Mexico has been one of the emerging markets and star economy sector in the world. Both domestic and international Mexico manufacturing has been always improving. After the ‘Bracero program’ was signed between United States and Mexico, Mexico manufacturing sector grows rapidly. Companies from United States started setting up their assembly in Mexico because Mexico had plenty of raw materials available.
The duties levied on the companies had also been relaxed between these countries. This program was called as ‘The Border Industrialization Program’. With the implementation of NAFTA called as North American Free Trade Agreement, Mexico manufacturing has tripled.
Earlier, Mexico attracted manufacturers who perform only simple assembling. But, later with the development in this industry many big shots with complex products started flowing in to Mexico. China attracted many inexpensive commodity manufacturing in world level. At this time, US were looking for a similar place like china which could produce low cost products. Mexico manufacturing proved as the exact solution for a situation like this. Many foreign firms started setting up their operations and manufacturing in Mexico.
Methods of implementation :
Mexico manufacturing companies used five common methods:
- Contract or sub-contract manufacturing – This method is a form of outsourcing where Mexico manufacturers manufacture products for another company. This method will be used for companies who like to drive down the production cost involved in setting up infrastructure.
- Joint venture – Two or more firms invest for a single manufacturing.
- Full-owned – As its name suggests, the whole capital and profit belongs to a single company.
- Shelter – In this method, a firm can operate manufacturing and assembly in Mexico without even having knowledge of the subsidiary.
- Outsourcing – This is almost same as contract or sub-contract, except that this method outsources people rather than products.
The price of the land marked as one of unique Mexico manufacturing companies’ advantage for its development. Unlike other developing countries, the land cost remain cheap in Mexico which attracted many manufacturing in Mexico. Many firms which require large engineering content preferred Mexico than to other countries. Its proximity to US also helped the manufacturing companies for coordinating activities. Products got manufactured soon as the raw materials were readily available nearby and the products got delivered in time because the markets were nearby.