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“Doing Business in Mexico: Business Opportunities and Cultural Challenges ”
Michael J. Pisani, Ph.D.Associate Professor of International Business,
Central Michigan UniversityFebruary 2, 2005
Co-Director, “Increasing International Business and Personnel Capacity in the Mid-Michigan Region through Private Sector Outreach and Curriculum Development” Title VI Grant funded by the U.S. Department of Education: Business and International Education Program and Central Michigan University.
“Doing Business in Mexico: The Bottom Line”*
Proposition #1: Rock-Bottom Price + Bell-Ringer Product = Sale
Wrong: This is a flawed approach to doing business in Mexico. It presumes that buyers are vendor neutral and will instantly issue a purchase order whenever that supplier offers a lower price or better product.
*Adapted from Becker (2004), Doing Business in the New Latin America, pp. 112-113.
Proposition #2:Reasonable Price + Satisfactory Product +
Customer’s Trust = Sale
Correct: This mirrors the reality found in Mexico (and Latin America). It is essential to reassure customers that they can rely on the assurances you make because they are backed by your own personal integrity. When you motivate customers to buy only from you because you are trustworthy, you expand the envelope of what qualifies as an acceptable price and product. This is why trust is such a precious currency in Mexico (and Latin America) to be earned, conserved, and invested in.
Map of Mexico
Brief Overview of Mexican History
Pre-Columbian Mexico Pre-Classic 1500 B.C.-200 B.C.
Olmecs (Tabasco and southern Veracruz) Teotihuacan (Central Mexico) Monte Albán (Oaxaca)
Classic Period 200 B.C. – 900 A.D. El Tajín (Veracruz) Maya (Yucatán)
Post-Classic 900 A.D.-1521 A.D. Toltecs (Central Mexico) Zapotecs and Mixtecs (Oaxaca) Post-Classic Maya (Yucatán) Aztecs (Central Mexico and beyond)
Brief Overview of Mexican History (Cont.)
Colonial New Spain Encounter & Conquest (1519-1521) Colony (1521-1821)
The Mexican Empire, 1821-1824 The Mexican Republic, 1824+ Loss of Texas (1836) and War with the United States (1846-
1848) The French Intervention (1863-1867) The Porfiriato (1876-1910) The Mexican Revolution (1910-1920?) The Revolution Institutionalized (1928?-2000) The PRI Loses and Multi-party Rule (2000-
Current Socio- Demographics of Mexico
Population 97.5 million (2000) Greater Mexico City 21.7 million Mexican States Along U.S. Border 16.6 million Population: 1950 = 25.8 million
1970 = 48.2 million
1990 = 81.2 million 7.2% Speak an Indigenous Language (6 million)
GDP: $626.1 billion in 2003 (Canada = $891.7 billion; US = $11 trillion)
GDP Growth Rate: 4.4% (2003/2004) Per Capita Income: $5,910 (2002) (Canada = $22,300, US = $35,060)
Current Socio- Demographics of Mexico (Cont.)
Income Distribution
CountryPoorest 20%
2nd Lowest 20% Middle 20% 2nd Highest 20%
Richest 20%
Richest 10%
GINI Coefficient
Mexico 3.6 7.2 11.8 19.2 58.2 42.8 .4080
USA 5.2 10.5 15.6 22.4 46.4 30.5 .48541
Other Mexico Facts of Interest
Mexico receives about 20 million tourists a year
Mexico has about 20 billion barrels of oil reserves
684,000 new cars were registered in 1999 Current Account Deficit 2003 $1 million (US $
530 billion) 2004 Inflation Rate: 5.1%
Michigan Exports 1 in 9.5 private sector jobs in Michigan are supported by exports (2001) 1 in 4 manufacturing jobs in Michigan depend on exports for their jobs
(2001) 1 in 8 manufacturing jobs in Michigan are provided by foreign controlled
companies (2002) 12,127 companies in Michigan exported in 2002 10,573 (87%) were small- and medium-sized firms (SME) employing
fewer than 500 workers (2002) SMEs generated 18.6% of Michigan’s total exports of merchandise
(2001) In 2002, foreign controlled companies in Michigan employed 204,100
Michiganians 47% in the manufacturing arena Michigan companies export to 185 countries (2003) Michigan exports to Mexico increased 68% from 1999-2003.
U.S. – Mexico Exchange Rates ($1 U.S. = in Mexican pesos)
Year Exchange Rate
1995 7.6425
1996 7.8509
1997 8.0833
1998 9.8650
1999 9.5143
2000 9.5722
2001 9.1423
2002 10.3125
2003 11.2360
2004 11.1660
U.S. Trade & Michigan Exports (Top Five)
U.S. Imports* U.S. Exports* U.S. Total Trade* Michigan Exports^ | $ Value
1) Canada (17.5%) Canada (23.2%) Canada (19.5%) Canada (60.1%) | $19.7 billion
2) China (13.3%) Mexico (13.6%) Mexico (11.7%) Mexico (12.2%) | $4.0 billion
3) Mexico (10.7%) Japan (6.7%) China (10.1%) Japan (3.3%) | $1.1 billion
4) Japan (8.8%) UK (4.4%) Japan (8.1%) Germany (3.0%) | $973 million
5) Germany (5.3%) China (4.2%) Germany (4.7%) UK (2.1%) | $706 million
Total Imports: $1,342 billion
Total Exports: $746 billion
Total Trade: $2,088 billion
Total Exports: $32.9 billion
* 2004 (January-November).^2003
Top 25 Commodities Exported from Michigan 2003, in Ranked Order
Commodity Value ($millions) Percentage Share
Parts and Accessories of Motor Vehicles 3,014.8 9.15
Parts & Accessories of Bodies of Motor Vehicles 2,589.4 7.86
Passenger Vehicles With An Engine Exceeding 3000 c 2,502.2 7.60
Spark-Ignition Reciprocating Piston Engines 1,660.6 5.04
Passenger Vehicle With An Engine Between 1500 &3000 cc 1,536.2 4.66
Gear Boxes for Motor Vehicles 1,296.3 3.94
Motor Vehicles for the Transportation of Goods 1,105.7 3.36
Parts of Spark-Ignition Internal Combustion Piston 507.5 1.54
Parts of Seats 494.0 1.54
Drive Axles With Differential for Motor Vehicles 487.4 1.48
Natural Gas 481.1 1.46
Brakes, Servo-Brakes & Parts for Motor Vehicles 448.1 1.36
Trucks With A Diesel Engine 443.9 1.35
Top 25 Commodities Exported from Michigan 2003, in Ranked Order (Cont.)
Commodity Value ($millions)
Percentage Share
Insulated Wiring Sets for Vehicles 287.4 0.87
Purifying Machine & Apparatus for Gases 281.7 0.86
Rear-View Mirrors for Vehicles 266.2 0.81
Steering Wheels, Columns & Boxes for Motor Vehicle 261.1 0.79
Automatic Regulating Instruments & Apparatus 230.0 0.70
Other Machinery & Mechanical Appliances 192.1 0.58
Metal Mountings & Fittings for Motor Vehicles 191.3 0.58
Motor Vehicles, Trans Goods, GVW between 5 & 20 Ton
184.0 0.56
Retail Medicaments in Measured Doses 173.7 0.53
Parts of Air Conditioning Machines 169.8 0.52
Compression-Ignition Combustion Piston Engines 160.2 0.49
Iron or Steel Threaded Screws and Bolts 160.2 0.49
Top 25 19,124.9 58.06
All Exports 32,941.1 100.0
Source: U.S. Census Bureau, Foreign Trade Division
Michigan’s Top 5 Agricultural Exports – 2002 ($ millions)
1. Soybeans and products – 162
2. Feed grains and products – 127
3. Vegetables – 106
4. Fruits – 79
5. Live animals and meat – 53
Total Agricultural Exports from Michigan = $735 million (2002)
(Note: Michigan began exporting apples to Mexico for the first time in February 2004)
Mexican Trade (in $ millions)
Year Export Total Exports to US (%)
Import Total Imports from US (%)
Maquiladora Imports (%)
1997 110,431.4 85.6 109,807.8 74.8 33.1
1998 117,459.6 87.9 125,373.1 74.5 33.9
1999 136,391.1 88.4 141,974.8 74.3 35.5
2000 166,454.8 88.9 174,457.8 73.3 35.4
2001 158,442.9 88.7 168,396.5 67.7 34.2
2002 160,762.7 89.1 168,678.9 63.4 35.1
2003 164,922.2 88.9 170,545.8 62.0 34.6
Top 15 U.S. Exports to Mexico – 2003 ($ billions)Rank Product Amount
1 Computer and electronic products 21.533
2 Transportation equipment 12.356
3 Chemicals 9.175
4 Machinery, except electrical 8.511
5 Electrical equipment, appliances, and component 6.184
6 Plastics and rubber products 4.826
7 Food manufacturing 4.165
8 Fabricated metal products 4.041
9 Agricultural products 3.586
10 Primary metal manufacturing 2.854
11 Textiles and fabrics 2.718
12 Paper 2.701
13 Petroleum and coal products 2.323
14 Misc. manufactured commodities 2.269
15 Apparel and accessories 1.656
Other 8.559
Total 97.457
Top 10 U.S. Exports to Mexico by State – 2003 ($ billions) Rank State Export Amount
1 Texas 41.561 (computer and electronic products, transportation
equipment and chemicals)
2 California 14.872 (computer and electronic products, machinery, and
plastics and rubber products)
3 Michigan 4.006 (transportation equipment, computer and electronic
products, and chemicals)
4 Arizona 3.229
5 Illinois 2.153
6 Indiana 2.105
7 Ohio 2.102
8 Florida 1.814
9 Louisiana 1.776
10 New York 1.705
All US 97.457
Foreign Direct Investment (FDI) in Mexico (in $ millions)
Year Total FDI ($) Manufacturing: $ (%) Financial Services: $ (%) U.S.: $ (%)
1999 13,165.6 8,984.6 (68.2) 759.7 (5.8) 7,066.7 (53.7)
2000 16,448.7 9,308.7 (56.6) 4,763.5 (29.0) 11,841.1 (72.0)
2001 26,569.2 5,854.4 (22.0) 14,409.4 (54.2) 20,361.8 (76.6)
2002 13,258.9 5,434.9 (41.0) 4,288.7 (32.4) 8,226.7 (62.1)
2003 9,431.4 4,531.7 (48.1) 1,832.9 (19.4) 5,100.6 (54.1)
Culture - Defined
Culture is “the collective programming of the mind which distinguishes the members of one group or category of people from another” (Hofstede, 1997, p. 5).
Furthermore, “culture could be defined as the integrative aggregate of common characteristics that influence a human group’s response to its environment. Culture determines the identity of human a group in the same way as personality determines the identity of an individual” (Hofstede, 1980, pp. 25-26)
Culture “is a learned, shared, and interrelated set of specialized behavioral patterns, understandings and adaptations of a like group of people” (Pisani, 2000, p. 25).
Cultural Dimensions
Geert Hofstede Power Distance Individualism vs. Collectivism Femininity vs. Masculinity Uncertainty Avoidance Long Run vs. Short Run Orientation
Cultural Dimensions
Edward T. Hall & The Language of: Time: refers to how one spends time
Space: physical distance; size and orderliness of surroundings
Things: material possessions
Friendship: the nature and make-up of friends
Agreements: commitments agreed upon
Silence:* the meaning of silence
*Developed in conjunction with Sang-Jin Kim, CMU MBA student
Mexican Culture
Hofstede’s Cultural Dimensions
Cultural Dimension Mexico USA
Power Distance High Low
Individualism vs. Collectivism Collectivist (in-group vs. out-group) Individualist
Femininity vs. Masculinity Masculine Masculine
Uncertainty Avoidance High Low
Long Run vs. Short Run Orientation Short Run Short Run
Mexican Culture
Hall’s Cultural Dimensions
Dimension Mexico USA
Time Variable, polychromic Planned/Scheduled, monochromic
Space Public, high-density Private, low-density
Things Personal status Personal status
Friendships A few long lasting friendships with many obligations
Temporal, casual , few obligations
Agreements Relationships more important than contracts (high context culture)
Contracts more important than relationships (low context culture)
Silence Denotes pain, disappointment, control Uneasiness in conversation, anger, grief
Historical Stereotypes: Mexico and the United States of America
Value Mexican View of Self North American View of Self
Mexican View of North American
North American View of Mexican
Self-Control Deal passively with stress, saying “ni modo” when something doesn’t go to plan
Rational, calm, masculine, deals actively with stress through discipline in life
Cold, insensitive, emotionless
Emotional, volatile, undisciplined
Civilization Traditional Advanced Condescending Primitive
Honesty & Trustworthiness
More important to be nice than objective, save face, maintain respect, ok to bend the truth or retain information if people’s feelings are preserved
Honest, direct, principled, literal
Manipulative, tactless, can’t be trusted
Dishonest, indirect, sneaky, not trustworthy
Character Brave, but overpowered Dominant, strong Aggressive, at times brutal and abusive
Submissive, weak
Historical Stereotypes: Mexico and the United States of America (Cont.)
Value Mexican View of Self North American View of Self
Mexican View of North American
North American View of Mexican
Time Orientation Lives in and enjoys the present, respects past, awaits a future to be determined by God’s will: “si Dios quiere”
The present is the birthplace of the future; planning, action-oriented
Obsessively future oriented. Doesn’t know how to relax. Unrealistically believes time can be mastered
Lives too much in the present while dwelling on the past; surrenders own will and ambition to chance. Procrastination.
Social Classes Exclusive, but more cultured and civilized at top levels
Orderly, efficient, upwardly mobile
Economically superior Chaotic, inefficient, unjust
Religion Repository of higher moral values (long Roman Catholic tradition)
Active Christianity, God’s appointed steward (mixed religions)
Profess a false religion Passive Christianity, God’s faithful servant
Historical Stereotypes: Mexico and the United States of America
Value Mexican View of Self
North American View of Self
Mexican View of North American
North American View of Mexican
Orientation to Nature
Nature merely “is”, can’t influence or control
Man can and should manage nature
Destructive, futilely trying to control only what God can master
Fatalism
National Intent Sovereignty, respect, recognition
Good natured, missionary, helpful, showing others “the way”
Interventionist, imperialist, subversive
Lacking vision
Work Ethic Work not inherently redeeming; something that must be done
Work is the measure of a man
Obsessive, materialistic
Lazy, work is bad
Source: Adapted from Harris, Moran and Moran (2004), Managing Cultural Differences, pp. 320-321.
Basic Mexican - US Customs
Custom Mexico United States
Greetings/Handshake “Good morning”“Good afternoon”“Good evening”“Hi”“How are you?”“Nice to meet you”Handshake Common(go to everyone in the room and
shake hands at entry and exit). Abrazo (hug) or kiss for close friends the norm
“Good morning”“Good afternoon”“Good evening”“Hi”“How are you?”“Nice to meet you”Firm Handshake at beginning
and end of a formal encounter; informally, a wave of the hand is acceptable
Pleasantries important first step in conversations
Necessary, but awkward
Eye Contact important important
Business Dining long, deals made at the end of the meal
short, business not mixed with pleasure
Social Dining begins late, no business discussed begins on time, business may be discussed
Basic Mexican - US Customs*
Custom Mexico United States
Punctuality flexible rigid
Questions in Social Gatherings keep conversation on a general level, do not pry into personal lives
Don’t discuss politics or religion, personal questions ok
Level of Formality moderately formal informal
Hospitality warm, friendly and hospitable Friendly, somewhat hospitable
Thank you Notes seen as a courtesy Desirable, not mandatory
Class and Status very important and operationalized Down-played
Language Competency Businessmen will speak English Assumes everyone speaks English
Nonverbal Gestures close personal distance, frequent touching and hand gestures
large personal distance and few hand gestures
*Source: Adapted Robert T. Moran and Jeffrey Abbott (1994), NAFTA: Managing the Cultural Differences, pp.47-49
Additional Cultural Factors*Factor Mexico U.S.
Family Family is the first priority and the base of society, children sheltered, executive mobility limited
Family usually second to work, children independent, executive mobility unrestricted
Pedagogy Memorization, theoretical emphasis, rigid and broad curriculum
Analytical approach, practical emphasis, narrow and in-depth specialization
Nationalism Very nationalistic, proud of long history and traditions, reluctant to settle outside of Mexico
Very patriotic, proud of the “American Way of Lilfe”
Etiquette “Old World” formality, etiquette considered a measure of breeding and is an expression of courtesy and consideration
Formality often sacrificed for efficiency, “let’s get to the point”
Personal appearance Dress and grooming are status symbols As long as appearance is reasonable, performance first
Status Title and position more important than money in the eyes of society
Money is the main status indicator and is a reward for achievement
Aesthetics Aesthetic side of life is important, even at work
No time for “useless frills”
Ethics Truth tempered by need for diplomacy, truth is a relative concept
Direct “yes” or “no” answers given and expected, truth is seen as an absolute value
*Source: Adapted from Eva Kras, (1995), Management in Two Cultures.
Traditional Mexican Management Style
Leading: paternalistic; autocratic; honest; demands respect and dignity
Staffing: nepotism encouraged; loyalty of staff of paramount concern
Planning: short-term focused; centralized and often capricious decision-making
Organizing: organizing activities are ritualized, codified and formalized; power tied to position
Controlling: business practices typically go unchecked to preserve organizational harmony
Additional Management Contrasts: Mexico and the U.S.
Management Practices Mexico U.S.
Work/Leisure Works to live Lives to work
Direction/supervision Traditional managers autocratic; modern managers delegate responsibility, not authority
Managers delegate responsibility and authority; executive seeks responsibility and accepts accountability
Theory vs. Practice More theoretical More practice oriented
Feedback Only positive feedback provided Tell the bad news as well as the good
Promotions Based on loyalty to the supervisor Based on merit
Individual vs. Task Person-oriented, social conventions come first, work second
Task-oriented, work comes first, social conventions come second if at all
Loyalty To supervisor To self
Decision-making Top-down Mixed
Bribery Part of doing business Forbidden
Additional Management Contrasts: Mexico and the U.S.*
Management Practices Mexico U.S.
Motivation Money, friendly atmosphere (in-group), loyalty to supervisor and firm
Money, opportunity for advancement
Teachers/trainers Are gurus who transfer personal wisdom Are experts who transfer impersonal truths
Promises Over promise, under perform Under promise, over perform
Responsibility Employees expect close supervision, paternalistic supervisors
Employees are self-starters
Model Boss Benevolent dictator Expedient communicator
Activity modality Personal relationships and “being” Accomplishments and “doing”
Records Deductive, analytical, conjectural Inductive, action oriented, factual
Respect Determined by unequal relationships and power. Respect given as a function of position
Values tied up in equality, fair play and democratic spirit. Respect earned.
*Sources: Adapted from Becker (2004), Moran and Abbot (1994), and Condon (1985).
Mexican and U.S. Negotiation Styles
Negotiation Variable Mexican U.S.
Basis of trust Friendship, then legal contract Legal contract, then experience
Role of personal involvement Primary To be avoided
Negotiator selection criteria Title, family or social ties Technical expertise, function
Role of face-saving in making decisions Great. Preserving personal dignity is paramount
Slight. Decisions are based on cost-benefit analysis
Decision-making process Spontaneous, impulsive Systematic
Negotiation agenda Slow paced Fast paced
Interpretation of mañana Not today Tomorrow
Extent, type of pre-negotiation preparation Slight, limited to awareness of company or brand name
Medium-high. Financial and technical analysis
Focus of negotiating goal Best bargain Cost-benefit ratio
Negotiation perspective Win-lose Win-win
Time perspective for deal under negotiation Short-term Medium-term
Time perspective for business relationship Long-term Medium-term
Mexican and U.S. Negotiation Styles (Cont.)*
Negotiation Variable Mexican U.S.
Adherence to agenda and deadlines Casual Strict
View of opposite party Friend, social equal Neutral
Emotional sensitivity Highly valued Not highly valued
Emotional display Passionate Impersonal
Protocol Formal Informal
Risk tolerance Low Medium-high if justified
Opening bid Extreme Reasonable
Type of arguments to defend position
Vague, emotional Concrete, rational
Power tactics Threat of withdrawal of stronger consequences
Real power, legal enforcement
Taking a settlement position Reopening previously closed issues Making a final offer
Form of final agreement Word of honor supplemented by brief written agreement
Formal legal contract
*Source: adapted from Becker (2004), Doing Business in the New Latin America, pp. 165-166.
References Becker, Thomas H. (2004), Doing Business in the New Latin America: A Guide to Cultures,
Practices, and Opportunities, Westport, CT: Praeger. Condon, John C. (1985), Good Neighbors; Communicating with the Mexicans, Yarmouth,
ME: Intercultural Press, Inc. Hall, Edward T. (1960), “The Silent Language of Overseas Business,” Harvard Business
Review, 38(2), 87-96. Harris, Philip R., Robert T. Moran and Sarah V. Moran (2004), Managing Cultural
Differences: Global Leadership Strategies for the Twenty-First Century, 6th Edition, Burlington, MA: Elsevier Butterworth-Heinemann.
Hofstede, Geert (1997), Cultures and Organizations: Software of the Mind, New York, NY: McGraw Hill.
Hofstede, Geert (1980), Culture’s Consequences: International Differences in Work-related Values, Beverly Hills, CA: Sage.
Kras, Eva S. (1995), Management in Two Cultures: Bridging the Gap Between U.S. and Mexican Managers, revised edition, Yarmouth, ME: Intercultural Press, Inc.
Moran, Robert T. and Jeffrey Abbott (1994), NAFTA: Managing the Cultural Differences, Houston, TX: Gulf Publishing Co.
Pisani, Michael J. (2000), “An American Management Training Model in a Latin American Context: Some Implications for International Business Consultants,” Journal of Teaching in International Business, 12(1), 23-39.
