Impact of NAFTA implementation on Wal-Mart’s success
The implementation of NAFTA has led to the liberalization of investment opportunities in Mexico while at the same time removing tariff barriers for international investors. This move has contributed greatly to the success of Wal-Mart since its entry into Mexico’s retail market. This is because NAFTA’s lifting of tariff barriers directly impacts on Wal-Mart’s pricing. Wal-Mart could now buy goods manufactured in US and ship them to Mexico. Since the tariffs had been eliminated, the retail store still managed to sell its goods at prices lower than other retail stores in Mexico (Daniel et al, 2007, p.298).
Further still, the implementation of NAFTA also led to an improved transport infrastructure in Mexico. This helped Wal-Mart greatly since the retail store was then able to solve the logistic problems it was facing upon its entry in Mexico. Therefore it is because of the implementation of NAFTA that Wal-Mart still managed to keep their prices low while at the same time shipping goods from the US (Daniels et al, 2007, p. 298).
Analysis of Wal-Mart’s success
Much of Wal-Mart’s success could be attributed to its own competitive strategy even though NAFTA has also contributed greatly to its success. It is because of the implementation of NAFTA that Wal-Mart has managed to keep up with its low price policy in Mexico. The tariff barriers could have implied that Wal-Mart had to set their prices higher than what they did and this would affect their customer base and sales returns as well (Lamont, 2002).
However, Wal-Mart’s success was largely influenced by its competitive strategy. It is motivated by its low price slogan which ensures that its prices are kept low and its employees also minimize their spending so as to keep the store’s costs low. Wal-Mart’s ability to negotiate with suppliers so that they can purchase goods at fair prices as well as its effective distribution system also contributes greatly to the retail store’s success. This therefore means that with a good competitive and marketing strategy any other US retailer is capable of success in Mexico (Daniels et al, 2007, p. 299-300).
Comerci’s competitive strategy
In an attempt to remain competitive within the market, Comerci strategize to purchase Sinergia. This strategy was meant to enable Comerci have a superior purchasing power that enabled them negotiate for the most competitive prices from suppliers. As a result, the management felt that this would put them in a better position to reduce the prices of their products. This strategy is advantageous to Comerci as its chance of purchasing more items at the best deal in the market is enhanced by the better leverage with suppliers. Besides, the strategy would also ensure better operations thus boosting the profit. However, this strategy is ineffective since not all prices can be reduced by Comerci in an attempt to keep up with the stiff competition from their competitors (Daniels et al, 2007, p. 300).
What Commercial Mexicana S.A should do to increase its competitiveness against Wal-Mart
Commercial Mexican S.A needs to be competitor oriented and strictly follow its goals and objectives as stipulated in any competitive strategy. By doing this, the organization will be able to avoid Wal-Mart strong points by strictly concentrating on its weak points when launching marketing attacks against these weak points thus building its competitive advantage. The competitive strategy includes customer value proposition and satisfaction, focus on marketing and growth strategies, product and service improvement and business improvement where the management will focus on perfecting the existing business model and creating new business models (Kotelnikov, 2008).
Kotelnikov, V. (2008). Competitive strategies. Retrieved November 10, 2008 from http://www.1000advices.com/guru/strategies_competitive_vk.html
Daniels, J. D., Radebaugh L. H. & Sullivan D. P. (2007). International Business: Environments and operations. 11th Edition, Pearson Prentice Hall. pp 298-301.
Lamont, D. (2002). Global Strategy, EXPRESS EXEC: Strategy. Vol 03.02. Capstone Publishing. Retrieved November 10, 2008 from http://www.expressexec.wiley.com/ee/ee03.02.01/frame.html
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