Business with China & Mexico – Pros & Cons

     Mexico and China are both popular destinations for outsourcing, foreign direct investments and offshoring.  Both have pros and cons, from an American vantage point, of doing business with them.

     Mexico has the obvious advantage of proximity so shipping and other transportation costs will be less significant and quicker.  Mexico is also positioned as global hub for international business as a member of 10 free trade agreements, 32 reciprocal investment promotion and protection agreements, and 9 trade agreements spanning three continents (ProMexico Trade and Investment, 2017) which will minimize the inconvenience and restrictions to global trade.  Labor and manufacturing costs are also cheap in Mexico which reduces the price per manufactured unit for bigger profits.  In my opinion, the biggest disadvantage to doing business in Mexico would be the unstable political situation and crime.  Drug cartels and associated crime could bleed over and affect foreign business activities.  Political corruption is infamous in Mexico from beat cops to high level politicians and judges.  This could lead to ethical dilemmas that could have longstanding consequences with between the host and home nations.

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    China also has the advantage of cheap labor but are also well known for replication abilities.  Economies of scale is achieved here if a product can be replicated but not necessarily duplicated.  China has been predicted to overtake even the US market to become the largest in the world (Peng, 2017).  A stable footing in the largest world economy would be attractive for business with other countries.  Disadvantages to doing business with China would be a byproduct of one of their advantages; master replicators could lead to product quality issues.  In order to reduce costs, materials may vary and production methods may be subpar of what is expected.  As a far eastern country, culture and communication could also be cumbersome to navigate.  Regular inspections and progress checks may be required to ensure the projects remain in scope and expectations.

References

Peng, M. W. (2017). Global Business 4th ed. Boston: Cengage Learning.

ProMexico Trade and Investment. (2017). Retrieved from ProMexico: http://www.promexico.gob.mx/en/mx/tratados-comerciales

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