INTRODUCTION The purpose of this paper is to evaluate Mexico and the possibility of internationalization. In order to make an informed decision about such a country, the benefits, costs and risks of the venture must be considered. In this paper, we will analyze Mexico’s economy, political structure, culture and management techniques. By examining these factors an American firm should be able to make a decision based on Mexico and the type of business considering a move into Mexico.
This paper will show that a company can not internationalize into Mexico due to the lower costs of labor only. A more all-encompassing approach is necessary to make a proper decision. A study of all aspects must be done and then the decision can be made. This paper will present an overview of the factors that must be considered when looking towards Mexico and the prospect of internationalization. LAND Mexico, officially the United States of Mexico, has an area of 760, 00 square miles, almost one-fourth that of the contiguous United States. It lies just south of the United States.
Guatemala and Belize bound Mexico on the south side, on the west by the Pacific Ocean and the Gulf of California, and on the east by the Gulf of Mexico and the Caribbean Sea. Mexico is the third-largest country in Latin America after Brazil and Argentina and among all the countries of the Western Hemisphere, only the United States and Brazil have more people. Mexico has six main regions: (1) the Plateau of Mexico, (2) the Pacific Northwest, (3) the Gulf Coastal Plain, (4) the Southern Uplands, (5) the Chips Highlands, and (6) the Yucatan Peninsula. Within these six land regions there are many smaller ones that differ greatly. The plateau of Mexico is the largest of Mexico’s land regions. The two main regions of this plateau are the Mesa Central (Central Plateau) and the Mesa del Norse (Northern Plateau).
... states, for example they have a literacy rate of 69% compared to the 87% that Mexico has on average. In this region ... gains. Onc source of conflict in Mexico is the Mexican State of Chiapas and the rebels that ... US. Mexico s President is Ernesto Ze dillo who is both chief of state and head ... country mostly consist of mestizo (Amerindian-Spanish). Mexico s democratic government consists of an executive, ...
The Mesa Central is the heart of Mexico averaging about 7, 500 feet above sea level. This region covers one of the most productive agricultural areas in the country with enough rainfall to grow corn, beans, wheat and barley. This area which includes Mexico City is considered the country’s leading center of culture, industry, and transportation. The Mesa del Norse consists of mountains ranging from 2, 000 to 9, 000 feet.
This area receives little rainfall and farming is only possible in such areas where irrigation can take place. The low mountains of this mesa have rich deposits of metal ores. The Spaniards began developing these mines during the 1500’s. In the nearby dry hills and plains huge ranches were established to supply the miners with beef, horses, and mules. In this area, vaqueros (cowboys) developed skills at riding, roping cattle, and fighting Indians, such skills were later copied by American cowboys. The Pacific Northwest region of Mexico is generally dry and consists largely of rolling mountainous desert.
During some years, the desert receives no rain at all. It has a few oases, where farmers in small settlements grow dates and grapes. The most valuable land of this area is along the mainland coastal strip. This area is popular for tourists from the United States and is one of the main revenue generating resources in this area. Tangled forests of low thorny bushes and trees largely cover the Gulf Coastal Plain in the north. Moving towards the southern, the rainfall increases and gradually the plant life changes until it becomes a tropical rain forest in Tabasco.
Many of Mexico’s longest rivers flow into the Gulf of Mexico from the coastal plains. They include the Rio Grande, which forms about 1, 300 miles of the Mexico border with the United States. A large portion of Mexico’s petroleum comes from large petroleum deposits that lie beneath the plain and offshore. The Southern Uplands consist largely of steep ridges and deep gorges cut by mountain streams.
... was greatly reported mainly in the south eastern part of Mexico. These areas include Chiapas, Campeche, Quintana Roo and other States ... has not improved in the urban areas. Revolutionary change/Soldiers and politics The revolution in Mexico began as early as 1910 ... in Mexico (Nesvig, 2006). The church state relations in Mexico have been ...
The most populated area of this plain is along the Sierra Madder del Sur, a rugged mountain range along the Pacific Ocean. The famous beach resort of Acapulco is on this coast. Some farming takes place on the steep mountain coast and much of the gold of the Aztec Empire is believed to have come from this region. The Chiapas highlands have great block like mountains that rise more than 9, 000 feet above sea level. This region consists of relatively flat surfaces at high attitudes called the tablelands, which are farmed by Indians who speak Maya and other ancient languages. With irrigation, farmers grow coffee, fruits, and other crops.
Yucatan Peninsula is a low limestone plateau with no rivers. Limestone dissolves in the water and rainfall reaches the sea through underground channels dissolved out of the rock. Great pits have formed where the roofs of these channels have fallen in and these huge pits were sacred wells of the ancient Mayas Indians. The north part of the region is dry bushland. To the south, the rainfall increases, and tropical rain forests cover the land. Climate The climate of Mexico varies sharply from region to region.
Dry conditions exist over the whole northern border from the Pacific to the Gulf of Mexico and over the north-central region southward to about 22 degree north latitude. Rainfall gradually increases as you travel farther south from 22 degrees north latitude until the southern most tip of Mexico where there are rainforest’s. The northern half of Mexico is usually dry and consists largely of deserts and semidesert’s. The lack of rainfall has limited agricultural development in the north.
Only the mountainous sections receive enough rainfall for growing hearty crops with out irrigation. Most of northern Mexico’s rainfall occurs during the summer, whereas northwestern Lower California receives most of its rainfall during the winter. Toward the southern end of Mexico rainfall gradually increases. Annual rainfall averages 23 inches at Mexico City and 35 inches at Puebla.
Only in the Gulf Coast states of Veracruz and Tabasco and along the south Pacific coast in Chiapas is there adequate rainfall all year. In the south like the northern half of the country the rainfall is concentrated in the summer months with dry winters. History The history of Mexico is long, rich, and colorful, and Mexicans have a strong sense of their country’s history. Hundreds of years ago the Indians of Mexico built large cities, developed a calendar, invented a counting system, and used a form of writing. The last Indian empire in Mexico, that of the Aztec, fell to Spanish invaders in 1521. The riches of Mexico made it attractive to Spaniards as an area of settlement rather than simply as an obstacle to overcome in the search for a waterway to the orient.
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The Spaniards began to occupy the West Indies during the 1490’s and discovered Mexico in 1517. An expedition of about 650 Spaniards sailed from Cuba under Hernando Cortes, in February 1519. Cortes’ 11 ships defeated large Indian armies with his horses and cannons in Mexico. He founded Veracruz, the first Spanish settlement in what is now Mexico. For three centuries, from 1521 to 1821, Spain dominated Mexico and gave it a political unity and relative peace it never had. Spain’s political structure, economic system, religion, and culture were imposed on the indigenous people of Mexico.
Under this new structure, there was much blending of what was indigenous and what was European, although considerable diversity persisted. The economy was based on the exploitation of native laborers forced to work in large-scale mining operations. The Spaniards modernized agriculture, introducing new techniques and crops including citrus fruits, wheat, sugarcane, and olives. They also initiated livestock rearing by introducing domesticated fowl, the horse, the mule, and the donkey. Spain remained in control until November 1813 when the war for independence started. The independence movement in Mexico was influenced by examples of the American and French revolutions and the occupation of Spain in 1808 by armies of Napoleon.
A group of powerful Creoles (white Spaniards born in the New World) felt that Spain was unfairly taxing them. These actions by Spain convinced many Creoles that they no longer could trust Spain. It was a long and bloody revolution that lasted 13 years but in the end the last Spanish officials withdrew from Mexico, and Mexico became independent. The way of life in Mexico includes many features from the nation’s long Indian past and Spanish colonial period. But Mexico has changed rapidly during the 1900’s. In many ways life in its larger cities have become similar to that in the neighboring United States.
... principles of social and political liberalism, especially in Great Britain, Canada, and the United States.80) Limited government is one that does ... controlled by a central authority; a capitalistic economy. 87) Marxism is the political and economic philosophy of Karl Marx and ... so. 89) Mercantilism is the theory and system of political economy prevailing in Europe after the decline of feudalism, based ...
Mexican villagers follow the older way of life more than the city people do. Even in the villages, however, government economic and educational programs are attempting to modernize the people’s lives. These programs are bringing the Indian villagers into the general life of Mexico, and making them think of themselves as Mexicans rather than Indians. The People Mexico had a census population of 81, 484, 551 in 1990, compared to 69, 979, 000 in 1980. The rate of population increase has been among the highest in the world in recent decades, averaging 2.
5 percent annually. The high rate of population growth has contributed to a shortage of jobs in Mexico. Since the 1980’s, far more people have entered the labor force then have left, while the economy has failed to create enough jobs. This situation has led to a high rate of unemployment. It has also stimulated increasing migration of Mexicans to the United States. CURRENT GOVERNMENT Mexico is a federal republic with an executive branch, a legislative branch and a judicial branch.
Executive authority resides with the president, elected by direct vote for a single six-year term. This branch is the decision making center of the government. It establishes government policies, proposes laws, and controls the distribution of federal tax revenues. The president appoints a cabinet that directs government operations. All prominent political figures in the executive branch depend indirectly on the president for their jobs. Mexico’s legislature is called the General Congress.
It consists of a Senate and a Chamber of Deputies. The Senate has 64 members who are elected to six-year terms. The Chamber of Deputies has 500 members. Three hundred of the deputies are elected from the country’s electoral districts. The remaining 200 seats are filled by deputies who do not represent a particular electoral district. Members of the Chamber of Deputies serve three-year terms.
Members of the General Congress can serve more than one term, but they may not serve consecutive terms. The highest court in Mexico is the Supreme Court of Justice. It has 21 members, appointed to six-year terms by the president, with the senate’s approval. The Supreme Court selects members of the circuit and district court system.
... with the rest of the Mexican government to see that the transition leads to the changes promised, else Mexico will most probably slide ... services leaving the government to care for only the poorest Mexicans. (World Press, 6-9) With respect to the United States, Fox has ... and NAFTA. Fox is somewhat critical on the Unites States handling of Mexico with respect to drug control. Foxs advisor Andres Rozental ...
The highest court in each state is a Superior Court of Justice. The courts rarely declare a law unconstitutional and generally support the president’s policies. Mexicans may use the courts to protect their individual rights through an amparo (protection) procedure. In amparo cases, the courts may decide that a law has resulted in unfair treatment and an exception should be made, but the law in question is not changed. A reality is that most Mexicans cannot afford to use the legal process.
Local Government Mexico has 31 states and a federal district. The people elect state governors to six-year terms and state legislators to three-year terms. The president can remove governors from office with the approval of the senate. Each of Mexico’s states are divided into (townships).
Each has a president and a council elected to three year-terms. Political Parties Mexican politics feature a peculiar combination of democratic and authoritarian characteristics.
Citizens have freedom of political expression, and a wide range of political parties to vote for, to fill seats in the national congress. Nevertheless, the Institutional Revolutionary Party (PRI) has monopolized power since its founding in 1929, and despite legal efforts, the party has traditionally and freely used resources of the central government to perpetuate its hold on power. Until 1988, the PRI enjoyed nearly absolute domination of Mexican elections. The 1988 elections, the PRI suffered a setback when opposition candidates won almost half the seats in the Chamber of Deputies, and nearly won the presidency. However, in 1991 elections PRI regained a large majority in the Chamber of Deputies. The strongest opposition parties are the Partido de Accion Nacional (National Action Party), and the Partido de la Revolution Democratica (Democratic Revolutionary Party).
Political Risk Investments in Mexico, even in the best of the emerging markets, are more complicated, expensive, and hazardous than making investments here in the United States. Economic growth rates have been quite positive for the Mexican economy, and therefore great possibilities for high investment returns. The present Mexican government is trying hard to open the economy and the politics, but the country has yet to solve many of its problems. The potential for conflict and unrest in Mexico is real.
... to have the same power as the states, like in the U. S. , the Mexican government actually has much more power than the ... , born in Mexico, and their parents must be Mexican by birth. The president is the dominating authority in the government with close to ... right to bear arms, and many others. The constitution of Mexico is a lot like ours because it contains many of ...
Confirming this observation are, in the early 1990’s war broke out between Mexican military and Zapatista rebels and there was assassinations of important political figures, such as when Mexico’s leading presidential candidate, Luis Donal do Colo sio, was brutally gunned down in downtown Tijuana. Conflicts such as this can wreak havoc on a country’ image and on foreign investments. While much progress has certainly been made in Mexico toward stability and democracy, future conflicts cannot be ruled out. In 1994, a country risk ranking had Mexico at 44 th out of 167 countries. Political risk is high in Mexico. U.
S. corporations should maintain safe investing practices, to minimize economic political risk, just in case history repeats itself. ECONOMY During Mexico’s 300 years as a Spanish colony, Mexico served as a cheap source of primary products and as a captive market for Spain’s manufactured goods. This policy enriched a very small Mexican elite of Spaniards and Creoles but it stifled general economic development. This type of economy produced a small middle class and inhibited the growth of manufacturing for its domestic market. The economy was largely based on the production of corn, beans, cattle, and chilies for domestic consumption and of silver and other minerals, and also tobacco, for export.
After the independence of Mexico from Spain, the Mexican economy did not change. This economy based on agriculture and mining was in place until the 1940’s when the government started to promote the development of industry, and Mexico now produces many of the manufactured products its people use. In the 1970’s, Mexico’s economic picture brightened when Petrol eos Mexicanos (Pem ex), the state run petroleum monopoly, discovered vast new oil fields in Tabasco, Chiapas and Campeche Bay just as world oil prices were soaring. The government attempted to capitalize on this seeming bonanza by borrowing heavily from foreign banks at high interest rates, to finance extremely ambitious industrialization projects. In the early 1980’s, the price of oil fell. Mexico found it difficult to repay its loans, and spending had to be severely cut.
The economy declined, and many Mexicans lost their jobs. Emergency loans provided by the United States and international organizations coupled with sharp devaluation of the peso saved Mexico from bankruptcy. Economic reforms instituted in the late 1980’s helped to revive the Mexican economy and inflation fell sharply. Mexico’s President Miguel de la Madrid Hurtado (1982-1988) through the legislature opened the protected economy of Mexico in order to boost labor productivity, stimulate investment, and activate the domestic business community.
De la Madrid sought to obtain foreign loans, attracted state-of-the-art technology, spur non-petroleum exports, and to combat inflation. He also promoted Mexico’s membership in the General Agreement of Tariffs and Trade (GATT), a Geneva-based, multinational organization that encourages trade by lowering barriers and conferring reciprocal benefits on members. The pie chart on the next page shows the economic structure of Mexico in 1991 and how the Mexican government has been able to diversify from agriculture and mining. TradeMexico’s chief export is petroleum and petroleum products. The main industrial export is automobile parts. Mexico also exports coffee, fruits and vegetables, and shrimp.
Mineral exports include copper, salt, sulfur, silver, and zinc. The leading imports include industrial machinery, electric and electronic equipment, and motor vehicles. About two-thirds of Mexico’s trade is with the United States, but trade with the Western European countries and Japan is increasing. Trade with other Latin American countries was relatively unimportant, but Mexico is trying to increase this part of its market through the Latin American Integration Association. This association is an economic union of Mexico and 10 other Latin American nations.
In 1988 a free trade agreement between the United States and Canada, designed to stimulate bilateral trade, prompted Mexico to pursue a similar arrangement that would include Mexico. More than a year of negotiations produced the North American Free Trade Agreement (NAFTA) approved by the U. S. Congress in November 1993. NAFTA extend free trade conditions not only to manufactured items but also to agricultural products.
The three countries agreed to enforce their own environmental and labor laws covering child welfare, minimum wage, and workplace health and safety. NAFTA went into effect on January 1, 1994. Some Mexican manufacturing sectors recorded surges in exports during the first five months of 1994, but on balance, Mexicans bought substantially more than they shipped abroad, resulting in a $7-billion trade deficit, nearly $2 billion more than that recorded in 1993. National Income In 1994 Mexico’s gross domestic product (GDP), its total output of marketable goods and services, totaled $366.
5 billion, or $4, 463 per person. In the mid-1990’s, manufacturing services, and trade each accounted for about a quarter of total output, while agriculture contributed about 9 percent. The Mexican economy grew between 3 and 4 percent annually during the late 80’s and early 90’s. In view of the countries 1. 9 percent population growth, per capita GDP actually declined in 1993. Neither NAFTA nor economic liberalization has altered the fact that Mexico has one of the most unequal distribution of income in the world.
The chart on the next page gives a comparative average of weekly wages of the Mexican worker compared to other nations. Employment and Unemployment In 1994 Mexico had a labor force of 28. 6 million people, of whom about 15 percent were unemployed and perhaps another 35 percent were underemployed. Because of rapid population growth some one million new jobs were needed annually in mid-1990’s simply to keep the unemployment rate from worsening. The search for jobs stimulates a huge migration of labor, mostly from the countryside, to Mexico City, the provincial capitals, and the United States. In the 1980’s the migrant labor force was estimated at 11 million people.
Mexican workers in the United States, who number in the millions, provide an important source of income for their families that remain behind. Unions The unions in Mexico are quite strong. Most estimate ranges from 25 to 30 percent of the active workforce belong to some type of union membership. Some estimates suggest that union membership could be as high as 50 percent but it is hard to get an accurate estimate because there are union-like labor associations among workers in the underground sector. About 80 to 85 percent of unionized workers belong to one of the nine nationally recognized labor organizations.
There are a number of national labor federations and unions. The largest and most important is Confederation de Trabajadores Mexicanos (the Confederation of Mexican Workers or CTM) which represents the majority of large unions. Union membership is highest among government employees and workers in government owned industries especially petroleum production and refining, transportation, and communications. Workers in agriculture, commerce, and non-government services are virtually unorganized. There are a host of additional, often competing, labor organizations that make Mexico’s labor situation complicated. Foreign Investment Starting the 1930’s, the Mexican government has pursued a policy of “Mexicanization” in order to modernize the economy according to national, rather than foreign, interests.
It parceled out many large and foreign-owned estates to landless peasants and nationalized hundreds of industries. To implement its Mexicanization policy, the government adopted a series of laws and regulations defining the types of ownership permissible in various industries. Electricity production, operation of the railroads, radio and telegraphic communications, and the petroleum and petrochemicals industries were reserved to government ownership. Broadcasting, automotive transport and timber production had to be entirely Mexican-owned. Foreign investors were permitted only a minority share in the ownership of many other industries, including iron and steel production, fishing, non-petroleum mining, and food processing. Other activities, especially assembly of imported components for re-export, could have unlimited foreign ownership.
The government acquired tremendous influence over the economy. By the 1980’s it owned or controlled two thirds of the nation’s economic activities. It had the power to waive or increase restrictions on foreign capital on a case by case basis and the Mexican government manipulated various financial incentives or disincentives, import licenses, protective tariffs, and price controls over basic necessities, such as food staples, gasoline, telephone service, water, and electricity, to promote its economic policy. The debt crisis of the 1980’s, however, forced the Mexican government to reverse this long-standing policy of Mexicanization. The government moved to sell off government-owned firms and to reduce restrictions on foreign capital. By early 1994, only 217 enterprises remained in state hands, down from 1, 155 a decade before.
In December 1993, the Mexican congress approved new foreign investment legislation. These laws opened more areas (not restricted by the constitution) to foreign ownership and made it easier to obtain automatic approval of foreign investment proposals. At the end of 1994, the preponderance of direct foreign investment in Mexico occurred in manufacturing, with U. S.
firms accounting for 62. 7 percent of the cumulative of $4. 3 billion. Taxes In 1994, corporation’s taxable income was subjected to a 34% federal income tax. Only the federal government taxes corporations and the federal government has set up a general taxing system for corporate income insuring that all of the corporate earnings are taxed in the fiscal year that they were earned.
The tax period ends December 31 of each year and tax returns must be filed by the end of the third month of the following year. CULTURE Culture, as defined in class, is the complex whole which includes knowledge, belief, art, morals, law, custom and other capabilities acquired by people as members of society. In international management culture is relative to the degree of success an organization can attain. Without a working knowledge of other cultures and how these cultures affect management and business the company is doomed for failure.
A cultural blunder can result from something as simple a showing up on time in a Latin American country. For example, Latin cultures have a very loose perception of time and showing up at 7: 00 PM for a 7: 00 PM dinner meeting is considered rude (McKinniss 58).
Managers must learn to be sensitive to cultures across the world. This sensitivity can be learned by understanding determinants of culture such as religion, social structure, politics, the economy, education and language.
The culture of a country will prescribe the behavior of the individuals in that country; so, in Mexico culture prescribes the values and norms of the society, which in turn shapes the behaviors of the society. Values are what tell a society what is basically right and wrong. Values work in conjunction with laws and customs. Norms are like values but can be applied to specific situations.
In Mexican culture and in regards to business, socialization is expected before any business dealing (Nolan 231).
This is a normal thing to do. The final outcome is behavior, shaped by culture, values, and norms. Once a businessperson understands the cultures, behaviors are easily understood and mimicked in order to be effective and sensitive. Religion The religion with the largest world following is Christianity.
In Mexico, Christianity is the dominant religion in the form of Catholicism, representing 90% of the population (Nolan 4).
Mexicans are strongly influenced in their daily lives by their religion. The rural population in Mexico is the center of religion; while in urban settings, religious expression is acknowledged but not as strong. For this reason religion is not overly present in business and government (Nolan 234).
There are occasions when factories will rely on their beliefs and ask that new sites and equipment be blessed by God. Religion in Mexico is not private, as it permeates Mexican life. Due to this, businesspeople from other countries would be well advised to respect the religion but avoid it in conversation (Nolan 234).
Spiritually, Mexicans believe that fate is guided by their God and religion. This is quite different from the American belief that hard work and sacrifice are what effect productivity and success.
Mexicans see themselves as having limited control over outcomes, whether these outcomes are business related or private issues (Nolan 234).
Knowledge of this Mexican attitude will help an American manager when trying to motivate employees in Mexico. Due to this fatalistic ideal, Mexicans will not be willing to exert considerable effort for something that is already fated to be or not to be. It is also important to realize that such an attitude by Mexicans does not translate into laziness but must be considered in its cultural context as having religious meanings.
Social Classes The strong business hierarchy in Mexico mimics the social hierarchy. Mexicans realize the unequal relationships that abound in their country and this is largely due to the complexity of the political and economic structure of the nation (Nolan 232).
While government and the business community are working toward preparing Mexico for the 21 st century, much of the rural population is still trying to enter the 20 th century. Despite the increasing economic growth and positive outlook, the wealth is anything but equally distributed in Mexico. Approximately 25 million Mexicans (28% of the population) are poor and at least 14 million (16% of the population) are extremely poor. This adds up to 44% of the population living in the poverty level (Nolan 37).
Mexico’s problem lies in the fact that their minimum wage, which is earned by nearly half of those employed, can not provide for even one-third of basic needs. Wages can not keep up with inflation and have very little real purchasing power. This fact is responsible for leaving almost half of the nation in a poor social status (Nolan 37).
Language Language emphasizes the uniqueness of a culture and allows for its better understanding.
Language is the key component to success in another country. The official language of Mexico is Spanish, which is spoken by 98% of the population (Nolan 4).
Besides Spanish, 50 other Indian dialects are present in Mexico and spoken primarily by 6. 4 million inhabitants. Education Education in Mexico is not as highly valued as in countries like America, Germany and Japan. In Mexico it is seen as having marginal importance.
The lack of importance of education in the Mexican society is largely a historical consequence. In the past, education was not valued due to the difficulty in attaining it. Also, the patron-client ideology, which represents the levels of inequality of Mexico, proves that is it more important whom you know rather than what you know (Nolan 290).
Currently the government and the population of Mexico would like to change the status of education. The cost of basic education is very low, to the point that it is almost free.
However, as was stated earlier, 16% of the population is extremely poor and this almost free education is impossible to come by. And with school comes the need for clothing and supplies like books and paper. A poor family can often not afford such luxuries and a large portion of the population continues to go uneducated (Nolan 291).
In Mexico, nine years of education is deemed mandatory for children ages six through 14.
Upon completion of their education, students must exhibit a minimum amount of retention and competency. These requirements were established by Education Reform in 1992. Previously it was the norm for children to only have to complete the sixth grade. Despite education’s overall low level of importance, the federal budget has increased funding for education from 6% in 1989 to 13. 5% in 1991; however, the problem still remains for rural children and their difficulty in attending school.
Despite the problems with education, Mexico boasts a literacy rate of 87%, one of the highest in Latin America (Nolan 291).
The following graph and table illustrate the breakdown for education in Mexico. Education Level Number of Students Preschool – Secondary 21. 4 million High School 2.
1 million Undergraduate 1. 2 million Graduate 46, 000 Vocational Training 414, 000 Women in Mexico It was not until the Constitution of 1917 that women were allowed equal rights in Mexico (McKinniss 23).
Then in 1953 Mexican women were finally granted suffrage (McKinniss 5).
Women have largely remained in the shadows of men.
A married woman is expected to care for home and family and always remain faithful. These strict expectations are not placed upon the husband (McKinniss 5).
For the most part, Mexican women are not allowed to participate in decision-making and are expected to carry out certain levels of femininity. Mexican women are never to be aggressive around their male counterparts and this may cause problems for foreign female business executives where females are encouraged to be strong in all aspects of life, including business (Nolan 236.
) If a Mexican woman is allowed to work, her husband tends to get incredibly jealous. Mexican men fear that working wives will possibly become attracted to others and become independent, no longer needing her husband to tell her how to act (McKinniss 5).
Mexico is traditionally patriarchal and for a woman to be working outside the home is uncommon. The Mexican workforce is predominantly male, 76. 5%.
The highest female attendance in the workforce occurs for women between the ages of 20 and 24 where 29. 1% of the workforce is female. However, after the age of 24, women tend to enter the domestic sphere and begin raising a family (Nolan 292).
Family The importance of family in Mexico can not be overstated. Family is interpreted in the broadest sense and includes not only parents and children but grandparents, uncles, aunts and even cousins. The head of the family is always a male, following in line with the machismo attitude of the Mexican society.
Machismo is an exaggerated perception of maleness (McKinniss 2).
Respect from the children towards the parents is demanded in the Mexican society. Concern for the family is so deep that Mexican families choose Godparents for their children. Parents and Godparents have a strong relationship and the Godparents are granted the same respect as the natural parents (McKinniss 3).
Due to the strong ties of the Mexican family, foreign businesspeople would be wise to consider r the role of family in all business dealings. Obviously a family oriented society lends itself to a more communal society.
Therefore an American businessperson must dismiss many of his / her individual ideas and concentrate on the family or group in order to be successful. In business, it is customary to ask your Mexican colleague about his / her family and develop a sincere interest (Nolan 234).
Should a foreign manager doing business in Mexico act in an individualistic manner, Mexican managers will see that person perspectives as being warped and incomplete (Nolan 235).
Such an individualistic attitude will never gain the complete trust of a Mexican businessman.
Hofstede’s Dimensions As stated earlier, underlying values in a country will define its culture. The culture of a country must be analyzed before attempting any business dealings. One way to understand culture and predict how culturally tough a country is going to be versus the businessperson’s home country is by studying Geert Hofstede’s dimensions. Hofstede developed five dimensions that can help in understanding and appreciating the culture of another country. With understanding comes success, so it is important to offer 100% effort when coming into contact with a new culture. Hofstede’s dimensions include power distance, individualism, uncertainty avoidance, masculinity and Confucian dynamism.
Power Distance Power distance is the degree to which an unequal distribution of power is acceptable in a culture (Schuler 56).
Inequality in the workplace is a common occurrence; but, the extent of the unequal power is determined by the culture of the society. Mexico is a country with high power distance. This high level of power distance can explain why Mexico has 44% of its population living at the poverty level. There is little sympathy for those who are poorer, less educated and less likely to achieve success in Mexico. This level of power distance is also evident in business.
Employees below the level of senior management have little authority over decision-making. Employees trust their bosses to tell them what to do and the employee tries very hard to please the supervisor (Schuler 57).
Formality is a component of power distance. In Mexico there is a high level of formality, both in business and the private sector. Mexican’s enjoy titles and the respect owed to such titles. Managers tend to distance themselves from workers.
In a Mexican facility, you would rarely find a manager getting his / her hands dirty. The managers tell the supervisors what is to be done and that information is then communicated to the workers (Schuler 57).
The high level of power distance will affect the way employees are managed and motivated. This will be analyzed in greater detail in the management section of this paper. Individualism The paternalistic society where it is the job of the employer to care for employees is prevalent in Mexican society. For this reason, individualism in not as common as it is in the United States.
In the U. S. , most companies do not consider it their duty to assume responsibility for the welfare of the employee and to insure job security. In Mexico, the employees assume that their employer will do just that. This is the paternalistic society in which Mexico functions.
Because the employee is cared for, he / she tries to perform the job to the highest standards and remain loyal to his / her company-family. In Mexico conformity is highly valued; employees are encouraged to act the same way and individualism is not encouraged. This will affect the way the work force is managed. In order to motivate, the manager must consider that no one employee is going to strive to be creative or different. Instead, the group of employees is going to wait for specific orders and complete them to the absolute best of its ability (Schuler 59).
Uncertainty Avoidance The extent to which people feel threatened by unclear and unfamiliar situations is in reference to uncertainty avoidance. Countries with a high level of uncertainty avoidance will create rules and regulations for nearly everything in society in order to avoid the dreaded unclear situation. Mexico is a country high in avoidance of uncertainty. A management example would involve workers who want to be told exactly what to do and to not be left alone when performing their job (Schuler 60).
The employee requires that everything be clearly explained to insure the job is being completed properly. The worker sees this as a way of performing well for his / her supervisor and being loyal to the company wishes.
Uncertainty avoidance also appears in reference to job security. Mexicans value a high level of security in their jobs. Mexican labor laws ensure that jobs will be easy to maintain as long as the employee does not steal or act violently towards others while on the job (Schuler 60).
By knowing that a job is always there, the employee avoids an uncomfortable level of uncertainty that can sometimes not be avoided in the United States. Also in contrast to American management techniques, a Mexican employee is not encouraged to take risks for the betterment of the company. In America it may be valued to see an employee try something new or take a risk for the company; but in Mexico employees are never expected to take a risk to create a new opportunity.
This would violate the written and unwritten rules in Mexico that are created to avoid uncertainty and it would also violate the low levels of individualism that are so highly valued in Mexican society (Schuler 62).
Masculinity Masculinity is in reference to the amount a country’s values are dominated by the need for material possession. In this sense, Mexico is on the higher end of the scale. Mexican’s, especially managers, find it necessary to be aggressive in order to achieve success (Schuler 62).
Success is then defined by titles, money and power earned. Mexico also ranks high in another and more obvious form of masculinity. In Mexico there are very clear sex roles where men are the dominant players in the society. Women’s roles are defined by family and household. Men are the primary breadwinners and women are not expected to enter the workforce (Schuler 62).
Confucian Dynamism Despite not having clearly defined numbers to represent either a long-term or short-term orientation among Mexicans, we will assume that based on cultural characteristics, Mexicans tend to be long-term oriented. With high levels of job security and an emphasis on lengthy business relations, Mexicans demonstrate the need to develop extensive business relationships. Mexicans place extreme emphasis on the importance of family. Children may live with parents until the age of 30 or better or until they marry (Nolan 235).
This exhibits the long lasting relationship within the Mexican culture. A summary of Hofstede’s dimensions can be found on the next page.
All of the dimensions have been assigned a number so it is easier to see the magnitude of each dimension. The dimensions for the United States and Mexico are available for comparison. (Schuler 62).
MANAGEMENT Management is an all-encompassing term that describes the organization, its people and strategy. The key to management is to remember that the organization is just another name for its people.
The people of the company are what make it strong or weak and management shapes the employees. So in order for the organization to be successful the people have to be successful and the management must train, compensate, select and perform several other functions to make this so. Structure and Strategy in Mexico Organizations in Mexico can be described by their hierarchical structure. The high level of power distance in Mexico makes it acceptable for a company to wield its power from the top down. The employees below senior management have very little authority and decision making ability. Senior management members usually attain their degrees from American schools; in fact, the highest form of management performed by the Salinas administration in Mexico was learned at U.
S. Ivy league schools (Nolan 291).
This is consistent with the fact that most high level management in Mexican organizations has been attained outside of Mexico and primarily in America. The hierarchical structure communicates authority throughout the organization.
The structure of a Mexican firm will depend on the type of organization. In Mexico, a firm could be concentrating on manufacturing and assembling, tourism or perhaps developing any of the vast amounts of natural resources in Mexico, including agricultural products and minerals (McKinniss 37).
The structure of the firm also relates to size, employee demographics and degree of investment. Upon deciding on the structure of the firm, a strategy can be developed that will work to achieve the goals of the organization. The objective strategy of the firm is to optimize the fit between the organization and its environment. In order to create a good fit between the two, the company in question must know the market of internationalization, the potential workforce and the culture of the country.
When these key components are known the organization may begin to effectively manage. Motivation As was already stated, the organization is only as effective as its employees. In order to have productive employees, the organization must learn how to motivate them effectively. In the case of an internationalizing company, the management team must be careful not to apply motivational theories that worked in the parent country because chances are great that these same theories will not work in the host country. This fact does apply to Mexico. A well-known motivational theorist is Abraham Maslow who created Maslow’s need hierarchy.
This hierarchy ranks common needs among individuals and states that as the individual fulfills one need, s / he can move onto the next. The needs in order of completion are physiological, safety, social, self-esteem and finally self-actualization. Maslow bases his theory on the fact that a person can not achieve a sense of social belonging until the physiological need and the need for safety have been attained. There is another very similar motivational theory by Frederick Herzberg that basically groups together Maslow’s pyramid into two groups, maintenance factors and motivational factors (Donnelly 310-311).
Despite which motivational theory an American business subscribes to, the fact is that these theories must be adjusted in order to successfully manage people in Mexico and other foreign countries.
These are American theories developed while studying American workers; therefore, the same ideas may not apply to workers in another country. With culture-specific modification these theories can however provide a framework for analyzing employees to see what is successful in motivating them. Motivation is culturally contingent. This explains why employees in the United States are motivated by completely different things than Mexican workers.
Workers from these two countries do not have the same values and thus different behaviors. It is the responsibility of management to realize what makes a Mexican employee work diligently and satisfactorily. To begin, the manager must know that due to a high level of uncertainty avoidance in the Mexican culture, employees wish to be told exactly how to perform their job. If a supervisor relates the responsibilities in exact detail, s / he will be pleased by the performance of the worker (Schuler 60).
However, if the employer is vague then the worker is libel to become discouraged and complete the job poorly or in extreme situations, even quit. In such a case, the supervisor will have lost the respect of the worker because s / he was seen as incompetent (McKinniss 97).
Also in terms of uncertainty avoidance, managers must be careful when choosing compensation packages for their Mexican employees. Due to the unpopularity of uncertainty, Mexican firms must use consistent pay plans.
Mexicans accept their assigned roles and in return they expect an assigned amount of pay. Changing the pay based on ingenuity or initiative will prove harmful for the organization. This will create a high level of ambiguity in the Mexican employee’s mind and cause high levels of distress (Schuler 60).
Leadership and Decision Making In Mexico leadership is imminent with a paternalistic society. Organizations assume responsibility for their employees and hence, good leadership skills will be necessary.
As one might guess, the leader acts as a father figure towards the workers. S/He encourages harmony among employees and generally will not tolerate dissent (Schuler 59).
Mexican employees are chosen because they have demonstrated a willingness to act like other employees, thus reducing the levels of individuality. By supplying an employee with not only a job but also a way of life, the manager expects obedience and respect in return from the worker (Schuler 59).
Effective leaders in Mexican organizations will rally their employees and make them feel as a part of a large family. The importance of family can not be understated in Mexico. And chances are that the organization will be comprised of members of the same blood family. Leaders will do well to offer dramatic and emotional speeches because these speeches can coerce employees to strive to make a better product or improve group relations (Schuler 60).
By creating a level of community within the workplace, a leader can receive impressive results from the workforce. Remembering the importance of family for Mexicans is vital for a manager. Many times, workers have moved from rural areas to the city in order to find work to supplement their family’s needs. A good manager will arrange for trips between common home villages for both workers and worker families. Doing this will show the concern by the manager and will create a thankful and committed workforce. Managers must also be sympathetic to a worker who asks for time off due to a family issue or illness.
This time should be allowed even if the family member is not as immediate as classified in the United States. Mexican workers may request time off for a sick wife, child or even cousin (McKinniss 99).
Family related policies would make the manager a hero in the eyes of the workers. In order to maintain a good reputation, decision-making should be left to management and senior officials. Any worker below senior management is not allowed to, nor does that worker want to, make decisions. This would violate several cultural dimensions in the Mexican society.
First this would destroy the high level of uncertainty avoidance. A Mexican worker wants to be told what to do, not asked. Secondly, a Mexican employee wants to work in a communal setting where no one individual is put on the spot and asked to take a risk. This is in compliance with their aversion to individualism. Such a paternalistic society fares better by acting as a family (Schuler 58).
The final cultural dimension being violated by allowing non-management employees to make decisions would be the idea of power distance.
The hierarchical structure of the organization wields power from the top down. Senior management employees enjoy a level of control and prestige, and those employees with that honor do not mingle with lower level employees; because, by allowing workers to have decision-making responsibilities, managers must be near by and willing to work closely with the common worker. This is just simply not the case in Mexico (Schuler 57).
Managerial Profile Due to the lack of emphasis on education in Mexico, managers will come primarily from urban areas where students have a better chance of receiving education beyond high school.
Residents of urban areas have more access to schooling as compared to rural residents and they also tend to have more access to higher wages. Higher learning in Mexico occurs at Mexico City’s National Autonomous University of Mexico (Universidad Nacional Aut ” ono mo de M’) or in an American institution. It is common for managers to receive their formal education in an American school, but this is a luxury for those who can afford it and the number is usually small (Nolan 290).
Women in Management Mexico’s culture puts women in the role of child reader and housekeeper. Women are rarely encouraged to work outside the home. Due to strict male and female roles in the Mexican society, women are less likely to hold jobs and ultimately less likely to appear in a management position.
Women are less likely to receive and equal level of education also and that will affect their ability to hold high level positions (WTT P 291-292).
Should a women attain the position of manager in Mexico, her role will be strikingly different form her male colleagues. A businesswoman must dress conservatively in Mexico; extreme necklines and short hems in skirts are predictors of failure. Mexican men tend to have large egos and may regard females in the business culture as fair game and offer unwanted leers and remarks. The professional woman would be wise to ignore such actions or offer a clear yet respectful response to unwanted actions (Nolan 237).
An American businesswoman must be prepared to feel less respected in Mexican business dealings.
In some instances she may not even be allowed to attempt any dealings at all. Older and more traditional Mexican men will have extreme difficulty in dealing with women in regards to business; the relationship may be strained if it is allowed to exist at all (Nolan 236).
Another matter of conduct for a female manager is to never attend a social function with a Mexican male manager without the presence of his spouse. This can create a business relationship wrought with jealousy and dislike. Labor Relations and Laws The Mexican constitution thoroughly protects workers rights. Mexican employees have the right to associate, bargain collectively and to strike.
As little as two employees can get together and organize with an outside union and the organization they work for is forced to recognize the outside organization. As much as 50% of the Mexican labor force is involved with unions (Nolan 302).
Unions are reserved primarily for blue-collar workers. The unions can be divided into three categories. The first category is company unions that represent a particular company. The second union is industrial which can represent employees of numerous companies within the same industry.
The final type of union is national. This union is considered highly unpredictable because workers with little union experience or association with the government generally found such unions. For an organization interested in Mexico’s market, it would be beneficial to know that large industrial unions are the easiest to deal with. These unions are represented by members who have little experience with the common worker’s job and are more interested in working out the problems with management to reach an agreement (Nolan 303).
All labor matters are governed by the Mexican Federal Labor Law. The state labor boards, comprised of members of government, management and unions supervise the enforcement of the laws.
The importance of screening applicants before hiring is paramount in importance. Once employed, the company has 28 days to review the employee’s contribution to the company and his / her overall usefulness. Should there be a problem with the new employee, this is the appropriate time for dismissal. After the 28-day period the employee becomes incredibly difficult to terminate.
The organization assumes full responsibility for the employee after the probation period and the employee is granted job security. Termination after the 28 days is very costly to the firm. An employee that has been with a company for six months and then terminated can cost the organization another six weeks in pay plus all bonuses and vacation during that six weeks. Under the Federal Law workers can only be dismissed for acts of violence and dishonesty without the organization incurring a major penalty (Schuler 60).
Should an occasion arise where the organization is forced to deal with a termination, it would be wise to employ a competent Mexican lawyer to handle any legal issues (McKinniss 45).
Many businesses moving into Mexico see the country as a haven for cheap labor.
Although the real wage rate may be lower in American dollars than the American wage rate, there are often hidden costs of employing a Mexican workforce. An additional 60 to 80% can be added onto the cost of labor by benefits alone (Nolan 295).
Things such as a Christmas bonus once again add costs, which is a minimum of 14 days, paid to the workers in cash, and due by the 20 th of December. Another cost is vacation time. Vacation is paid at a rate of 25% above the regular working pay. In some instances the premium is as much as 75% above regular pay.
Mexican workers also require seven annual holidays and additional holidays specified by contracts, usually totaling 18 days off annually (Nolan 294).
With this information, it is obvious that foreign businesses must look past the $0. 55 hourly wage rate in Mexico and assume responsibility for the unexpected costs of doing business in Mexico. In summary, effective labor relations can be obtained by doing eight things: o Know Mexico’s labor law so Know what union you may be dealing with Have a working knowledge of employee benefit so Employ a Mexican to oversee relation so Make contact with unions as early as possible Study your region and its manufacturer so Understand the cultural difference so Re-examine your human resource management function (Nolan 299-300) Porter’s Diamond Michael Porter has developed four attributes of a nation that can determine the level of competitive advantage. These conditions can offer advantages for specific industries and the country in question. The four attributes include factor endowments, demand conditions, related and supporting industries and the firm’s strategy and structure.
The factor endowments for a country will be either basic or advanced. Basic endowments are natural resources, climate and demographics. Advanced factors include the infrastructure of the country, research facilities and education. Mexico would rate high with the basic factors and very low with the advanced factors.
Mexico’s infrastructure is greatly lacking and what little infrastructure there is, is created primarily by the companies who have moved to Mexico (Nolan 395).
Mexico’s educational system is also lacking with a requirement to only finish nine years of education. Should a student chose to continue his / her education in Mexico, the only university is in Mexico City and is also the primary research facility within the nation (Nolan 290).
Demand conditions of a country can be represented by the sophistication of its consumers. Mexicans tend to have achieved lower levels of education and they are more likely to be less sophisticated.
Highly rural countries tend to have very basic needs for food and shelter, not however for the latest in technology or automobiles. The poor infrastructure of Mexico will also bring down the dependability and availability of suppliers to Mexican companies. Transportation of goods in and out of the country is a major hassle. Mexico has a lack of new and reliable equipment, customs delays and a lack of facilities. These aspects of Mexico present huge hurdles to the organizations settled in Mexico (Nolan 309).
However some industries have been successful in Mexico due to their proximity to the United States and the access to suppliers and a market.
The maquiladora program allows U. S. companies to assemble product in Mexico and later re-export them to the U. S.
The Maquiladoras have become an important source of jobs in Mexico and the numbers employed by the program are continuing to rise. As an illustration, in 1980 the workforce totals were 119, 546 in the Maquiladora industry and in 1991 the number rose to 452, 399 (McKinniss 42).
The strategy of the firms in Mexico can be characterized by their CEOs. Due to high levels of masculinity and a management workforce largely educated in the United States, Mexican firms seem to be focused on the bottom line. The focus is on money and the quest for respect and fame. Mexican’s structure their firms to put the power at the top and to allow very little to trickle down.
Subordinates are managed according to this hierarchical structure. According the Porter’s diamond, Mexico has a fairly low competitive advantage; it does not have a healthy infrastructure to rely on, nor does it have sophisticated consumers demanding high quality and new products. Despite the success of the Maquiladoras industry, Mexico is a fairly difficult country to operate in with its transportation problems and obsession with the bottom line. Hofstede’s Dimensions and Management The national culture is bound to effect the culture of the organization.
It is imperative for management to understand culture and develop organizational processes accordingly. The cultural dimensions developed by Geert Hofstede can be analyzed by management in order to better understand the culture of Mexico. Once again the dimensions include power distance, individualism, uncertainty avoidance, masculinity and Confucian dynamism. The high level of power distance in Mexico illustrates the importance of a hierarchical structure.
Managers are greeted with respect and seldom mingle with common workers. High level managers are responsible for making decisions and delegating work in order to implement the decisions. Employees trust that their supervisors will tell them with great clarity the job to be performed. Managers must remember that with high levels of power distance, employees need to feel that their supervisors are more knowledgeable than they are. Managers must also exhibit certain levels of formality, preferring to be addressed with titles by the employees while maintaining a degree of separation from workers.
By doing this, employees will know their place and respect their managers. Managers in Mexican firms also expect low levels of individualism from their workers. The entire Mexican society is low on the individualism scale. In contrast to American firms, Mexican firms do not value free thinking and novel ideas put forth by one person. Organizations assume the responsibility of caring for the workforce and in doing so they expect the workforce to act as a family with similar goals and values. Risk takers are not rewarded by the Mexican organization; instead, those that are loyal and consistent are the ones rewarded.
This highly communal workforce will change the way organizations from foreign countries motivate and compensate their employees. Singling out one worker for a pay increase due to impressive work may create strife within the organization. This employee may be seen as having ties to upper management, a connection that is not socially acceptable due to the hierarchical structure (Schuler 59).
This would affect the harmony of the organization that is so highly regarded. Other rewards may be more effective in Mexico. Offer an employee a chance at being a team leader.
This will communicate respect while maintaining harmony within the organization (Schuler 59).
In order to reduce ambiguity and maintain high levels of certainty, managers will want to create rules and regulations for everything in the organization. Employees will want to know the duties of their job and the benefits from completing such a job. Everything must be clear in the Mexican workplace. Encourage employees to step forward with questions and always give them a response. Never tell an employee to make a decision about work-related issues.
This will violate several cultural dimensions, including uncertainty avoidance. By managing the human assets correctly, an organization can reap the benefits of a loyal workforce. The majority of the Mexican workforce is male and culturally men are more aggressive than women. With this in mind, a Mexican organization will therefore be more masculine in terms of importance of material possession and aggressiveness. Masculinity dominates the Mexican culture.
These high levels of masculinity will prescribe the way an American based firm will do business in Mexico. It would be best to send male managers into Mexico rather than females. Mexican society does not grant females as much respect regardless of their nationality and education. Unfortunately, a female manager may slow down the success of the organization; however, if the female is the absolute best choice for the organization, the manager should act and dress conservatively to have a better chance of fitting in the Mexican society.
Although we have not seen any clear number on the level of Confucian dynamism in Mexico, according to their culture we would assume that they are long term oriented. Mexicans value the importance of family and relationships. A long-term relationship in business can prove prosperous for both parties. Mexicans begin business with small talk about family and friends. This small talk is an indicator of the desire to develop long and trusting relationships. This long-term view is also obvious in the acceptance of responsibility for all employees by the organization.
Mexican workers assume that their jobs are going to be long lasting with high levels of security. By hiring an employee, the employer makes an investment in the future, and this investment is difficult to remove. These dimensions should shed some light into the proper management techniques to be used in Mexico. Americans must remember that they are quite different from Mexicans and these differences must be appreciated and dealt with rather than discarded as a hindrance. Successful managers and organizations will adapt to the new culture and in turn create great success for two countries at the same time. COMPARISON TO THE U.
S. Two major concerns for an U. S. businessperson operating in Mexico has been corruption and graft and business accomplished on a whom you know basis.
Mexican families (in fact, dynasties) have operated most of the big Mexican corporations. Relationships between people were the key to getting business done. For instance, a bank may make a loan to businessman based on their family relationship or friendship not on financial statements and an evaluation of business prospects or owners / managers acumen. The good news for businesses considering relocation to Mexico at this time is that these Mexican families are citing control to foreign investors. Prior to NAFTA and open trade, a Mexican business could survive, even though grossly inefficient, because of government protection.
Now with trading opening up, those companies will fail unless they change. The companies’ inefficiencies are being exposed with the focus of global competition. The dynasty families seek foreign investors for multinational experience in terms of management, strategic planning, technology, global markets and investment. They are running to pair up with foreign investors. (see WSJ 9/30/97 Foreigners Snap up Mexican Companies, A-1) In fact, some of the old relationships have come back as a slap in the face. No one will bail out an owner now.
If he borrowed money on unsound financial’s or for vague purposes, the new owner / managers of the bank or company will hold him accountable. So for a businessman considering relocation or investment in Mexico, now is an opportune time as new foreign owners “have shattered many of the old fraternal links between bankers and businessman.” (Id at A-12) However, graft is still prevalent in Mexican business. As one American businessman operating in Mexico informed this author ‘Permits can take from five months to one year to obtain.’ For his business permitting is within control of the “Port Captain.” If you pursue it through legal (no bribing) means, your business may sit stagnant for months awaiting the proper papers.” The businessman was aware that many other businessmen “paid” for early documentation. Bruce Woods “Commercial Water Sports, Cabo San Lucas, Mexico. Comparisons between the U. S..