Mexico Analysis
Devin Demirpolat, Feier Fan, Bailee Kwilinski & Philip Metz
Hofstede's Insights
- Power Distance- Hierichal power, subordinates expect to be told what to do
- Individualism- considered a collectivistic society. This is manifest in a close long-term commitment to the member ‘group’, be that a family, extended family, or extended relationships
- Masculinity-considered masculine, people “live in order to work”, managers are expected to be decisive and assertive, the emphasis is on equity, competition and performance and conflicts are resolved by fighting them out
- Uncertainty Avoidance- very high preference for avoiding uncertainty
- Long Term Orientation- normative, prefer to maintain time-honoured traditions and norms while viewing societal change with suspicion
- Indulgence- Mexican culture has a definite tendency toward Indulgence There is willingness to realise their impulses and desires with regard to enjoying life and having fun. They have a positive attitude and are optimistic
Culture
Legal & Political
Doing Business in Mexico
- Business is personal, important to build meaningful relationships
- Handshake, physical contact, and cordiality are essential to build trust
- Business attire is expected
- Family is an important element, so working this into casual coversation is meaningful
- Third-party entrance gives a positive first impression
- There is low confidence in the legal authoritiies, in addition crime and violence are likely to occur
- Corruption rank of #110 is high, however the current president is making it a priority to decrease the amount of corruption
- Recent changes to the NAFTA which will go into effect in 2020, changes impacting Mexico:
- Mexican workers can form unions
- At least 30 % of the car must be made by workers earning at least $16 an hour. That increases to 40% in 2023. That's three times was the average Mexican auto worker makes. Autos that don't meet these requirements will be subject to tariffs
- Mexican trucks must meet safety standards before crossing the US boarder
- Did not recieve the anit-corruption clause that they were hoping for
Mexico
Mexico has faced a somewhat temperamental past, but through its social properties and robust culture it has welcomed great change to become a participant in the global market.
Economy
- GDP expected to be 1.2 Trillion and have a 3% YOY growth rate in the next few years
- Inflation rate is stable at approximately 3% each year 2019-2022
- Extremely reliant on the US for imports and exports
Geographical
- Neighboring countries include the US, Guatamala, and Belize, Pacific Ocean to the west, and the Gulf of Mexico on the east, also near the Carribean Sea
- More than half of the Mexican people live in the center of the country
- Tremendous cultural and economic diversity, distributed over an enormously complex and varied physical environment, that gives Mexico its unique character
Country Environment
Market Attractiveness
Business Idea
- Low labor costs
- Installation costs of large solar farms are far below those of the U.S. and Canada
- To help guide the adoption of renewable energy, the government is implementing a Clean Energy Certificate program (CEL)
- Qualified Consumers are required to consume clean energy. [Minimum 5% of energy consumed must be from renewable resources]
- A total of 66,912 megawatts of capacity would need to be added over the next 15 years.
- 55% will come from clean technology
- 17% will consist of solar energy
- Enter the Mexican Wholesale Energy Market as an Energy Supplier
- Focus on Renewable Energy generation through Solar Farms
Geographical
- Considered among the top locations to build a solar farm.
- Need to consider factors such as elevation, latitude, and pollution
- Mexico’s proximity to the equator, high elevation, and moderately low pollution levels outside of the city regions make this country ideal
Strategy
Existing Infrastructure
- Currently, there are 10 major private companies engaged in the production of renewable energy, who also sell production equipment to businesses and individuals
- Largest solar field owned by Enel Green Power
- Short Term: Buy CELs at auction and sell to Big Energy Consumers
- Long Term: Long term contracts lasting up to 15 years
- Partner with Mexican based company for simplified contract process and post sale support
Legal and Political
- Mexico committed to unconditionally reduce its greenhouse gas emissions by 22% by 2030
- Recent reform in Mexico City has made doing business in the energy market easier for contractors
- The government is currently working to improve regulations and laws regarding renewable energy, as every few years we see advances
- The government has released a plan to generate 35% of its energy from renewable energy by the year 2024
Renewable Energy Market