INTRODUCTION

• Wal-Mart Entered Mexico in 1991 through a joint venture with

Grupo Cifra, the largest retailer in Mexico at that time.
• Its goal was to operate Sam’s club warehouse stores
throughout the country.

• It acquired Grupo Cifra in 1997 and established a leadership

position in Mexican retail industry.
•
• After Wal-Mart purchased Grupo Cifra, the Aurerra stores
were converted to Wal-Mart superstore format or the
Bodega (large market) format.

• By 2005, Wal-Mart Mexico is the largest foreign subsidiary of

Wal-Mart stores.

• 1991 came out to be the best time at which Wal-Mart entered

Mexico as firms were allowed to trade among North
American borders through North American Free Trade
Agreement (NAFTA).

• 62% shares of Wal-Mart Mexico are owned by its US based

parent.

• Wal-Mart Mexico accounts for 25% of Wal-Mart’s foreign

sales.

INTERNAL FACTORS
SOCIAL RESPONSIBILITY:

Wal-Mart Mexico publishes an annual social responsibility report. The

vision of Wal-Mart Mexico totally reflects the social responsibility of Wal-
Mart towards Mexican citizens. It states that: “To contribute to improve
the quality of life for Mexican families. Thus, we invest to be near and offer
them the best products at Every Day Low Prices.”Certified as “Socially
Responsible Enterprise” since 2001.Employees more than 109,000
throughout the country, out of which, 48% are female. Wal Mart Invested
over $8 million in 2003 and 2004 to open 73 water treatment plants and a
variety of recycling, energy conservation, and pollution-reduction
activities.Also involved in programs focusing education, nutrition,
homelessness, and health.

FINANCE

Wal Mart's Sales increased by 20.8% during the period of 2002-2004.its

Net Profit increased by almost 45% and its assets increased by 10% during
the same period. Wal-Marts owns 595 units at the end of 2002, which
increased to 694 at the end of 2004.it also employed 92,708 people in
2002, which increased to 109,057 in 2004.

DIVISIONS:

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Wal-Mart operates 694 stores in 73 Mexican cities. It has 360 stores are
self-service and capture 55% of Mexican retail market. It has three major
formats of stores i.e. Aurerra (30%), Wal-Mart Supercenter (27%), and
Sam’s Club (29%) collectively provide more than 86% of its revenues.
AURERRA (162 stores) targets lower to lower-middle income classes. It
offers 48,000 stock keeping units (SKUs).Sam’s Club (61 stores) offers
limited variety of products i.e. 4,000 SKUs. The target market for Sam’s
Club includes individuals and businesses that buy in volume. Wal-Mart
Supercenter (89 stores) offers 80,000 stock keeping units. Superama
stores (48 stores) are located in residential territories and account for only
3% of total Wal-Mart Mexico Sales,6% sales come through Suburbia 50
departmental stores that target the middle class and offers fashionable
apparel at reasonable prices and 3% sales come from VIP restaurants that
Wal-Mart Mexico operates in 284 locations.Wal-Mart focuses on the urban
population of Mexico. 44% of population lives in top 25 largest cities of the
country where almost 85% of Wal-Mart stores operate.33% of Mexican
population is rural and no retail outlet is present in the rural areas of
Mexico. People living in rural areas are dependent on neighborhood stores,
public markets, or street vendors.

COMPETITORS
CHEDRAUI:

Chedraui purchased French retailer Carrefour’s operations in 2005, which

has 29 hypermarkets in the southern part of the country this purchase
bolstered the position of Chedruai. It operates 64 grocery stores, 17
bakeries, and 19 convenience stores, as well as a transportation unit.
Chedraui competes as a provider of low cost products.

COMMERCIAL MEXICANA:

Commercial Mexicana owns 181 stores throughout Mexico (in five different
formats) and stands at 3rd position in terms of Mexican market share of
retail sector. Commercial Mexicana was established by a Spanish
Immigrant in 1957 and opens its first self service store in 1962, Currently
it operates 58 California Restaurants throughout Mexico and Costco Stores
in Mexico since 1991 through a 50-50 joint ventured during 2003-2004,
Sales have decreased by 2%, whereas the profits declined by almost 40%

GRUPO GIGANTE:

Groupo Gigante operates 263 self service and general merchandise stores
in Mexico and it is very successful in penetrating foreign markets and
operates 8 stores in Los Angeles, USA.it also operates 92 Office Depot
stores in Mexico and 9 in Central America through 50-50 joint venture and
98 Radio Shack stores throughout Mexico through 51-49 joint venture with
Radio Shack. its also runs 47 Toks Restaurants. Its has 13% market share
in Mexican retail industry and operates with 4 different retail store
formats: Gigante supermarkets, Bodega Gigante, Super Gigante, and
SuperPrecio discount.

SORIANA:

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Soriana is operational since 1908, but began its modern, incorporated
operation in 1968.its Principal shareholders are members of two families
that own $1.7 billion of its stocks. its operates 144 stores throughout the
country, headquartered at Monterrey, Mexico. It is the toughest
competitor to Wal-Mart as it touched the operating margin of Wal-Mart of
6.1% in the 3rd quarter of 2004.it operates price clubs in competition with
Wal-Mart’s Sam’s Club. Soriana's marketing strategies are quite efficient in
providing extra profits. It tailors its stores to the local community in which
it operates. Apart from Mexico’s bigger cities, Soriana is also successful in
mid-size towns. its major weakness is that it is still in process of opening
stores in the Mexican Capital city.

EXTERNAL FACTORS
MEXICAN RETAIL TRADE ASSOCIATION:

The Association Nacional de Tiendas de Autoservicio y Departamentales

(ANTAD) is the trade association that represents the retail industry in
Mexico.The goal of ANTAD is to promote free competition among retail
stores. Wal-Mart left ANTAD in 2002 because its ethics code of ANTAD
stated that members should not publish any type of promotions stating
another member’s prices. Which is Wal-Marts business strategy .

SINERGIA:
This is a purchasing cooperative being formed by the competitors of Wal-
Mart—Comercial Mexicana, Gigante, and Soriana—because of Wal-Mart’s
huge purchasing power. SINEGIA Introduced in 2002. Mexican antitrust
authorities approved it in 2004and it is involved in purchasing electronics,
groceries, and packaged food items for Wal-Mart’s competitors.

SPECIALIZED RETAILERS:
A Wide variety of retail formats, many of which are informal.Many
shoppers in Mexico are daily wagers.Corner stores, public markets, and
street vendors help in providing necessary items to such population These
stores constitute a significant share towards Mexican economy. Gas
Stations and many small entrepreneurs are becoming a part of such
markets.

THE MEXICAN ECONOMY:

Mexican Economy is very volatile. Peso devalueation results in decline in

GDP. Similarly, appreciation in the value of Peso results in higher GDP
growth.The Mexican consumers are very price sensitive and this variation
in GDP and inflation results in posing a negative impact on consumers and
businesses.

THE FUTURE:
Competitors are learning to respond to Wal-Mart’s success.The purchasing
habits of Wal-Mart have been under criticism Impact of Wal-Mart’s success
as a foreign company in Mexico, has a great impact on local businesses,
and looms as a significant threat for Wal-Mart itself.

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QUESTIONS

1. What are the possible future scenarios for the Mexican

retail industry?

Competitors are learning to respond to Wal-Marts size,

efficiency and success. So, in order to remain competitive in
Mexico Wal-Mart must formulate new business strategies.

In Future Wal Mart need to be more transparent in purchase

practices, supplier and employee relation ship. Because
despite of its many social responsibilities its is often being
criticized by many people.

2. Which markets have not been exploited by Wal- Mart

Mexico? How could it do so?

Wal-Mart can achieve first mover advantage by tapping in the

rural market which is stil not tapped by retails stores operatin
in Mexico. Income level of Mexican's rural population is quite
low as compared to Mexican Urban population; low cost
products would be best sellers in that market. Moreover,
Walmart can start a new Retail Category. That allows
different neighborhood stores, mom-and-pop or Kirana Stores
to obtain Franchise rights from Mal-mart against some fee.
This enables the willing Parties to use Wal-Mart Expertise and
successful business model.

3. Why (or why not) should Wal-Mart Mexico continue to

operate several different retail formats, as well as
departmental stores and restaurant chains?

Wal-Mart should operate in different retail formats, because

each retail format target different social economic class of
Mexico. Since Wal-Mart Competitors are also in Departmental
and restaurant business so its must also enter in these
business not only to provide competition in those business

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 but also to distract their attention from Wal-mart core
business.

4. To what degree is Wal-Mart Mexico's reputation in the

Mexican Market similar to or different from its reputation in
the U.S. market?

Wal mart Mexico has a positive reputation in Mexico as a

good cooperate citizen and received prestigious awards for
its actions and it is Mexico's largest private employer with
109,057 employees in valuable jobs in local community. But
Wal-Mart reputation in U.S completely differs from its
reputation in Mexico. In U.S It faces numerous issues which
includes; gender discrimination, employee relationship and
workers rights. This has completely distorted the reputation
of Wal-Mart in U.S market.

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5. Will Mexican retail perfectly resemble U.S retail in the
Future, or will differences persist?

Wal-Mart foresees further integration of the U.S and Mexican

markets and increased opportunities for outside investment
in Mexico with the trade agreements such as NAFTA intact.
With the free movement of factor of productions among
NAFTA counties U.S based industries are likely to come
up with new retail based and agriculture oriented
products for the Mexican market. As a result, there is
going to huge number of new products, large of new
retail outlets shall open up, employment opportunities
shall increase, people’s way of living would change and
ultimately the economy would revert to a boom.

6. How can retailers protect themselves from economic

volatility

The economic volatility has negative impact on business and

consumers alike. In order to survive in recession firms are
required to restructure and realign in an effort to reduce
expenses and optimize operational profit. But big
corporation can turn this treat into and opportunity like wall
mart did, they entered in Mexican market in period of
economic recession and buys Cifra Shares at very low price.

In struggling economy its is easier to reach people who have

been negatively impacted by corporate downsizing, these
people are open to fresh new ideas about how to make
money, and are actively searching for a way to recession
proof and protect themselves.

7. How can domestic player compete against Wal -Mart?

Domestic Players can lobby against Wal-Mart, as ANTAD

and SINERGIA have already given strength to the Wal-
Mart’s competitors, Mergers between Wal Mart's
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competitors would also be an option to look upon. In this
way the consumers would feel the presence of Wal-
Mart's compititor everywhere they go, and consequently
it would remain in the minds of customers whenever
they are making a purchase.