Wal-Mart's Goes South

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

NAFTA reduced tariffs on American goods sold to Mexico from 10 to 3 percent. Once the agreement was signed, the barriers fell and Walmart was on a level of playing field with its competitors. Since NAFTA has gone into force, Mexico has invested significantly into public and private infrastructure, which has helped Walmart to improve the efficiencies in its distribution network. It opened the gates wider to foreign investment in Mexico. The restrictions of foreign direct investments being eased resulted in many foreign suppliers building plants in Mexico from which Wal-Mart could purchase products for better prices and thus offer lower prices to its customers.

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?

NAFTA has been beneficial for Wal-Mart to gain entry to Mexico however Wal-Mart’s size and volume purchasing power to obtain lower prices coupled with the NAFTA benefits is the real reason for Wal-Mart’s success. Wal-Mart’s purchasing power would not be available to other companies. The reasons lead to the success is not only the implementation of NAFTA, but also the competitive strategy. NAFTA can solve the difficulties Wal-Mart facing, but Wal-Mart has its own superiority. It can keep everyday low price. Wal-Mart can use their volume of purchases, their sheer size and their "economies of scale" to decrease the prices to very low levels, challenging smaller competitors and making their actions more difficult.

3. What has Comerci and Soriana done in its attempt to remain competitive? What else do you think they need to remain competitive in the future?

In order to remain competitive,