Wal Mart

Commercial Mexicana S.A. (Comerci), one of Mexico’s largest retails chains, is faced with a serious dilemma. Since Wal-Mart’s aggressive entry into the Mexican retail market, Comerci has found it increasingly difficult to remain competitive. Wal-Mart’s strong operating presence and low prices since NAFTA’s lifting of tariffs have put pressure on Comerci, and now management must determine if Comerci’s recent participation with the purchasing consortium Sinergia will be sufficient to compete against Wal-Mart.

What’s caused this intense competitive pressure on Comerci, and what is likely to be its future? Mexico’s retail sector has benefited greatly from the increasing trade liberalization the government has been pushing. After decades of protectionism, Mexico joined GATT in 1986 to help open its economy to new markets. In 1990, with Mexico’s economy on the upswing and additional free trade negotiations with Canada and the United States taking place, the founder of Wal-Mart, Sam Walton, met with the president of Cifra, Mexico’s leading retail store. Their meeting resulted in a 50/50 joint venture in the opening of Mexico’s first Sam’s Club, a subsidiary of Wal-Mart, in 1991 in Mexico City.

It only took a couple of months after the opening to prove the store’s success – it was breaking all the US records for Sam’s Club. The joint venture evolved to incorporate all new stores, and by 1997, Wal-Mart purchased enough shares to have a controlling interest in Citra. In 2000, it changed the name to Wal- Mart de Mexico, S.A de C.V., and the ticker or label symbol to WALMEX.

Prior to 1990, Wal-Mart had never made moves to enter Mexico or any country other than the United States. Once Wal-Mart started growing in Mexico, management created the WalMart International Division in 1993. The company has expanded internationally to 14 countries through new-store construction and acquisitions. lt now operates in Argentina, Brazil, Canada, China, Costa Rica, El Salvador,...