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managerial economic
INTERNATIONAL BUSINESS
INB 780

(Case Study of Walmart Goes South)

MOHD SUKRI BIN YAHYA
2011307109

MOHD IKHWAN BIN AZIZ
2011100565

HAMDAN BIN A.WAHAB
2011986143

EXECUTIVE MASTER IN BUSINESS ADMINISTRATION
FACULTY OF BUSINESS MANAGEMENT
UNIVERSITI TEKNOLOGI MARA
CAMPUS DUNGUN TERENGGANU

Dec 2013
Question 1

How has the implementation of NAFTA affected Walmart’s success in Mexico?

The North American Free Trade created in 1994 affected Wal -Mart`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 Wal- Mart 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. Wal-Mart`s success in Mexico was definitely possible because of the NAFTA implementation.

Question 2

How much of Walmart’s success is due to NAFTA, and how much is due to Walmart,s inherent competitive strategy? In other words, could any other U.S retailer have the same success in Mexico post-NAFTE, or is Walmart a special case?

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
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