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

6812 Words Apr 5th, 2011 28 Pages
Competition between Emerging Market and Multinational Firms: Wal-Mart and Mexican Retailers
Dante Di Gregorio, Douglas E Thomas, Fernán González de Castilla. International Journal of Management. Poole: Sep 2008. Vol. 25, Iss. 3; pg. 532, 15 pgs
Abstract (Summary)
We analyze how competitive dynamics within the Mexican retail sector have shifted following the entrance and ascendance of Wal-Mart, and how Mexican retailers have responded individually and collectively to Wal-Mart 's dominance. We discuss implications for strategic management and international business research as well as for managers of emerging market firms that face dominant foreign competitors. Within fifteen years of entering Mexico, Wal-Mart has become the dominant
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To analyze these competitive interactions, we draw on the competitive dynamics stream of research within strategic management (e.g., Grimm & Smith, 1997; Smith, Ferrier & Ndofor, 2001; Ketchen, Snow & Hoover, 2004). We show how competitive dynamics have evolved in the Mexican retail industry following the entrance and dominance of Wal-Mart. We conclude with a discussion of the implications for both theory and practice.
1. Competitive Dynamics between Dominant Multinationals and Emerging Market Firms
Emerging economies are generally characterized by a rapid pace of economic growth, increasing liberalization of trade and investment regimes, and economic restructuring (Hoskisson et al, 2000). Mexico, for instance, maintained high trade barriers and imposed strict limitations on foreign investment through the mid-1980s. From the point at which Mexico joined the General Agreement on Tariffs and Trade in 1986 through the implementation of the North American Free Trade Agreement with Canada and the United States in 1994 and a broad range of similar agreements with other countries, Mexican firms became increasingly exposed to competitive pressures from foreign firms in the form of imported products as well as foreign-owned operations in Mexico. In this respect, the Mexican experience is similar to that of emerging economies throughout Latin America (which also moved away from import substitution industrialization toward a more
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