4 Modes of Entry for Manufacturing in Mexico

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!