Strategic challenges for the organization prior to expansion in Mexico were retail-outlet saturation in the United States, which presented the prospect of slow domestic growth in income for the business and which therefore presented the possibility of retarding the price of the stock. In other words, investors that saw no growth could abandon the stock in favor of a more lucrative investment opportunity. The fact that employees, or "associates" of Wal-Mart were also stockholders (Hill, 2002, p. 516) meant that a depressed stock price could depress morale and/or expectations for profit-sharing or retirement plans.
Mexico was prime for Wal-Mart expansion because of geographical proximity and because of executive management's personal acquaintance with Mexican retail executives. Wal-Mart took a two-pronged expansion approach to developing new markets: expanding retail offerings to include grocery sales and locating retail outlets outside the United States.
Wal-Mart had competitive advantage because of a sharply defined business format and employment policy, plus strong distribution controls. The good news for the international strategy, launched in the 1990s, as that it coincided with conclusion of the North American Free Trade Agreement, or NAFTA, a trade-barrier-reduction protocol for the US, Canada, and Mexico. As well, despite the persistence of a large underclass in Mexico, the country had developed a middle class. In nther words, the potential for exploiting markets that could afford to purchase Wal-Mart goods appeared strong in Mexico.
The strategic advantages, however, immediately served to point up operational challenges and barriers for Wal-Mart expansion. The challenges began with consideration of an appropriate business format. In that regard, the text makes much of the unique Wal-Mart corporate culture and the sharply defined management philosophy that dominates the organization. Wal-Mart planners recognized that the...