I also do NOT believe they would drive smaller businesses out of business, but would almost definitely put a hurting on the big monopolistic stores.
If we are talking of legitimate businesses, then I think small businesses will find themselves tremendously squeezed by such competition and eventually will have to call it quits. The larger local chains are much better in adopting new technology, new management style, etc in order to accomplish productivity as high as those of the new foreign competitors.
Look at the supermarket segment, prior to Pricemart entering the Dominican market, supermarkets in the DR were highly inefficient, not much variety, etc. Once Pricemart and Carrefour and other foreign supermarkets and hypermarkets entered the Dominican market, suddenly the presence of those much more productive enterprises caused a ripple effect through those segment of the economy and increase productivity across the board.
Afterwards, local supermakets began to increase their productivity, in many cases matching the productivity of Pricemart, and you got what exist today; chains of local supermarkets indistiguishable from supermarkets in much of the world offering everything from Heinz Ketchup and Entements cupcakes at competitive prices, modern facilities, etc.
The local chains opted to modernize themselves rather than go out of business and that helped them stay in business. Other stores like Americana Departamento and Ferreteria Hache, etc expanded into other niches beyond their original market niche in order to compete with the new foreign hypermarkets like Carrefour.
If, however, we are talking of illegitimate small businesses, it would be hard to say if they will go out of business, given that illegitimate small business, despite being extremely inefficient (take a look at any colmado, the inefficiency is obvious from the way everything is set up to the large amount of time employees waste behind the counter when they could be more productive doing something else, etc). Such inefficiency and lack of product diversity is reflected in the prices being higher than they probably would be in a hypermarket which could take advantage of economies of scale.
So, why do small illegitimate businesses still manage to compete with large legitimate businesses?
The answer lies in the fact that most small illegitimate businesses don't pay taxes. When it comes to chiriperos and such, they don't even keep records of anything, much less will they pay any taxes. The large legitimate stores pay very high taxes and part of the reason why taxes are so high has to do with the widespread evasion of taxes by all the little illegitimate guys.
Most of those small illegitimate business employees would had been more productive working for a large legitimate business and the prices would be much lower if the illegitimate businesses were either eliminated or made legit.
The problem lies in people not wanting to follow the rules and other people with bleeding hearts who prefer to keep small illegitimate businesses in business, despite the inefficiencies and lower productivity which hampers development in the long run.
Stores like Wal-Mart will be good in the legitimate business sector, but for the illegitimate sector its questionable if they will get much effect from that since Wal-Mart will be subjected to the taxes those illegitimate business don't pay!
Let's wait and see.
-NALs
