Business Relationship and Opportunities in Mexico - Research Proposal Example

?Business Relationship and Opportunities in Mexico Table of Contents Table of Contents 2 0 Introduction 3 2.0 Business Relationship in Mexico 3 3.0Mexican Economy 3 4.0 Role of NAFTA on Mexico 6 5.0 US-Mexico Trade 6 5.1 Trade between the US and Mexico 7 6.0 SWOT Analysis of Business Opportunities in Mexico 8 7.0 Recommendation 9 8.0 Conclusion 9 References 10 Bibliography 11 1.0 Introduction Mexico is situated in north - western part of Latin America. It is a place of advanced Amerindian society. The ethnic composition of Mexico and the famous identities of its region along with extremely bright culture have been created by the influence of external indigenous and migration of people. The culture of Mexico is also influenced by African and Spanish civilizations. The valuable assets of the region are its rich diversity of varied cultures. For conducting business in Mexican environment, a wide knowledge of its intricate culture and heritage need to be properly understood. For those who want to conduct business in Mexico and make them successful, it is necessary to acquire a clear knowledge of tradition and culture of Mexico (Communicaid Group Ltd, 2009). 2.0 Business Relationship in Mexico Formal approach of business relations is adopted by Mexicans. They address the business partner with the suitable title. Civility or professional titles are utilized which is followed by a surname. The business meeting starts with the most suitable type of greeting such as warm and positive handshake. This is done both in case of arrival and departure from the meeting regardless of gender or superiority. A vital part of Mexican business procedure includes reliable contacts and connections need to be secured for maintaining the business. For gaining trust and success in business in Mexico, it is essential for the use of ‘personal introductions’ with the help of a common friend or a suitable professional. The negotiations of business are a lengthy procedure in Mexico and exchange of elements is expected. It is also vital to note that Mexican business people are inclined to support business decision as well as proposals based on the level of trust of the individual established with the foreign counterparts (Communicaid Group Ltd, 2009). 3.0 Mexican Economy The economic pattern of Mexico can be understood by analyzing the sectoral and regional economic pattern of the nation. The recent data of Gross Domestic Product of Mexico shows that the service industry is dominating in the market of Mexico. The service has huge contribution to GDP other than the industrial sector. The industrial sector accounts for slightly more than one fourth of GDP. The manufacturing industries have dominated in the market. There is a strong growth in mining and construction industries in the last eight years. Growth has been particularly high in the areas of metal industries as well as machineries and equipments, indicating a gradual sophistication of the Mexican product portfolio. The textile industry has shown failure in competitiveness which implies that it has grown lower than the average point. Due to rising of manufacturing costs in Mexico, the attractiveness of the country as a textile producer is losing its sheen. The low-rated countries in Asia and Central America too are capturing amounts of business in large scale. Till now, the efforts of the Government to protect this industry through a moderately protectionist sectoral trade policy have not been capable to prevent this erosion. Mexican region, for the past fourteen years, has not experienced development from the expansion of economic growth. Mexico City, on the other hand, has the benefit of per-capita income of little more than 15.000 USD. In the Southern states of Chiapas and Oaxaca, GDP per capita remains lower than 3.000 USD. The same is relevant for industrialization. The accounts manufacturing is about 30% of GDP in several states in the region of Mexico City and in the North, it remains below 5%. This includes the units of Southern Campeche and Chiapas. The significance of Foreign Direct Investment (FDI) for an economy of the state differs significantly. It is quite high in the Federal District and in certain states in the North, while only small amounts of FDI have so far reached the South (Zimmremann, 2002). Table 1: Basic Economic data in Mexican States Source: (Zimmremann, 2002). 4.0 Role of NAFTA on Mexico The North American Free Trade Agreement (NAFTA) is an agreement of free trade that act as removal of investment obstacles and barriers of trade among trading partners of NAFTA. It has been in effect since January 1994. For maintaining bilateral economic association between the United States and Mexico, it plays a significant role. Besides trade association, both the countries are attached in other areas too which are connected to security, health matter and environmental migration. NAFTA has an effect on Mexico and the economic situation of Mexico has impact on political and economic situation of the U.S. 70% imports of the U.S. from Mexico and 50% export of the U.S. to Mexico obtain duty-free treatment. At that point of time, NAFTA came into effect, various economic studies forecasted that the trade agreement have a great positive effect on the Mexican economy. As a result, the gap between the prices and goods of the U.S-Mexico and the discrepancy in actual wages was narrowed (Villarreal, 2010). 5.0 US-Mexico Trade The trade between the US and Mexico has risen significantly since 1994. Post – NAFTA, the exports to the US has improved and the imports from the US have also increased. Mexico has a trade excess of $4.8 billion with the US. In 2008, the U.S. imports from Mexico were $216.3 billion and exports to Mexico were $131.5 billion. The U.S-Mexico trade turned down in 2009 resulting from economic deceleration that was caused from the financial crisis globally. In 2009, there was 19% decrease in the U.S. imports from Mexico and 20% decrease of the U.S. exports to Mexico. The top imports of materials from Mexico to the US in 2009 were motor vehicles, audio and video kits, oil and gas, and communications equipments. The exports in the same year to Mexico were parts of motor vehicle, essential chemicals, products of petroleum and coal, resin based products and oilseeds along with grains (Villarreal, 2010). Table 2: US Mexico Trade: 1994-2009 Source: (Villarreal, 2010). For the US Mexico is the second largest market. US Exports Billions of Dollars 2004 Source: (Gonzalez, 2006). 5.1 Trade between the US and Mexico Exports to the US The various products and materials of Mexico are exported to the US. These are electrical equipments, machinery, medical instruments, plastics, clothes, parts of vehicles, oil, steel and iron products (Gonzalez, 2006). Imports from the US Various products are imported to Mexico from the US, which are natural gas, food, beverages, paper, vehicles, machineries, iron and steel products (Gonzalez, 2006). 6.0 SWOT Analysis of Business Opportunities in Mexico Strengths The financial market of Mexico is profound. The external pressure of debt service has no influence in business. The inflation is low with a rate of 3% in Mexico and income is being reduced in this region. The allowance level is much high. The economic environment of the Mexican market is stable. The price of oil is extremely high. The workforce in Mexico is efficient and capable. The business environment is friendly in nature and thus the relationship plays an effective part in conducting business in Mexico (Gonzalez, 2006). Weaknesses The government of Mexico is responsible for all the regulations for development activities including uses of soil, land availability and water supplies. The government has approved a new bill in 2006 for support of National Housing system and dropping the housing deficit in the country. This has been done with a better synchronization between federal states along with government for concern of authorization and the licenses of the land approved by them. Due to tropical weather condition in Mexico at times, it is quite difficult to conduct business in that area (Lugarini, 2009). Opportunities Mexico is rich and efficient in oil products, energy, transportation equipments and electronic components. As it is a tourist destination, tourism services provide tremendous scope in this place. There is a prospect for construction of house and public infrastructure in this region because the number of people is rising. The Mexican Congress in 2006 approved a new housing demand for payment in order to support the National Housing System. It is also done to lessen the housing deficit through a good synchronization among the federal and state governments about authorizations and land permit approved by them (Lugarini, 2009). Threats In Mexico at times the rise of political and social conflict, issues related to illegal immigration related instability with the US may have negative impact on operation of business. The existing competition with already established business organizations can create difficulty in operating business operations. The retardation of the economy of the US may create risk in the business. When the energy price is increased it leads to direct impact on distribution and production cost (Gonzalez, 2006). 7.0 Recommendation Various strategies can be developed to deal with several uncertainties and risks in the market of Mexico. The marketing strategy can be undertaken based on the demographic condition of the people. The size of the products and its pricing, likeness of consumer - all these may help to adapt strategies effectively. One must adapt and learn the culture of the place in order to make good relationship with the Mexicans for effective and successful business (Technologico De Monterrey, n.d.). 8.0 Conclusion In this paper the importance and opportunities of doing business in Mexico have been discussed. It has been observed that Mexico is a good place for conducting business for its various positive attributes. By understanding the culture of the region, one can develop business readily. Mexico is considered as the second largest market for the United States. The effect of NAFTA in Mexican trade has great influence. The major role of NAFTA is to increase the Foreign Direct Investment and its role in economic activity. For developing business certain strategies need to be adopted with a view to make it successful. References Communicaid Group Ltd, (2009). Business Practices in Mexico. Doing Business in Mexico | Mexican Social and Business Culture. Retrieved Online on February 22, 2011 from http://www.communicaid.com/access/pdf/library/culture/doing-business-in/Doing%20Business%20in%20Mexico.pdf Gonzalez, E., (2006). Mexico Strong Competitive Advantages. Doing Business in Mexico. Retrieved Online on February 22, 2011 from http://www.queenslibrary.org/UserFiles/File/Doing_Business_in_Mexico.ppt Lugarini, F., (2009). SWOT Analysis. Marketing Performance & SWOT Analysis of CEMEX. Retrieved Online on February 22, 2011 from http://www.alacra.com/acm/2099_sample.pdf Technologico De Monterrey, (No Date). Marketing. Summer 2006 Courses. Retrieved Online on February 22, 2011 from http://www.gda.itesm.mx/ip/archivos/Course%20descriptions.pdf Villarreal, A. M., (2010). Effects of NAFTA on Mexico. NAFTA and the Mexican Economy. Retrieved Online on February 22, 2011 from http://www.fas.org/sgp/crs/row/RL34733.pdf Zimmremann, A. T., (2002). The Mexican Economy. Doing Business in Mexico. Retrieved Online on February 22, 2011 from http://mpra.ub.uni-muenchen.de/4499/1/MPRA_paper_4499.pdf Bibliography Bustamante, A. J. & Et. Al., (1992). U.S.-Mexico Relations: Labor Market Interdependence. Stanford University Press. Collins, M. S. & Et. Al., (1997). Coming Together? Mexico-United States Relations. Brookings Institution Press. Gordon, G. & Williams, T., (2002). Doing Business in Mexico: A Practical Guide. Routledge. Nolan, L. J., (1999). Mexico Business: The Portable Encyclopedia for Doing Business With Mexico. World Trade Press. Pohlmann, D., (2007). The Economic Impact of NAFTA on Mexico. GRIN Verlag, Read More