Mexico Agricultural Equipment

1. Mexico Agricultural Equipment Erik Smith INB300 – International Business Lynn Bertsch August 28, 2005

2. Market: Basic Need • Agriculture is a significant portion of Mexico’s exports and production • Farm machinery is a need for their economy • Farm Machinery is an established import (The World Factbook - Mexico, August 9, 2005, Economy Section)

3. Market: Agriculture Market • GDP 1.006 Trillion • PPP $9,600 • Agriculture Accounts for 4% of GDP (The World Factbook - Mexico, August 9, 2005, Economy Section)

4. Market: FDI & FDI Confidence • $7.46 billion for 1st Half of 2005(Mexico’s foreign direct investment falls, August 19, 2005) • $75/Capita • FDI Confidence .80 (FDI Confidence Index, 2004, p. 3)

5. Corruption Perception Index • Scores a 3.6 • Compares Favorably with Other Developing Nations • Easily Outpaces India (2.8) and China (3.4) which are the top 2 for FDI confidence (Corruption Perceptions Index 2004, 2004, p. 236-237).

6. Import Restrictions • Due to NAFTA there are virtually no trade restrictions on importing farm machinery • Used machinery may be banned from import, especially if it is a motor vehicle (Used Equipment and Goods under NAFTA, n.d., para. 1-5)

7. Price Controls • Mexico does not significantly compete locally for agricultural machinery • No price controls are set for almost any product, but especially for agricultural equipment so critical to their economy(The World Factbook - Mexico, July 28, 2005, Economy Section, para. 1)

8. Government and Public Attitude Towards Buying American Products Governmental, and public, tensions focus on other agricultural issues, and not on machinery (Response to Criticism of U.S. Agricultural Policy and NAFTA, December 5, 2002, para. 1)

9. FDI vs. International Trade • Leverage the best of both scenarios • US Based Manufacturing • Mexico based Marketing and Service

10. Global Strategic Planning Process Multi-Domestic or Global Strategy • Product • Promotion • Personnel (Ball, et al., 2006, p. 67)

11. Marketing • Leverage Local Talent • Appeal to Large Institutional Clients • Loss Leader

12. Service • Train Local Mechanics • Additional Revenue Stream • Offset the equipment used as a loss leader or low margin item

13. Equipment Modification • Less Wealth in Mexico • Lower-End equipment • Use Older Designs

14. Export Management Company • Save Money by hiring outside vendor • Allows us to leverage our strengths • Save money in the long run

15. Foreign Exchange • Mexican Peso vs. US Dollar • Forward Hedge for Purchases • Quick Conversion for Service Figure 1. 3yr data on the Mexican Peso (MXN) against the U.S. Dollar (USD). Retrieved on August 24, 2005, from http://web-ip1-ptl.ntrs.com/ptl.public/cgi-bin/ptl/ntrs/jsp/servlet/action/GetQuoteMain

16. Conclusion • Significant Need for Product • Extremely Limited Trade Barriers • Established Market (The World Factbook - Mexico, August 9, 2005, Economy Section) • Easily Accommodate the Complexities of International Commerce • Easily Grow our Revenue

17. References Used Equipment and Goods under NAFTA (n.d.). Retrieved on August 4, 2005 from http://web.ita.doc.gov/ticwebsite/naftaweb.nsf/504ca249c786e20f85256284006da7ab/ea62156cda30408c852566c20070b943!OpenDocument The World Factbook (Mexico, August 9, 2005). Retrieved on August 4, 2005 from http://www.cia.gov/cia/publications/factbook/geos/mx.html Response to Criticism of U.S. Agricultural Policy and NAFTA (December 5, 2002). Retrieved on August 25, 2005, from http://www.usembassy-mexico.gov/releases/ep021205realitiesNAFTA.htm Corruption Perceptions Index 2004 (2004). Retrieved July 15, 2005, from http://www.globalcorruptionreport.org/gcr2005/download/english/corruption_research_%20I.pdf Mexico’s foreign direct investment falls (August 19, 2005) Retrieved on August 25, 2005 from http://www.businessweek.com/ap/financialnews/D8C37BKG0.htm