Wal-Mart Goes South
Wal-Mart, founded in 1962 in Benton Arkansas by Sam Walton has grown from a small mom and pop store to an international juggernaut of a corporation today. Wal-Mart now, “serves customers and members more than 200 million times per week. We serve them in the ways they want to be served – in retail outlets, online and on mobile devices. Wal-Mart operates under 69 different banners in 27 countries. With fiscal year 2012 sales of approximately $444 billion, Wal-Mart employs 2.2 million associates worldwide.” (walmart.com, 2012)
How has the implementation of NAFTA affected Wal-Mart’s success in Mexico? The implementation of NAFTA has affected the success of Wal-Mart in Mexico in many ways. Firstly, the lowering of tariffs on American goods sold in Mexico from 10 percent to 3 percent has allowed Wal-Mart to level the playing field with its major competition. With the ratification of NAFTA, European countries were more likely to build manufacturing plants in Mexico due to the reduction of the restrictions against foreign direct investments in Mexico. These plants allowed Wal-Mart to reduce supply chain expenses through lower overall cost of goods. Further savings to Wal-Mart were seen when the upgrades in infrastructure allowed for an easing costs of distribution even further, which in turn permitted Wal-Mart to offer product at an even greater discount.
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 US retailer have the same success in Mexico post –NAFTA or is Wal-Mart a special case? Much of Wal-Mart’s success in Mexico is due to NAFTA.NAFTA gave entry to Wal-Mart in the Mexican market where before tariffs, poor infrastructure and regulation prevented a truly successful expansion into the market. Wal-Marts extremely competitive edge in Mexico was sealed when coupled with their ability to use their extreme purchasing power to offer...
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