Walmart Goes South
Dr Andrew Moehlennpah
15 February 2012
Wal-Mart goes South
1. NAFTAs implementation has facilitated the success of Wal-Marts in Mexico in many ways. First, NAFTA reduced American-sourced goods from 10 to 3 percent (Daniels et al. 315). Second, NAFTA encouraged Mexico to improve its transportation system and infrastructure, there-fore helping solve Wal-Marts logistical problems (315). Third, NAFTA has eased restrictions on foreign direct investment and as a result, many of Wal-Marts suppliers have built plants in Mexico in order to better serve the whole of NAFTA region.
2. The benefit enjoyed by Wal-Mart after NAFTAs implementation would be the same benefit available to other competitors in the retailing industry. However, compared to Wal-Mart, smaller competitors do not have Wal-Marts size and volume of purchases in order to negotiate prices to a lower level. Wal-Mart works closely with “suppliers on inventory levels using an advance information system that informs suppliers when purchases have been made and when Wal-Mart will be ordering more merchandize” (Daniels et al. 314). This helps Wal-Mart to attain cost reduction. Wal-Mart then reduces it prices rather than pocketing the accrued cost savings. Therefore, U.S. retailers who want to be successful in Mexico post-NAFTA have to compete with Wal-Marts price or have to position itself in another target market.
3. Comerci has attempted to lower its price, but due to the fact that it lacks negotiating pow-er with its suppliers it has not been successful (Daniel et al. 315). Faced with extinction, Comerci has collaborated with two other Mexican super market chains, Soriana and Gigante to form a pur-chasing consortium called Sinergia for