1. Why would multinationals be interested in setting up operations in Mexico? Give two reasons.
There are a lot of reasons why MNC´s would be interested in setting up operations in Mexico.
First, according with the analysis SWOT by b y Business Monitor International (2011) explains that “r ules ules on foreign investment are relatively relaxed in some sectors, with majority ownership allowed in some circumstances.” circumstances.” And this represents a big big opportunity for MNC´s to be interested in establishing themselves in Mexico.
In addition Mexico has signed a considerable amount of free trade agreements (FTAs) in recent years as Luthans and Doh (2012) mentioned; with an increment of promotion of foreign investment. At the same time Business Monitor International (2011) cited that “the “the government's focus on improving infrastructure should help the overall business environment in the longer term, once credit conditions improve, making Mexico a more attractive location for FDI inflows.” inflows.” (pg.6)
The second reason as Rusnak (2011) describes in his article “Mexico provides a cheap portal to U.S.A. for Multinationals”, is true as the title of the article mentions. Since Mexico firms NAFTA the market is open to foreign environment competition.
And economy Mexico’s report shows an increasing number of investors from Europe and Asia setting up operations in the country to exploit the opportunities of labor costs; and more significant motivation is foreign investors want to compete in the U.S. market at a
lower cost. Moreover the MNC´s think about the logistic costs, most of companies want to take place in the American market, and Mexico is the neighbor.
2. Would cultural differences be a major stumbling block for U.S. MNC’s doing business in Mexico? For European firms? For Japanese firms? Explain your answer.
I consider the major stumbling blocks for foreign MNC´s doing business in Mexico are the cultural differences and in some cases the points of view, because Mexico is a very traditional country. But to explain this affirmation it is necessary to focus on Hofstede´s dimensions.
Following Hofstede´s dimensions from the Hofstede Centre website (2012) in Mexico their population accepts hierarchical order, and the power is centralized. In contrast in United States their population focuses on equal’s rights, and employees trust more in their superiors and consult them, at the same time their superiors are always accessible.
And in my personal experience sometimes it is difficult for Americans to make their Mexican employees understand that they have to be more participative. Although in recent years most of the Mexican Universities try to transmit trough courses like Organizational Learning and programs like Leadership and entrepreneurship this type of knowledge’s to students.
About Individualism dimension United States scores 91, in contrast Mexico with 30, this shows that Americans are a very individualist society, and Mexico is totally the opposite, Mexican aitre a very collectivist culture they are more attached to traditions.
Mexico and United States following with Hofstede´s dimensions from the Hofstede Centre website (2012), this page scores in Masculinity/ Femininity dimension to Mexico with 69, and United States with 91, the scores indicates that the two nations are focused in masculinity that means both have a society that will be driven by competition, achievement and success. Since both are masculine countries their people “live in order to work”, managers are expected to be decisive and assertive. And this is the reason why I explained before that in Mexico in recent years most of Universities are training better their students, because today's globalized world we live in demands global managers, which allows a panoramic view and a more open mind way to listen to their subordinates and work with them successfully. Also this characteristic is what the American investors and MNC´s are looking for at the moment to do business with Mexico.
Meanwhile about Uncertain Avoidance dimension both countries have a high score in this dimension. That means both show a very high preference for avoiding uncertainty, Americans and Mexicans have the same ideas about time is money, they prefer to be busy and work hard, and security is an important motivation. It shows that in this area is not a problem. (Hofstede Centre website, 2012)
Other barriers that American MNC´s found in Mexico is the language, because Mexico according with INEGI (2010) figures that Mexico has a 112 millions of habitants, but only around of 8 million of Mexicans speaks English. In addition USA has a low context communication, while Mexico is a high context of communication, and making them to confront challenges like the bad habits in communication.
However for European firms, depending on the country that we are focused on have advantages over other countries, for example England, Germany, and Sweeden are very similar in Hofstede´s dimensions, and basically the blocks that they stumble upon in order to do business with Mexico are the same as the ones with USA. But some countries like France, Italy and Spain have the advantage in the language section which makes communication barrier less than the countries like USA.
And Finally for Japanese firm the Hofstede´s dimensions exploring found that Japan is a middle hierarchical society. And this is why Mexico has a lot of Japanese MNC’s like Sumitomo, Toyota, Honda and others established. My husband is a Japanese that worked in Sumitomo Mexico for 6 years, and he confirmed me that Japanese have a middle centralized
decision making process: all the decisions must be confirmed by each
hierarchical layer and finally by the top management in Japan. (Hofstede Centre website, 2012)
Japan as Mexico on the Individualism dimension, both countries are a very collectivist society.
Mexico and Japan following with Hofstede´s dimensions from the Hofstede
Centre website (2012), this page scores in Masculinity/ Femininity dimension to Mexico with 69, and Japan with 91. On the dimension of Uncertainty of Avoidance Japan scores 92 and Mexico with 82, and this indicates that both have the same ideas about time is money, they prefer to be busy and work hard, and security is an important motivation. In this case Japan has the reason that their people are exposed to natural disasters and this makes the Japanese to be very prepared for any uncertain situation.
On the dimension of Long term Orientation, Japan scores with 80 while Mexico doesn´t have any score, this means that Japan are very long term oriented society, that believes that “enterprises are not here to make money every quarter for the share holders, but to serve the stake holders and society at large for many generations to come.” (Hofstede Centre website, 2012) In contrast USA scores with 29 this means that they are very short oriented, they want results in a short period of time.
3. Why might MNCs be interested in studying the organizational culture in Mexican firms before deciding whether to locate there? Explain your logic.
MNC´s are interested in studying the organizational culture in Mexican firms before deciding whether to locate there; because it is the way that the firm operates, allow it to survive today’s globalized market having benefits and results
I am Mexican and I am going to explain this with my own experience, most of Mexican managers are often called lazy and when they work, nothing gets done since they have flexible deadlines (tomorrow, tomorrow). (Büter, 2012) and the foreign investors want to check that
peoples work in their company, complies with the necessary standard.
But as it can be seen according with Hofstede´s dimensions in Power of Distance in Mexico their population accepts hierarchical order, and the power is centralized. In addition the Mexican managers are traditional and very autocratic, basically with a theoretical mind. (Büter, 2012)
Like I mentioned before in recent years the new generation of managers
have started to accept and delegate responsibility; and the MNC´s need a managers or leaders with a pragmatic mind; and oriented to solve problems.
MNC´s have experience with the hierarchy organizational culture, and they know that sometimes it´s difficult to work with Mexicans, since Mexican managers are sensitive to giving and receiving critical feedback. To contra rest all of this bad habits, most of MNC´s have to train and invest in programs of leadership and entrepreneurship to change the mentality of their Mexican employees; in order to have more adapted, open and proactive employees in their companies.
References Büter, S. (2012). Does culture explain managerial effectiveness? University of Twente. Querétaro, México. Retrieved from: http://essay.utwente.nl/61445/1/MSc_S_Buter.pdf
Instituto Nacional de Estadística Geografía e Información. (2010) Censo de población y vivienda: lenguas extranjeras en México. Retrieved from: http://www.censo2010.org.mx/
Luthans, F., & Doh J. P. (2012). International management: culture, strategy and behavior . th
(8 ed.). New York: Mc Graw Hill. 138-164.
McCrimmon, M. (2010) Reinventing Leadership and Management. Retrieved from: http://proquest.umi.com.millenium.itesm.mx/
Mexico insurance report - Q1 2011. (2011). (). London, United Kingdom, London: Business Monitor International. Retrieved from http://search.proquest.com/docview/189769064?accountid=36299
Rusnak, K. (2011) Mexico provides cheap portal to U.S. A. for multinationals. America´s Economic Report Daily. Retrieved from: http://economyincrisis.org/content/mexico-provides-cheap-portal-us-multinationals
The Hofstede Centre. (2012). Geer Hofstede dimensions: Mexico. Retrieved from: http://geert-hofstede.com/mexico.html
The Hofstede Centre. (2012). Geer Hofstede dimensions: United States. Retrieved from: http://geert-hofstede.com/united-states.html
