MEXIC O - nebula.wsimg.com
Transcript of MEXIC O - nebula.wsimg.com
MEXICO
Josh Bregier ∙ Meredith Freeland ∙ Brian Kim ∙ Kayla Orringer ∙ Connor Steppe
Strategies for Successful Entry
Future
Business Practices
Current
Characteristicsof Mexico
Background
There are many characteristics of Mexico’s past and current culture and economy to investigate when determining whether or not to enter
into the Mexican market.
Executive Summary
Strategies for Successful Entry
Future
Business Practices
Current
Characteristicsof Mexico
Background
There are many characteristics of Mexico’s past and current culture and economy to investigate when determining whether or not to enter
into the Mexican market.
Executive Summary
Background Current Future
The name “Mexico” comes from the shape of its geography
Source: Maphill,
Los Estados Unidos Mexicanos (United Mexican States)
Since the positions of the lakes, upon which Mexico City was founded, are shaped like a rabbit and correspond to the same pattern on the moon. This gives Mexico a meaning of "In the navel of the Moon".
Mexico = ”The Rabbit's Navel"
Metx - 'moon’ xic - 'navel' co - 'in'
In "Nahuatl" (the language of the "Aztecs/Mexicas") it is the combination of three words:
Background Current Future
The U.S. shares a 1,989 mile border with Mexico
Source: Maphill,
Size: 1,972,550 sq. km About 3 times size of Texas
Background Current Future
Mexico fought in many wars before their period of peace
Source: TIME,
Spanish forces led by Hernán Cortés arrive and conquer Mexico
1519-1521
1821Mexico gains
independence from Spain through Treaty of Córdoba
Mexican-American War
1846
1857The Reform
War
Franco-Mexican War1861
1910The Mexican Revolution
Post-Revolutionary era of relative peace after amendments to
Constitution1917
Background Current Future
Where did the indigenous people come from?
Source: Mexico News Daily,
Popol Vuh
Background Current Future
Southern Mexico is home to most of the indigenous population
Source: Mexico News Daily,
The majority of the indigenous population is concentrated in
the southern and south-central region of Mexico
Background Current Future
A majority of the population is Mestizo
Source: CIA World Factbook
62%21%
7%
10%
Mestizo (Amerindian-Spanish)
Predominantly Amerindian
Amerindian
Other (mostly European)
Background Current Future
Roman Catholicism is the dominant religion at 82.7%
Source: CIA World Factbook
82.7
1.61.4
51.9
4.7 2.7
Roman Catholic
Pentecostal
Jehovah's Witness
Evangelical Churches
Other
None
Unspecified
But prevalence of Roman Catholicism is slowly declining due to increasing
Protestant and Mormonism
Background Current Future
People in Mexico celebrate many national holidays throughout the year
Date (2017) Holiday (National Holiday)
January 1 New Year's Day
February 6 Constitution Day
March 21 Benito Juárez's Birthday Memorial
April 14 Good Friday
May 1 Labor Day / May Day
September 16 Independence Day
November 20 Revolution Day Memorial
December 12 Day of the Virgin of Guadalupe
December 25 Christmas Day
Source: Timeanddate.com, Biography, Huffington Post,
Background Current Future
There are many non-national holidays celebrated in Mexico
Source: Timeanddate.com, Biography, Huffington Post,
Cinco de Mayo, May 5 All Saints’ Day, November 1
Day of the Dead, November 2
Background Current Future
Culture is a big part of life in Mexico
Source: MexicoCulture, Biography, Huffington Post,
Background Current Future
The majority of Mexico’s population is young
Source: CIA World Factbook
Background Current Future
Although smaller now, Mexico’s population is growing at a much higher rate than the U.S.
Mexico
Total Population: 123 million
Population growth rate: 1.15%
Median age: 28 years
Life expectancy: 75.9 years
Source: CIA World Factbook
United States
Total Population: 323 million
Population growth rate: .81%
Median age: 37.9 years
Life expectancy: 79.8 years
Background Current Future
While improving in some metrics, Mexico still faces challenges
Source: Transparency International
25th
65th
in World Happiness Report
in Prosperity Index
U.S. is 14th
U.S. is 17th
123rd in Corruptions Perceptions Index U.S. is 18th
Background Current Future
Mexico has three major political parties
Source: Mexico Institute Elections
National Action Party(PAN)
Party of the Democratic Revolution
(PDR)
Institutional Revolutionary Party
(PRI)
Smaller Political Parties
- Center-right party- Founded in 1939
- Formed after theMexican Revolution
- Founded in 1986- Formed by left-
- Long considered the “loyal opposition” to PRI- First party to defeat the PRI on the presidency in 2000 with Vicente Fox
leaning pro-reform priístas- Promote a democraticand open party
- Generally trailed the other two parties until 2006
- Tries to prevent violence among rival political groups- Held a majority of political positions until the 1990s
Background Current Future
Mexico’s political structure is similar to that of the United States
Source: New York Times,
Congressional system with President acting as head of state and head of government
Current President: Enrique Peña NietoElected: December 1, 2012
Direct election process without electoral collegePresidency term is 6 years, no reelection.
Power is split into three branches
Executive Legislative Judicial
Background Current Future
Mexico is a large trading partner of the U.S.
Source: Central Intelligence Agency,
“Mexico's $2.2 trillion economy has become increasingly oriented toward manufacturing in the 22 years since the North American Free Trade Agreement
(NAFTA) entered into force. Per capita income is roughly one-third that of the US; income distribution remains highly unequal.” – CIA
U.S.’ 2nd largest in exports3rd largest in imports ($590B in trade in 2014)
GDP: $2.307 trillionGDP Growth: 2.1%Per Capita: $18,900
63.2%
33.1%
3.7%
Services Industry Agriculture
GDP Composition
Background Current Future
Mexico has a large trade importance on a state basis
Source:HSBC
Destination of Mexican exports
Origin of American exports
35%
13%13%
11%
6%
22%
Texas
California
Michigan
Illinois, Louisiana,Arizona, OhioMississippi, Florida,NCOthers
52%
16%
16%
16%
Texas
California
Michigan, Arizona,Illinois, Louisiana
Others
Strategies for Successful Entry
Future
Business Practices
Current
Characteristicsof Mexico
Background
There are many characteristics of Mexico’s past and current culture and economy to investigate when determining whether or not to enter
into the Mexican market.
Executive Summary
Background Current FutureSource: PBS
9th largest economy in the world
Main exports:• Silver• Fruits• Vegetables• Coffee• Cotton• Oil• Oil productsMain industries
Petroleum
TobaccoFood & Beverage Iron & SteelChemicals
Clothing Motor Vehicles Tourism
Mexico has a strong and growing economy
Background Current FutureSource: CNBC, North American Production Sharing, Inc.
Mexico’s large, diversified labor pool and its proximity
to the U.S., coupled with wage and transportation
inflation in China, is driving the largest manufacturing
expansion in Mexico over the past 20 years.
Tijuana, Mexico now claims the largest concentration of medical device
manufacturers in all of North America.
Mexico is now the largest North
American auto-producing nation,
recently surpassing Canada and the U.S.
Manufacturing is growing in Mexico
Background Current Future
There are many large companies based in Mexico
Source: Economy Watch
Company Industry Market Value
América Móvil Telecommunications $70.7B
Femsa Beverage $37.7B
Grupo Mexico Mining $32.3B
Grupo Modelo Brewery $29B
Grupo Inbursa Banking $18.5B
Industrias Peñoles Mining $17.4B
Fresnillo Mining $16.1B
ALFA Industrial $12.7B
Background Current Future
Many large industries have a significant presence in Mexico
Source: Economy Watch
Industry Crude Petroleum Cars
Competition Level High High
Leading Companies PEMEX ToyotaVolkswagenGeneral MotorsRenault-Nissan
Country Mexico JapanGermanUSAFrance-Japan
Background Current Future
Four main companies produce a majority of their goods in Mexico
Source: North American Production Sharing, Inc.
- Began manufacturing in Mexico in 1925
- Participant in Mexico’s Maquiladora program
- In September 2016, announced they would be moving all of their small-car production to Mexico
- PepsiCo has invested $3 billion since 2009
- In 2014, PepsiCo announced that they would be making an additional five billion dollar investment in Mexico
- In 2014, Nestle announced they were planning to make a one billion dollar investment in two additional factories in Mexico in the next five years
- A lot of Nestle’sinvestment is for the local Mexican market
- Began establishing Maquiladoras in Mexico in the last fifty years
- Has experienced increased profits from internal demand within Mexico and have reduced the cost of their vehicles
Background Current FutureSource: Export Gov
• NAFTA has increased demand for U.S. goods and services
• Liberalization of Mexican economy has led to economic growth
• Corporate Social Responsibility• Consumers are price sensitive but
sophisticated
Mexico’s economy is evolving along several business trends
Background Current FutureSource: North American Production Sharing, Inc.
Businesses move manufacturing to Mexico
Higher quality products are made
Skilled workforce is increasing
Adaptability, innovation, and tech advancements characterize workforce
The Maquiladora Program is incentivizing business
Background Current Future
Mexico exports a variety of goods
Source: North American Production Sharing, Inc.
90.4
81.2
58.9
22.8
15.2
9.98.3
7.1 5.7 5.6Top Ten Exports (in Billions)
Vehicles
Electronic Equiptment
Machines, engines, pumps
Oil
Medical, technical equiptment
Furniture, lighting, signs
Plastics
Gems, precious metals, coins
Iron or steel products
Vegetables
Background Current Future
Mexico is a world leader in exports
Source: The Balance, Atlas Media, MIT
12th
73%
largest exporter in the world
of exports went to the U.S. in 2015
>90%of Mexico's trade is under 12 free trade agreements with over 40 countries
73.0%
6.1%
2.0%1.5%1.3%1.3%
14.8%
Mexico's Export Destinations
United States Canada China
Spain Brazil Columbia
Others
<10% dependence on any export category
Background Current Future
The U.S. imports a significant amount of goods from Mexico
Source: The Observatory of Economic Complexity
Background Current Future
There is need for improvement in Mexico’s infrastructure for effective distribution
Source: Economy Watch
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Truck
Train
Ship
Airplane
Mexico Shipping Methods
Mexico Shipping Methods
Mexico has a modern highway system with toll
roads connecting the main Industrial
areas. Outside these main highways road condition is “fair to
poor.” Mexico is aggressively upgrading its
infrastructure to make exportation
more cost-effective and competitive.
Background Current Future
Appearance is very important, business professional attire
Business meals are a common occurrence, usually involves drinking and smoking
Patience: meetings usually last much longer and small talk is necessary before discussing business
The concept of time is flexible
Mexican etiquette makes it difficult to say no, so “yes” does not always mean yes
Most of Mexico’s business customs are fairly similar to the U.S.
Source: Export Gov
Background Current FutureSource: Trending Economics
Consumer prices in Mexico jumped 4.86 percent year-on-year in February of 2017, following a 4.72 percent rise in January and above market expectations
of 4.82 percent. This was due to liberalization of gas prices.Inflation Rate in Mexico averaged 25.52 percent from 1974 until 2017, reaching an all time high of 179.73 percent in February of 1988 and a record low of 2.13
percent in December of 2015.
Mexico’s inflation rate has recently been increasing rapidly
Background Current FutureSource: Mannatt Jones Global Strategy
Legislation to limit the monopolistic practices that have plagued the Mexican economy for
generations
Gives the Commission real sanctioning powers that should allow it to force dominant actors to comply with Commission rulings
Authorizes the Commission to eliminate barriers to competition and free market entry anywhere in the economy (except in the telecom sector) and to identify and regulate access to essential production inputs.
Empowers Mexico’s antitrust agency, the Federal Competition Commission (COFECE), which has lacked meaningful authority and sanctioning power.
Mexico’s new competition law aims to limit the power of monopolies
Strategies for Successful Entry
Future
Business Practices
Current
Characteristicsof Mexico
Background
There are many characteristics of Mexico’s past and current culture and economy to investigate when determining whether or not to enter
into the Mexican market.
Executive Summary
Background Current Future
Mexico is an attractive business destination
Source: CNBC, The Economist, The Balance, Financer Worldwide, Goldman Sachs
Geography
• Proximity to the US
• Port of Lazaro Cardenas
• Labor pool of 78 million people
• World Trade Organization ranking
• Spanish and English speaking
• 44 free trade agreements
• International trade is 66% of the GDP
• Predicted to become 5th largesteconomy
Workforce
• Telecomm, economic competition, energy, and financial services
• Resulted in increased foreign investment
ReformsTrade
Background Current FutureSource: CNBC, Financer Worldwide
Given the landscape and trends, there are 3 major current market opportunities for goods and services
• Financial Services
• Information Technology
• Aerospace
Background Current Future
Financial service organizations use the nation’s most popular sport for advertising
Source: Oxford Business Group, PwC
2
5%
decades of growth and stability
of customers switch between banks due to tough competition
<50% of the population currently has a bank account
Key Companies: Banamex, BBVA Bancomer, Santander, Banorte, HSBC
Background Current Future
Mexico is an Information Technology powerhouse
Source: The Catalist, ATKearney
human factor’s availability and skills
labor costs
business environment
6th best location for IT development
Key Companies: IBM, Lenovo, Motorola Mexico, Ericsson
Background Current Future
Mexico appears as the 2nd largest fleet of private aircarft in the world
Source: The Catalist, ATKearney, Staff Relocation Services
Number of companies set in the country
high-level professionals have been employed
billion dollars have been reached
Key Companies: Boing, Delta, Safran Group
>270
>31k
7.1
Background Current Future
There are substantial risks of moving into Mexico
Source: CNBC, EY, Export
Corruption Global Recession Drug CartelTied to the
U.S.
Fragmented sectors
Many underserved
areas
Current U.S. foreign policy
Differing regulations,
product standards,
and labor laws
Background Current Future
People around the world have mixed opinions regarding the potential tariff
Source: Forbes, Business Insider, Five Thirty Eight
“A 20% tax on Mex.imports to pay 4 the #BorderWall wudhav the same impact as a
category 5 hurricane on the [Rio Grande
Valley]~catastrophic&hard 2 overcome,” tweeted Ruben o.
Villarreal, a Republican and former mayor of Rio Grande City, which on on the Texas-
Mexico border.
Background Current Future
There are many factors to consider when determining the best possible entry strategy
Source: Export Gov
One needs to develop
close relationships with clients
and partners in Mexico
Mexican businesses
prefer direct communication
(on-site presence often
required to build rapport)
Mexican companies are
often very price sensitive, seek
financing options and
exclusive agreements
They value flexibility and outstanding
customer service
Background Current Future
Many resources can help when entering Mexico
Source: Export Gov, Travel State
The U.S. Commercial Service can assess market potential of products and services,
and provide advice on exporting strategies
The U.S. Commercial Service can also help facilitate business agreements and run
background checks
The U.S. Department of State
Background Current Future
Cost leadership is the dominant pricing practice in Mexico
Source: University Honors in Business, Language and Culture, XE Currency
63%
25%
6%6%
Perceptions on Most Common Pricing Strategy for Consumer Products
Cost Leadership
Product Differentiation
Mixed Strategies
Competitive Pricing
Currency: Mexican Peso
1 MXN = 0.0523814 USD1 USD = 19.0908 MXN
The value of the peso has decreased over the past 5 years
Background Current Future
Marketing in Mexico is focused around the culture
Source: AT&T,
Background Current Future
We recommend several strategies for entering the Mexican market
Source: AT&T,
- Market to the culture- Partner with a local agent- Use a celebrity as brand representative - Evaluate sector risks based on global
geopolitical situation- Get assistance from U.S. commercial department- Be selective and strategic when choosing
distribution partner
Strategies for Successful Entry
Future
Business Practices
Current
Characteristicsof Mexico
Background
There are many characteristics of Mexico’s past and current culture and economy to investigate when determining whether or not to enter
into the Mexican market.
Executive Summary