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
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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.
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For Walmex, having banking operations within its stores would
improve the traffic at its stores and boost its retail sales.
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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. |
The Success Story of Wal-Mart in Mexico
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