FDI in Indian Retail Market Case Study to Wal-Mart Mexico Market

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INTERNATIONAL EXPANSION
A Primer for Activists

WAL MART’S

Published by Wal-Mart Watch • 1130 Connecticut Ave. NW Suite 430 • Washington, DC 20036 • http://walmartwatch.com

WAL-MART’S INTERNATIONAL EXPANSION
“All around the world, we save people money, so they can live better. That’s good news – in any language.” – Wal-Mart Stores Inc. As of May 2007, Wal-Mart’s 7,343 stores and Sam’s Club locations in 14 markets employ more than two million Associates world wide, serving more than 179 million customers a year. Wal-Mart isn’t just another company but it is the largest retailer in the United States and in the world. Since 2002, Wal-Mart has topped the Fortune 500 list, except for in 2006, when it trailed in second place behind Exxon-Mobil “but only because the world price of oil had risen 50 percent” in that year.1 WalMart’s annual revenue in 2008 was $378 billion.2 All around the world, Wal-Mart exploits people and resources, so Wal-Mart can profit. That’s bad news – in any language. As Wal-Mart seeks to capitalize on its international strategy, it is working toward building new retail empires in other countries, namely India and Russia. This primer is intended to educate activists around the world about Wal-Mart’s retail development strategies and the company’s impact on local retail culture. The three primary tactics used by the company prior to entering a country include 1.) building partnerships with local businesses and organizations 2.) working with government officials and 3.) tapping into the burgeoning middle class’s purchasing power. We have chosen Mexico and India as two international case studies to highlight what happens before and after Wal-Mart enters a country. Protestors at Wal-Mart Shareholder Meeting in Mexico.

Credit: Global Exchange, 11/14/06

WAL-MART AND MEXICO
In looking at Wal-Mart’s ventures in other countries, important parallels and warning signs become evident. In Mexico, Wal-Mart gained access to the “rapidly expanding” Mexican middle class by first engaging in a joint venture with domestic retailer Cifra.3 While a joint venture with Wal-Mart might seem benign, Wal-Mart’s influence and power grows leading to exploitation, political fraud, and the desecration of local culture and farmland. In Mexico, Wal-Mart’s growth has serious costs for domestic suppliers and consumers. Wal-Mart’s practices have “aroused concern” that “Wal-Mart takes advantage of local customs to pinch pennies” even “when its Mexican operations [had] never been more profitable.” For example, Wal-Mart’s Mexican stores utilize unpaid baggers who do not receive “a red cent in wages or fringe benefits.” Mexican authorities describe this Wal-Mart practice as “downright exploitative” and “an injustice” when the corporation’s Mexican profits were $280 million in just the second quarter of 2006.4

To this day, Wal-Mart continues to incite protest and disharmony among Mexican citizens. Wal-Mart’s alleged involvement in Mexico’s political process provoked violence where protesters “blocked [WalMart’s] cash registers and threw around merchandise,” telling WalMart to “stay out of Mexican politics.”5 In 2007, Wal-Mart saw more unrest from protesters showing “support for [Wal-Mart] employees trying to form a union.”6 In 2008, Wal-Mart Mexico workers went on strike because of “bad treatment from managers” and “not being paid overtime or given benefit packages” comparable to those of other workers.7 In addition to disrespecting and mistreating employees, Wal-Mart has shown Mexico’s land an equal disrespect. When Wal-Mart decided to place a store in an area of San Juan Teotihuacán, a mere one and half miles from Aztec ruins, some Mexican citizens staged a hunger strike in protest of destroying Mexico’s “indigenous heritage”. Not only did the Wal-Mart store destroy the “cultural heritage” of the land, it destroyed “alfalfa and cornfields” which were “razed to make way” for the big box store.8

the world’s largest retailer...
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