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Openness and Industrial Response in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers

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Author Info

  • Beata Javorcik
  • Wolfgang Keller
  • James Tybout

Abstract

This paper uses a case study approach to explore the effects of NAFTA and GATT membership on innovation and trade in the Mexican soaps, detergents and surfactants (SDS) industry. Several basic findings emerge. First, the most fundamental effect of NAFTA and the GATT on the SDS industry was to help induce Wal-Mart to enter Mexico. Once there, Walmex fundamentally changed the retail sector, forcing SDS firms to cut their profit margins and/or innovate. Those unable to respond to this new environment tended to lose market share and, in some cases, disappear altogether. Second, partly in response to Walmex, many Mexican producers logged impressive efficiency gains during the previous decade. These gains came both from labour-shedding and from innovation, which in turn was fuelled by innovative input suppliers and by multinationals bringing new products and processes from their headquarters to Mexico. Finally, although Mexican detergent exports captured an increasing share of the US detergent market over the past decade, Mexican sales in the US were inhibited by a combination of excessive shipping delays at the border and artificially high input prices (due to Mexican protection of domestic caustic soda suppliers). They were also held back by the major re-tooling costs that Mexican producers would have had to incur in order to establish brand recognition among non-Latin consumers, and in order to comply with zero phosphate laws in many regions of the US. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal World Economy.

Volume (Year): 31 (2008)
Issue (Month): 12 (December)
Pages: 1558-1580

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Handle: RePEc:bla:worlde:v:31:y:2008:i:12:p:1558-1580

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References

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  1. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2007. "Market Entry Costs, Producer Heterogeneity, and Export Dynamics," Econometrica, Econometric Society, vol. 75(3), pages 837-873, 05.
  2. Alfredo Cuevas & Miguel Messmacher & Alejandro Werner, 2005. "Foreign Direct Investment in Mexico since the Approval of," World Bank Economic Review, World Bank Group, vol. 19(3), pages 473-488.
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Citations

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Cited by:
  1. Horst Raff & Nicolas Schmitt, 2009. "Imports, Pass-Through, and the Structure of Retail Markets," CESifo Working Paper Series 2817, CESifo Group Munich.
  2. Horst Raff & Nicolas Schmitt, 2007. "Buyer Power in International Markets," Discussion Papers dp07-23, Department of Economics, Simon Fraser University.
  3. Eleni A Kaditi, 2011. "Market Dynamics in Supply Chains: The Impact of Globalisation and Consolidation on Food Companie's Mark-ups," Working Papers id:4430, eSocialSciences.
  4. Godart, Olivier N. & Görg, Holger, 2013. "Suppliers of multinationals and the forced linkage effect: Evidence from firm level data," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 393-404.
  5. Arnold, Jens M. & Javorcik, Beata S. & Mattoo, Aaditya, 2011. "Does services liberalization benefit manufacturing firms?: Evidence from the Czech Republic," Journal of International Economics, Elsevier, vol. 85(1), pages 136-146, September.
  6. Silva, Peri, 2005. "The role of importers and exporters in the determination of the U.S. tariff preferenes granted to Latin America," Policy Research Working Paper Series 3518, The World Bank.
  7. Emek Basker, 2006. "The Causes and Consequences of Wal-Mart's Growth," Working Papers 0611, Department of Economics, University of Missouri.
  8. Igan, Deniz & Suzuki, Junichi, 2012. "The “Wal-Mart effect” in central and eastern Europe," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 194-210.
  9. Carluccio, Juan & Fally, Thibault, 2013. "Foreign entry and spillovers with technological incompatibilities in the supply chain," Journal of International Economics, Elsevier, vol. 90(1), pages 123-135.
  10. Kaditi, Eleni A., 2011. "Market Dynamics in Supply Chains: The Impact of Globalisation and Consolidation on Food Companies' Mark-Ups," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114452, European Association of Agricultural Economists.
  11. Javorcik, Beata S. & Li, Yue, 2008. "Do the biggest aisles serve a brighter future ? global retail chains and their implications for Romania," Policy Research Working Paper Series 4650, The World Bank.
  12. Brock, Gregory & German-Soto, Vicente, 2013. "Regional industrial growth in Mexico: Do human capital and infrastructure matter?," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 228-242.
  13. Cédric Durand, 2009. "Wal-Mart en México, una trajectoria exitosa y sus causas," Post-Print hal-00522525, HAL.

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