The Success Story of Wal-Mart in Mexico
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Case Code: BSTR264 Case Length: 14 Pages Period: 1991 - 2007 Pub Date: 2007 Teaching Note: Not Available |
Price: Rs.300 Organization: Wal-Mart Industry: Retail Countries: Mexico, USA Themes: International Business, Globalization Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
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...
Positive Image Helped
Analysts felt that Walmex's retail operations certainly helped make the regular household items more affordable for Mexicans. During its initial years, Walmex published price comparisons showing how much cheaper its prices were compared to other retailers. This forced other retailers to improve their services and bring down prices too. This competitive environment fostered by Walmex ultimately benefited the Mexican customers. When Mexico experienced an economic setback in 1994, other foreign retailers like Sears Roebuck & Co. and Kmart sold out their stakes and quit the country, but Wal-Mart stayed on. During this time, the company established and improved its market share in Mexico's retail sector and that indicated its own confidence in the Mexican economy's long run prospects...
Outlook
Walmex established itself as a company that was largely unbeatable on the price front. This widely held perception in Mexico helped it grow as the Mexican market was predominantly price conscious. It was seen both by the people and the government of Mexico as a company that catered to the large section of people with low incomes. On the same lines, Walmex successfully diversified into selling drugs and into banking. Walmex also stepped up competitiveness based on both price and quality, forcing the local retailers such as Commercial Mexicana, Soriana, and Gigante to gear up their efficiency...
Exhibits
Exhibit I: A Note on Retail Market of Mexico
Exhibit II: Milestones in Wal-Mart History
Exhibit III: Share Price Movement of Wal-Mart and Walmex
Exhibit IV: Walmex's Various Retail Formats
Exhibit V: Key Financials of Walmex
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