Organization of product sales is the final and most important stage in the activities of any organization in the field of production. As a rule, developing countries are a good market for products because there is less competition, while labor, infrastructure, and manufacturing are cheaper. This is a clear advantage for transnational companies to tap into the markets of developing countries. In this essay, I will focus on the main benefits of hiring offshore talent from my country – Mexico.
I would like to start with the most apparent benefit for the company – lower labor costs. It is much cheaper to open and maintain a business in Latin America than in Europe (Binder, 2019). For example, it is often profitable for a business to transfer its branch from Spain to Mexico: the language is the same, and the costs are 30-40% lower (Binder, 2019). Now in Mexico, there are very favorable conditions for foreign companies. The country boasts a large skilled workforce: about 60% of the population in Mexico is under the age of 35, and this is not just cheap but also a skilled workforce. At the same time, the population has a good level of health; life expectancy is close to that of the United States. In addition, in terms of logistics, Mexico’s proximity to the United States in the north and South America in the south is an undeniable advantage.
On the other hand, hiring employees directly from the offshore branch in Mexico is a strategically important step in ensuring business operations’ stability. Today, the political situation in the United States indicates the instability of economic ties and common problems between the United States and Mexico. The United States is Mexico’s largest trade partner in terms of turnover; Mexico is the third for the United States (after China and Canada). In 1992, the United States, Mexico, and Canada signed the North American Free Trade Agreement (NAFTA) to remove barriers to trade and investment. Since then, the export of American goods to Mexico has increased by 468%, from $ 41.6 billion in 1993 to $ 236.4 billion in 2015. Imports grew by 639% – from $ 39.9 billion to $ 294.7 billion (Mao & Gorg, 2020). However, bilateral relations are complicated by the problem of illegal migration. At the same time, the United States does not demonstrate stability in resolving this problem, hesitating between the liberalization of migration policy and constructing a wall between the two countries. At the same time, it is vitally important for a business to maintain the continuity of its operations, especially when the business is transnational.
In addition, recruiting employees in Mexico is politically beneficial because it will help strengthen businesses in the face of uncertain trade relations between the United States and China. Mexico turns out to be one of the primary beneficiaries of the trade war between China and the United States – the country took the place of the leading trade partner of the United States in the first half of 2019. During this period, Mexico delivered $ 309 billion worth of goods to the United States, accounting for 15% of all United States trade (Mao & Gorg, 2020).
On the other hand, Mexico also opens up access to other foreign markets, primarily China. In recent years, some Chinese companies have moved their production to their territory for the convenience of trading with the American market. In addition, Mexico began to be actively considered a kind of transshipment point for goods from China to the United States or in the opposite direction.
Thus, the presence of a US company in the Mexican territory makes it possible not only to stabilize its own business operations but also to outline a strategy for expanding the business and strengthening it even in the most challenging and unstable political and economic situations. Now the labor force in Mexico is on average 19.6% cheaper than in China, which increases the country’s competitiveness (Mao & Gorg, 2020). In addition, Mexico is a member of the North American Free Trade Area, making this country attractive for investors.
References
Binder, A. (2019). All exclusive: The politics of offshore finance in Mexico. Review of International Political Economy, 26(2), 313-336.
Mao, H., & Görg, H. (2020). Friends like this: The impact of the US-China trade war on global value chains. The World Economy, 43(7), 1776-1791.