rewriting work
Expansion into the Mexico Market
Hello my name is Tammy Dehntjer, in this presentation I will explain what risks a company could face in entering the market in Mexico. I will also explain how the risk might be different then those face with staying in the American market. Lastly, I will analyze how the company can manage the risks associated with our Mexico expansions
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Risks of Doing Business in Mexico
Cultural Differences
Economic and Financial
Laws and Regulations
Environment
Mexico is a country rich with tradition and cultures different from the US. Culture refers to the set of values, beliefs, rules, and institutions held by a specific group of people (Nickels, McHugh. 2016). Mexico has different laws and regulations than the United States and culture is an important factor that any company must take into account when expanding into a particular area. You can directly influence how the people or market in that area will respond to the new product.. A company must understand the culture of the Mexico and then wether or not their product or service is in conflict with the area‘s culture.
Economic and financial forces include the economic conditions of the country in which the company would expand. When expanding into Mexico the company would conduct business using the local currency, Pesos. The company would then be required to convert the Pesos into US dollars using the exchange rate. The fluctuation exchange rate or having the exchange rate drop are problems that companies have when doing business in Mexico. When expanding into Mexico, the company must fully understand all of the laws and regulations relevant to its operations. When expanding into foreign markets companies are often faced with the difficulty of navigating the bureaucracy and layers of red tape. Some companies have required reliable, work force, for example, may find it necessary to provide their Mexican employees with improved roads, schools, health care, housing, and child care to ensure that they have safe working and living conditions
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Opportunities of not Expanding into Mexico
Culture
Economic and Financial
Legal and Regulatory environment
Developed Infrastructure
By staying the American market the company has the advantage of knowing what out culture is. By staying in the United States you are only paying taxes for our roads, water supply, our schools, and our national defense. Keeping American manufacturers in business in America can only benefit every citizen. By keeping the business here we only have laws and regulations of the United States, rules, labor relations, patents, copyrights, trade practices, taxes, product liability, child labor, prison labor, and other issues are governed by the United States. Even though some areas of the country have aging or over-burdened roadways and utility systems, but the nationwide infrastructure is capable of supporting the needs our economy.
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Minimizing the Risks of Expanding into Mexico
Licensing
Indirect Exporting
Licensing would allow our company to giving another company the right to manufacture our products and use our trademark . This is a very low risk strategy and your company cost nothing for setting up manufacturing and the sale of your product. Licensing would allow our company to create a revenue stream with minimal investment.
Indirect exporting is another option we could utilize where our company would ship our product into Mexico with the help of export-management companies. Export management companies would handle the entire process of shipping the goods, handling customs and even matching our products with buyers within the destination market for a fee.
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Minimizing the Risks of Expanding into Mexico
Contracting Manufacturing
Strategic Alliances
Foreign Direct Investment
Contract manufacturing would involve our company contracting a foreign manufacturer in Mexico to produce or product for us. A firm can also use contract manufacturing temporarily to meet an unexpected increase in orders, and, of course, labor costs are often very low(Nickels, W., & McHugh, J. (2016. It also allows a company to test the market with minimal risk.
Strategic alliance is a long-term partnership between two or more companies established to help each company build a competitive market advantage (Nickels, McHugh. 2016). With a strategic alliance your company woud not have to share costs,risks or profits with a partner company.
Lastly, the most common form of FDI is a foreign subsidiary a company owned in a foreign country by another company, called the parent company. The subsidiary operates like a domestic firm, with production, distribution, promotion, pricing, and other business functions under the control of the subsidiary’s management. The subsidiary also must observe the legal requirements of both the country where the parent firm is located (called the home country) and the foreign country where the subsidiary is located (called the host country)(Nickels, W., & McHugh, J. (2016).By doing this it allows for your company to maintain control over technology and expertise.
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Conclusion
In this presentation was discussed the risks associated with expanding into Mexico . Discussed the four factors affecting global expansion; cultural, economic and financial, legal and regulatory and developed infrastructure. Also identified were the risks that would be different if your company decided to conduct business in America instead. Lastly, we identified how the risks of expanding into Mexico could be mitigated by utilizing five strategies for global expansion; licensing, indirect exporting, contract manufacturing, strategic alliances and foreign direct investments.
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References
Nickels, W., & McHugh, J. (2016). Understanding business (Eleventh ed.). McGraw-Hill Higher Education.
Wazwaz, N. (2015, July 06). Retrieved June 27, 2016, from http://www.usnews.com/news/articles/2015/07/06/its-official-the-us-is-becoming-a-minority-majority-nation