Microeconomic Influences on Managers
The discussion of Wal-Mart’s strategies in Mexico in the Wall Street Journal article illustrates several of the microeconomic choices that firms must make. Given increasingly saturated home markets in the 1980s and 1990s and the reduced trade barriers from the North American Free Trade Agreement (NAFTA), Wal-Mart managers sought out new markets in Mexico where there would be a favorable consumer response to its low prices, the wide range of goods the company sells, and the clean, air-conditioned environment of its stores. The company adapted to the local Zapotec lndian environment in its employment and selling practices in certain stores. Wal-Mart’s size and efficient production and distribution systems, reflecting past decisions on production technology and strategies to lower supplier costs, enabled it to not only compete in, but to dominate, the Mexican retail market. When Wal-Mart entered Mexico, it partnered with the local retailer, CIFRA. In 1997, it purchased a majority share of CIFRA, forming Wal-Mart de Mexico or Walmex, which then expanded aggressively. However, Wal-Mart was impacted by other competitors, such as the French grocery giants Carrefour (the world’s second-largest retailer) and Auchan, J.C. Penney department stores, the Texas-based grocer HEB, and the Spanish apparel retailer Inditex, which also entered Mexico following the implementation of NAFTA.