are connected to outer causal elements. The attribution theory proposes that people observed behaviour and afterwards ascribe causes to it. Hence the methodology centres around inferences that are utilised to deduce some else’s attitude or qualities through perception (Winkler, 2009). Moreover, from this theory, leadership cannot be observed directly, but through a continuous process where a group takes not of the behaviour of certain groups and individuals. Based on this information, leadership qualities and abilities are ascribed to specific individuals and members (Yukl and Mahsud, 2010). From Calder’s assumptions, leadership is an ordinary concept comprising of specific individual characteristics that can be depicted utilising typical language. These qualities may vary from group to group. The attribution theory of leadership can be considered relevant since it is based on behavioural theories that are critical to identifying suitable or problematic traits.
Topic: Corporate Social Responsibility
Volkswagen Group and CSR
Corporate social responsibility (CSR) for large corporations can mean several things, including paying employees better, improving labour conditions, embracing more diversity, and being more environmentally responsible (Siano et al., 2017). The European Commission describes CSR as the responsibility of businesses for their impact on the community by following rules and regulations, human rights concerns, integrating social environmental and ethical values in their operations. Engaging in CSR activities can lead to revenue increases through the indirect promotion of the company’s brand and image. Today’s most significant cause of concern is CSR strategies are merely used as a marketing and public relations approach by corporations, with few of them embracing the plan.
Volkswagen has recently been in the spotlight for its absolute failure to engage in corporate social responsibility. The company was exposed back in 2015 for deliberately circumnavigating emission regulations to give the organisation an unjust advantage over competitors. The Environmental Protection Agency (EPA) discovered that the company had been using software that concealed the real amount of nitrogen oxide released by their engines (Mačaitytė, and Virbašiūtė, 2018). The revelation led to the resignation of not only Volkswagen’s CEO but also Audi’s head of Research and Development and Porshe’s engine chief, hinting that the company’s management was fully aware of what was happening (Dans, 2015). The scandal dubbed the “Dieselgate” scandal tarnished the image of one of the biggest automobile manufacturers in the world. According to EPA’s report, the vehicle software was programmed to bypass the tests conducted by the agency. Vehicles fitted with this software were found to release nitrogen oxide at up to 40 times the federal maximum limit. Moreover, the report revealed that the software made it possible to distinguish testing conditions in the laboratory, such as speed, wheel position, and acceleration, and automatically restrain the diesel engine power when a test was conducted.
When this information was first revealed, the company tried to hide their actions by portraying the incident as a software problem that that had slipped been passed on without their knowledge. According to the agency’s investigation, more than 500,000 cars sold under the Volkswagen Group in the US were affected, and more than 11 million vehicles worldwide. The scandal caused a lot of ripples in the automotive industry, considering the Volkswagen Group had been on numerous occasions listed as the leading automaker in the sustainability ranking. No one would have imagined that such an incident would be a car in a corporation that had such healthy Corporate Social Responsibility practices and policies. The firm was ranked the best socially responsible automotive firm in 2015, promoting both its image and market value. The revelation of the company’s engagement in illegal activities reasserts the idea that most modern companies use CSR efforts to improve their image while allocating little thought to the implementation of their CSR strategies. The meritocratic systems of promotion that company’s such as the Volkswagen Group are based on pushes people to take risky and unethical actions.
Recommendations
The company should be more transparent in pursuing its CSR strategies. One of the primary steps the company should have taken is to assume responsibility for the whole mess. The Volkswagen Group failed to acknowledge its mistakes in the first place and later on admitted to tampering with the tests after immense pressure was piled on them. The company should also promote accountability, and proper ethical behaviour starting from management to junior employees had the company adhered to this management would not have agreed to the use of the software to cheat the system. The company should also adopt universal respect international norms of behaviour. By selling cars that had higher emissions, Volkswagen had blatantly shown disrespect for international standards of practice that were implemented to reduce carbon emissions and mediate the impacts of climate change.
References
Dans, E., 2015, September 27. Volkswagen And The Failure Of Corporate Social Responsibility. [Online] Retrieved from https://www.forbes.com/sites/enriquedans/2015/09/27/volkswagen-and-the-failure-of-corporate-social-responsibility/#89139004405c
Knorr, A., and Arndt, A., 2003. Why did Wal-Mart fail in Germany?.
Mačaitytė, I. and Virbašiūtė, G., 2018. Volkswagen emission scandal and corporate social responsibility–a case study.
Masood, S.A., Shahbaz, M., and Shaheen, M., 2012. Transformational Leadership and Attribution Theory: The Situational Strength Perspective. Life Science Journal, 9(1).
Nawaz, Z.A.K., and Khan, I., 2016. Leadership theories and styles: A literature review. Leadership, 16(1), pp.1-7.
Nizam, I., 2016. Why Walmart Failed in Germany? An Analysis in the Perspective of Organizational Behaviour. International Journal of Accounting & Business Management, 4, pp. 206-215.
Pioch, E., Gerhard, U., Fernie, J., and Arnold, S.J., 2009. Consumer acceptance and market success: Wal-Mart in the UK and Germany. International journal of retail & distribution management.
Siano, A., Vollero, A., Conte, F., and Amabile, S., 2017. “More than words”: Expanding the taxonomy of greenwashing after the Volkswagen scandal. Journal of Business Research, 71, pp.27-37.
Winkler, I., 2010. Attribution theory in leadership research. In Contemporary leadership theories (pp. 9-22). Physica-Verlag HD.
Yukl, G., and Mahsud, R., 2010. Why flexible and adaptive leadership is essential. Consulting Psychology Journal: practice and research, 62(2), p.81.