INTERNATIONAL BUSINESS

Case Analysis
Wal-Mart de Mexico
Submitted By- Ankur Kejriwal
On- 8/21/2012

ID: 2011H149202

CASE REPORT

IntroductionThe case Wal-Mart de Mexico talks about the dominance of Wal-mart in the Retail Sector of Mexico in early 2000. In order to increase trade liberalisation Mexico joined GATT in 1986 to help open its economy to new markets. Sam Walton, founder of Wal-mart entered into a 50-50 Joint venture with Mexicos leading retail store, Cifra to form Mexicos first Sams Club, a subsidiary of Walmart in 1991 which was later renamed to Wal-mart de Mexico & became a huge success soon due to its Everyday Low Pricing Strategy. Initially Wal-mart faced a lot of challenges in Mexico like logistics problem, high Import duties, cultural clashes between the Arkansas executives & local Mexican managers but due to emergence of NAFTA ( North American Free Trade Association) in 1994, solved most of the problems. NAFTA encouraged Mexico to improve its transportation infrastructure, opened gates for foreign investments , imports duties vanished due to formation of NAFTA free trade zone comprising- Mexico, U.S & Canada. Wal-mart bargained with their suppliers on Price due to their huge volume & they pass the portion of that high margin due to end users resulting in price which no other competitor could offer to its customers. Walmart unique distribution system & advanced Information system which they used to managed its inventories also credited to its competitive advantage over its competitors. Due to decreasing market Share Comerci , a leading retail store in Mexico formed a Purchasing Consortium with Soriana & Gigante known as Sinergia to better negotiate bulk prices from suppliers. Sinergia initially faced rejection from CoFeCo (Mexico Federal Competition Commission) but later on the consortium was approved but its future is still uncertain, leaving the management of Comerci puzzled over its future strategies. Problem DefinitionDespite continuous efforts Comerci is not able revive its market share which has dropped to 15% in 2004 due to intense completion from Wal-Mart which continued to dominate retail sector in Mexico by using advance technology , unique distribution system ,very competitive Pricing strategy & Every day low Costs which inspire employees to spend money wisely & also cut on its costs.

AnalysisI believe the management of Comerci has the following alternatives which they can analyse & explore if its consortium Sinergia fails to capitalise on the market opportunities

Look to possible takeover by some foreign buyer like Frances Carrefour. Differentiate itself from the Walmart like Soriana & focus on meeting aspirations of a particular segment (Niche Marketing).

Look to venture into some foreign country through a Joint venture initially with some local player where opportunities are present & government & trade practices are favourable

As per my understanding of the case the future of Sinergia is not very bright in Mexico since its purchase are only limited to local suppliers with whom they can bargain & get voluminous discounts. Since, a lot of products in the retail supermarket are obtained from foreign players across several categories in which Sinergia cannot asks for bulk discounts, being only a representative body with No assets .Though Mexico has opened itself for foreign investments, but the future is still uncertain so as to which foreign company will establish manufacturing plants in Mexico & be able to give huge discounts to Sinergia. Even if Sinergia obtains the foreign goods from their local distributors in Mexico, it will not have a very high margin like Wal-mart which obtains everything direct from the company. It can also target & cater to the specific needs of a particular by differentiating itself from all other players by carefully studying the needs, preferences & buying pattern of people of Mexico. Like this it will have a certain group of people who will look forward to Comerci. It can even look for foreign expansion like Walmart did in some economy which has vast potential/opportunities & is offering a favourable climate to operate & perform by entering into a joint venture with some local player which will help Comerci better adapt to the local culture & environment & also use its existing connections of distribution for expansion. If Sinergia fails to work & nothing happens in favour of Comerci , then probably it can look forward for a possible takeover before it further hampers its Image in Mexico, which will result in even less valuation of Comerci by foreign buyers( mainly on Goodwill account).

RecommendationAccording to me , Since the future of Sinergia is not looking very bright in Mexico & Comerci has been faced with extinction recently , therefore it(Comerci) should first establish a Niche Market for itself in Mexico since competition is very high on various domains & focus on that particular segment only. By this it will stay alive in the market .Its future strategy should be with time once it gains the confidence of the people back & starts showing good numbers in sales & profit , it should look for expansion into foreign market where the market is unorganised ,competition is less , trade practices are favourable with the help of some local player & establish itself over there as a largest retail store.