Wal-Mart’s failed entry into the German retail market represents a
puzzle for theories of globalization, which assert that more efficient producers
will drive out poorly performing competitors, producing profits for themselves
and gains for consumers. Wal-Mart’s ability to dominate its input
network and to provide low-cost leadership through lean production has
often been seen as the global example of creating efficiencies in the retail
sector. In 2006, however Wal-Mart abandoned an eight-year effort to
become a dominant player in Germany’s retail market. I argue that efficiency
is not absolute, but rather context-specific and socially constructed.
Domestic culture and institutions interact to constrain convergence towards a
single business model in the retail sector. In the end, it was not the rigidity of
German market conditions—such as high labor costs or union power—that led
to failure, but rather the inflexibility of Wal-Mart’s strategy in coping with
complex local conditions.