Seminar Paper, 2003
I. The Introduction
II. The speaker review
1. The environment analysis
2. The company analysis
a) Aisling Company
Porter’s Five Forces of Competition
Business-Level Competitive Strategies
The Marketing Mix (the 4 P’s)
a) Mitsubishi Company
Porter’s Five Forces of Competition
Business-Level Competitive Strategies
The Marketing Mix (the 4 P’s)
III. The analysis and conclusion
In this paper I will show the link between the international marketing theory and practice based on the example of the maquiladora industry located on the US-Mexican border. Furthermore, my research will pinpoint the fact that most of the decisions made by international mangers are a conclusion of the international marketing theory. This is the case starting with the macro analysis of the foreign markets and ending with the individual usage of the “4 P’s” regardless of the sector of business.
In the age of globalization many companies want to or are forced by the markets to expand their business to other countries. However, in the early years of the globalization process firms mostly extended their commerce usually on the national level or to the home country’ s neighbor markets, but today it does not appear anymore oddly, when a single company owns facilities located across the globe. Concerning this development, the company faces different challenges in each market, which will shape the usage of the marketing-mix. International marketing understood as “the segment of business concerned with planning, promoting, distributing, pricing and servicing of the goods and services desired by intermediate and ultimate consumers” is an important business tool in order to describe the decisions made by many companies across political boundaries.
To be fully able to understand the process of the companies’ expansion in terms of international marketing it is very important to begin the analysis with the assessment of the political and economic forces in the world, in the home country and in the particular country, where the business is supposed to be done. These forces create a framework for a company’s further decision-making. Therefore, only having the information about the political, economic and legal environment one is able to retrace the reasons for a multinational companies’ strategy choice.
Nevertheless, regardless of the environment every company involved in any business is seeking its individual competitive advantage in the particular market in order to increase profits or to strengthen its market power. Concerning this, after the determination and analysis of all external factors a company one is able to assess to key strengths of a company using for, for instance, Michael Porter’s five forces of competition or the SWOT analysis). Furthermore, the international marketing literature distinguishes between two approaches - the focused differentiation and focused low-cost strategy. However, it should be mentioned that the implementation of one of the strategies can significantly differ from another due to a not identical business environment.
Once a company has identified all external factors and has chosen its strategy, the realization of the theoretical assumptions is only due to internal decision-making. The endogenous variables are determined by the individual usage of the “four marketing P’s” (price, product, place, promotion). Every single “P” can be crucial for a company’s business. However, no standardized approach can be found, thus the best 4 P’s strategy of one company can be worthless for another. The critical factor is again the business environment, to which firms have to adjust.
Basing on the knowledge of the theoretical framework provided by the international marketing theory one can establish apparent links to the practical business world on the US- Mexican border area. However, to ensure that the assessment of the ongoing market forces is accurately, one should take the historical development and the characteristics of the whole maquiladora industry into account, as well.
The roots of the maquiladora program can be traced into the end of 1960s as it was established as an alternative to the cancelled “Brazzero Program”. The term “maquiladora” is used as a synonymous for the official description of a facility located in one of the “exportprocessing zones” (EPZ) in Mexico. The EPZs are “designated areas providing special tariff treatment and infrastructure to firms performing labor-intensive assembly operations”. Currently the program attracted investors mostly from USA, Japan and the EU, who opened over 3700 maquiladora facilities mainly along the borderline with the USA. These firms employ over 1.3 million people and generate approximately 50% of Mexico’s export with a value of $83 billion. The products are mostly moved through San Diego to the U.S. markets. The highest increase could be observed in the late 1990s due to the signing of the NAFTA agreement by the United States of America, Mexico and Canada.
Finally, it should be mentioned that business activities in this industry, which are object of this research paper, have a special character since this sector participates to a much higher degree in the globalization process than other sectors do. Accordingly, the global approach allows the observer to find noticeable links to the international marketing theory.
The competitive advantage of the maquiladoras is mainly derived from the geographical location with all its benefits (cheap labor force, no duties). This exogenous variable is the driving force for the development of maquiladoras. Nevertheless, the endogenous variables, for instance in form of the marketing mix, can support and leverage the positive factors and accordingly increase the competitiveness of the companies. However, while reviewing the statements of the maquiladora employees one should be aware of the fact that the facilities located on the borderline are mostly used only as assembly places and are not independent companies
According to the speakers, the business environment is the crucial factor for the development of the maquiladora industry for in the EPZs. Referring to Sergio Quiroz the main advantages for the location are: the cheap labor, the proximity to the US, the availability of educated management staff and the special tariff treatment. These factors, which have been recognized by the vice-president of Aisling Industries (Mexicali) and by other speakers, as well, can be identified as economic variables impacting the business environment. The basic labor force with an average hourly payment of $2.5 is considerably cheaper than in the United States, where the cost of labor are almost five times higher. Furthermore, the duty-free import and export of goods, which is the most important characteristic of the EPZs, is another economic factor, which has a positive impact on the maquiladora industry development. Besides, referring to the economic factors concerned with the geographical location, all introduced guest speakers discern the globalization process, which consolidates the markets more and more, as the one that mainly shapes their decisions.
The protective labor laws in Mexico, which force an employer to pay a dismissed worker the salary of three months and additionally twenty daily payments for each year worked in the company, mentioned by the Ernesto Duarte, the human resource manager of Mitsubishi (Mexicali), is an significant factor with regards to the legal environment of doing business. This regulation can notably hinder an efficient allocation of the labor force. Legal impacts can be also identified in form of loose environmental protection laws in Mexico, which, on the contrary to the labor laws, can attract an investment.
The choice to employ Sheena Bumer as the responsible person for the purchasing of material in China shows that the Aisling management valued Sheena Bumer’s language skills and cultural experience. By doing so, Aisling was influenced possibly unconsciously by the third factor, namely the cultural variable, to which it adjusted its decision-making. Furthermore, the culture with regards to the working consuetude of the Mexican employees is the main reason for a strong management need - this fact was observed by Sergio Duarte.
As shown in the above-discussed examples, all decisions made by the management of the maquiladora factories are indirectly a consequence of one of the environmental factors, having economic, legal, or cultural nature. As a result, the provided framework can be seen as indispensable in order to be able to comprehend the reasons for particular decisions and to evaluate the outcomes correctly. This fact is especially true referring to the examination of long-term decisions since every company must make predictions with respect to the further development of the business environment. A wrong prognostication can be responsible for the failure of all strategies regardless of the quality of their implementation. An example provides the Mitsubishi Company, which made wrong assumptions relating to the survival of the CRT technology on the market after of the LCD technology had been introduced.
Both of the of the introduced companies, Aisling and Mitsubishi, pursue different strategies in their business sector. The reason for the distinction can be accounted to the fact that Aisling is an independent company, which can alter its strategy choice independently without the approval requirement of a host company. As a consequence, the company is able to maintain its own marketing mix. On the contrary Mitsubishi in Mexicali (headquarters is located in Japan) is only an assembly facility for one of Mitsubishi’s multiple products. Accordingly, the plant in Mexico has no significant impact over strategic decisions made in Japan. Nevertheless, both are located in one of the EPZs and operate in the same business environment.
The Aisling management, in persona of Sergio Quiroz, sees the main reason for the need to change the company’s strategy in the increasing integration of markets. In the past only big companies had to oversee other markets, geographical spoken, in order to find new opportunities. The today’s ongoing developments altered this situation considerably. Nowadays also small and middle size companies, like Aisling, have to modify their business strategies in order to remain competitive.
 Albaum, Strandskov, Duerr, Dowd, p.2.
 Benett, p.24.
 van den Bosch/de Man, p.9.
 Clement, del Castillo Vera, Gerber, Kerr, MacFadyen, Shedd, Zepeda, Alarcon, p.79.
 data based on the year 2000; Lindquist.
 The structure of this section is determined by the fact that only two companies have been introduced in the class (Aisling and Aisling Sources Group is regarded as one company since the companies are joint ventured). Concerning this, it seems to be appropriate for understanding reasons to discuss the companies’ strategies separately, preceded by an assessment of the business environment, in which both companies operate.
 This fact with all its consequences will be discussed more sophisticated in the following sections.
 all provided examples are based on the statements of Sergio Quiroz and Sheena Bumer.
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