At that point, the competitive advantages of the American retailers would shine through. U.S. companies that lack these competitive advantages would see no benefit from entering the Mexican market, regardless of NAFTA. 3. Comerci's main move to remain competitive was to try and match Wal-Mart's buying power. It tied with another competitor to form a buying group, in the hopes that it can lower its cost of goods sold to a level that would allow it to compete with Wal-Mart. This appears to have been the main strategic response the company has made to compete.

Ultimately, Wal-Mart derives its buying power from its global scale. In addition to its massive U.S. market, it buys for Mexico and Canada at the same time, and often its goods from China are sold by its stores there as well. This means that Comerci cannot match the buying power of Wal-Mart no matter with whom it enters a buying group.

The advantage of this strategy is that it does improve the company's buying power. The first disadvantage of this strategy is that it does not do enough to match Wal-Mart's buying power. The second disadvantage is that it fails to address the many other ways that Wal-Mart outcompetes Comerci, including the other ways that impact on the company's overall cost structure. Comerci's actions are insufficient, and unlikely to succeed. The company is going to need a much broader customer base -- beyond Mexico -- in order to even approach the buying power of Wal-Mart now that Wal-Mart has half the Mexican retail market.

4. Comerci is in a difficult position. Mass market retailers usually struggle when Wal-Mart enters...

The key to Comerci is that it needs to stop viewing itself as a cost leader in the market. It will probably never be able to match Wal-Mart's prices. Comerci instead needs to focus on finding ways to differentiate itself from Wal-Mart. It can do this in another ways. A marketing campaign to compra mexicano might help, to appeal to patriotism. However, Wal-Mart's appeal is always related to its prices. Nationalistic approaches may have short-term success, but are not sustainable in the long-run.
A more comprehensive differentiation strategy is necessary for Comerci to survive. The company needs to shift to a higher-end position in the market. This will mean sacrificing more market share to Wal-Mart, but that will probably happen no matter what Comerci does. The company needs to adjust its product mix, adjust its target market, and focus on Mexicans who are not shopping strictly on the basis of price. The country has a large and growing middle class, and this class may be more interested in spending their money on better quality goods. Comerci needs to take the time and spend the money on marketing studies to get to know Mexico's markets that are more quality-sensitive than they price-sensitive.

Such a strategy would involve a dramatic restructuring of the firm. However, this is necessary to survive against Wal-Mart. Even if Comerci wanted to be a cost leader it would have to restructure, so it should at least restructure in a direction that takes it out of direct competition with Wal-Mart. Ceding the cost leadership ground and pursuing differentiated markets is the only real way that Comerci can survive.