Business Overview of Wal-Mart de Mexico - Case Study Example

College: Wal-Mart entered a joint venture with Cifra in 1991 following the launching of the Sam’s club in Mexico which became the first market of Wal-Mart’s international division. Six years later Wal-Mart obtained a majority position in Cifra, this later prompted the name change to Wal-Mart de Mexico otherwise known as walmex in 2000. In 2006, walmex/ Wal-Mart de Mexico acquired a license to run and manage a bank within the country by the ministry of finance. In the following year, Banco de Wal-Mart initiated operations in five states of Mexico with 16 branches. A year later the company commemorated fifty years of service to Mexican citizens. 2009 ended with the acquiring of Wal-Mart de Centro America by the Wal-Mart de Mexico giant expanding its service to six countries (Kojadinovc 41). There are credible reports that Wal-Mart the largest retailer in the world was aware that one of its branches, wal -mart de Mexico used bribes coerce foreign officials to allow their operations. The bribes were paid to acquire permits for the Mexico stores establishments in desirable places such as the Teotihuacan. Alleged bribes are said to have been given to the Teotihuacan Municipal Council and the National institute of Anthropology and History’s director. Handsome Bribes were also orchestrated in relation to zoning laws and environmental permits that would have been hurdles in the company’s expansion. It is also under scrutiny for subverting democratic governance such as public votes, transparent procedures and open debates and the same bribes to offset competition. This is against compliance to the mandated foreign Corrupt Practices Act which prohibits an American company from offering bribes to foreign officials. In a response to the claims, Wal-Mart stated that it has been conducting extensive investigations in relation to the allegation cases and that they are non-tolerant to non-compliance to the law anywhere at any level of the company’s branches and is diligent to provide necessary contribution. In a separate statement the spokesman reiterated that the company has divulged substantial resources dedicated to this effort. Corruption and bribery are vastly permeated notions in Mexico. The justice system in the city is feeble and I can be manipulated with ease. Further, bribery is fuelled by the relatively low salaries paid to the local public workers. Hence it was not shocking for Wal-Mart to have its way through the law. Wal-Mart de Mexico was an insistent and crafty corruptor offering humungous bribes to get what was barred by the law. Much of the allegations are engrossed on the store set up proximate to the ageless ruins in San Juan Teotihuacan. A report indicates that the company’s international real estate committee consisting of 20 or more members agreed to Wal-Mart de Mexico’s plan to employ resources worth $ 8 million on the Teotihuacan branch. The company really preferred to inaugurate a branch of the company in Elfa Piruda’s field. The location was perfect, it being off the town’s very active main entrance. It is also adjacent to the ancient pyramids which are a worldwide tourist attraction. The company estimated that it would garner 250 customers per hour with the store set up in Mrs. Pineda’s field. This would however become a pipe dream due to a major hindrance that stood on its way. The town’s official leaders had just then approved a new zoning map. They wanted to stop any future developments in the town’s proximity as it was far more congested. Consequently according to the 2003 zoning map, commercial development at Mrs.Pineda’s field was to be unlawful. This move would dampen the company’s hopes of expansion at that location. The headquarters were not about to be impeded by this decision and hence decided to “act” on it with an alleged handsome bribe of $52000. It was a simple intrinsic plan. Since the zoning map could become law unless it was gazetted, Wal-Mart de Mexico orchestrated a bribe to an official to have the map altered in their favor before it was published in the government newspaper. As sure as day, the deal went through because when the zoning map was gazette, Mrs. Pineda’s field zoning was redrawn and hence there was nothing preventing the establishment of Wal-Mart store. The problem was solved . But even with that hurdle surpassed the company still needed a range of permits and that is when their connections with the then mayor Guillermo Rodriguez became helpful. He asked his officials to meet privately with officials from Wal-Mart and indicated that there was a necessity to act with speed and vigor to help Wal-Mart set up shop. “They shall explain their business here” the mayor informed his colleagues. The mayor was approximately bribed with $11400. In 2004,their establishment however months later provoked fierce opposition dissenting the set up a mile from the city and just near the cultural treasure (Lauren 11). They protested that the traffic would be maddening and local public markets made inept. The hunger strikes and protests notwithstanding, the secret of the improved map was still a secret. After eight years after its establishment the Teotihuacan store remains a major controversy out of all the stores reflecting the globalism’s impact on the Mexican culture and the development of its commerce. The estimates of the company’s bribes that were offered to officials are not well-defined . However, reports have pointed out occurrences that the company paid $34000 in bribes to create a store near the Basilica de Guadalupe without having the required permits; a construction permit, an environmental permit, an urban impact review or a traffic permit. Yet another report stipulated that Wal-Mart paid another $765000 in bribes to construct a refrigerated distribution center at a location purported to be environmentally fragile in north of Mexico. The place was very remote and electricity was limited the move shunned away small developers. The Wal-Mart’s top executives are reported to have covered up an internal investigation that also echoed there is a significant amount of money deemed as suspicious. This was in 2005 where the inquiry was shut down and they did not notify the officials until December 2011 when the New York Times said it will look into the matter. The previous week before the expose, shares had risen by 0.65% to close at $69.20 in New York. The giant retailer’s stock in the market fell drastically after news on the bribes surfaced . After the report the company lost $50 billion of its market value. The company says it has used $3 million to update its global anti-corruption program so as to assure its investors. Since this instance of corruption came into light, the company has extended its probe to cover allegations in the other stores in foreign markets and in this effect several top official from china, Brazil and India have been suspended due suspected wrongdoing. The U.S Justice Department, the U.S lawmakers and the relevant authorities in Mexico have been carrying out probes into the issue. In my opinion the corruption crimes perpetuated by this renowned retailer is the U.S law department. The company has operated in American soil and there hasn’t been any reported instance of bribery or any corrupt dealings between the company and the U.S officials. The system is stronger and fiercer against corruption under the Foreign Corrupt Practices Act. The DoJ and the SEC are firm to handle the situation. In addition Mexican officials have been given an opportunity to handle the matter and they have not tabled tangible results ever since asserting that despite them conducting probes they haven’t come to any realization of evidence. They have instead supported the company, stating that they have found no illegality in the Wal-Mart de Mexico establishments. The North American Free Trade Agreement (NAFTA) is a trilateral agreement that is signed by Canada, Mexico and the United States creating a trilateral trade bloc in northern America. It came into effect in 1994. It established the world’s most vast trade area which links millions of people producing trillions worth of goods and services. Since the NAFTA agreement entered in to force, the United States and its partners in the agreement have soared to greater heights economically. A good trading relationship has brewed between the member countries and the highest numbers in imports and export records are reflected in the move between the member countries. This agreement has established free trade zones and has thus bolstered the expansion of different companies from one country to the other member country. This has increased economic growth, wealth and has delivered real benefits to the country’s families, workers, farmers, manufactures and the consumers. This has seen company’s like Wal-Mart expand from the United States to Mexico. Even though some set ups are questionable the ones without fault have benefited both parties. The company has been reaping profits from NAFTA as it has allowed Wal-Mart to be the dominant retailer and this is clearly reflected in the drastic change in the revenues of the company when NAFTA came into law. Statistics show that 50-60 percent of the benefits of total merchandise sold by the Wal-Mart’s branches are realized overseas. Work cited Kojadinovc, Miodrag. “Friends And Neighbors:The NAFTA Agreement” Angels Magazine. Alberta . The Canadian Press. 1994. Print Tora Lauren & Woo Ryan. “Wal-Mart Inquiry Reflects Alarm On Corruption.” New York . New York Times.Com. Nov,15 2012. Internet Source. Read More