Wal-Mart Goes South

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Competition with local supermarket companies

The competition between Wal-Mart and local supermarkets has become stronger and more vicious. Wal-Mart is so large and worldwide, which grants an advantage in negotiating low prices with many suppliers. However, Local supermarkets such as Comerci, Soriana, and Gigante, do not seem to give up the market so easily. They have already taken several actions to fight Wal-Mart continuously.

Unable to get low prices Wal-Mart can get from the suppliers, local supermarkets tried using “high and low” to attract more customers. It is a method of lowering prices of some products but not all products; they have also gone to the federal competition commission with complaints of Wal-Mart’s unfair pricing practices.

Later on, Comerci – Wal-Mart’s main competitor, has formed a cooperation called Sinergia with two other struggling homegrown supermarket chains, which would allow them to negotiate better prices with suppliers.

Currently, there has been notable success of Soriana, who is attempting to differentiate itself from Wal-Mart by providing products and atmosphere more appealing to middle (income) class consumers. Wal-Mart is also facing ethical and legal issues raised from their recent law suit because Wal-Mart had been paying its employees store coupons as a part of the salary, which forces the employees to shop at Wal-Mart.

NAFTA’s Limitations

The implementation of NAFTA has greatly reduced the costs of doing business. Wal-Mart has utilized the benefits of NAFTA very well and has passed the savings to their customers. Therefore, with NAFTA they were able to lower prices even further on top of their originally lower price from the result of supplier advantage. However, there are still some limitations with NAFTA.

The first limitation is that NAFTA is not as fully integrated compared to other trading blocks, such as the European Union. For example the European Union has one single currency, no tariff, one...
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