The Success Story of Wal-Mart in Mexico


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Case Details:

Case Code : BSTR264
Case Length : 14 Pages
Period : 1991 - 2007
Pub Date : 2007
Teaching Note :Not Available
Organization : Wal-Mart de Mexico SAB de CV
Industry : Retail
Countries : Mexico, USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Wal-Mart's power is changing Mexico in the same way it changed the economic landscape of the United States, and with the same formula: cut prices relentlessly, pump up productivity, pay low wages, ban unions, give suppliers the tightest possible profit margins and sell everything under the sun for less than the guy next door."1

- Tim Weiner, New York Times, in December 2003.

"We have a commitment to Mexico, a long-term view in this country."2

- Raul Arguelles, spokesman for Wal-Mart de Mexico SAB de CV, in 2005.

"Wal-Mart can have a dramatic effect in emerging markets. If you look where Wal-Mart has been less successful, it's developed economies like Germany and Japan, where you have sophisticated urban dwellers who have a host of other concerns."3

- Mark Husson, Analyst at HSBC Securities, in 2007.

Introduction

On March 01, 2007, Wal-Mart de Mexico SAB de CV (Walmex), the Mexican arm of Wal-Mart Stores, Inc. (Wal-Mart), the world's largest retailer, announced plans to open its first in-store bank branch in Mexico by June 2007.4 While Wal-Mart's efforts to enter into the banking space in the US had been unsuccessful owing to protests from small banks and unions, Walmex was able to get government approval easily to set up in-store bank branches in Mexico owing to its image as a successful retailer that catered to the daily needs of the Mexican people. Walmex was seen by the Mexican government as being capable of breaking the oligopoly of international banks in Mexico. This was expected to make financial products more affordable to millions of Mexicans, many of whom didn't even have a bank account.

For Walmex, having banking operations within its stores would improve the traffic at its stores and boost its retail sales.

Wal-Mart started its international operations with its entry in Mexico in 1991.5 It formed a joint venture with Grupo Cifra SA de CV (Cifra), a well-established retail chain in Mexico.

Industry experts credited much of Walmex's success in Mexico to its entry through a joint venture with an established local player. Cifra provided Wal-Mart with the necessary understanding of the Mexican market and helped it fine-tune its strategies to suit the Mexican customer.

Walmex's drive for low prices attracted protests from small vendors and suppliers in Mexico.

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1]  Tim Weiner, New York Times, "Mexico: Wal-Mart Invades," www.corpwatch.org, December 06, 2003.

2]  Lorraine Orlandi, "As Wal-Mart Expands in Mexico, Opposition Grows," www.signonsandiego.com, March 22, 2005.

3]  "Oft-Criticized Retailer Defies its Opponents," www.eluniversal.com, March 06, 2007.

4]  "Mexico's Walmex to Open First Bank Branch in June," www.yahoo.reuters.com, March 01, 2007.

5]  Knight Ridder, "Wal-Mexico: Wal-Mart's Biggest Success," www.laborrights.org, January 25, 2006.

 

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