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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Please note:

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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Excerpts

Background Note

Wal-Mart was founded by Samuel Moore Walton (Sam Walton) in 1962. Before starting his own discount stores, Sam Walton had worked at JC Penney Corporation, Inc. for a brief period and had later run Ben Franklin franchises . His experience in retailing led Sam Walton to believe that buyer behavior in the US was changing rapidly and discount stores would be in great demand in the future especially in the smaller towns. When he was operating the Ben Franklin franchises, he proposed to the owners that the business could grow rapidly by passing on more margins to customers and making profits on volume, rather than bargaining with wholesalers in order to make profits...

A Successful Entry

Wal-Mart entered Mexico in 1991 through a joint venture with Cifra, the family-owned company of the Mexican businessman, Jeronimo Arango. Cifra was a dominant player in the organized retail market in Mexico at the time. Wal-Mart consolidated its position in Mexico after it acquired a major stake of 62% in Cifra in 1997...

Low-Prices for the Customer

Nearly 70% of the population in Mexico lived below the poverty line and they depended largely on informal street shops for cheap food and clothing. Under such a scenario, Walmex's low-price strategy raised enormous interest among Mexican customers. The low-price strategy suited the socio-economic conditions of Mexicans, which led to the company's immediate acceptance and quick growth. Through its low-price strategy, Walmex was able to strategically penetrate into markets which otherwise depended on unorganized vendors...

Walmex into Banking

Walmex planned to open its first in-store bank branch in Mexico by June 2007. Walmex's bank, Banco Wal-Mart de Mexico Adelante SA, was to offer savings accounts, debit cards and consumer loans to start with and subsequently expand to mortgages and car loans. According to the company, its banks would operate within Walmex stores, but not in its restaurants. Walmex's banking unit would be Wal-Mart's first banking venture anywhere in the world...

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