MEXICO
STRATEGY FORMULATION & IMPLEMENTATION
 
 
 
 
 

S.W.O.T. Analysis For Doing Business In Mexico:

STRENGTHS

a.)  Mexico has abundant natural resources.  Mexico’s natural resources are comprised of: petroleum, silver, copper, gold, zinc, natural gas and timber.  This provides Mexico with a significant competitive advantage in the export industry.  Mexico has become a prodigious exporter of oil, which can be exploited further, given the tensions in the Middle East.

b.)  Mexico has a political agreement on economic policy, namely the North American Free Trade Agreement.  This agreement has strengthened Mexico’s economy by providing its people with more job opportunities and better incomes.  NAFTA has brought several multinational companies to the region, which is investing in its people and economy.

c.)  A key global strategic competitive advantage offered by Mexico is the country’s unique geographic position: a 3,300 kilometer border with the United States; coastlines facing Europe and Asia; gateway to all of Latin America.  With the passage of NAFTA, Mexico is posed to have an economic resurgence.

d.)  Mexico also offers companies a highly literate, young and cost efficient work force of over 34 million.  Several multinational corporations who have moved their operations to Mexico have recognized the advantages of this. 

WEAKNESSES

a.)  Mexico has become heavily dependent on oil exportation.  This has created opportunity as well as economic volatility.  Because of oil price fluctuation, Mexico’s revenues have been extremely volatile.  The lack of predictability has caused some deficit spending, which has exacerbated Mexico’s economic problems.

b.)  Mexico is to heavily dependent on the United States economy.  NAFTA has exacerbated this problem.  Mexico’s economy has experienced a recession in the past year, which is primarily attributable to the United States and its recession.  Mexico needs a better diversification of its trading partners so they can rely less on the United States.

c.)  Mexico has a serious pollution problem.  Natural fresh water resources are scarce and polluted in the north.  Mexico has raw sewerage and industrial effluents polluting rivers and urban areas.  Serious air pollution exists in the national capital and urban centers along the US-Mexico border.

d.)  Mexico also has a problem with corruption.  Corruption exists in every facet of the economy from the legal system to the government.  With the low level of pay for government workers, corruption is systemic. 

OPPORTUNITIES

a.)  The North American Free Trade Agreement enables Mexico to be partners with the world’s largest economy, namely the United States.  This agreement removes all trading deterrents, such as tariffs and government subsidies.  Mexico has tripled its trade with the US and Canada since NAFTA.  Additionally, Mexico offers significant opportunities with most of Latin America because of similar trade agreements.

b.)  Mexico offers significant investment opportunity with the privatization of seaports, railroads, telecommunications, electricity, and natural gas.  This privatization has brought increases in technology and capital spending to Mexico and has afforded other companies to compete in the market. 

c.)  Mexico offers companies a young, educated and abundant labor force.  This has appealed to many multinationals that have already exploited this by establishing operations in Mexico.

 

THREATS

a.)  Mexico’s economy is too reliant on oil exports, which has experienced tremendous price volatility.  Oil exports make up over one third of Mexico’s exportation revenues. 

b.)  Mexico’s has become to reliant on the United States economy.  Since the United States comprises 88% of its total exports, Mexico’s fate is based almost entirely on the health ot the US economy.  Mexico needs to diversify its export partners.  Otherwise, its economy will fluctuate with that of the US.

c.)  If Mexico continues to have corruption problems, foreign investors will become disillusioned with the prospects of doing business in Mexico.  Mexico has to change the compensation of its public servants or corruption will continue to pervade the entire government.  The disparity in pay between the top 10% and the bottom 10% is too pronounced.

 


 

Sources:  Deresky, Helen, International Management (Prentice Hall 2000) p395-397,403-405.
Political Stability, www.mexconnect.com/mex_/dtpolistabil.html
www.american,edu/carmel/SQ7712a/abutmx.html
Business in Mexico, www.go2mexico.com/article/business/