1
How Question has the implementation of NAFTA affected Walmarts success?
Answer
In 1986, Mexico joined GATT to help open its economy to new markets. In 1990 with
additional free trade negotiations with Canada and US taking place, founder Walmart met
with Cifra and Stated 50/50 partnership. This partnership was extremely successful as
they have broken all records.
Prior to 1990, Walmart never move to outside US but now they have developed Walmart
international division in1993. They have expended themselves to 15 countries. Walmart
now have 8000 retail stores worldwide of which 3659 outside US.
They resolved many of the problems by trial and error but emergence of NAFTA help
them very much. As NAFTA reduced tariffs on American goods sold in Mexico from 10
to 3 percent. Perior to NAFTA, Walmart was not a threat for companies like Comerci,
Gigante and Mexican top retailers but once tariffs goes down which removed barriers and
as a result Walmart get opportunity. NAFTA encouraged Mexico to improve its
transporation infrastructure. Benefits of NAFTA are for every company but Walmart use
them most effectively.
To conclude, we cant say that Walmart itself was nothing its NAFTA who made them.
We can say, in case of Mexico, only high tariffs were the hurdle to their winning strategy
everyday low price which is supported by NAFTA.
Question 2
How much of Walmarts Success is due to NAFTA, and how much is
due to Walmart inherent competitive strategy? In other words, could
any other U.S. retailer have the same success in Mexico post-NAFTA, or
Walmart is special case.
Answer
Walmarts basic strategy to win the markets is offered prices. They offer prices market
lower then every other which help them to become a leader. This strategy was supported
by NAFTA very much as NAFTA reduced tariffs on American goods sold in Mexico from
10 to 3 percent. NAFTA encouraged Mexico to improve its transportation infrastructure.
Benefits of NAFTA are for every company but Walmart use them most effectively.
Walmarts inherent competitive strategy was effective for Mexican market.
Time to Enter Market:
Time to enter in market helps a lot. Take the case of South Korea, Wal-Mart has missed a
proper timing to enter the Korean market, and was unable to capture logistically efficient
locations which can allow building an efficient distribution system with advantage of
economies of scale that it enjoyed in the US market. Major Korean retailers had already
located their stores in key commercial areas and developed their distribution networks to
optimize the merchandising and the retailing operations prior to Walmarts market entry
Buying behavior of Residents:
Buying behavior of country in which you are working matter a lot. Again take the case of
Korea, Wal-Mart expected the Korean consumers drive to to its stores for price shopping
as the American consumers do. However, this location strategy did not match well with
the Korean consumers lifestyle and shopping habits. Korean consumers have
substantially different shopping styles and preferences compared to North American
consumers. They prefer to purchase smaller units on a more frequent basis and to have
accessibility to a store in walking distance.
Korean consumers were quality conscious and tend to be more brand-loyal, less likely to
switch to less expensive products. Korean consumers were unwilling to compromise the
customer service and the quality for the low price, and expected to see sales people in
each aisle of the retail stores and aggressive promotion in the value of service and
products offered by the retailers (Ramstad, 2006b)
References:
1. Ramstad Evan (2006b). South Koreas E-Mart is no Wal-Mart, which is precisely
why locals love it. Wall Street Journal. ( Eastern Edition). New York, NY. Aug, 10,
2006. p 1.
Question 3
What has Comerci done in its attempt to remain competitive? What are
the advantages and challenges to such strategy and how effective do you
think it will be?
Answer
In 2004, Comerci form a purchasing constorium with two other stuggling hometown
supermarkets chains, Soriana and Gigante, to negotiate better bulk prices. The
collaboration, known as Sinergia.
They have formed this constorium to negotiate bulk prices. This can help them to rise
again. Major reason of winning of Walmart was low prices. As we have studied that
Comerci was unable to offer low prices because they are not getting them at low cost.
The first challenge they faced is that it was initially rejected by COFeCo and met
resistance from the consumer Product Counsil of Mexico in fear that it will use its
purchasing power to force unreasonably low prices by latter on accepted in second
presentation provided that it issue regular reports to CoFeCo outlining the nature of its
purchasing.
Second challenge was that Sinergias purchases are currently limited to only local
suppliers, and its future is still uncertain. There might be a possibility that if local
supplies came in discount store business then Walmart will it self through foren supplies
but Sinergia will end up. Although in foren sells Walmart still have more power of
negotiatable supplies.
Question 4
What else do you think Commercial Mexicana S.A should do, given the
competitive position of Walmart?
Answer
I think, Comercial Mexicana needs to change it business model. They need to develop
small stores everywhere in the country and make large wherehouse in each city from
where they supply to stores.
This above diagram very well explains my model. Like change there business model
from city super store to convenient store.