Competition Between Emerging Market and Multinational Firms: Wal-Mart and Mexican Retailers

As the world’s largest retail store in the world, Walmart wants to be in every market that they can be prosperous in. They know they rule the United States market, so why not try to expand overseas and dominate those markets as well. Now that they have reached limits on expansion here in the U.S., the next step was to test the water in other nations. As they began to go international, there were many critics saying they will never make it because their business practices and culture wouldn’t work in other countries. Yet the company’s globalization efforts progressed at a rapid pace. Its more than 4,263 international retail units employ more than 660,000

Taken from, Waddell, Jones, and George (2013) 3rd Edition.  Contemporary  Management, Sydney, McGraw Hill (pages

The evolution of Wal-mart from the early 1960s to the present day has set a benchmark that few can achieve. Wal-mart executives have been successful nationally as well as globally. The knowledge and expertise in economics have made Wal-mart a global giant. The research completed is the final recommendations by the members of research team C and will address questions regarding global competition and issues of the organizations ability to expand or reduce current operations.

"In 1994, both countries [Mexico and the United States] signed the North American Free Trade Agreement (NAFTA) which has increased their mutual trade and foreign direct investment. Between 1994 And 2005, the US-Mexico foreign direct investment flows increased substantially from 16,968 billion to $71,423 billion. By 2007, the Mexican commercial relationship with the U.S. almost tripled from $297 billion to $930 billion." [2] This mutual increase in business inherently has had an attendant growth in "the number of foreign enterprises who have situated in each country." [2] With this increase in international business and trade comes cultural shifts and increased globalization and differences in managerial functions.

Walmart is one of the biggest companies in the world, but it also has extremely tough competitors. Currently Walmart is the largest retailer in most countries of the world for numerous reasons. For one, they supply a wide variety of items to be purchased that include entertainment, groceries, health and wellness, hardware, furnishing, apparel and many more. Walmart also has over 11,100 stores in over 27 countries according to Market Realist. These two reasons alone give Walmart a huge advantage over its’ competitors. Walmart has both strengths and weaknesses when it comes to its’ competitors not only across the nation, but across the world as well. Some of the main domestic competitors of Wal-mart consist of Target, Costco, Amazon, and the dollar store trinity. Along with that, Walmart has international competition such as Carrefour in France, Metro in Germany, Tesco in the United Kingdom, Loblaw Companies in Canada, and Ahold in the Netherlands. Although Walmart has competitors with all of these companies worldwide, it still remains the “#1 retailer in Canada and Mexico and has operations in Asia (where it owns a 95% stake in Japanese retailer SEIYU ), Africa, Europe, and Latin America”, according to Hoovers. Strangely enough, Walmart is growing more overseas than it is in the United States. Even with all these companies it has to compete with, Wal-mart’s total sales are still almost 5 times its’ competitors. As it generates a net sale of over $483 billion in one year,

Seong, Jee Young; Kristof-Brown, Amy L.; Park, Won-Woo; Hong, Doo-Seung; Shin, Yuhyung; Journal of Management, Vol 41(4), May, 2015 pp. 1184-1213. Publisher: Sage Publications; [Journal Article], Database: PsycINFO

If there was a choice for you as an American consumer between a Wal-Mart store that uses foreign goods and services over a local business that purchases local goods and local services, which one would you choose? Thousands of people choose to shop at Wal-Mart every day, which isn’t just the world’s largest retailer; it is the largest company in the global economy that brings the lowest possible prices to its customers. It has grown very rapidly throughout the years, bringing great bargains to its customers. However, despite Wal-Mart’s lowest prices, almost no one outside the world of Wal-Mart and its suppliers knows the high cost of those good deals. To reach a nearly unapproachable goal, Wal-Mart chose to avoid the United States’ products

     The discount retailing industry, in which Wal-Mart competes, suffered slower growth in industry sales and in new store increases by reaching maturity. This resulted in a shakeout that has left the industry very concentrated. These trends are likely to continue due to intensified competition driven by companies seeking to expand market share by gaining efficiencis and economies of scale in distribution and purchasing. Indeed, in 1993 the top 5 discounters accounted for over 70% of total industry sales. Consequently, barriers to entry are high. Other barriers to entry include the high capital expenditure requirements of leasing or buying the

In just over half a century Wal-Mart’s global reach had gone from just one store all the way to 11,450 stores in 27 countries. This is one way of saying that Wal-Mart is a multinational company and that its globalisation is only limited by its host’s country. The current increase in globalisation has accelerated due to the rapid growth of multinational companies such as Wal-Mart.

This paper was prepared for Essentials of Management, Module 2 Homework Assignment taught by Dr. Justin Barclay.

Analysis for Business Policy: Strategic Management. Instructor: Dr. M. Reitzel, DeVry University, February 2007, Austin, TX. Members of the Team: Marcus Bedford Jon Cable Wayne Oulicky Constince Sanchez

Mexico began their journey to a more open economy with foreign trade and investment in the 1980’s by unilaterally lowering barriers on imports and elimination restrictions on multi-national firms. With the North American Free Trade Agreement (NAFTA) Mexico signed with United States of America and Canada in 1994, the free trade reforms of this country were solidified. Under NAFTA, Mexican tariffs on U.S. goods declined from an average of 14% in 1990 to 1% in 2001. Even though the peso crashed in late 1994, one manufacturing operation has proven to be highly successful. Maquiladoras are assembly plants that take in imported components to produce goods for export and they are the most dynamic exporters in Mexico. Hecksher-Ohlin Theorem suggests that a country will export goods that use its abundant factors intensively. The most prevalent industries maquiladoras have are apparel, electronics and auto parts. The intensive factor used in maquiladora plants is labor, which Mexico is abundant in. How it works for instance is: Mexico imports the primary sources of inputs to be assembled from United States and then exports back to them. The growth of maquiladora industry accelerated during the 1990s.

Wal-Mart is the number one retailer in the world in both sales and earnings, dwarfing many of its retail competitors. It offers a full assortment of products ranging from clothing to electronics. It currently has 6000 locations predominately within the United States with over $312.4 Billion in net sales during 2006. In addition to its strong domestic presence, Wal-Mart has expanded aggressively to Canada, Mexico, and Puerto Rico with over 1000 locations within those countries. This expansion can potentially create greater economies of scale for Wal-Mart services and merchandise. The synergies created by expansion will also drive profitability in the future by providing goods and services at even lower costs to consumers. In order to enter foreign markets successful, Wal-Mart engages in both joint ventures and acquisitions. By utilizing this method, Wal-Mart intends to leverage foreign retailer's market knowledge with its own core competencies of merchandising and supply chain management (Stilgoe, 2003).

Mexico is the top trading nation in Latin America and the ninth-largest economy in the world. No country has signed more free trade agreements – 33 in all, including the two biggest markets in the world, the US and the EU. Altogether these signatory countries make up a preferential market of over more than billion consumers. Much of the FDI in Mexico is attracted by the country’s strategic location within the North American Free Trade Agreement, which has positioned it as a springboard to the US and Canada. Other attractions are competitive production costs and a young, skilled workforce, together with political stability and an open economy.

These few years, cross-border mergers and acquisitions have increased, accelerating the globalization of manufacturing and restructuring industrial structure at the worldwide level (Kang, N. and S, Johansson., 2000). Wal-Mart is one of the examples of real world cross-border mergers and acquisitions; this can enlarge the market reach. Wal-Mart was founded by Sam Walton with a single store in Rogers, Arkansas in 1962 and has grown to the world’s largest retailer, its headquarters are in Bentonville, Arkansas, United States. Wal-Mart extended its market by acquiring the biggest local retailer Massmart at South Africa, is also operates as ASDA in the United Kingdom and Seiyu in Japan. This increased Wal-Mart 's client base and has made Wal-Mart better known to the world (Z, Nie., 2013).