Manufacturing in Mexico Podcast

After focusing in the last episode on the different modes of entry for expanding into Mexico, Ricardo and David shift their attention today to where to manufacture in Mexico and how companies can work through the initial site selection process.

First, David identifies the most important criteria companies should take into account when choosing a manufacturing site in Mexico. These factors include accessibility, manpower services, customers, cost and security. Then, he divides the industrialized areas of Mexico into six options and provides pros and cons for each one. The first region is the one directly south of the U.S. border. Otherwise known as the border region, the proximity to the U.S. and high skill levels are its major benefits. Downsides include high expenses and security concerns. The northeastern area of Mexico has been industrialized for over a century. This region is the best option for companies who want to avoid the expenses and security risks of the border zone, but still want to be close to U.S. markets. Companies may consider the northwest region for its coastal logistics and low turnover rates, though there are fewer workers and customers within close proximity. Bajío is a region north of Mexico City which is rapidly growing and attracting more attention for its excellent access to Mexican markets and both ports. The southeast region has long term established infrastructure and skills. Guadalajara is the second-largest metropolitan area in Mexico and is known as the Silicon Valley of Mexico, focusing on electronics, software and computing.

Now that we’ve identified the six major areas in Mexico, David explains an effective process companies should follow in order to choose the right location for them. They should consider individually the factors of logistics, manpower, competition, local wage and benefit costs, security, and accessibility. Finally, he shares the best people to ask for advice before making a final decision.

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In this episode, Ricardo Rascon welcomes back David McQueen to build on their previous conversation. After focusing in the last episode on why expanding into Mexico might make sense for your company, Ricardo and David shift their attention today to how a company can get started with this expansion process. They discuss modes of entry to consider, factors to weigh in choosing one, and David's own experience and advice to manufacturing leaders!

There are several modes of entry for manufacturing companies to consider as they move toward expanding into Mexico: subcontracting, joint ventures & acquisitions, incorporation, and the shelter. In order to determine which mode to pursue, companies should bear in mind the five factors of risk (including technological and/or financial risk), cost (investment and operational), speed to market, production control, and feasibility and viability. David considers each mode of entry in turn and explores how it relates to the decisional factors companies should be weighing. Subcontracting, he shares, represents a low-cost and low-risk option, but raises the challenge of identifying and qualifying subcontracting partners. Joint ventures and acquisitions are a good path for companies with existing trustworthy partner relationships, but this mode of entry requires a good deal of due diligence. The incorporation process is similar in the US and Mexico, but companies can err by incorporating too hastily or by missing the purpose and subtleties of the incorporation model.

The shelter mode of entry is unique to Mexico, and it allows foreign manufacturing companies to enter the Mexican market with limited dealings with legal and regulatory issues. The company must be eligible for IMMEX and come under the shelter of an IMMEX partner, and the arrangement effectively outsources administration to the shelter company. After offering further comments on when a shelter model does and doesn't make sense to adopt, David explains his own experience leading two Canadian companies that expanded into Mexico and shares parting advice with listeners looking to take next steps in a similar expansion process.

Thank you for joining us on Manufacturing in Mexico! Don’t miss our upcoming episode, which will focus on how to choose the right location for expanding into Mexico!

In Episode 1 of Tetakawi's Manufacturing in Mexico Podcast, David McQueen and Ricardo Rascon discuss five reasons companies should consider manufacturing in Mexico. They touch on workforce characteristics, logistics, trade barriers, market access, and operating cost.

On top of everything else companies have to worry about in terms of tariffs and geopolitical risks, they now have to consider pandemics as a threat to supply chains. Based on the interactions had by the team at Tetakawi, many companies seem to be putting Mexico at the forefront of their strategies. First, David identifies five critical factors critical in choosing a manufacturer: manpower, logistics, trade barriers, market access, and operating costs.

Beginning with manpower, David highlights the expansive pool of available labor in Mexico. In addition to considering the ability to hire manpower now and in the future, companies also need to be able to retain the people they have hired and ensure their workforce remains engaged and productive. Many industrialized regions of Mexico have an abundance of people equipped with the experience and training needed in manufacturing skills. The border Mexico shares with the U.S. gives them an important advantage in terms of logistics, expanding into the modern highways and rail systems. Addressing trade barriers, David reveals that Mexico has more free trade agreements than any other country. Additionally, their involvement in the USMCA Trade Zone provides the best possible access to Canada and the U.S. In fact, Mexico is far more likely to offer secure access to the U.S. than most other low-cost countries for the foreseeable future. Speaking of market access, Mexico has large manufacturing clusters in many different industries. Finally, David discusses Mexico's competitive edge regarding manufacturing costs. As this episode draws to a close, David touches on a few other benefits Mexico offers: affordability of electricity and natural gas, an agreeable climate, and intellectual property protection.

Thank you for joining us on Manufacturing in Mexico! Don't miss our upcoming episodes, where we'll discuss gateways to entry and how to select a location in Mexico.