Walmart Goes South

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IBO 58001

Walmart Goes South – Ch. 8 Case Study

1) How has the implementation of NAFTA affected Walmart’s success in Mexico? The implementation of NAFTA has affected Walmart’s success in Mexico by lowering/abolishing the tariff’s which Walmart was originally subject to prior to NAFTA. This has allowed the Walmarts in Mexico to offer the same “Every Day Low Prices” to its consumers on both sides of the border without having to raise prices due to tariff fees. Prior to NAFTA, Walmart was experiencing strong levels of success in the Mexican region but the largest challenge it faced was incorporating the import charges on the goods it sold in its stores. NAFTA implementation in 1994 not only lowered tariffs from 10 to 3 percent on all American goods travelling into Mexico, but it also encouraged the Mexican government to improve its infrastructure. These improvements to unsatisfactory roads and transportation routes helped to bridge the logistical issues foreign companies were having transporting goods into the country and thus resulted in an influx of foreign investment interest. The new interest in foreign direct investment also worked to Walmarts advantage as it lead to the stationing of new manufacturing plants by some internationally owned supply companies such as Sony, an electronics manufacturing company based out of Japan which sells its products to Walmart.

2) How much of Wal-Mart’s success is due to NAFTA, and how much is due to Walmart’s inherent competitive strategy? In other words, could another US retailer have the same success in Mexico post-NAFTA, or is Walmart a special case? As aforementioned, Walmart had experienced success in Mexico prior to the NAFTA implementation and this is largely due to the company’s competitive strategy. The company’s operations are second to none in minimizing costs and their system of purchasing large quantities from suppliers at the lowest negotiable rates and then storing them in central locations...
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