Because of its sheer size and volume purchases, as well as its unique distribution system, Walmart has been able to reduce its prices so successfully that in 2001, it became the largest company in the world. Mexico’s first Sam’s Club, a subsidiary of Walmart, opened in 1991 in Mexico City. Mexico’s retail sector has greatly benefited from the increasing trade liberalization under NAFTA, as well as the improvements to its transportation infrastructure encouraged by NAFTA. In addition, NAFTA improved opportunities for foreign investment in Mexico. One of the country’s largest retail chains, Comercial Mexicana S.A. (Comerci), has found it increasingly difficult to remain competitive since Walmart’s aggressive entry into its market. Walmart’s strong operating presence and low prices since the lifting of tariffs under NAFTA have put such strong competitive pressures on Comerci that it must now decide whether its participation with the recently formed purchasing consortium, Sinergia, will be sufficient for its survival.

Questions

1. 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-NAFTA, or is Walmart a special case?

2. What can local Mexican retailers do to compete against Walmart?

3. How do you think the passage of USMCA will impact Walmart’s strategy in Mexico?