Wal-Mart entered the Mexican market in 1991 and hasn’t looked back. Using a form of globalization called glocalization, Wal-Mart achieved tremendous success in Mexico. The perception of Wal-Mart globally is less than stellar because of what has been coined as Wal-Martization. Some have also called Wal-Mart a ‘Cathedral of Consumption.’ But Wal-Mart learned the hard way how to become successful in the global marketplace. It didn’t just happen overnight. By utilizing five glocalization strategies, Wal-Mart became the largest private employer in Mexico.

Wal-Martization is a philosophy where faster, better and cheaper are words used to describe their process. More words that define Wal-Martization are bigger, global and standardized. While Wal-Mart is known for its everyday low pricing, it also has a few negative connotations associated with it. They include its anti-union poilicies, downward pressure on manufacturers, low salaries for employees and its merciless expansion practices. When Wal-Mart comes to town local shop owners panic because Wal-Mart can reduce prices as much as it wants and the local businesses can’t compete with that. Sam Walton opened the first Wal-Mart in Bentonville, Arkansas, in 1962. By 1979 Wal-Mart was making $1 billion in annual sales. By 1993 it was making $1 billion in weekly sales. And by 2001, Wal-Mart began making $1 billion in sales each day. According to its official website, corporate.walmart.com, Wal-Mart is currently in 27 countries, has $466 billion in fiscal sales for 2013, and employees 2.2 million people worldwide. According to Matusitz and Minei, “Wal-Martization rarely resonates positively with other cultures across the globe because the company is perceived as a gargantuan behemoth trying to force its home-country practices upon local cultures (p. 420).

Before getting into how Wal-Mart succeeded in the global market it is important to recognize some of its failures. In 1997 Wal-Mart entered Germany. With it, Wal-Mart brought its ‘service with a smile’ attitude and American corporate policies. Some of the things that didn’t work included employees having to smile at all the customers and bagging groceries at the supercenter locations. According to Luthans and Doh, “Male employees who were ordered to smile at customers were often seen as flirtatious to male customers, and Germans do not like strangers handling their groceries” (p. 174). A multitude of other cultural differences plagued Wal-Mart in the German market and they decided to completely withdraw in 2006 after losing hundreds of millions of dollars.

Glocalizaton is a term that was created by combining the words globalization and localization. Glocalization can be described as the combination of local elements into global products and services. An MNC who wants to be successful needs to respect local idiosyncracies and adjust to local expectations. Simply put, globalization means that regional economies, societies and cultures have become absorbed into the global network because of communication, transportation and trade. “Glocalization, on the other hand, accentuates particularism of a global product, idea or service” (Matusitz and Minei, 2011). Wal-Mart has been called a ‘cathedral of consumption’ in the United States. According to Matusitz and Minei, “For US shoppers, the cathedral of consumption means that anybody can purchase a Wal-Mart microwave for less than $30, 24 cans of Coke for less than $4, and Vlasic pickles—a whole gallon-size jar—for less than $3 (p. 421). While this is true in the United States, many studies have shown that the ‘cathedral of consumption’ mentality is not accepted in other parts of the world and Wal-Mart had to change its ways.

Prior to Wal-Mart’s entrance into Mexico, the country only had a handful of national chains. This is partly because until the late 1980’s Mexico had one of the most closed economies on the planet. All of the grocers and retail stores were a part of the National Retailing Association of Mexico, called ANTAD. In most parts of the country the more common types of stores included tiendas, boticas, panaderias, carnicerias, and papelarias. Translated these were mom-and-pop shops, pharmacies, bakeries, meat markets, and stationary stores. These types of stores can still be found throughout Mexico, but the presence of big-box stores has increased significantly over the past couple of decades. Those include Wal-Mart, Sam’s Club, Dillard’s The Home Depot, and Office Max (Matusitz and Minei).

A joint venture, as defined by Luthans and Doh, “can be considered a specific type of alliance agreement under which two or more partners own or control a business (p. 310). This is precisely what Wal-Mart did and is how it got its foot in the door in Mexico. The year was 1991 and Wal-Mart had yet to venture out of the United States. The timing couldn’t have been better for Wal-Mart, as Mexico had just opened its doors to global trading. By signing a joint venture with Cifra, a Mexican chain, Wal-Mart became an MNC and started on its journey to becoming one of the most prolific International corporations ever. By 1997 Wal-Mart had attained a majority ownership of Cifra. Three years later Wal-Mart became Wal-Mart de Mexico, or Wal-Mex. By 2007, Wal-Mart de Mexico had over a thousand stores and employed over 150,000 people.

The first glocalization strategy that Wal-Mart used was to glocalize indigenous customs. It did this in a number of ways. Obviously, Wal-Mart de Mexico sold a lot more Hispanic foods that would appeal to its new Mexican consumers. But Wal-Mart had to do more in a cultural sense to achieve success in Mexico. For example, in the southern highlands of Mexico Wal-Mart recognized that the native language in that region wasn’t Spanish, but Zapotec, a Mesoamerican language. Wal-Mart hired employees who spoke Zapotec so they could connect with local consumers. Interviewers who spoke Zapotec were hired to make applicants feel more comfortable. Females in traditional flowing skirts conduct in-store advertising announcements and traditional local music is played throughout the stores. Another example of how Wal-Mart de Mexico adapted to indigenous customs happened when the price of corn skyrocketed in the United States and Mexico in 2007. Wal-Mart was aware that corn tortillas were a major ingredient in the diets of poor Mexican families and worked hard to keep the price of corn tortillas low, Wal-Mart de Mexico used the crisis as free advertising because it was the only retailer who could sell tortillas for a cheap price. The result was thousands of Mexicans lining up at Wal-Mart de Mexico locations to purchase tortillas for their families.

The second glocalization strategy that Wal-Mart used was glocalizing shopping practices. In the United States Wal-Mart uses the slogan, everyday-low-pricing. Wal-Mart used the same strategy in Mexico with its ‘precios bajos todos los dias.’ The big thing that Wal-Mart was aware of, though, was that the GDP per capita in Mexico was only $13,000 per year. Because of this statistic Wal-Mart de Mexico offered crazy low prices on a number of items ranging from flour to diapers. The prices for these items were even cheaper than for what it sold them for in the United States. By offering that kind of savings Wal-Mart significantly helped low-income families. Another example of glocalizing shopping practices is that in some of its Wal-Mart de Mexico locations a security guard will tell people that note-taking is not permitted. In large Mexican retail stores note taking is a forbidden practice. This is just another way Wal-Mart de Mexico adapted to local shopping practices. Finally, it is common to walk into a Wal-Mart de Mexico and have to pass a bunch of random goods with actual receipts from Wal-Mart de Mexico’s largest competitor, Soriana. On the receipt the competitor’s price will be highlighted to show consumers how much they are saving by purchasing those items at Wal-Mart de Mexico instead of Soriana.

The third glocalization strategy that Wal-Mart used was glocalizing store formats. Wal-Mart realized that it couldn’t put a store in every small town in Mexico. So, to reach the smaller towns, with low-income families, Wal-Mart created Bodega Aurrera. Bodega Aurrera is a small marketplace that mostly sells food and housewares. This concept of a small grocery store was sometimes protested initially by townspeople, but in the end Wal-Mart de Mexico won because the fact is that poor people want to see their money go further. By creating another banner, Bodega Aurrera, Wal-Mart de Mexico expanded out of the big cities and border towns and penetrated the rural, less populated areas. Wal-Mart also introduced Suburbia, a retail clothing store designed for the middle class consumers. Another example o glocalizing store formats occurred when consumers were offended by the size of the parking lots surrounding the stores. Many low-income Mexicans don’t own vehicles and the parking lots were hardly ever filled with cars. In response, Wal-Mart de Mexico started providing shuttle services from the front door of the store to bus stops or taxi stands.

The fourth glocalization strategy that Wal-Mart used was glocalizing Mexican logistics. Wal-Mart de Mexico uses a highly sophisticated inventory and sales tracking system. Because of this it can see what consumers want and where they want it. By having this knowledge Wal-Mart pressures manufacturers to lower their prices or else they will drop their products. This seems cutthroat, but it is because of Wal-Mart’s vast distribution capabilities that the manufacturers sales are high. This can be witnessed in the most remote parts of the country where retail stores have to mark up their prices due to transport costs, but Wal-Mart can sell a toaster oven in those regions for the same price as they would in Mexico City.

The last glocalization strategy that Wal-Mart used was the glocalizing employee practices. It is a well-known fact that in the United States Wal-Mart is against the organization of unions. However, in Mexico Wal-Mart had to give in to the labor unions. This proved to be a wise move because employees are paid an above average union wage which improves employee retention. Wal-Mart de Mexico also provides its employees with benefits like share and bonus plans. According to Trompenaars’s orientations on cultural dimensions Mexico is a culture of high particularism (Luthans and Doh, p. 124). Luthans and Doe defined particularism as, “the belief that circumstances dictate how ideas and practices should be applied (p.123). They went on to add that, “In cultures with high particularism, the relationship is on trust than on formal rules (p.123). Wal-Mart recognized that Mexico is a country where family connections tend to be more important than skill. In response to this Wal-Mart de Mexico trains floor workers to walk up the ladder and become managers (Lyons, 2007).

By using these glocalization strategies, Wal-Mart de Mexico has become the nations largest retailer. Through cultural adaptations and everyday-low-pricing campaigns, Wal-Mart de Mexico has given the company a 33% increase in quarterly net profits. According to Matusitz and Minei, “Wal-Mart’s power is evidence to a cultural mélange of glocalization, market know-how, and low prices” (p. 426). Matusitz and Minei went on to say that, “Robert Ford, a Merrill Lynch analyst in Mexico City, credits Wal-Mart de Mexico for maintaining a low level of inflation in Mexico through helpful food distributions and discount pricing” (p.426). Mexico has long had a bad reputation in regards to the retail culture. Wal-Mart de Mexico is changing that perception and improving the way Mexicans see the retail industry.

References

Luthans F., Doe J. International Management: Culture, Strategy and Behavior. New York, New York. McGraw Hill Companies Inc.

Lyons J (2007) Southern hospitality: In Mexico, Wal-Mart is defying its critics. The Wall Street Journal, p A1, 5 March 2007

Matusitz J., Minei E. Cultural Adaptation of an MNC in Mexico: A Success Story. Publish online 19 November 2011.