Sources of Trade Regulation <ul><li>GATT and WTO </li></ul><ul><ul><li>Set up to deal with tariffs and non tariff barriers...
Trade Agreements and Associations <ul><li>U.S. – Canada Free Trade Agreement </li></ul><ul><ul><li>Formed January 1988 – w...
Trade Agreements and Associations (contd..) <ul><li>Asia-Pacific Economic Corporation </li></ul><ul><ul><li>APEC establish...
Opportunities and Threats  Opportunities and Threats from Government Actions McGraw-Hill McGraw-Hill © 2003 The McGraw-Hil...
Political Strategy <ul><li>Essential for a firm to form and implement political strategy </li></ul><ul><li>Formulation  </...
NAFTA
1991  1994  1998  2003   2008  Negotiations Started NAFTA  Signed  Ratified I  Schedule II Final
Beginnings <ul><li>• US-Canada auto pact 1965 </li></ul><ul><li>• Canada-USA FTA 1989 </li></ul><ul><li>First tariff cuts ...
NAFTA Provisions <ul><li>General features </li></ul><ul><li>• elimination of trade barriers </li></ul><ul><li>- in 10 year...
Nafta Specific Features <ul><li>Investment </li></ul><ul><li>• national treatment </li></ul><ul><li>• dispute settlement b...
Nafta Specific Features <ul><li>Open Previously-Protected Sectors of Economy  </li></ul><ul><li>Agriculture  </li></ul><ul...
Textile <ul><li>Shock of low-priced textile. </li></ul><ul><li>Diversification  </li></ul><ul><li>More labor-intensive app...
Textile
Textile <ul><li>US: Provides jobs for more than 1.5 million workers. </li></ul><ul><li>(8% of domestic industrial workforc...
Textile <ul><li>Focus on non-price factors of competition (Abbott & Bredhal, 1994). </li></ul><ul><ul><li>Firm’s strategy ...
Textile <ul><li>The forces of globalization caused: </li></ul><ul><ul><li>Overcapacity of production;  </li></ul></ul><ul>...
 
Mexico United States Pre-NAFTA Maquilla Networks Textile Mills U.S. Manufacturer Retailer U.S. Broker Assembly Plants (U.S...
OMJC Wrangler Mexico Aalfs Wrangler  de Mexico Post- NAFTA  Full-Package Networks Retailer JC Penney Marketer Manufacturer...
 
Table 5
 
 
Garment Workers in Los Angeles, by Race
SUPERMARKETS
Economic Integration <ul><li>Direct Investment </li></ul><ul><li>Strategically Alliances/Joint Ventures </li></ul><ul><li>...
Market <ul><li>5729 Food and Beverage Retail Stores </li></ul><ul><li>No including tiendas  </li></ul><ul><li>Sales increa...
Changes <ul><li>1. Arrival of Foreign Retail Chains. </li></ul><ul><ul><li>Wal Mart, Sams, Carrefour, Auchan, HEB, Safeway...
Changes <ul><li>5. Decline of average food shopping trips/week (11-12 in 1995 to 7.5 in 1999). </li></ul><ul><li>6. Increa...
Changes <ul><li>3. Four fold increase in number of self -service food retail chain stores (1998/1993). </li></ul><ul><li>4...
Changes <ul><li>7. Decline in number and sales of traditional food retail outlets.  </li></ul><ul><li>8. Aggressive expans...
Challenges <ul><li>1. Regional Distribution Centers (private chains) </li></ul><ul><li>2. Less Government-build Wholesale ...
Changing Demand <ul><li>Mexico </li></ul><ul><ul><li>Quality/freshness </li></ul></ul><ul><ul><li>Variety/Novelty </li></u...
Changing Demand <ul><li>Mexico </li></ul><ul><ul><li>Quality/freshness </li></ul></ul><ul><ul><li>Variety/Novelty </li></u...
Changing Demand <ul><li>Mexico </li></ul><ul><ul><li>Short Supply: </li></ul></ul><ul><ul><li>Milk powder, poultry, red me...
Wal-Mart de México, SA de CV  Supercenters (89), Supermarkets (48), Clubs (61), Warehouses (162) Wal-Mart, 62.4% 12,547 36...
03/23/11 Typical  Mexico Produce  Distribution System Producer Wholesale Market Public Markets Grocery Stores  Street mark...
03/23/11 International Distribution US Exporter US Exporter US Exporter
03/23/11 Typical US Produce  Distribution System Packer/ Shipper Chain  Distribution Center Supermarket Independent Wholes...
HEB <ul><li>1997:  </li></ul><ul><li>San Antonio Company. First store opens in Monterrey, NL </li></ul><ul><li>1998:  </li...
HEB <ul><li>2 Distribution Centers under implementation </li></ul><ul><li>30% of Mexican stores sales are IMPORTED </li></...
HEB WalMart Hyper market 45,000 - 100,000 Almost a full line of merchandise and additional services. Super market 5000 – 4...
HEB <ul><li>Highly advertised store brands (20% cheaper) </li></ul><ul><li>Processing: bread, tortillas, sodas, ice cream,...
Walmart <ul><li>Joint Venture Strategy:  </li></ul><ul><li>Combined with Cifra. </li></ul><ul><li>Concept Adaptation:  </l...
Walmart <ul><li>Initial Problems. </li></ul><ul><li>Lack of leverage with Local Suppliers. </li></ul><ul><li>Inefficient D...
03/23/11 April First Store Opens Cifra 563 Wal Mart Stores In Mexico
03/23/11 Wal Mart Mexico Sales Growth 6.1% 4.7% 4.8% % Net Profit/Sales 17% 15% 12% SALES GROWTH RATE  2002* 2001 2000 Yea...
Walmart <ul><li>Consolidación 1997  </li></ul><ul><ul><li>WalMex.  </li></ul></ul><ul><li>Precio bajo Diario.  </li></ul><...
Walmart Bodega Aurerra
Walmart Bodega Aurerra
Walmart Bodega Aurerra
Gigante <ul><li>Horizontal and Vertical Integration  across borders </li></ul><ul><li>Market Niche:  </li></ul><ul><li>Mex...
Gigante <ul><li>3 Billion USD Annual Sales. </li></ul><ul><li>475 Stores in 31 States. </li></ul><ul><li>20 Stores in US. ...
Gigante <ul><li>1994:  </li></ul><ul><li>Strategic Alliance with Radio Shack and Office Depot. </li></ul><ul><li>1997:  </...
Gigante <ul><li>Technology - Cultural Transfer. </li></ul><ul><ul><li>Logistics. </li></ul></ul><ul><ul><li>Buying.   </li...
Gigante <ul><li>Improve Logistics </li></ul><ul><li>Originally “Seat of the pants” ordering </li></ul><ul><ul><li>Ineffici...
Gigante <ul><li>Collective Buying: </li></ul><ul><ul><li>Sinergia. </li></ul></ul><ul><ul><li>Limitend Liability Company. ...
Gigante US <ul><li>7.  </li></ul>
Gigante US <ul><li>Target: </li></ul><ul><ul><li>Latin. </li></ul></ul><ul><ul><li>Latin Interested. </li></ul></ul><ul><l...
Gigante US <ul><li>Buyer Behavior: </li></ul><ul><ul><li>US Consumer 2.2 visits a week. </li></ul></ul><ul><ul><li>US Lati...
Gigane US <ul><li>Opposition:  </li></ul><ul><ul><li>Union: </li></ul></ul><ul><ul><ul><li>Hire Spanish Speakers. </li></u...
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CESA International Business 2.1

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  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • Karin Los Angeles garment workers are predominantly Latino and Asian. 58% are women. Among Asians- Chinese are the largest percentage, then Korean, Vietnames, Filipino
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • http://www.fas.usda.gov/gainfiles/200502/146118911.doc
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • http://www.zonalatina.com/Zldata380.htm
  • http://www.zonalatina.com/Zldata380.htm
  • http://www.zonalatina.com/Zldata380.htm
  • http://retailtrafficmag.com/design/trends/retail_pride_ambition_daring/
  • http://retailtrafficmag.com/design/trends/retail_pride_ambition_daring/ http://www.csmonitor.com/2005/0315/p01s03-woam.html http://www.teradata.com/t/go.aspx/?id=114937
  • 1.http://retailtrafficmag.com/markets/northwest/retail_california_show_go/index.html 2.
  • 1996 Ministerial Trade Meeting in Singapore: Based on Uraguay Round Added investment and competition policy, trade facilitation, transparency in government procurement 1999. Seattle. Failure. Sources of discourd. Agriculture, agricultural exporters. Slow phase out of quotas by developing countries on texttiles. TRIMS (trade related investment measures) TRIPS (trade related intellectual property rights) GATT nameless bueaucrats, WTO brings in other interersts – activities and NGO’s Failure of the seatle round has brought about a number of regional trade agreements in asia
  • http://www.globalexchange.org/campaigns/sweatshops/2269.html
  • http://www.globalexchange.org/campaigns/sweatshops/2269.html
  • http://www.globalexchange.org/campaigns/sweatshops/2269.html
  • http://www.globalexchange.org/campaigns/sweatshops/2269.html http://www.time.com/time/insidebiz/article/0,9171,1101030310-428051,00.html http://www.bajaquest.com/bajanews/archives/archv032.htm
  • http://www.globalexchange.org/campaigns/sweatshops/2269.html http://www.time.com/time/insidebiz/article/0,9171,1101030310-428051,00.html http://www.bajaquest.com/bajanews/archives/archv032.htm
  • http://www.globalexchange.org/campaigns/sweatshops/2269.html http://www.time.com/time/insidebiz/article/0,9171,1101030310-428051,00.html http://www.bajaquest.com/bajanews/archives/archv032.htm
  • CESA International Business 2.1

    1. 1. Sources of Trade Regulation <ul><li>GATT and WTO </li></ul><ul><ul><li>Set up to deal with tariffs and non tariff barriers to trade </li></ul></ul><ul><ul><li>Tokyo Round in mid 1970s </li></ul></ul><ul><ul><ul><li>Tariff barriers reduced significantly </li></ul></ul></ul><ul><ul><ul><li>Partial success with non-tariff barrier reduction mainly due to complexity and sensitivity </li></ul></ul></ul><ul><ul><li>Uruguay Round – 1986-1993 </li></ul></ul><ul><ul><ul><li>Challenging problems addressed – technical barriers, trade in services, intellectual property rights, trade in technology etc. </li></ul></ul></ul><ul><ul><ul><li>More member countries – 117 </li></ul></ul></ul><ul><ul><ul><li>Problems of developing countries addressed </li></ul></ul></ul><ul><ul><li>WTO formed – meets every 2 years </li></ul></ul>McGraw-Hill McGraw-Hill © 2003 The McGraw-Hill Companies, Inc. All rights reserved. Slide 12-2 INTERNATIONAL MANAGEMENT 5/e Beamish, Morrison, Inkpen and Rosenzweig
    2. 2. Trade Agreements and Associations <ul><li>U.S. – Canada Free Trade Agreement </li></ul><ul><ul><li>Formed January 1988 – world’s largest free trade area </li></ul></ul><ul><ul><li>Dispute resolution mechanisms established </li></ul></ul><ul><ul><li>NAFTA formed with Mexican representatives </li></ul></ul><ul><li>Association of Southeast Asian Nations </li></ul><ul><ul><li>ASEAN formed August 1967 with 5 member states, presently has 10 members </li></ul></ul><ul><ul><li>Regarded as a loose economic cooperation channel but expected to change, FTA with China expected </li></ul></ul><ul><ul><li>Move towards ASEAN FTA </li></ul></ul>McGraw-Hill McGraw-Hill © 2003 TheMcGraw-Hill Companies, Inc. All rights reserved. Beamish, Morrison, Inkpen and Rosenzweig
    3. 3. Trade Agreements and Associations (contd..) <ul><li>Asia-Pacific Economic Corporation </li></ul><ul><ul><li>APEC established 1989, presently has 21 members </li></ul></ul><ul><ul><li>Primary vehicle for open trade and economic cooperation </li></ul></ul><ul><ul><li>Agreement to develop free trade yet to be reached </li></ul></ul><ul><li>ANDEAN and MERCOSUR </li></ul><ul><ul><li>Composed of South American nations with an objective of setting a common external tariff </li></ul></ul><ul><li>European Union </li></ul><ul><ul><li>Slow process of European integration </li></ul></ul><ul><ul><li>Founded on the principle of supranationality </li></ul></ul>McGraw-Hill McGraw-Hill © 2003 The McGraw-Hill Companies, Inc. All rights reserved. Slide 12-4 INTERNATIONAL MANAGEMENT 5/e Beamish, Morrison, Inkpen and Rosenzweig
    4. 4. Opportunities and Threats Opportunities and Threats from Government Actions McGraw-Hill McGraw-Hill © 2003 The McGraw-Hill Companies, Inc. All rights reserved. Slide 12-5 INTERNATIONAL MANAGEMENT 5/e Beamish, Morrison, Inkpen and Rosenzweig Threats Government Actions Opportunities Increase costs Reduce ROI Competitive disadvantage Increased competition Co-opt  Regulation   Taxation   Expenditure   Privatization   Consultation  Control competition Competitive advantage Subsidies, grants, customer Level playing field Influence policy
    5. 5. Political Strategy <ul><li>Essential for a firm to form and implement political strategy </li></ul><ul><li>Formulation </li></ul><ul><ul><li>Objectives </li></ul></ul><ul><ul><li>Issues </li></ul></ul><ul><ul><li>Stakeholders (allies, opponents, targets) </li></ul></ul><ul><ul><li>Position/Case (“public interest”) </li></ul></ul><ul><li>Implementation </li></ul><ul><ul><li>Timing </li></ul></ul><ul><ul><li>Techniques </li></ul></ul><ul><ul><ul><li>Direct (negotiate, litigate) </li></ul></ul></ul><ul><ul><ul><li>Indirect (advocacy advertising, political contributions) </li></ul></ul></ul><ul><ul><li>Vehicles (e.g. coalition, Government Relations department, consultants) </li></ul></ul><ul><ul><li>Style (e.g., confrontation or conciliation) </li></ul></ul>McGraw-Hill Slide 12-6
    6. 6. NAFTA
    7. 7. 1991 1994 1998 2003 2008 Negotiations Started NAFTA Signed Ratified I Schedule II Final
    8. 8. Beginnings <ul><li>• US-Canada auto pact 1965 </li></ul><ul><li>• Canada-USA FTA 1989 </li></ul><ul><li>First tariff cuts on January 1, 1989. </li></ul><ul><li>Tariff cuts of different magnitude across sectors. </li></ul><ul><li>• maquiladoras - employing 1/2 million in 1980s </li></ul><ul><li>• US proponents of NAFTA </li></ul><ul><li>- trade benefits </li></ul><ul><li>- reduce immigration pressures </li></ul><ul><li>- prosperity, stability, democracy for Mexico </li></ul>
    9. 9. NAFTA Provisions <ul><li>General features </li></ul><ul><li>• elimination of trade barriers </li></ul><ul><li>- in 10 years </li></ul><ul><li>- 15 for special products (e.g. agriculture) </li></ul><ul><li>• no common external tariff </li></ul><ul><li>• restrictive rules of origin </li></ul><ul><li>- goods must have “a substantial transformation” </li></ul><ul><li>- e.g. 60% of autos must be locally made </li></ul><ul><li>- e.g. textiles must be made from NAFTA yarn </li></ul>
    10. 10. Nafta Specific Features <ul><li>Investment </li></ul><ul><li>• national treatment </li></ul><ul><li>• dispute settlement by international tribunals </li></ul><ul><li>• exempt – Canadian cultural industries </li></ul><ul><li>Environment </li></ul><ul><li>• Commission on Environment </li></ul><ul><li>• fines or trade sanctions can be imposed </li></ul><ul><li>Safety valve </li></ul><ul><li>• pre-NAFTA measures allowed if import surge </li></ul><ul><li>Transportation </li></ul><ul><li>• no barriers eventually </li></ul><ul><li>No permanent independence </li></ul><ul><li>• NAFTA functions through meetings of country officials </li></ul>
    11. 11. Nafta Specific Features <ul><li>Open Previously-Protected Sectors of Economy </li></ul><ul><li>Agriculture </li></ul><ul><li>Energy </li></ul><ul><li>Textiles </li></ul><ul><li>Automotive </li></ul><ul><li>Safeguards to deal with: </li></ul><ul><ul><li>Subsidies and Unfair practices </li></ul></ul><ul><ul><li>Private Commercial & Agricultural Disputes </li></ul></ul><ul><ul><li>NAFTA Implementation Concerns </li></ul></ul>
    12. 12. Textile <ul><li>Shock of low-priced textile. </li></ul><ul><li>Diversification </li></ul><ul><li>More labor-intensive apparel production to Mexico and apparel imports from Mexico include: </li></ul><ul><ul><li>U.S. – Mexico relative exchange rates </li></ul></ul><ul><ul><li>U.S. FDI flows to Mexico </li></ul></ul><ul><ul><li>(explained by relative costs of capital, differential wages and incomes) </li></ul></ul><ul><ul><li>Tariff rates levied by Mexico on U.S. exports </li></ul></ul>
    13. 13. Textile
    14. 14. Textile <ul><li>US: Provides jobs for more than 1.5 million workers. </li></ul><ul><li>(8% of domestic industrial workforce). </li></ul><ul><li>The industry complex is the largest manufacturing employer in North Carolina, Pennsylvania, Alabama, Virginia, Tennessee, and California. </li></ul><ul><li>Textile and apparel firms are often primary employers in rural areas. </li></ul><ul><li>Major metropolitan areas include middle Atlantic States and California. </li></ul>
    15. 15. Textile <ul><li>Focus on non-price factors of competition (Abbott & Bredhal, 1994). </li></ul><ul><ul><li>Firm’s strategy (sourcing); </li></ul></ul><ul><ul><li>Industry structure; </li></ul></ul><ul><ul><li>Quality of products. </li></ul></ul>
    16. 16. Textile <ul><li>The forces of globalization caused: </li></ul><ul><ul><li>Overcapacity of production; </li></ul></ul><ul><ul><li>global financial crises; </li></ul></ul><ul><ul><li>emerging trade agreements; </li></ul></ul><ul><ul><li>changing price of cotton; </li></ul></ul><ul><ul><li>cheap imports from Mexico. </li></ul></ul>
    17. 18. Mexico United States Pre-NAFTA Maquilla Networks Textile Mills U.S. Manufacturer Retailer U.S. Broker Assembly Plants (U.S. & Mexican Owned) Subcontractors Full-package networks (orders) Assembly networks (cut parts) Key
    18. 19. OMJC Wrangler Mexico Aalfs Wrangler de Mexico Post- NAFTA Full-Package Networks Retailer JC Penney Marketer Manufacturer U.S. Lead Firms -Retailers -Marketers -Manufactuers Kentucky-Lajat Siete Leguas Libra Textile Mills Textile Mills Full-package networks (orders) Full-package Manufacturers Joint Ventures/ U.S. Subsidiaries The Gap Textile Mills United States Key Assembly networks (cut parts) Assembly Plants/ Subcontractors
    19. 21. Table 5
    20. 24. Garment Workers in Los Angeles, by Race
    21. 25. SUPERMARKETS
    22. 26. Economic Integration <ul><li>Direct Investment </li></ul><ul><li>Strategically Alliances/Joint Ventures </li></ul><ul><li>Horizontal and Vertical Integration across borders </li></ul><ul><li>Similar business practices </li></ul><ul><li>Connection of production-marketing- procurement chains </li></ul>
    23. 27. Market <ul><li>5729 Food and Beverage Retail Stores </li></ul><ul><li>No including tiendas </li></ul><ul><li>Sales increased 7% 2002 -2003 </li></ul><ul><li>Floor Space increased 5.4% in 2002, 8.9% 2003 </li></ul><ul><li>Top 4 retailers invested 233 million 2004 and 300 million 2005 </li></ul><ul><li>Top 4 </li></ul><ul><ul><li>Wal-Mart, 9 percent; </li></ul></ul><ul><ul><li>Soriana, 7 percent </li></ul></ul><ul><ul><li>Comercial Mexicana, 4.9 percent; </li></ul></ul><ul><ul><li>Gigante, 3.2 percent </li></ul></ul>
    24. 28. Changes <ul><li>1. Arrival of Foreign Retail Chains. </li></ul><ul><ul><li>Wal Mart, Sams, Carrefour, Auchan, HEB, Safeway. </li></ul></ul><ul><li>2. Modernization of domestic supermarket chains. </li></ul>
    25. 29. Changes <ul><li>5. Decline of average food shopping trips/week (11-12 in 1995 to 7.5 in 1999). </li></ul><ul><li>6. Increase in variety and convenience offered to Mexican consumers. </li></ul>
    26. 30. Changes <ul><li>3. Four fold increase in number of self -service food retail chain stores (1998/1993). </li></ul><ul><li>4. Increase on consumers preference of supermarket format. (60% of Mexicans by 1999). </li></ul>
    27. 31. Changes <ul><li>7. Decline in number and sales of traditional food retail outlets. </li></ul><ul><li>8. Aggressive expansion plans of main food retail chains for the next five years (10-15% square feet/year). </li></ul><ul><li>9. If pattern continues, in 10-15 years, Mexico would have the same square feet/ capita as the US. </li></ul>
    28. 32. Challenges <ul><li>1. Regional Distribution Centers (private chains) </li></ul><ul><li>2. Less Government-build Wholesale (terminal) markets. </li></ul><ul><li>3. Increase in volume, quality and consistency requirements on suppliers. Contract pricing. </li></ul><ul><li>4. Shortages on adequate transportation, storage and refrigeration services. </li></ul><ul><li>5. Need of enforceable quality grades and standards system. </li></ul><ul><li>6. Increased demand for a more diverse, higher quality, value added food supply. </li></ul>
    29. 33. Changing Demand <ul><li>Mexico </li></ul><ul><ul><li>Quality/freshness </li></ul></ul><ul><ul><li>Variety/Novelty </li></ul></ul><ul><ul><li>Appropriate Packaging </li></ul></ul><ul><ul><li>Convenience </li></ul></ul><ul><ul><li>Safety </li></ul></ul><ul><ul><li>Consumer services </li></ul></ul><ul><ul><li>Reasonable prices </li></ul></ul><ul><li>US </li></ul><ul><ul><li>Ethic Food </li></ul></ul><ul><ul><li>Greater variety </li></ul></ul><ul><ul><li>Multilingual Packaging, Services and marketing </li></ul></ul><ul><li>Competitive advantage of modern supermarkets vs. traditional retail outlets </li></ul>
    30. 34. Changing Demand <ul><li>Mexico </li></ul><ul><ul><li>Quality/freshness </li></ul></ul><ul><ul><li>Variety/Novelty </li></ul></ul><ul><ul><li>Appropriate Packaging </li></ul></ul><ul><ul><li>Convenience </li></ul></ul><ul><ul><li>Safety </li></ul></ul><ul><ul><li>Consumer services </li></ul></ul><ul><ul><li>Reasonable prices </li></ul></ul><ul><li>US </li></ul><ul><ul><li>Ethic Food </li></ul></ul><ul><ul><li>Greater variety </li></ul></ul><ul><ul><li>Multilingual Packaging, Services and marketing </li></ul></ul><ul><li>Competitive advantage of modern supermarkets vs. traditional retail outlets </li></ul>
    31. 35. Changing Demand <ul><li>Mexico </li></ul><ul><ul><li>Short Supply: </li></ul></ul><ul><ul><li>Milk powder, poultry, red meat, canned fruits, sugar, cereals and pet food cannot meet domestic demand (Source: Bancomext). </li></ul></ul><ul><ul><li>Communication: </li></ul></ul><ul><ul><li>Supplier, distributor and end-user: cited often by interviewees as one of the most important components to building a successful distribution network </li></ul></ul><ul><ul><li>NOM Norms (Mexican Official Norms) </li></ul></ul><ul><li>US </li></ul><ul><ul><li>Sanitary </li></ul></ul><ul><ul><li>Sanitary needs high, with significant change from state to state </li></ul></ul><ul><ul><li>Supply: </li></ul></ul><ul><ul><li>Fresh Fruit, vegetables (especially tomatoes) are high dollar and seasonal </li></ul></ul>
    32. 36. Wal-Mart de México, SA de CV Supercenters (89), Supermarkets (48), Clubs (61), Warehouses (162) Wal-Mart, 62.4% 12,547 360 All major cities Direct, local distributors; importers Grupo Gigante, SA de CV Hypermarkets (61), Supermarkets (100), Clubs (3, closing 2/05), Warehouses (52), Gigante USA (8) Local 2,736 224 All major cities and California Direct, local distributors; importers Supermercados Internacionales HEB, SA de CV Hypermarkets (8), Supermarkets (12) US owned 801 20 Northern Mexico Direct, local distributors
    33. 37. 03/23/11 Typical Mexico Produce Distribution System Producer Wholesale Market Public Markets Grocery Stores Street markets Supermarkets Distribution Centers Middlemen
    34. 38. 03/23/11 International Distribution US Exporter US Exporter US Exporter
    35. 39. 03/23/11 Typical US Produce Distribution System Packer/ Shipper Chain Distribution Center Supermarket Independent Wholesalers Terminal Markets
    36. 40. HEB <ul><li>1997: </li></ul><ul><li>San Antonio Company. First store opens in Monterrey, NL </li></ul><ul><li>1998: </li></ul><ul><li>Second Store opens in Monterrey </li></ul><ul><li>1999: </li></ul><ul><li>Five stores in Monterrey </li></ul><ul><li>2002: </li></ul><ul><li>18 stores open in 3 Mexican States </li></ul><ul><li>2004: </li></ul><ul><li>40 stores projected </li></ul>
    37. 41. HEB <ul><li>2 Distribution Centers under implementation </li></ul><ul><li>30% of Mexican stores sales are IMPORTED </li></ul><ul><li>Growing number of “store brands” </li></ul><ul><ul><ul><li>H-E-B </li></ul></ul></ul><ul><ul><ul><li>Hill Country Fare </li></ul></ul></ul><ul><ul><ul><li>EconoMax </li></ul></ul></ul><ul><ul><ul><li>“ Personal Expressions” </li></ul></ul></ul><ul><ul><ul><li>Tierra Linda (Mexican products) </li></ul></ul></ul><ul><ul><ul><li>4% non perishable </li></ul></ul></ul>
    38. 42. HEB WalMart Hyper market 45,000 - 100,000 Almost a full line of merchandise and additional services. Super market 5000 – 45,000 Food items (perishables and dry goods) limited services, pharmacy. Mega market More than 100,000 Full line of merchandise and additional services such as a pharmacy. Hyper market 45,000 - 100,000 Almost a full line of merchandise and additional services.
    39. 43. HEB <ul><li>Highly advertised store brands (20% cheaper) </li></ul><ul><li>Processing: bread, tortillas, sodas, ice cream, yogurt, milk etc. </li></ul><ul><li>Starting new format “home stores” (Via Hogar) </li></ul><ul><li>Texan HEB suppliers exporting indirectly </li></ul>
    40. 44. Walmart <ul><li>Joint Venture Strategy: </li></ul><ul><li>Combined with Cifra. </li></ul><ul><li>Concept Adaptation: </li></ul><ul><li>First Wal Mart Supercenter in Mexico. </li></ul><ul><li>Force Competition: </li></ul><ul><li>Force Mexican Monopolize. </li></ul><ul><li>Replicate US Logisitcs. </li></ul><ul><li>Introduce Warehouse. </li></ul>
    41. 45. Walmart <ul><li>Initial Problems. </li></ul><ul><li>Lack of leverage with Local Suppliers. </li></ul><ul><li>Inefficient Distribution in Mexico. </li></ul><ul><li>Merchandise: </li></ul><ul><ul><li>Ice Skates. </li></ul></ul><ul><ul><li>Leaf Blowers. </li></ul></ul><ul><ul><li>Fishing. </li></ul></ul><ul><li>Automated Information System: </li></ul><ul><ul><li>Auto reorder. </li></ul></ul><ul><li>Higher Prices. </li></ul>
    42. 46. 03/23/11 April First Store Opens Cifra 563 Wal Mart Stores In Mexico
    43. 47. 03/23/11 Wal Mart Mexico Sales Growth 6.1% 4.7% 4.8% % Net Profit/Sales 17% 15% 12% SALES GROWTH RATE 2002* 2001 2000 Year
    44. 48. Walmart <ul><li>Consolidación 1997 </li></ul><ul><ul><li>WalMex. </li></ul></ul><ul><li>Precio bajo Diario. </li></ul><ul><li>2do mas grande negocio (Volumen De Ventas). </li></ul><ul><li>3ro El patrón más grande. </li></ul><ul><li>485 minoristas, 285 restaurantes. </li></ul><ul><li>1997 Consolidation </li></ul><ul><ul><li>WalMex. </li></ul></ul><ul><li>Everyday Low Price. </li></ul><ul><li>2 nd Largest Company (Sales Volume). </li></ul><ul><li>3 rd Largest employer. </li></ul><ul><li>485 Retailers, 285 restaurants. </li></ul>
    45. 49. Walmart Bodega Aurerra
    46. 50. Walmart Bodega Aurerra
    47. 51. Walmart Bodega Aurerra
    48. 52. Gigante <ul><li>Horizontal and Vertical Integration across borders </li></ul><ul><li>Market Niche: </li></ul><ul><li>Mexican Nationals and Ancestry, Mexican Sympathetic. </li></ul><ul><li>Product Transfer </li></ul><ul><li>Adaptive Corporate Culture and Logistics. </li></ul>
    49. 53. Gigante <ul><li>3 Billion USD Annual Sales. </li></ul><ul><li>475 Stores in 31 States. </li></ul><ul><li>20 Stores in US. </li></ul><ul><li>Product Promotions. </li></ul><ul><li>Adaptive Corporate Culture and Logistics. </li></ul>
    50. 54. Gigante <ul><li>1994: </li></ul><ul><li>Strategic Alliance with Radio Shack and Office Depot. </li></ul><ul><li>1997: </li></ul><ul><li>Strategic Alliance with Carrefour. </li></ul><ul><li>1999: </li></ul><ul><li>Stores in San Diego. </li></ul><ul><li>2002: </li></ul><ul><li>Anti Gigante Legislation eliminated in Orange. </li></ul><ul><li>2003 Alliance with Comercial Mexico and Soriana. </li></ul>
    51. 55. Gigante <ul><li>Technology - Cultural Transfer. </li></ul><ul><ul><li>Logistics. </li></ul></ul><ul><ul><li>Buying. </li></ul></ul><ul><ul><li>Marketing. </li></ul></ul><ul><ul><li>Cleanliness. </li></ul></ul>
    52. 56. Gigante <ul><li>Improve Logistics </li></ul><ul><li>Originally “Seat of the pants” ordering </li></ul><ul><ul><li>Inefficiency. </li></ul></ul><ul><ul><li>Large Margins. </li></ul></ul><ul><ul><li>Reports on a Weekly Basis. </li></ul></ul><ul><li>Modern Logistics </li></ul><ul><ul><li>9 Central Distribution Centers. </li></ul></ul><ul><ul><li>2000 introduced Data Warehouse. </li></ul></ul><ul><ul><li>Went from 3 or 4 days to solve query to 15 minutes. </li></ul></ul><ul><ul><li>Automatic POS transfer. </li></ul></ul><ul><ul><li>Vendor Data. </li></ul></ul>
    53. 57. Gigante <ul><li>Collective Buying: </li></ul><ul><ul><li>Sinergia. </li></ul></ul><ul><ul><li>Limitend Liability Company. </li></ul></ul><ul><li>Target: </li></ul><ul><ul><li>Bodega Gigante: </li></ul></ul><ul><ul><ul><li>Blue Collar. </li></ul></ul></ul><ul><ul><li>Super G: </li></ul></ul><ul><ul><ul><li>High End. </li></ul></ul></ul><ul><ul><li>Gigante. </li></ul></ul><ul><li>Promotion: </li></ul><ul><ul><li>Redecorating Stores: </li></ul></ul><ul><ul><li>Beatles month. </li></ul></ul><ul><ul><li>Classic songs played. </li></ul></ul><ul><ul><li>Sold Beatles CD's, movies and T-shirts. </li></ul></ul>
    54. 58. Gigante US <ul><li>7. </li></ul>
    55. 59. Gigante US <ul><li>Target: </li></ul><ul><ul><li>Latin. </li></ul></ul><ul><ul><li>Latin Interested. </li></ul></ul><ul><li>Brand: </li></ul><ul><ul><li>Gigante. </li></ul></ul><ul><ul><li>Superprecio. </li></ul></ul><ul><li>Product: </li></ul><ul><ul><li>Bimbo. </li></ul></ul><ul><ul><li>Ariel Detergent. </li></ul></ul><ul><ul><li>Tampico Juice. </li></ul></ul><ul><ul><li>Jaritos Soda. </li></ul></ul><ul><ul><li>Flavored Tortillas. </li></ul></ul><ul><ul><li>Marinela Bread. </li></ul></ul><ul><ul><li>Chilis (Variety). </li></ul></ul><ul><ul><li>Meats. </li></ul></ul><ul><ul><li>Larger Produce Section. </li></ul></ul>
    56. 60. Gigante US <ul><li>Buyer Behavior: </li></ul><ul><ul><li>US Consumer 2.2 visits a week. </li></ul></ul><ul><ul><li>US Latin Consumer 4.4 visits a week. </li></ul></ul><ul><ul><li>Latin’s spend 3 rd more of income on food. </li></ul></ul><ul><ul><li>Driving. </li></ul></ul><ul><li>Price: </li></ul><ul><ul><li>For Mexican consumers. </li></ul></ul><ul><ul><li>15% below average. </li></ul></ul><ul><li>Promotion: </li></ul><ul><ul><li>70% name recognition among latinos. </li></ul></ul><ul><ul><li>Spanish Language. </li></ul></ul><ul><ul><li>Spanish Adds. </li></ul></ul><ul><ul><li>Mexican Music. </li></ul></ul>
    57. 61. Gigane US <ul><li>Opposition: </li></ul><ul><ul><li>Union: </li></ul></ul><ul><ul><ul><li>Hire Spanish Speakers. </li></ul></ul></ul><ul><ul><ul><li>United Food & Commercial Workers Union. </li></ul></ul></ul><ul><ul><ul><li>Clerks make 10.79 hr. </li></ul></ul></ul><ul><ul><ul><li>Union 17.59 hr. </li></ul></ul></ul><ul><ul><li>Residents: </li></ul></ul><ul><ul><ul><li>Anaheim Planning Commission. </li></ul></ul></ul><ul><ul><ul><li>Liquor Laws. </li></ul></ul></ul><ul><ul><li>Vendors: </li></ul></ul><ul><ul><ul><li>Personal Guarantees. </li></ul></ul></ul>
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