Walmart de Mexico

1591 WordsSep 28, 20057 Pages
Wal-Mart de Mexico Comercial Mexicana S.A. (Comerci), one of Mexico's largest retail chains, was faced with a serious dilemma. Since Wal-Mart's aggressive entry into the Mexican retail market, Comerci has found it increasingly difficult to remain competitive. Wal-Mart's strong operating presence and low prices since NAFTA's lifting of tariffs have put pressure on Comerci, and now management must decide if it can improve Comerci's competitive position by remaining independent or by merging with either a local or foreign retailer. Which raises one question that needs to be answered: What has caused this intense competitive pressure on Comerci, and what is likely to be its future? Mexico's retail sector has benefited greatly from the…show more content…
Wal-Mart has also come across logistics problems due to poor roads and the scarcity of delivery trucks. Yet another problem was the culture clashes between the Arkansas executive and the Mexican managers. Some of these problems were solved by trial and error, but the emergence of the North American Free Trade Agreement in 1994 helped solve most of the problems. Among other things, NAFTA reduced tariffs on American goods sold to Mexico from 10 percent to 3 percent. Prior to NAFTA, Wal-Mart was not much of a threat to companies like Comerci, Gigante, and Soriana, Mexico's top retailers. But once the agreement was signed, the barriers fell and Wal-Mart was on a level playing field with its competitors which was all it needed to become number one. NAFTA encouraged Mexico to improve its transportation infrastructure, thus helping to solve Wal-Mart's logistical problems. The signing of NAFTA also opened wider gates to foreign investment in Mexico. Wal-Mart was paying huge import fees on goods shipped to Mexican areas like Europe and Asia. Foreign companies knew that if they built manufacturing plants in Mexico, they could keep costs low with Mexican labor but ship to NAFTA's free trade zone, Mexico, the United States, or Canada. As companies began to build manufacturing plants, in Mexico, Wal-Mart could buy these products without paying the high import tariffs. An example of this tactic is Sony's flat-screen television line, Wega. Sam's Clubs in Mexico imported

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