Department Store Industry Analysis in Mexico Essay

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Mexican Department Store Industry The department store industry in Mexico functions just like the majority of department stores around the world. They target the middle to upper class people with money to spend on popular brands, food and entertainment. While the department store chains in many countries tend to focus on one line of products (e.g., clothing), the department stores in Mexico have diversified products and services that helps to decrease direct competition, but it also makes it more difficult to predict a competitor’s next move. As the middle class population grows in Mexico, the market becomes more attractive, but many possibly new entrants are kept out by the high barriers of entry.

Porter’s Five Forces Assessment
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On the other hand, Sears Roebuck’s failure in Mexico was not due a problem of scale. Sudden high tariffs drove them to sell shares of their company to Grupo Carso. Now with the NAFTA Agreement signed, large U.S. competitors could enter the market without as much of a threat from high tariffs. Additionally, Philipe Calderon’s effort to reduce corruption eases the barriers to entry. Although the middle class is not extremely big, it is growing, which makes it a very desirable target market. If a department store is to start in Mexico with scale and succeed then it is likely they will not have too much force from competitors driving them out of the market.
Suppliers
Suppliers have a lot of power in the department store industry in Mexico. Department stores must seek out popular brands in order to attract their target segment, which places the department stores in a position of power. The department stores also will not order and sell in such quantities that the designer labels and popular brands will feel compelled to submit to a department store’s demands. The big companies that department stores in Mexico are trying to attract also have to consider the risk off their investments, whether it is from the possibility of loss in route to the department store or diminishing profits during bad economic climates. This keeps popular brands from selecting small, low-end department stores. In Mexico these brand labels, many of which are coming
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