Electrical Resistance of Different Liquids | Experiment

Electrical Resistance of Different Liquids | Experiment After the invention of electricity by Michael faraday many scientists studied the ways of conducting electricity. It was in the middle of 18th century scientists thought about using liquid as a medium of conducting electricity. In 1808 Sir Humphrey Davy conducted electricity using potassium solutions in ammonia. The experiments were to show the electrical conductivity of liquids, but the reason for this was not explained in his experiments. In 1879 F.Kahlrausch proposed that ions are responsible for the conductivity of liquids. Ions are the building blocks of each molecule defined by its electron number. Ions which formed by the decomposition of minerals and other impurities carry current across the liquid and this is directly proportional to the ionic velocities. These findings were scientifically proven by M.M.Wrobleewisky and Olszweski in 1883 by liquefaction of nitrogen and other minerals from a solution under a pressure of 50 atmospheres showing the presence of ions in solute. The experiments conducted by WG Scaife in 1973 on the natural conductivity of liquids showed that at higher pressures of 2500 bars and above the electrical conductivity of polar solutions decreases rapidly. Even though there is a decrease at low pressures which are not practically measurable. Polar compounds like castor oil, sebacate etc. were used for these experiments and were discovered that the double layer formed at the tip of electrodes was the reason behind the reducing nature of electrical conductivity. While experiments on ionic solutions like Diethyl ether, carbon disulphide, benzene etc showed an increasing trend of electrical conductivity with pressure. This was due to the triple ions formed during the experiment. [1] In the experiments conducted by Alexander, Stoppa, Johannes Hunger, and Richard Buchner in 2009, it was found that the electrical conductivity of ionic solutions is higher than a mixture of ionic and polar mixture solutions. The experiment used potassium chloride (ionic) and non soluble oil base (polar) and the experiments were conducted under constant temperature and pressure conditions. The experiment showed a decrease in resistivity of nearly 1 ohm with an addition 5 wt % ionic compound. This experiment proved that the electrical conductivity depends on the charge density (number of ions) and the resistance to the movement of ions known as viscosity of a liquid [Stokes-Einstein, 1906]. The experiment compared the conductivities by increasing the percentage of ionic molecules in the solution. [2] Experiments were conducted by Aresatz Usobiaga, Alberto De Diego, and Juan Manuel Madariaga 1n 1999 to relate temperature with the electrical conductivity in solutions. HCL Solution (ionic solution) was used for the experiments. Under different temperatures close to the room temperature (292-315K) the solution exhibited an inverse proportionality relation to the conductivity. This correlated to the findings of A I Zhakin in 1995 were KCL which is less ionic compared to HCL was used. The experiment with HCL pointed out that at near to room temperatures resistivity was increased by 5-10% with every increase of 5K. The reason for this behaviour was the increase of viscous properties of the solution and viscosity decreases electrical conductivity. [3] In 2006 J. Vilaa, P. Ginà ©sa, E. Riloa, O. Cabezaa and L.M. Varelab conducted experiments on the electrical conductivities of solutions of aluminium chloride, aluminium bromide, aluminium sulphate and aluminium chromide. These compounds are ionic in nature. The experiments were carried out under constant temperature and pressure conditions. Experiments conducted by increasing the density of solutions showed an increasing trend of electrical conductivity by 10 % on each increase of density. Density was increased by adding 5 wt % aluminium salt into the solution. These increasing trends went until the solution is 50% saturated. The reason for the rise in conductivity was explained to be the increase in ion concentration. The more the ionic compounds present the more the conductivity would be. The results also showed that aluminium chloride which is more ionic than other samples will conduct more electricity at any concentration. But for polar compounds the increase in density resulte d in a decrease of conductivity. [4] J. Vilaa, P. Ginà ©sa, J.M. Picoa, C. Franjoa, E. Jimà ©neza, L.M. Varelab and O. Cabeza in 2005 conducted experiments on aluminium chloride and aluminium bromide for the binary relation on electrical conductivity with varying temperature and density. The experiment used 30% and 60 % concentrated solutions over a temperature range of 250-430K. The electrical conductivity increases with temperature, up to 400 times for aluminium chloride and 52 times in aluminium bromide solutions. But the conductivity decreases inconsistently with the increase in concentration. The probable reason for this controversial result could be the change in the properties of compounds with temperature. This showed that temperature had a greater influence on conductivity than density. [5] METHODS AND MATERIALS Overview of the experiment In order to contrast the electrical resistance of different liquids to expose their ionic or covalent characteristics, the following measures were carried out. Description of the procedural steps Firstly the electrical resistance measurement was set up. Then hundred and fifty milliliters of desired liquid was measured and poured in to a clean beaker. After the power supply was switched on, using the multimeter, circuits current was measured. Then at five minutes interval reading was traced again for three times. After this the average of three recordings was determined. Once the current was computed resistance of liquid was found out using Ohms law. Next the steps were repeated for all selected liquids. Subsequently all the selected liquids were cooled to 18 °C. Finally the above steps were followed for the refrigerated liquids. Materials Overview of mechanism The materials used for the experiment are listed below. Digital Multimeter DC Power supply, 250 ml glass beaker Sample solution of 150 ml Orange juice, 0.01% salt solution, 1% salt solution, 2% milk, and mineral water. Table salt Description of principal parts Digital multimeter Multimeter is an electronic tool which can be used for the measurement of voltage, current and resistance. There are two types of multimeters available. Multimeter which comes with digital display is commonly known as DMM (Digital Multimeter).Main parts of a digital multimeter are measuring probes, adjusting knob and digital display. Firstly the probes are used to get connection between points where we need to measure electrical property. One multimeter got two probes for achieving the connection between two selected points. Secondly the adjusting knob is used to select which property need to measure. It is also used to select the range of values of the results. The digital display helps the user to get accurate readings. It also provides information about different settings used for measurement. The multimeter can be switched on by turning the adjusting knob to desired property to measure. The display will provide us the relevant information. To test the DMM, turn the knob to resistance measuring mode and then touch each end of a copper wire to probe tips. Then the display will show resistance which should be almost zero. Results and Discussion The resistances of different liquid solutions prepared for the research were calculated using the Ohms law equation at room temperature. Observations show the average resistance of different liquid ranged from 26.1 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦ to 1728 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦. Among the liquids, orange juice was best conductor (26.1 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦) and distilled water (1728 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦) was the worst. The two salt solutions showed almost the same resistances even though higher concentrated gave us a slightly lower resistance. Orange juice The figure 8 chart shows that orange juice is the best conductor of electricity. The resistance for orange juice was found out to be the least during the experiment. We had an assumption that acids are the best conductors because they are ionic in nature. Acids separate into ions when mixed with water and ions are charge carriers. The electrical resistance computed was 26.1 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦ at room temperature. We had also made another assumption that when refrigerated; the conductivity will increase as the ions move slower related to normal room temperature liquid. After refrigeration, the resistance increased slightly to a value of 26.4 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦. Even though there was only a small decrease in the resistance value from that of the room temperature, our assumption regarding the refrigerated liquids came true. As studies and experiment done by Aresatz Usobiaga, Alberto De Diego, and Juan Manuel Madariaga in 1999 to relate temperature with the electrical conductivity in solutions [3] supports our results in this section. Salt solution The second best conductor is the salt solution. For the salt solution, the experiments were carried out with a concentration of 0.01% and 0.1% salt. The salt crystals in solid state wont conduct electricity because anions (chloride ions) and cations (sodium ions) are held together. But in a salt solution they are free to move around and thus conduct electricity. The main reason behind conducting this research experiment on different concentration of salt is to study whether it is the density or temperature of the solution that affects the electrical conductivity more. We hypothesized that the density of solution would decrease the electrical conductivity. The 0.01% and 0.1% concentrated salt solution exhibited almost the same resistance value of 35.6 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦. But the higher concentrated solution gave slightly less resistance value of 35.3 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦ as compared to the other solution. The resistance value of refrigerated salt solution of 0.01% and 0.1% are 115.2 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦ and 114.1 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦ respectively. As per the assumptions the higher concentrated solution gave slightly less resistance and the refrigerated solution showed great resistance as compared to the room temperature values. This showed that temperature had a greater influence on conductivity than density. [5] Milk The third liquid tested was 2% milk solution. Milk also conducts electricity but only in a small amount as compared to orange juice and the salt solutions. Electrical resistance of the milk solution was worked out to be 210.3 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦ during the experiment at room temperature. Viscosity and density are the other factors that contribute to the poor conductivity of electricity as compared to the above mentioned liquids. The refrigerated resistance value of the milk solution calculated is 211.1 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦. While cooling, the viscosity increases due to the higher voluminosity of fatty acids, proteins, etc. [Website reference: http://www.dairy-science.org/cgi/reprint/80/4/628.pdf]. Thus we came to the conclusion that milk conducts electricity due to their typical covalent bond structure and the presence of fatty acids. Distilled Water Figure 8 shows that distilled water is a worst conductor of electricity. During the research experiment, distilled water showed a resistance value of 1728 kilo à ¢Ã¢â‚¬Å¾Ã‚ ¦. The reason why liquid conducts electricity is due to the free movement of cations and anions in between the electrodes. For example, in our salt solution test electricity was conducted as the salt readily ionizes to sodium cations and chloride anions which can move freely around in the solution thereby transporting electric charges. In the distillation process water is boiled to steam and the steam is again condensed to water. Nearly all the salts present in the water is thus left out during the distillation process. Thus distilled water is pure H2O. Although pure H2O (distilled water) can dissociate into H+ and OH- ions like salt, it ionizes very rarely therefore exhibiting the property of an insulator. [Citation may or may not be given for the above statements made] Thus from the research experiment carried out we concluded that among the liquid solutions chosen, orange juice is the best electrical conductor and distilled water is the worst. From this we understood that orange juice has more ions present than distilled water (pure H2O). Therefore our assumption regarding acidic solution has high electrical conductivity is correct. Adding to the above results, the density and temperature also affects the electrical conductivity. The more salt added to the solution i.e. more ions added, the lesser the electrical resistance. The assumption regarding temperature as a factor affecting electrical conductivity was correct in some measure as some liquid solutions show higher resistance whereas some show almost the same resistance value with the room temperature values. Discount Retailers: Porters Five Analysis Discount Retailers: Porters Five Analysis In a context of post World War II, there was an economic boom in the USA, driven by the baby boom. The families needs increased, and discount retailing stores started to appear. Their main aim was to operate within low prices, to be able to offer everyday products at a very affordable price. In order to analyse the attractiveness of the discount retailing industry in the USA in the 1950s, we can use Porters Five Forces. Porter (1980:3) stated that competition in an industry depends on five basic competitive forces. As seen below in figure 1. Force 1: The Degree of Rivalry According to Ghemawat (2008), the degree of rivalry is the most obvious of the five forces in an industry [â‚ ¬Ã‚ ¦]. It influences the extents to which the value created by an industry will be dissipated through direct competition. With the economic boom, many discount retailers have emerged, especially in big cities (with a minimum population of 100  000). For the already existing supermarkets industry, their customers were used to having a lot of competitors to choose from. That is why the newly emerging discount stores attracted a lot of new entrants. That industry was characterized by an intense competition. The growth of the industry was significant and this factor of high profitability attracted many entrepreneurs willing to open new stores. As a result, in the US cities in the 50s and 60s, the concentration for the discount retail industry was low and the rivalry was intense (factor of industry unattractiveness). The theory says that the rivalry between competitors decreases when the buyers switching costs are high. But in the case of the discount retail industry, the switching costs are almost nonexistent: urban customers have a lot of competitors to choose from and the recent use of the car and the quite low price of the petrol in the 50s allow them to easily change and shop in another store. Also, unlike the supermarkets, discounters sold more or less the same kind of products. The available retailers focused on non-food products, and a competition for price began among the stores, offering a wide variety of household products such as toiletries, appliances, groceries and household goods. Thus, there is a significant rivalry here, characterized by high fixed cost and a lack of product differentiation. However in the 50s, in small towns and rural areas, the competition was not as fierce, as not many discount retailers were willing to open a shop in the countryside. This made that business landscape less competitive. Sam Walton saw an opportunity there, and decided to locate his first Wal-Mart stores there: Our strategy was to put good-sized stores into little one-horse towns that everyone else was ignoring. Force 2: The Threat of Entry Average industry profitability is influenced by both potential and existing competition (Ghemawat, 2008). The Five Forces framework gives 3 basic types of entry barriers: economies of scale, brand identity and capital requirement: Economies of scale: large economies of scale allow providing cheap products to their customers. It is an essential part for a discount retailer, and without it, could represent a real barrier to entrance. Brand identity: the products were standard in nature, and there were little or no differences between discount stores. That means that in the 50s, it was not really a barrier for new entrants. Capital requirements: the threat of entrants is also possible because of the high capital required. Entrepreneurs need high capital (building, equipment) and financial resources to start up a new discount store and this represents a barrier to entry the industry. Moreover, the barrier is much higher when the plan is to set up a stores chain. There are also some other barriers to take into account: Access to distribution: the discount retailer has to find new reliable suppliers, to have a competitive distribution channel. Advertising: it can also be seen as an entry barrier. In order to be known and to attract customers, new entrants need to spend a lot more money on advertisements. In the 50s, the US discount industry was characterized by high price and advertising competitiveness, with little buyer loyalty. To summarize, there were many obstacles for new entrants in the discount retail industry. Force 3: The Threat of Substitutes The threat that substitutes pose to an industrys profitability depends on the relative price-to-performance ratios of the different types of products or services to which customers can turn to satisfy the same basic need (Ghemawat, 2008). Due to the lack of product differentiation and the absence of switching costs, the goods sold in the discount stores can be found in other types of stores. There is a high buyer propensity to substitute. The discount retailer just like any other has to develop strategies to sell at a low costs but this is not the solution. It constantly has to ensure that its products are exactly what the consumer needs. This means that high quality products at an affordable price should also be part of Walt Mat strategy of being competitive, as well as product differentiation. Supermarkets represented a big threat of substitution for the discount stores selling groceries because they were cheaper than the conventional stores chains and they dominated the retail industry in the 50s (Markin, 1968). Force 4: Buyer Power The buyer information availability was almost non-existent. Indeed, nothing in the way of information technology was accessible at that time, either for EPOS (Electronic Point of Sale) use or for more sophisticated applications. The bargaining power of buyers is weak when reduced to a single individual, but the demand as a whole is extremely powerful. However, the fact that there were many discount retail industries made each of them weaker against the buyers bargaining power. That power was high in the USA in the 50s: customers could easily walk away and go to another shop (low switching costs). In the post World War II years, US consumers became educated in the merits of self-service, low price shopping via the spread of supermarkets. The customers price sensitivity was then high, because of the high product standardization, they could find their products in every discount retail. The buyer loyalty was low. Force 5: Supplier Power In the US discount retail industry in the 50s, the suppliers power was much stronger than today, because of the RPM (Resale Price Maintenance). The RPM was legal at this time and gave the right for the suppliers to set the final price of their products (price sometimes printed on the product). It was virtually impossible for retailers to pass on the benefits of more efficient operations to customers via lower prices. Thus, in the 50s the strong suppliers power was a criterion of unattractive industry. After the analyze of the US discount retailing industry in the 50 through Porters Five Forces, it can be inferred that this industry was not attractive, due to the high new entrants barriers, the level of competition in the cities, the threat of substitutes, and the high buyer and supplier powers. However, it is possible to slightly alter this statement: although the competition was tough in big cities, it was easier to set up a shop in the rural areas, where the degree of rivalry was lower. As a consequence, the different threats and barriers that looked like an insurmountable challenge in the cities were no longer impossible to overcome in the countryside. QUESTION 2 Every business has to adopt a business strategy, seen by many authors as the Paradox of Markets and Resources. The strategic management process means defining the organizations strategy. Managers have to make choices and set up strategies for the company that will enable it to achieve better performance. It is also sometimes referred to as a Business Model. Porters theory The Outside-In Perspectives key features are the positioning activities and the Value Chain, which will define a strategy through different business choices. This model is supported by the key protagonist Michael Porter (1996). Porters Generic Strategies  Model According to the chart above, we can identify Wal-Marts positioning strategy. Wal-Marts main strategy is characterized by its low cost policy, accessible to anyone. It can then be put in the cost leadership strategy strategy. However, with particular attentions for its customers (more than its direct competitors), Wal-Mart also plays a differentiation strategy, and delivers an excellent customer service. With the analysis of Wal-Marts value chain given above, a description of its key value drivers can be done. Every companys activities mapped in the value chain can be a possible source of competitive advantage but its the way they are cheaply performed and combined that will create competitive advantage and value for customer. In 1985, Porter suggested the value chain, which regroups functions into support and primary activities. The value chain is divided into 5 primary activities and 4 support activities. These activities can be linked and connected to the value chain to determine some factors of a competitive position and show how these activities add value to the consumer. Wal-Mart: the Value Chain According to the Wal-Mart value chain, two main support activities show that Wal-Mart uses a differentiation strategy through its human resource management and its technology development. The use of the technology is coupled with the inbounds logistics activity and the operations. Indeed, Wal-art was a pioneer in applying information and communications technology to support decision making and promote efficiency and customer responsiveness. (Zarbo, 1998) In the early 1980s, Wal-Mart invested over half a billion dollars to boost its computer and satellite network systems. They added barcode systems, scanners and other near-real-time technology to link cash registers in every store into one unified link. From the instant a sales transaction takes place, data simultaneously flows back and forth from stores world-wide to Wal-Marts distribution centres, its headquarters in Bentonville, and to Wal-Marts suppliers in a continuous, informative loop. In addition to offering Wal-Mart an environment that monitors and shares its current inventory trends with external vendors, this technology, through a sophisticated network which bridges individual stores, identifies the most efficient way to manage the distribution of its products internally. Moreover, a good example of Sam Waltons early understanding of the importance of technology is its current development and use of an automated distribution system known as the Retail Link. This system shares sales information with Wal-Mart suppliers to ensure that customers always find the shelves well stocked at their local Wal-Mart store. Retail Link allows Wal-Mart suppliers to dial-up and retrieve the history of important sales data from the last 56-weeks worth of sales. Over 4,000 of Wal-Marts suppliers access this service averaging approximately 10,000 queries a day (Zarbo, 1998). The large database of purchasing information enables Wal-Mart to set the right item at the correct price and in the right store. Concerning the human resources management at Wal-Mart, it is considered as very efficient. Sam Walton calls his employees his associates. They are an important part of the Wal-Mart family. The relationships between Wal-Mart and his associates are based on respect, high expectations, autonomy, close communication and clear profit incentives. Through its superior management and communication, Wal-Mart created an advantage. The Marketing and Sales activity is also a crucial point for the company. Wal-Mart has been founded on Sam Waltons belief that: There is only one boss: the customer. Indeed, the basic principle of Wal-Mart was to cut prices, and was thus well below its competitors, enhanced by its slogan Everyday Low Prices. This confirms the companys low cost strategy. In summary, the key value drivers of Wal-Mart match each other to lower the costs. Every activity is involved in cost reduction and that is why we can say that Wal-Marts value chain is very coherent with its cost leader positioning strategy and customer focused value for money approach. Barneys theory Firms obtain sustained competitive advantage by implementing strategies that exploit their internal strengths, through responding to environmental opportunities, while neutralizing external threats and avoiding internal weaknesses. Barney, 1991 The Resource-Based View (RBV) focus on strategic resources as the determinants of a competitive advantage. Those strategic resources are valuable because they allow to achieve superior performance (e.g. accumulated knowledge, or resources impossible to replicate). Grant, the key protagonist of the RBV theory focuses on resources, organisational features and capabilities. In the model, resources must be rare, valuable, inimitable and unsubstituable. Although, intangible resources can create the most competitive advantage, as they are harder to copy by competitors. The chart above reviews Wal-Marts tangible and intangible resources. The firm possess many intangible resources, which made its model hard to copy for competitors. So according to the RBV, Wal-Mart has some real competitive advantages here. QUESTION 3 Tetra-threat framework The Tetra Threat Model was first proposed by Ghemawat (2008). This model helps to determine the level of each threat category, in order to try to reduce their impact. This model can be used to identify what are the threats against Wal-Mart competitive advantage, and how it can sustain itself among the other discount retailers. Threat of Imitation Wal-Mart set up large barriers to overcome it: Scale economies: efficient hub-and-spoke distribution system; high volume purchases, strong dealing power with suppliers; national and regional economies of scale. Learning/private information: a significant effort has been made in understanding the operation of the discount retail industry. Wal-Mart has the right know-how to improve its logistics, reduce storage space, and incentive its people to work efficiently. Switching cost/relationship: due to its pricing policy and experience, Wal-Mart is able to offer inexpensive products to its customer (low switching costs). They also possess strong relationships and sustainable contracts with their suppliers (bargain power due to Wal-Marts size and partnership through data sharing and communication networks). Threat of retaliation: Wal-Mart has a strong reputation of fierceness. The local managers ability to adapt their prices to the local competition is a strong advantage to always have the lowest prices on the market. Time lags, upgrading and strategic complexity: the Wal-Mart business has been built upon the years, and accumulated years of knowledge and experience. Thus, they now own a very complex logistics and technologic system, and upgrade it constantly. To summarize, the imitation threat is not a real danger to Wal-Mart. It has raised many insurmountable barriers for its competitors to overcome. They do not have the sufficient knowledge to do it, or it will take them so much time, that by the time they catch up with their goal, Wal-Mart will already be way ahead of them in terms of innovation and technology. Wal-Mart has here a real sustainable advantage. Threat of substitution Substitution reduces the demand for what a firm uniquely provides by shifting the demand elsewhere. It is the most difficult threat to predict. However, Wal-Mart has developed many strategies to overcome that threat. The chain best answer to the substitution threat has been to own numerous substitutes on the discount retailing industry, such as warehouse clubs, supercenters and neighbourhood markets. Its mobility across format is a successful alternative against substitution threat. However, Wal-Mart has demonstrated being very good at scanning the landscape broadly and understanding underlying customer needs. It has continually been studying the competition in order to be responsive in fighting the upcoming threat. Finally, thanks to its low cost competitive advantage, Wal-Marts cheap prices restrain many competitors to enter a fight with the discount retailer giant. Threat of Holdup Holdup refers to customers, suppliers, complementary organizations, or other industry participants capturing value created by the focal company through the exercise of bargaining power. Concerning this threat related to Wal-Mart, two aspects can be distinguished: suppliers and employees. First, Wal-Mart has a total control over its suppliers, even the largest ones (e.g. Procter Gamble), in order to restrain their hold it up value. However, the holdup can be found the other way around: Wal-Mart ask its suppliers to closely integrate into their system and requirements. The requirements that Wal-Mart imposes on its suppliers extends well beyond low prices. Increasingly, the chain has involved itself in its suppliers employment policy (workplace safety, working hoursâ‚ ¬Ã‚ ¦), making Wal-Mart possibly pose a threat of holdup to them. Nonetheless, labor holdup can be considered as a real issue. With a weak percentage of union penetration, employees abuse (low wages, unpaid overtime, discrimination) are widespread. As a result, it depicts a negative image of the company, as well as employee demotivation and turnover. Wal-Mart should take into consideration this aspect to avoid a labor holdup. Threat of Slack Slack tend to dissipate value within the firm, and is not easy to identify. It regroups all form of inefficiency. However, this is not a big threat to Wal-Mart. In fact, there is a high organizational effectiveness within the human resource management. The relationships with the associates is based on respect, high expectations, close communication and clear incentives. Everything is done to motivate the staff and increase their loyalty to the firm. Finally, according to Casadesus-Masanell and Ricart (2007), protection against slack comes from the right mix of incentives and monitoring. As it is drawn in this analyse, Wal-Mart has develop strong responses to threats from imitation, substitution, holdup and slack, setting mechanism which allowed Wal-Mart to sustain its competitive advantage. QUESTION 4 The Dunnings Eclectic Paradigm (1981) of Foreign Direct Investment (also known as the OLI-Model) sets up 3 conditions that a company has to meet in order to engage in foreign operations: Ownership advantages, Location/Country-specific advantages and Internalization advantages. This theory will be used to contrast Wal-Marts entry into the German market in 1997 and into the UK market in 1999, in the following table. Wal-Marts entry into German market UK market Acquisitions (1997 and 1998): 21 stores Wertkauf ($1.04 billion) 74 hypermarkets Interspar (‚ ¬560 million) Both were renamed Wal-Mart stores. Acquisitions (1999): 219 outlets Asda ( £6.7 billion) Kept its name. Ownership Advantages Wal-Mart owns several intangible assets, which will allow it to overcome the costs of expanding abroad. These intangible core competencies are: Dominant clothing/textile and food retailer on the US market Every week, around 100 million shoppers frequent its stores Its 2003 turnover is 3 times bigger than Carrefours, the worlds no. 2 retailer (Knorr and Arndt, 2003) Internationalization experience: more than 1100 outfits abroad, which leads to considerable experience and management learning from a portfolio of stores in diverse markets Wal-Marts Retail Link-system (backbone of its sophisticated inventory management and logistics infrastructure) Operating the worlds biggest private satellite communications system (to track sales, to replenish inventories, to process payments in real-time) Wal-Marts retail proposition of everyday low prices, good customer service, wide assortment and community values High customer service levels, strong organizational culture, efficient logistics operations Location Advantages Location advantages are the factors in a foreign country that lead the company to make profits on its FSAs. Germany accounts for around 15% of Europes $2 trillion-a-year retail market German GNP: ‚ ¬2 trillion 80 million customers: biggest national retail market in Europe Germany is meant to be its bridgehead into Europe After its acquisition, Wal-Mart became the countrys fourth biggest operator of hypermarkets (Knorr and Arndt, 200) Politically stable country Economically powerful with big family incomes Very similar culture and social laws between UK and the US Internalization Advantages A firm possessing an advantage can either use the advantage itself (internalize it) or lease the advantage to other firms. The FDI decision depends on which option presents the best net return. Internalization also allows avoiding transactional costs. Internalization is the option chosen by Wal-Mart in many countries: Closer control by the Wal-Mart management (full control strategy) Economies of scale Sharing of the organizations knowledge and management capabilities to the new business According to the OLI-Model, implementing Wal-Mart stores in those two countries could really help the US firm to set a foot in Europe. Wal-Marts goal is to be the number one in every market in which it operates. Its international retail model equates to the aggressively industrial model. However, despite a bright success in the UK, the German venture has been unprofitable, and led it to exit the country in July 2006. What are the reasons for Wal-Marts failure and success? The reasons for Wal-Marts: Failure in Germany Success in the UK Acquisition of the wrong German companies Acquisition of the adequate UK company First, the German acquisitions have been very costly for Wal-Mart. The German market in renowned for its minimal profit margins and price-led strong domestic competition. Wal-Mart entered Germany at a time when the grocery market was saturated. At the time, Aldi was its major competitor, already holding a strong share of the discount retail segment. Wal-Mart now possessed 2 small disparate retail chains with different organizational structures and a heterogeneous portfolio of stores (the Wertkauf was a highly centralized family store) (Fernie et al., 2006). As a consequence, Wal-Mart did not have enough impact on the German market. For example, nearly 80% of the population did not have access to a Wal-Mart store (bad geographic penetration). Moreover, the patchy geographical coverage of Wal-Marts meant that its nationwide competitors have been able to adopt a zone pricing policy to compete on price in specific local markets. The weakness of the German economy in those years, coupled with the increased prominence of discounters, has reinforced this trend and discounters now account for 30% of the German grocery market and have been growing at 5% per year in a static market. Wal-Marts market share of 1.5% is dwarfed by its major competition (Fernie et al., 2006). There is a strong price competition where price leadership is already occupied by discounters. Asda was already a major discount retailer player before the entry of Wal-Mart. In fact, it was the third major grocer in UK in 1999. Wal-Mart acquired a well-established retail chain and Asdas management had already applied Wal-Mart practices to its corporate culture (Fernie et al., 2006). Asdas marketing, operations and organisational culture mirrored that of the US giant (Burt and Sparks, 2000) and was regarded as good strategic fit. Wal-Mart strategy for UK was to build on these similarities. There has been a high degree of stability throughout the chain during the merger, especially at store level, which facilitated the transition. Wal-Marts takeover also increased Asdas supply chain efficiency and improved its stock availability. Government regulations The German market had a strict legal and institutional framework, often ignored by Wal-Mart. German labor regulations are very different from these in the U.S. : obstacle to embrace the Wal-Mart culture. For example: The zoning regulations impose severe restrictions on the construction of large-scale store Restrictive shopping hours regulations: legal maximum of 80 hours/week store opening hours. Sunday and holidays openings are not permitted Fair trading and antitrust laws contain some important restrictions for retailers pricing policies: it forbids merchants to sell goods below cost on a permanent basis (Knorr and Arndt, 2003) In the UK, the Government was concerned about high food prices and that British consumers were being ripped off by retailers. That is why they were in favour of the creation of a more price competitive environment (Fernie et al., 2006). Moreover, the legal and institutional UK surroundings were not as complex and heavy as in Germany. For example, the legal maximum of a store opening hours was 168 hours/week, and was also allowed to open on Sunday and holidays (Knorr and Arndt, 2003). In the UK, Wal-Mart was able to recreate its 24/7 opening format. Inability to understand the German consumer and business culture The closeness of the UK and the US culture Wal-Mart culturally failed in delivering its Everyday low prices or excellent customer service. Indeed, the expectations are very different from a country to another. The German acquisitions were very different in their organizational structure from the Wal-Mart US model. That is why, when Wal-Mart try to impose its new culture (Anglo-Saxon management level), it led to resistance. Operational errors has been made when remodelling stores to look like US stores, which was not customer wanted (Fernie et al., 2006). Thus, Wal-Marts strategy was contradictory and disoriented to German customers. They didnt see Wal-Mart as a low-price store, due to confusing advertisements. Moreover, German notion of customer service is different from that in the U.S. (e.g. German consumers prefer to pack their own bags and pay by cash), because they hold price and value in much higher esteem than service and quality (Knorr and Arndt, 2003). The British culture was very similar to the American one, and that is why the takeover ran more smoothly in the UK. Also, Asda was already working on a Wal-Marts model, so the consumers did not feel any major difference after the Wal-Mart acquisition. For the British customers, price was a key attribute along with convenience; price is the most important factor in the retail offer. And finally, the UK workforce responded positively to the Wal-Mart way, and the integration was very successful, with good employee relationships (Fernie et al., 2006). Conclusion: When Wal-Mart entered the UK, the economic situation was favourable for a low pricing strategy. Wal-Marts entry created a high competitive environment on prices, and the customers responded well to this new form of discount retail. However, Wal-Mart has failed on every point in Germany. It resulted mostly from a cross cultural inconsideration. Wal-Mart has not been able to adapt its business model to a different culture and ignored the basic key principles of internationalization strategies and intercultural management. The firm should have tried to understand the German surroundings, the market rules and the consumer habits. Thus, they could have shape their business model, the human resources practices and a proper marketing message to fit that local market. Wal-Marts failure in Germany highlighted its inability to select and implement an adequate entry and business strategy. That is why its inability to understand the German retail market and business culture and the consumer needs led it to a bitter failure.