This paper has attempted to review Mexico as an investment hub for multinational companies. The countries’ potential is discussed briefly alongside cultural considerations. The importance understanding the organizational culture of firms in Mexico before investing has also been discussed.
We will write a custom Case Study on Multinational companies in Mexico specifically for you
301 certified writers online
Reasons for multinationals’ interest in setting up operations in Mexico
The main reason why MNCs should relocate to Mexico is the availability of highly skilled labor. This could be attributed to the government’s huge investment in human resource.
The good bit about this labor is that it calls for low wages. Such highly skilled labor is quite expensive in other regions including United States. It is evident that much less is used in terms of labor capital investment in Mexico. Labor is an important factor in any business and not only the cost that matters but also the quality. This combination is readily available in Mexico.
The second reason is the potential of businesses in Mexico to achieve high productivity, growth rates and quality performance. This means that the companies break even very fast. Various studies that have been carried out proofed this point. Amongst three auto assembly plants in Canada, United States and Mexico, the Mexican plants topped according to a study by Massachusetts Institute of Technology. The research conducted by J. D. Power and Associates placed Ford Motor’s Hermisillo plant (Mexico) at the top in North America.
Mexico is also favoring the expansion of plants particularly those to do with computers and electronics. That is why Intel put in some $ 1.5 billion in its upgrading program in 2007. This is an example of a company which operates out of many countries and investing in Mexico is an indication of the potential that the country has. Mexico’s market is wide due to the many trade agreements it has made with countries across the world.
Cultural differences and MNCs
MNCs in the world today are adopting the four basic predispositions to enhance their operations. These are ethnocentric, polycentric, regiocentric and geocentric. In ethnocentric, the values and the interests of the parent company guide the strategic decisions. Using this approach means the MNC is not concerned about the cultural differences found in the country of operation.
Polycentric predisposition is guided by the need to allow the culture of the country of operation to guide the strategic decisions. Regiocentric attempts to strike a balance between the company’s values and interests with those of the region of operation. In geocentric predisposition, the company adopts a global approach to decision making.
The United States MNCs have already dominated the Mexican investment arena. Their strategic predisposition uses an approach which is responsive to the values and interests of the local people. As has been mentioned earlier, many MNCs are opting to do production in Mexico.
By so doing, the highest percentage labor force comes from Mexico. The employees of a company more often than not dictate the direction that the company will take with regard to the local needs. This narrows down to the company assimilating the local people’s culture within its organization.
For the European companies, cultural barriers may portend a potential challenge. However, the utilization of the various strategic predispositions would give them a choice on the direction to take. It is a fact that there are many European MNCs operating in Mexico. A good example is the French MNC Thomson. Looking at the expectations of the French people about doing business in their country shows the general characteristics of the Europeans.
Examples of these expectations include keeping time, a quick pressurized grip in handshake, respecting meal time and not rushing at making decisions. These may be readily acceptable to the Mexicans but it is always good to work with what is locally appreciated. The Japanese MNCs may find their values and interests to be a bit far from those of Mexicans due to vast cultural differences. The MNCs have however adopted strategies that are sensitive to the locals hence removing the potential cultural barriers.
Importance of MNCs studying the organizational culture in Mexican firms
For MNCs to succeed in a certain country or region, it is important for the management to understand the organizational culture of the firms. It goes without saying that the MNC’s that decides to invest in Mexico must get to know this culture before shifting. This has to do with how the organizations are in terms of human resource and the hierarchies involved.
This would assist in placement of staff and shed light on what positions to give to the expatriates. This is a major step in getting closer to the Mexican culture and also getting accepted. The knowledge would also be an asset in setting up work related policies within the firms. One thing that is clear is the fact that there exist similarities within firms that operate in Mexico with regard to organizational culture. The situation is unique and any MNC willing to invest here should have the full knowledge of it.
The way forward is to adjust the firm’s strategies so that they could fit the local situation. This can be done through realization that all countries are not the same. The firms would then set their subsidiaries in such a way that they accommodate the local demands. Autonomy should be given to such subsidiaries so that they could be responsive to the local values and interests.