Wal-Mart Goes South

Case: Walmart Goes South

Chapter 8

1. How has the implementation of NAFTA affected Walmart’s success in Mexico?

The implementation of NAFTA has “reduced the tariffs on American goods sold to Mexico from 10 to 3 percent” (Daniels, Radebaugh and Sullivan 321). Mexico has invested into the public and private infrastructure which has helped with the distribution networks. This also helped with Wal-Mart’s logistics problems. Another implementation of NAFTA is it opened up the opportunity for foreign investments in Mexico. “Foreign companies knew that if they built manufacturing plants in Mexico, they could keep costs low with Mexican labor and also ship to NAFTA’s free trade zone” (Daniels, Radebaugh and Sullivan 321).

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

NAFTA applied the same benefits to Walmart as it does its other competitors. Walmart is a company that can negotiate with suppliers to drop prices down to an agreeable level. In turn these prices will not be available to smaller competitors. “It also works closely with suppliers on inventory levels using an advanced information system that informs suppliers when purchases have been made and when Walmart will be ordering more merchandise. Suppliers can then plan production runs more accurately, thus reducing production costs, resulting in cost savings for Walmart, which then can pass on the savings to the consumer as lower prices” (Daniels, Radebaugh and Sullivan 320). If retailers want to compete with Wal-Mart they will either have to meet Wal-Mart’s prices or position themselves in a different segment of the market.

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

Comerci and other have tried to get their prices...