CASE REPORT ON
Wal- Mart de Mexico
This case discusses the serious competition of Mexico’s one of the largest retail chain Comercial Mexicana S.A. (Comerci) and Wal- mart. Wal-Mart’s sheer size and volume purchases, as well as its unique distribution system, strong negotiating power with suppliers and by emergence of NAFTA makes Wal-Mart very successful in Mexican market. To deal with this serious competition Comerci along with two other struggling homegrown supermarket chains, Soriana and Gigante formed a purchasing consortium that would allow them to negotiate better bulk prices from suppliers.
Problem Definition and decisions to be made
• The management of Comerci wants to find out a way to deal with this serious competition with Wal- Mart, which has strong operating presence and low prices since NAFTA’s lifting of Tariffs from 10 percent to 3 percent which was used by Wal-mart than anyone else.
• Whether the Comerci’s recent participation with the purchasing consortium Sinergia will be sufficient to compete against Wal- Mart? The same benefits that have accrued to Wal-Mart following the implementation of the NAFTA are also available to other competitors. However, Wal-Mart uses its sheer size and volume of purchases to negotiate prices to rock-bottom levels that are not available to smaller competitors.
• Sinergia’s purchases were limited only to local suppliers and its future is not certain.
• Comerci can form a Joint venture with another local Mexican retail chain so that it has large purchasing and negotiating power with its suppliers.
• Comerci needs to reduce its production cost by employing cheap labour and optimization of its resources. So that it can give its benefit to its consumer.
• Comerci can import its store items from Canada or US as there were no/ very less tariffs or it can enter into bilateral agreements with other countries.
• Comerci will...