Wal-Mart Goes South
“Save money. Live better” is the slogan of the 1962 founded American multinational retailer corporation that runs chains of large discount department stores and warehouse stores around the world. Wal-Mart today is the world’s 18th largest public corporation according to Forbes Global 2011 list. In 1991 Wal-Mart opened its first stores in Mexico and the competition between the store and local supermarkets began. Wal-Mart being so large and worldwide gave the company an advantage in negotiating low prices with many suppliers. Nevertheless, other local supermarkets such as Comerci, Soriana, and Gigante, didn’t give up the market to Wal-Mart ...view middle of the document...
How much of Wal-Mart’s success is due to NAFTA, and how much is due to Wal-Mart’s inherent competitive strategy? In other words, could any other U.S. retailer have the same success in Mexico post-NAFTA, or is Wal-Mart a special case?
Any company that is similar in size as Wal-Mart could have been or can be just as successful. I don’t think they are a special case and without NAFTA I don’t think they would have made it in Mexico. The company is huge and takes advantage of its size and volume to negotiate prices that smaller competitors can’t achieve. However, I don’t think that they have a secret competitive strategy that other companies don’t know about and Wal-Mart is not free of making mistakes. During their first three years in Mexico they actually continuously stocked their stores with ice skates, fishing tackle, and riding lawnmowers which obviously didn’t sell well in that region. Instead of notifying headquarters of these unnecessary items they were heavily discounted in the end and restocked again. In the end though Wal-Mart learned from these mistakes and became very successful in many other countries around the world. One important thing that differentiates Wal-Mart from its competitors is that they don’t try to pocket profits that they make from lower tariffs or new deals they actually lower their overall prices so that customers don’t have to pay as much and profit as well. As a matter of fact, in 1999 they closed one of its Supercenters for one day to discount up to 6000 items by 14 percent (Daniels, Radebaugh, & Sullivan, 2011).
What has Comerci done in its attempt to remain competitive? What are the advantages and challenges of such a strategy, and how effective do you think it will be?
Comerci tried very hard to offer lower prices to customers; however, because they lacked the size of Wal-Mart’s purchasing power they were not able to negotiate prices as low as them. In order to avoid going out of business, Comerci merged together with Soriana and Gigante. The result was another large store similar in size to Wal-Mart called Sinergia. Thanks to higher volumes they were able to negotiate better bulk prices from suppliers and compete with Wal-Mart. With the intention of preventing price-fixing and other monopolistic behaviors the CoFeCo (Mexico’s Federal Competition Commission) necessitated that Singergia issues regular reports concerning the nature of its purchasing agreements and to sign confidentiality agreements with the involved...