Mexico Case Study

CHAPTER 5:
MEXICO CASE STUDY

DR Fareed qawasmeh
Why would multinationals be interested in setting up

operations in Mexico? Give two reasons.
I think Mexico’s increasing growth of economy and more operations from multinationals are
mainly dependent on these two reasons.
The first one is that Mexico implements strategy of free trade zones. Currently, Mexico
signed twelve free trade agreements with 43 countries and regions in the world through
bilateral and multilateral negotiations. These agreements make the imports of many parts for
industries free.
Meanwhile, Mexico is the first one who reached free trade agreement with both North America
(NAFTA) and the European Union. These two largest economies’ market capacity has reached
more than 800 million and most of them are developed countries that have strong purchasing
power and great potential. Multinationals that set up operations in Mexico can enjoy the
Mexico’s free trade agreements with 43 countries and regions all over the world and easily
enter these countries’ markets. The free trade agreement will set regulations of Dispute
Settlement Body (DSB), so that the investment’s environment is more peaceful.
The second one is the healthy and younger population structure in Mexico. The population
is aging in a high speed all over the world, while more than half of the population is less than
29 years old in Mexico. Plenty of young labors make industries of multinationals more
energetic and innovative. At the same time, the level of Mexico's population quality is
improving. According to UNESCO, the amount of college graduates related to production has
doubled since 1999, which attracted more high-tech enterprises such as computer and
automobile industries. In addition, the rich resources, perfect industrial system, smooth
communication, convenient traffic and good geographical condition are all the factors to
explain why multinationals set up operations in Mexico. The economic situation in Mexico is
good and it will continue to improve.
Would cultural differences be a major stumbling block for U.S.

MNCs doing business in Mexico? For European firms? For
Japanese firms? Explain your answer.
The cultural differences will be stumbling block for European and Japanese MNCs’
business in Mexico, but it is not the major reason. But for the US, the cultural
differences will be the major stumbling block. These three countries all have
differences with Mexico in culture and habits when they are doing business.
The first one is the attitude to truth which is the most severe barrier of their
communication. In Mexico, people prefer to view things in a perspective of
interpersonal relationship and the lies are accepted in many social occasions, which
is a custom. It is common for Mexicans that to refer a wrong way to questioner
and tell their bosses they have finished their tasks actually they haven’t started
their works. In their opinion, the most important thing is not the truth but the
sociable conversations. For Americans, they attach great importance to honesty.
Male - Washington and Lincoln, two legendary heroes in the United States, have
the clearest object lessons related to honesty in their life. And the other two
notorious Presidents - Harding and Eriksson had to step down because of
dishonesty. Americans and Europeans are almost professing Christianity, so that
they are restrained by the Ten Commandments and they are required to tell the
truth. Japanese culture is traditional, which is similar with China, so that they are
also against telling lies.
The second one is the communication style. Mexicans prefer to flatter and laugh
at others than the US, also, they prefer to attract others’ attention, which is result
from that Mexicans are more respective to people who can make a strong
impression to others. When doing business, they want to emphasize the differences
of people’s gender, social status and ages. What’s more, Mexicans will not say ‘no’
in communication, they prefer indirect ways to express their ideas. On the
contrary, Americans, European and Japanese always suspect the people who
excessively boast themselves and despise people who pay too much attention to
title. In addition, Americans are the most sensitive nation about gander in
business all over the world. They will not pay too much to others’ social status
and ages, which is regarded as the impolite behavior. Europeans and Japanese are
not as sensitive as American, but they are also not accustomed to emphasize the
social status and ages of their partners. Europeans and Americans like direct ways
when they are in business, but Japanese business man are used to communicate
with others in an indirect way,
The third one is the attitude to time. Mexico is known as a country of
tomorrow. Mexican sense of time is optional and they don’t think punctuality is an
important thing. Be interrupted and Extension are habitual and expected in this
country. It is common that young female bank clerk fixes her nails and talks to
boyfriends on the phone when waiting for her boss signing or cashing a cheque,
which is never permitted in the other companies of other three cultures. If you
want to invite Mexicans to you party, you have to adjust your psychological clock
because your guests may arrive at about 9:00 or 10:00 even though you invited
them at 8:00.
The senses of time of Americans are even unusual from all over the world. They
are controlled by their schedules and deadlines. Most of Americans will be angry
for the unpunctuality of Mexicans. For Mexicans, they think Americans are the
slaves of time and don't really know how to enjoy life. Japanese culture is famous
for accuracy and hard-working, they are very punctual. However, they also can’t
bear the oppressive American attitude toward time. Europeans are also puncture,
especially in business, although they never work in vocations.
Why might MNCs be interested in studying the organizational
culture in Mexican firms before deciding whether to locate
there? Explain your logic
If a MNC locates in Mexico, they will employ Mexicans to be their workers and
even executives, so that the main part of its subsidiary company is Mexican. The
MNCs who want to locate there have to study the organizational culture from local
firms to estimate if they can handle this different culture and establish the
appropriate corporate culture. So, here are some factors to explain why
organization culture is so important. Firstly, Organizational culture affects
organizational performance. Organizational culture identity will produce consistent
behavior at work, which will lead to the completion of the organization's strategy.
For a corporate, more widely the corporate culture accepted by employees, more
easily corporate can achieve business goals. Secondly, Organizational culture is a
sign of an organization. On one hand, the organizational culture is an important
reason that the market accepts the organization. The enterprise's organizational
culture, such as enterprise brand, reputation, enterprise concept, style and so on,
is one of the most important ways for customers, suppliers and investors confirm a
certain corporate. On the other hand, the organizational culture is selection
standard for employees when they decide whether to choose this company or not.
For employees, the good enterprise culture makes them to recognize the corporate’
personality and be proud of their work. At last, organizational culture is the core
competitive advantage and the key to differentiate itself from competitors for an
organization. When the product and financial markets reach equilibrium,
organizational culture will become the most valuable resource in competition.
What’s more, appropriate organizational culture can make up the inadequacy of
technology and capital in some respects. The organizational culture is so important
that MNCs need to study from Mexico which is their target market and establish
an appropriate organizational culture.
‫والء الداود‬
‫ماجستير ادارة اعمال‬

Mexico Case Study

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CHAPTER 5:

MEXICO CASE STUDY

Why would multinationals be interested in setting up

Would cultural differences be a major stumbling block for U.S.

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