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QUESTIONS
8-1. Why did the Europeans try to protect their auto industry from Japanese imports, and do you
think this was fair to European consumers?
8-2. What has Toyota done to be more successful in Europe, and why do you think it hasn’t been
more successful? What else can it do?
TEACHING TIPS: A useful Web site for the opening case is www.toyota.eu/ where
students can explore the European operations of the company in greater detail.
Carefully review the PowerPoint slides for Chapter Seven.
CLOSING CASE: Walmart Goes South
Because of its sheer size and volume purchases, as well as its unique distribution system,
Walmart has been able to reduce its prices so successfully that in 2001, it became the largest
company in the world. Mexico’s first Sam’s Club, a subsidiary of Walmart, opened in 1991 in
Mexico City. Mexico’s retail sector has greatly benefited from the increasing trade liberalization
under NAFTA, as well as the improvements to its transportation infrastructure encouraged by
NAFTA. In addition, NAFTA improved opportunities for foreign investment in Mexico. One of
the country’s largest retail chains, Comercial Mexicana S.A. (Comerci), has found it increasingly
difficult to remain competitive since Walmart’s aggressive entry into its market. Walmart’s
strong operating presence and low prices since the lifting of tariffs under NAFTA have put such
strong competitive pressures on Comerci that it must now decide whether its participation with
the recently formed purchasing consortium, Sinergia, will be sufficient for its survival.
Questions
8-3. How much of Walmart’s success is due to NAFTA, and how much is due to Walmart’s
inherent competitive strategy? In other words, could any other U.S. retailer have the same
success in Mexico post-NAFTA, or is Walmart a special case?
8-4. What can a local retailer like Comerci do to compete against Walmart?
8-5. How can NAFTA be beneficial to suppliers of Walmart?
ADDITIONAL EXERCISES: The Economic Integration Process
Exercise 8.1. In 1998 the World Trade Organization issued a ruling in which it stated that
the U.S. was wrong to prohibit shrimp imports from countries that failed to protect sea
turtles from entrapment in the nets of shrimp boats. The basic position of the WTO was that
while environmental considerations are important, the primary aim of international trade
agreements is the promotion of economic development through unfettered free trade. Ask
students to debate the position of the WTO in decoupling trade and environmental policy.
(LO: 1, Learning Outcome: To identify the major characteristics and challenges of the World
Trade Organization, AACSB: Dynamics of the Global Economy.)
Exercise 8.2. Ask students to compare the foreign market entry strategies of exporting,
licensing, and foreign direct investment in (a) a free trade area, (b) a customs union, and (c)
a common market. What barriers and incentives do they expect to encounter? (Be sure
students assume the perspective of a firm located outside of the regional bloc.) (LO: 4,
Learning Outcome: To define different forms of regional economic integration, AACSB:
Analytical Skills.)
Exercise 8.3. Prior to the breakup of the U.S.S.R., COMECON (also known as the
Council for Mutual Economic Assistance [CMEA]) held the Soviet bloc together
economically. It represented a trade association that existed to help fulfill the output goals
of the central planning authorities of Russia and its satellite nations. Ask students to discuss
the reasons they believe that COMECON disintegrated in a post-Soviet environment. (LO:
5, Learning Outcome: To compare and contrast different regional trading groups, AACSB:
Dynamics of the Global Economy)
Exercise 8.4. Ask students to consider the major geographic areas of the world: Europe,
Asia (including Oceania), Africa, South America, and North America. Then have them
speculate about the extent to which they expect regional economic integration to progress in
each of those areas (a) in 10 years and (b) in 25 years time. Finally, ask them to discuss the
extent to which they expect global economic integration to progress during the next 25
years. Which organization(s) do they expect will play a major role in that process? (LO: 5,
Learning Outcome: To compare and contrast different regional trading groups, AACSB:
Analytical Skills.)
