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AD749 Prof Rambow 4-4-2010 Final Exam Wal-Mart Goes South 1. How has the implementation of NAFTA affected Wal-Marts success in Mexico? NAFTAs implementation affected Wal-Marts success in Mexico positively. We have to consider that NAFTAs implementation reduced tariffs that people had to pay on goods that were originated in America from 10% to 3%, which allowed them to increase their bargaining power easily. Another aspect that benefited Wal-Marts success in Mexico is the fact that the NAFTA encourages the improvement of the transportation network and the infrastructure, solving all Wal-Marts problems with logistics, supplies and warehouses. Another aspect in which NAFTA helped Wal-Marts success is the decrease in the regulations and restrictions on foreign direct investment, which allowed Wal-Mart to bring their foreign suppliers, so they can build manufacturing plants, improving Wal-Marts efficiency, not only in Mexico, but in the whole NAFTA region. Huerta-Goldman (2010) explains that NAFTA changed international Trade between Mexico and other countries by litigating it, and also that before NAFTA, with the GATT and the WTO foreign retailers such as Wal-Mart had more trouble accessing the Mexican Market. The implementation, affected positively the trade on U.S. border retailers, as Ford (2009) mentions in his article, but also remarks that the retailers are vulnerable to the exchange rate fluctuations and Wal-Mart is no exemption to it. Therefore, what Wal-Mart did as soon as they had access to the Mexican market is to build suppliers factories in order to avoid currency exchange risks. 2. How much of Wal-Marts success is due to NAFTA, and how much is due to Wal- Marts inherent competitive strategy? In other words, could any other North American retailer have the same success in Mexico post-NAFTA, or is it Wal-Mart a special case? It is important to remark that the NAFTA was not implemented just to favor Wal- Mart, and that all the competitors of Wal-Mart benefit the same privileges and advantages that NAFTA gives Wal-Mart. The main difference is that 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. Javorcik, Keller and Tybout (2008), state that NAFTA their actions more difficult.... View Full Document

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