Wal-Mart Success in Mexico

WAL-MART’S MEXICAN ADVENTURE

SYNOPSIS

Strengthened by a unique culture and armed with the industry’s state of the art information system that powers a unique hub and spoke distribution system, Wal-Mart entered the Mexican market. It perceived that continued growth in the U.S. markets was no longer possible and took advantage of the free trade environment to be created by NAFTA.

The strategy Wal-Mart originally adopted by Wal-Mart was to begin a joint venture with thee discount and grocery store giant, Cifra. Problems were apparent very early. Wal-Mart encountered transportation problems, poor merchandise selection, and government interference. In the mid-1990s, the collapse of the Mexican peso hit Wal-Mart hard, because it meant that the goods imported from the U.S. were more expensive.

During the market slump, Wal-Mart built its market share and began to invest heavily in Mexico. It improved its distribution problems, sourced more products from Mexico, and changed its mix of products to appeal to the Mexican market. Soon, Wal-Mart had improved its cost structure and repositioned all of its Mexican stores to operate under the strategy of Every Day Low Pricing. Surging volume in early 2000 was an indication that Wal-Mart had finally hit it big to control most of the Mexican market.

TEACHING OBJECTIVES

The main teaching objectives of the case are:

1. To indicate the strategies and problems that may be used when entering a foreign country.

2. To understand how to create value in a foreign venture.

3. To appreciate the operational culture of one of America’s great retail firms.

This case can be most effective when used after Chapter 17, describing the distribution, communication and pricing strategies and the marketing mix that most be considered in international business.

STRATEGIC ISSUES AND DISCUSSION QUESTIONS

1. Why did Mexico make such a good proving ground for Wal-Mart’s foreign expansion strategy?

First,...