American’s come under the heading of liberal market economies. The mangers in this system have freedom to manage their operations and government has not much influence to effect these organisations.
On the other hand German has neo-corporatism as their business fundamental principles. In these economies organisations focus on social welfare of workers and corporations go after stake-holder models. In corporatist economies government plays very significant role in pursuing organisation to provide welfare to employees.
Because these doctorial approvals company’s institutional isomorphism in which company goes for attaining similar strategies, processes and similar structures and these should be in accordance with its external environment (Lodge and Wegrich, 2005). As Wal-mart came from the neo-liberalist background it focussed on purchasing other chain markets to expand its business rather focussing and managing its operations carefully. American business system differs severely from the national business system of Germany.Wal-mart wanted to have immediate profits from German market and it can be seen that it deducted the money from workers benefits system.
It became evident from this deduction that Wal-mart is a Anglo-Saxon business system and it wants immediate profits, financial source of business is thought to be stock market and shareholders have great value. On the other hand competitors of Wal-mart are Aldi and Lidli which fall in Rhineland national business systems with no stock market pressure and it give value to its stakeholders.This type of business systems look for long term profitability and take their institutions as a source of financial improvements. Institutional perspective can also be viewed from other two points like Germans are thought to be insiders who focus on giving value to the workers and Americans are thought to be outsiders who concentrate their attention towards profit and don’t give any value to the employees.Germans had a strong institutional system as compared to Americans systems. It is in the German laws that companies have to follow the rules which have been made for the betterment of institutional system and encouragements are given to those companies who follow these rules (Muller, 1998). Both countries significantly differ in institutional factor and those are collective bargaining, initial vocational training, unions and work councils, anti trust laws, building contracts etc.American company have to deal with those factors with which it never dealt before.
Employee commitment, industrial peace and harmony is the responsibility of trade unions and work councils who work on the behalf of workers as well as fight for their rights. In this institutional frame of work employees have right to select non-executive member of board of directors who will going to talk about employees performance and company’s new strategy effects on their motivation (Glunk et al., 1997).
Wal-mart poor strategy can be judged from the fact it purchased Wertkauf and Interspar chain markets which were considered as second class operators in comparison to its competitors Aldi and Lidl who were covering 70-80% market of Germany. Instead of improving its operation and adapting German institutional system its decision to buy two second class chain market led to opening of its poor strategy.These stores were small in size and were not located at suitable locations so that customer couldn’t reach those locations easily. This strategy completely worked against the Wal-mart.
Negative branding Wal-mart disobeyed the legal rules and regulation mentioned in German law and it become the cause bad fame of Wal-mart in Germany. Many workers and unions went to court against their decisions and these cases won by workers and their councils which created an impression of bad employer in the market. Resource dependent theoryOrganisations are dependent on the resources available in the country to which it is moving and it needs sufficient amount of resources to survive In that country (Salancik and Pfeffer, 1998). Wal-mart tried to control its resources in German market but failed create interaction with suppliers because of its very less share in German market.
But its competitors had full advantage of resources and they had continuous supply of materials. Due to this problem material arrived late in the markets and run out off sock in the stores (Fernie and Arnold, 2002).