Mexico's Global Business - Essay Example

Table of Contents Table of Contents Executive Summary 2 General introduction about Mexico 3 The Country's Economic health 3 Political Conditions ofMexico 4 Cultural Factors of Mexico 5 Decision-making and Ethical Issues of the country 7 Conclusion and Recommendations 9 Bibliography 11 Executive Summary The main aim of the paper is to discuss about the idea of setting up a new global business. The target country is Mexico. With reference to this aspect, various kinds of information about Mexico ranging from the country in general, its economic health and political conditions to the cultural and ethical issues have been discussed. Finally, it is assumed that a new service provider wants to set up a new business in Mexico and the various aspects that are to be considered and kept in mind by the service provider have been discussed and depicted. General introduction about Mexico Mexico is a large country containing almost 2 million square kilometers. The topography is very diverse, and the climate reflects this fact. At any time of the year you can find an area of Mexico with a perfect climate. Many parts of the central highlands and some coastal locations, have "perfect" weather all year round (Blog, 1996). The country can be split into four geographical areas namely, The Baja Peninsula, The Pacific Coast, The Caribbean coast and The Central Highlands. The Baja has a climate that varies considerably from its west coast to its east coast and north to south. The coastal areas get hot and humid weather in the summer and ideal weather in the winter. The central highlands get ideal weather year-round. The northern desert areas have very hot weather in the summer and cool nights in the winter with some snow on occasions. Details on climate can be obtained from the more specific pages in Virtual Mexico (Blog, 1996). The Country's Economic health The economic health of Mexico is basically more focused on travel and tourism. The other areas in which the country has a good reputation are industrial production, oil and gas production, textiles and clothing and agriculture. Mexico is highly dependent on exports to the U.S., which represent more than a quarter of the country's GDP. The result is that the Mexican economy is strongly linked to the U.S. business cycle. Real GDP grew by 4.8% in 2006 and by 3.3% in 2007 (Bureau of Western Hemisphere Affairs, 2008). Hundreds of North American factories have been built to take advantage of the lower labor costs. Mexico has 1/5 of the world's oil reserves. Mexico produces and exports a wide selection of agricultural goods. Just about every kind of fruit and vegetable is grown on giant modern irrigated farms and small family plots. Political Conditions of Mexico Mexico is bogged down in a grim economic crisis, and the people are tired of inflation, of poverty, and of the appalling poverty-linked crime wave. The government of Mexico is a federal republic (Lake, 1998). The 1917 constitution provides for a federal republic with powers separated into independent executive, legislative, and judicial branches. Historically, the executive has been the dominant branch, with power vested in the president, who promulgates and executes the laws of the Congress. The Congress has played an increasingly important role since 1997, when opposition parties first made major gains. The president also legislates by executive decree in certain economic and financial fields, using powers delegated from the Congress. The president is elected by universal adult suffrage for a 6-year term and may not hold office a second time. There is no vice president; in the event of the removal or death of the president, a provisional president is elected by the Congress (Bureau of Western Hemisphere Affairs, 2008). In the 2006 elections, the PAN emerged as the largest party in both the Senate and the Chamber of Deputies, with just over 40% of the seats in each house of Congress. It does not enjoy a legislative majority. Although the PRI no longer controls the presidency and has fewer congressional seats than either the PAN or PRD, it remains a significant force in Mexican politics, holding 18 governorships and often playing a pivotal role in forming coalitions in the national Congress (Bureau of Western Hemisphere Affairs, 2008). The administration is grappling with many economic challenges, including the need to upgrade infrastructure, modernize labor laws, and make the energy sector more competitive. Cultural Factors of Mexico The population of Mexico is approximately 100 million, and it is very diverse. More than 50 distinct Indian cultures exist together with the Spanish speaking 'Mestizos' (mixed Indian and European, who make up the main population). Although Spanish is the official language and is spoken by the majority, many different indigenous languages are spoken as well. There is also a growing population of Norte Americanos (applied to Americans, Canadians, and Europeans), as many people decide to retire to Mexico and benefit from the lower cost of living, and the wonderful climates (Blog, 1996). Mexico is a traditionalistic country, where the hierarchies between social positions, age, sex and cultural level are observed. The professionals are called by their academic degree: Doctor, Lawyer, Engineer, Architect, etc. the painters and writers are called Master, the youth women are called "Miss" and the married or mature "Mrs."; to the persons of age as well as to those that have gained the respect of the community, its place before their first name "Lady" if it is woman or "Sir" if it is man. The happiness, the spontaneity and the natural education, the knowledge and the work capacity in a person are admired (Tour by Mexico, 2006). Mexico is famous for its great diversity including deserts, volcanoes, cosmopolitan cities and ivory beaches. Tropical jungles in the south hide ancient Mayan ruins. Colonial cities, water sports, Aztec pyramids, markets and fiestas are the main tourist attractions of the country. Since the signing of the NAFTA (the North American Free Trade Agreement) in 1994, the country's trade has dramatically expanded and hence the trade in Mexico draws business travelers. The capital, Mexico City, is the world's largest Spanish-speaking city, with a population of more than 20 million inhabitants (The Safe Traveler, 2007). Tourism is a major industry in Mexico and the country has a developed service sector to cater to visitors. Popular destinations include the resort towns of Cancun, Puerto Vallarta, Playa Del Carmen, Cozumel, Acapulco, Veracruz and Cabo San Lucas (The Safe Traveler, 2007). Each of the above mentioned destinations offers a variety of resort and hotel accommodations. The majority of the population is Mestizos, with mixed Native American and European blood. Sizable minorities of pure Spanish or Native American descent also live in this country. Spanish is the official language of the country, but many people speak English as well, especially in tourist and business areas such as Monterrey (The Safe Traveler, 2007). The communications infrastructure in Mexico is modern and is also a highly developed system with extensive microwave links. International direct dialing is available; however, the rural population is poorly served. The condition of roads varies widely, with modern toll roads and badly pot-holed, narrow, crowded, free roads. Rental cars are available in almost all areas the country. Decision-making and Ethical Issues of the country Every agency of the federal government is based in Mexico and the headquarters of many of Mxico's most important companies are located as well. The laws are drafted and passed in the country's capital ' The Mexico city'. Apart from this, most of the important law firms as well as the major accounting firms are all based in the country's capital. Industrial parks, numerous large office buildings and access to aneducated work force make Mxico City popular for many national and foreign companies that want to do business in Mxico. The capital is the country's major national and international transportation and shipping hub, which makes the movement of products and personnel very easy (All about Mexico.com, 2007). The local government agencies and many of local business oriented associations are more than willing to provide up to date information as such information relates to the start up of a new business and to ease the opening of a branch office or a manufacturing plant in and around Mxico City. One the main reasons many foreign companies open their branches in Mxico City is the fact that this city is the very pulse of business in Mxico. The capital is also closely linked to most of the other business centers of Latin America. The weather is pleasant year round and there is an abundance of cultural activities. All types of recreational facilities are readily available in Mexico. All of the above factors combine to make up an area that offers a highly effective infrastructure that makes doing business in Mxico easier. Reducing trade barriers is one way to promote global trade and this is not exclusion in the current case as well. WTO is committed to reducing tariffs, import bans or quotas that determine the quantity of imports, and even red tapism. Exchange rate policies were also subject of discussion in this context. The labor market is characterized as a "two-tier labor market", where high tech or professional skilled workers from one category and relatively unskilled labor form another category. Higher skilled workers earn superior pay; enjoy health insurance coverage, and other benefits. The long-term problems are inadequate investment in economic infrastructure, the rapidly rising medical and pension costs of an aging population, sizable trade deficits, and the stagnation of family income in the lower economic groups. Mexican people are generally friendly and helpful. They almost always return a greeting, and usually with a smile. Speak a little Spanish, and they will go out of their way to be helpful (Blog, 1996). Mexican government workers and police are paid very low wages, and they sometimes try to supplement their incomes by collecting "fines". You can decide whether the "fine" is justified or not, but remember, it is a part of their way of life, and in spite of official condemnations, it is not considered a serious crime by many people. It also keeps taxes low. Conclusion and Recommendations Considering all the above discussed factors, let us now assume that a service provider wants to do business in Mexico. There are many aspects which the service provider needs to look into. First and foremost is the intangibility factor. A service is intangible in nature. Consequently, marketing of something that cannot be seen, touched or felt is difficult. A service cannot be store or inventoried and has to be performed whenever the consumer demands it. Therefore, a service organization that plans to expand overseas, must transfer skilled employees overseas or train employees in the foreign country to perform the service. The next important characteristic that varies the marketing of service is the heterogeneity factor. Maintaining homogeneity in the delivery of services is a difficult task. Hence, it is required that a service provider must train his employees carefully to adapt to the customers' needs. The success of a service industry depends largely on consumer satisfaction. For a service, its production and consumption are simultaneous. Therefore, both the service provider and the customer need to be present for the delivery of the service. This makes exporting a service difficult. A service can only be exported to another country market through franchising, licensing, directly investing or by acquisition of similar foreign businesses. Using advanced technology is also helpful in expansion. When services are marketed internationally, different markets will have different rates of demand at different times. A service provided must try to forecast the future demand for his services for each market accurately, so that he can plan in advance to cater to the additional demand in the market. Bibliography All about Mexico.com. (2007, June 5). Information for Business Travellers. Retrieved July 7, 2008, from All about Mexico.com: http://www.allaboutmexicocity.com/strictlybusiness.htm Blog. (1996, May 22). A Mexico Blog. Retrieved July 7, 2008, from Virtual Mexico: http://www.virtualmex.com/general.htm Bureau of Western Hemisphere Affairs. (2008, April 3). Background Note: Mexico. Retrieved July 7, 2008, from U.S. Department of State: http://www.state.gov/r/pa/ei/bgn/35749.htm Lake, G. B. (1998, June 10). Mexico on the brink - political conditions. Retrieved July 7, 2008, from BNET: http://findarticles.com/p/articles/mi_m1282/is_n11_v40/ai_6432322 The Safe Traveler. (2007, May 4). Mexico. Retrieved July 7, 2008, from The Safe Traveler: http://www.safetraveler.com/destination_mexico.aspx Tour by Mexico. (2006, Spetember 29). General information about Mexico. Retrieved July 7, 2008, from Tour by Mexico: http://www.tourbymexico.com/infogral.htm#TOP Read More