Mexico versus China

By:C. Rivera

Introduction

• Have you ever thought how a Mexican can compete with Chinese enterprises?

• Of course many will say that they are taking care of their pocket, which is respectable, but for how long?

• Look at this: if we buy Chinese products, Mexican companies would break, employment would miss and you could lose your job!!!

Are you taking care of your pocket?

Introduction• What attitudes and actions must be taken by

Mexican enterprises?

• Is it possible for Mexico to be as competitive as China?

• I am an international business student and this problem is something that really worries me… that is why I am going to develop this topic and look for solutions for Mexican companies, for you and for me, because we are all MEXICO.

China’s economic development

Trade opening

Worldwide export of really cheap products

How has it affected Mexican economic development?

China’s competitive advantage

•What is it in China that no other country has?

Huge Population + Cheap LaborCheap Labor

NoteNote: : The minimum wage in Mexico is $52The minimum wage in Mexico is $52The minimum wage in China is $37The minimum wage in China is $37

Why is cheap labor so important?•Cheap labor (+huge population) is

very attractive to FDI.

•BUT… what is FDI?

• Foreign Direct Investment (FDI) occurs when a firm invests directly in a foreign country which provides advantages to produce (as China with cheap labor) and market a product.

FDI in China•FDI means:

Many new jobs Money to impulse the enterprises Money to impulse the economic development Transfer of know-how An opportunity to have technology

innovations…

Another China’s strategy

To invest in education

Hou Yifan, a fourteen year old girl, is a high school student and spends up to 15 hours per day in her studies…

In 2008, Hou Yifan won the third place in a world chess competition (which is endorsed by the Internation Chess Federation –FIDE-).

IT IS AN EXAMPLE OF HOW CHINESE SCHOLARSHIPS ARE REALLY

EXPLOITED.

China’s disadvantages

•On the other hand, China has a lot of disadvantages compared to Mexico, such as:

Poor quality of products Cultural differences Low skilled jobs Distance

Competitive opportunities for Mexican enterprises

• Mexican enterprises have to work on China’s disadvantages… so the market that China is

losing because of them, Mexico will make their own market.

•If China is so distant to America, has cultural differences and its products are in a very poor quality, Mexico should focus on creating high skilled jobs and develop products that satisfy the demanding markets.

Mexico’s strengths and weaknesses

• *Proximity to US, short travel times, easy collaboration & service)

*High market potential

*Prosoft: initiative to attract TI companies and improve TI infrastructure

• Highly lacking in IT services

• Old-fashion infrastructure

• Limited talent pool for multinational positions

• Political instability

• Poor education system and low level of English

Distance!•What about american market?

•If USA needs 100 jeans, which one would be faster: Mexico or China?

Conclusion•We have seen that China has developed

its strategies based on a cheap labor, which is really attractive to FDI… however, it is still having some disadvantages…

“Whom much covers little squeeze”

•That’s where Mexican enterprises should focus its attention: create high skilled jobs = high quality products to satisfy the demanding markets and take advantage of its little distance to American market.

References• Charles W.L. Hill. International Business. Competing in the Global

Marketplace. Mac Graw-Hill, Sixth Edition

• http://www.sat.gob.mx/sitio_internet/asistencia_contribuyente/informacion_frecuente/salarios_minimos/default.asp

• http://www.spanish.xinhuanet.com/spanish/2006-10/28/content_336401.htm

• -The International Business Dictionary and Reference, Lewis A. Presner, 1991

• -BusinessWeek, 1997• -Texas Business Review, 1998• -Manufacturing in Mexico, World Trade, Celestine Martha.,1999• -Expansion Management, David Hendricks, 2004• -Maquiladoras Rebound Special Report, Journal of Commerce, 2006• -Developing Mexico’s Offshoring Opportunity, Diana Farrell, Antonio Puron,

Ignacion Quesada,• The McKinsey Quarterly, 2007• -Español 305 Informe de Sector. Industria Maquiladora en México, 2008