Openness and industrial response in a Wal-Mart world : a case study of Mexican soaps, detergents, and surfactant producers
AbstractThis 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 the 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 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 labor-shedding and from innovation, which in turn was fueled 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 U.S. detergent market over the past decade, Mexican sales in the U.S. 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 to establish brand recognition among non-Latin consumers and to comply with zero phosphate laws in many regions of the U.S.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 3999.
Date of creation: 01 Aug 2006
Date of revision:
Markets and Market Access; Transport Economics Policy&Planning; Access to Markets; Economic Theory&Research; Water and Industry;
Other versions of this item:
- Beata Javorcik & Wolfgang Keller & James Tybout, 2008. "Openness and Industrial Response in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers," The World Economy, Wiley Blackwell, vol. 31(12), pages 1558-1580, December.
- Keller, Wolfgang & Smarzynska Javorcik, Beata & Tybout, James R, 2006. "Openness and Industrial Response in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers," CEPR Discussion Papers 5823, C.E.P.R. Discussion Papers.
- Beata Smarzynska Javorcik & Wolfgang Keller & James R. Tybout, 2006. "Openness and Industrial Responses in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers," NBER Working Papers 12457, National Bureau of Economic Research, Inc.
- F1 - International Economics - - Trade
- F2 - International Economics - - International Factor Movements and International Business
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L6 - Industrial Organization - - Industry Studies: Manufacturing
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- 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.
- Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2001.
"Market Entry Costs, Producer Heterogeneity, and Export Dynamics,"
NBER Working Papers
8629, National Bureau of Economic Research, Inc.
- 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.
- Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2001. "Market entry costs, producer heterogeneity and export dynamics," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 03-10, Indian Statistical Institute, New Delhi, India.
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