Walmart Goes South

699 Words3 Pages
Question 1 How has the implementation of NAFTA affected Walmart’s success in Mexico? The North American Free Trade created in 1994 affected Walmart’s success in Mexico in three specific ways. Wal-Mart had a marketing campaign where it offered “Every Day Low Prices”, but this was not quite true in Mexico because it had significant import charges on many of the products brought from the U.S. After the implementation of NAFTA, Mexico became a free trade zone. This made it possible for Walmart’s to reduce its tariff from 10% to 3 %. This led the government to solve the logistical problem due to the fact that Mexico`s transportation system was below average. NAFTA encourages Mexico to improve the transportation system, which lowers the logistical cost. Additionally, NAFTA allows foreign investment in Mexico. As a result, Wal-Mart was able to build manufacturing plants in Mexico because of the cheap labor. In this particular case we can observe how low labor cost contributes to obtain low import tariffs therefore leads to cheaper products. Walmart’s success in Mexico was definitely possible because of the NAFTA implementation. Question 2 NAFTA benefits every company that is willing to operate abroad. This agreement solved some difficulties but Wal-Mart`s inherent competitive strategy was effective in the Mexican Market. As we all know Wal-Mart`s strategy to win against its competitors is its offered prices. The company is considered leader in the market because it has the capability to offer the lowest prices for this reason Wal-Mart is considered to have a large negotiating power. They can negotiate with suppliers to drop prices and consequently lower prices. In my opinion NAFTA benefits plus Wal-Mart`s purchasing power was the combination that allowed the company to be successful. Wal-Mart uses time inventory system which allows them to keep track of what they need

More about Walmart Goes South

Open Document