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Wal-Mart
At the time that Wal-Mart embarked on a program of international expansion, the United States was undergoing negotiations with Mexico and Canada over the North American Free Trade Agreement or NAFTA and this brought Mexico to the attention of Wal-Mart as a fit global venue (Hill 2002). Although the Mexican economy, at the time, was beset with huge barriers to cross-border trade and investment, substantial state involvement in business activity and high inflation, the government of Carlos Salinas introduced free market reforms that rendered the country's conditions attractive to Wal-Mart. Since Salinas assumed office in 1988, Mexico's economy was growing at 4-5% yearly and with an increase in disposable income at 70%. Although it was considered a very poor country by American standards, 30 of its 80 million people could be classified as middle class, the affluent segment concentrating in Mexico City and two others. Wal-Mart's Sam Walton and a founder of Cifra in Mexico believed that the NAFTA agreement and conditions augured well. A decade earlier, Mexicans cried out against colonial and economic imperialism. But that cry died out later.
2) Wal-Mart's competitive advantage consisted...
These difficulties were high prices, an unsuitable distribution system, poor infrastructure, crowded roads, lack of leverage with local suppliers, improper selection of merchandise and government bureaucracy impositions on labels and instructions in Spanish (Hill).
3) Wal-Mart had intended to license its brand name to franchisees, expand via wholly owned subsidiaries, or enter into joint ventures with a Mexican company, Cifra. Because of the difficulties in transferring its culture and systems to franchisees and realizing its negligible knowledge about Mexico, Wal-Mart entered into a 50-50% joint venture with Cifra as part of its globalization expansion program.
4) Unlike other foreign ventures that moved out of Mexico City during the 1994 peso crisis, Wal-Mart took advantage of the crisis to build its market share, with 63 stores in operation at that time. It only put off expansion plans for 25 additional stores in 1995. In the meantime, it strongly improved its operational efficiency by opening a distribution center in Mexico City. This center…
BIBLIOGRAPHY
1. Hill, CWL. (2002). International business competing in the global marketplace. In Entry Strategy and Strategic Alliances (515-519), 4th edition. INC Group: McGraw-Hill Companies
2. Weiner, T. (2004). Wal-Mart invades and Mexico gladly surrenders. Retrieved December 20, 2004 from Progressive Trail.Org. Website: http://www.progressivetrail.org/articles/031207/Weiner.html
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