The Political Environment of Firms - Essay Example

Autonomous decision-making failed to grasp the strength of embedded social and political in the customer consciousness. The German business entities are not known for their autonomous identities and are expected held as social and political accountable. The US business turf is different. Further to that Wal-martisation is known for reducing costs along the supply chains, downing of supplier revenue to keep its ‘every day low price’ policy going and passing on the profits derived thereof, to the stakeholders.

The costs are passed onto the communities in which the company operates. This particular policy was not in tune with German ethos. In contrast, the regulatory environment in Germany makes the redistribution of social costs associated with experimentation to increase profits (and expansion) difficult and expensive (Vitols, et. al, 1999). This in fact, is the chief economic reason for failure of Wal-mart in Germany. In other words, faulty strategic planning, constraints posed by regulatory environment and their poor negotiation, a governance structure moulded in the US retail environment, and competition from small retailers added to the difficulties of Wal-mart’s lean retail experiment in Germany.

Broadly the causes can be categorized as political, social, economic and strategic. The German retail business is mostly private held, is highly unionized, and enjoys state patronage and regulation leaving little scope for autonomous action unlike in the US. However, the Wal-mart, spurred by its US experience didn’t heed union activism, ignored unions over cooperative consultation thus conducting a ‘social miscarriage’ that drove the German middle class away from Wal-mart. Another strong contention of critics of Wal-mart in Germany is that supply chain was spread over a time period that was only half as that of