Chapter 8, Walmart Goes South - Closing Case Studay

Chapter 8, Walmart Goes South

1. How has the implementation of NAFTA affected Wal-Mart’s success in Mexico?

Tariffs were reduced from 10 to 3% on goods imported from the U.S. With Walmart in place the Mexican government saw the advantage of improving their infrastructure and transportation system. Since the restrictions on foreign businesses were relaxed, other foreign supplies, starting with some of Wal-Mart suppliers, have and are exploring building businesses in Mexico now.

2. How much of Wal-Mart’s success is due to NAFTA, and how much is due to Wal-Mart’s inherent competitive strategy? In other words, could any other U.S. retailer have the same success in Mexico post-NAFTA, or is Wal-Mart a special case?

Although NAFTA has been advantageous for Wal-Mart to gain entry to Mexico, Wal-Mart’s size and volume purchasing power to obtain lower prices coupled with the NAFTA benefits would be the real reason for Wal-Mart’s success. Wal-Mart’s purchasing power would not be available to other companies. Wal-Mart uses a real time inventory system and keeps its suppliers informed of merchandise needs in real time as well. If a competitor wants to survive, they will need to beat Wal-Mart’s prices or change businesses. Another option would be to become a supplier to Wal-Mart and to the whole NAFTA.

3. What has Comerci done in its attempt to remain competitive? What are the advantages and challenges of such a strategy, and how effective do you think it will be?

Comerci has attempted to remain competitive with Wal-Mart by lowering its prices. As with other would be competitors of Wal-Mart, the smaller company just does not have the purchasing power and price negotiating power that Wal-Mart has. Comerci however has joined forces with other Mexican chains (Soriana and Gigante) to form Sinergia. This joint purchasing group now has an edge and is able to negotiate