Free The BMW Group Essay Sample
The BMWGroup is one of the most famous manufactures of cars and motorcycles in the world. The BMWGroup owns three strong premium brands BMW, MINI and Rolls-Royce, which bring the company leading positing in the marker and rising profits. Nevertheless, the organization still plans to expand its production facilities to new foreign markets. This paper will analyze the external environment in Mexico as well as will offer strategies for addressing the possible issues there. Mexican market has a great potential, and the BMW can use it for strengthening leadership in the Latin America and the U.S.
Overview of BMW
The BMWGroup is presented in more than 150 countries across the world and its research network is located in approximately 130 countries in five countries. It has thirty production facilities in fourteen countries. Nevertheless, the company still desires to open new plants to satisfy the strong demand for its products. In particular, the BMW demonstrates interest to expanding its presence in Brazil, Mexico and Slovakia.
Comparison of Desirable Foreign Markets
According to the WTO, Mexico took the fifth position among top ten exporters of automotive products in 2015. Moreover, the country increased the value in the exports of these products by 5% in 2015. Although the total exports of goods from Mexico declined in 2015, it had more resilient rates than Brazil. In particular, the export from Mexico decrease by 4%, whereas export from Brazil diminished by 15%. The WTO also found that Mexican import also reduced only by 2%, which also proves the positive trends in the country. As for Brazil, it demonstrated severe recession in 2015. One of the reasons was currency issues due to falling prices for oil and other products, which led to decreasing of export earnings. Slovakia is the weakest location out of these three countries considering statistics about exports and imports of goods. Thus, Mexico, Brazil and Slovak republics hold the 13th, 35th and 39th ranks in the list of leading exporters in world merchandize trade. Therefore, the WTO statistics for 2015 reveals that Mexico is the best market to enter if to analyze the countries from the perspective of operations manager.
Political Policies. Mexico is characterized by a presidential governmental system. Therefore, the President might have some influence on business. In 2012, the President Pena Nieto has introduced a range of reforms to enhance legislation concerning monopolies, taxation and fiscal policy. The aim of all these reforms was to improve economic situation in the country. For example, fiscal reform was adopted to raise tax collection and fiscal reform helped to enhance access to cheaper credits. Therefore, the Mexican governments generally demonstrate positive attitude to business modernizing the state legislation. On the other hand, some Mexican top politicians were accused of corruption, which might affect the international business in some way. For example, there were some investigations of cases related with the Presidents family and the cabinet. These cases encouraged the President to start anti-corruption reform. Today, Mexico takes 99th rank out 144 countries in the bribes indicator of the Global Competiveness Index. The following factors allow concluding that doing business in Mexico involve some risks due to the size of the corruption in the county. Even if the BMW does not face the corruption directly, it will have to operate in unequal conditions with other competitors.
Economic Forces. Mexican has an upper-middle income. GDP per capita was about $18, 700 PPP in 2015. However, the report of the UK government demonstrates that the distribution of resources is unequal; particularly 46% of people live in the poverty, while 43% of the national wealth is taken by 1% of the population. Mexico generates more than half of its GDP from the service sector. According to the World Bank, Mexico was the third easiest county in South for doing business in 2015. Mexico is the largest exporter on the continent. Its key exports are in the same industries as its key imports. For example, the country has significant export and import of machinery, electrical equipment and automobiles. The main trading partner of Mexico is the U.S. Almost 80% of products were exported there in 2013, which means the country is very dependable on the American demand for goods. Mexican monetary policy is effective. The inflation is low and does not exceed 3-4%. The budget deficit and net public debt also favorable and even lower than in the UK or the US. International reserves reach $193bn so that the country has strong protection again currency exchange rate fluctuations. Therefore, the macroeconomic indicators are very positive.
Legal Policies. Mexico has justice and human rights issues. According to the Global Impunity Index 2015, the country occupied 58th rank out of 59, which means that criminals do not receive punishment for their illegal action. Moreover, the majority of crimes are not reported or investigated. Mexico has a lack of judges, which also does not allow improving impunity rate. Another problem is that thousands of people disappear or experience extrajudicial execution. Human rights defenders do not have full freedom. The Mexican Constitution permits strikes and creating units only if they are related to the living salary or eight hour work day. Union leaders have some power in Mexico but also workers do not enough access to these unions. In addition, Mexico is characterized by ignoring of economic, social and cultural rights while developing large projects. Finally, the country has negative statistics regarding following Intellectual Property Right.
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The list of issues includes corruption, the income gap, dependence on the export to the U.S. , high impunity rate and violations of human rights. The BMWGroup has strict rules concerning paying incentives to officials, which would protect the company from possible violations from the side of top management. In addition, Mexico is the easiest country for doing business on the continent, which means that the governors do not demand bribes directly or apply other ways of affecting business. The income gap could be converted into opportunity. Thus, the BMWGroup needs to use fewer resources to hire local human resources and maximize their productivity and motivation. The dependence on the export to the U.S. means that the BMWGroup should focus on producing cars for the American market. For example, the company can locate production of electric automobiles in Mexico because these products are attractive for American customers. As for the issue of high impurity rate, the company should develop strict guidelines about reporting all cases of crime committed on the territory of the plant. The managers should inform workers about the importance of following these guidelines. Besides, the plant should provide easy access of workers to unions as well as consider the needs of local communities while developing a project.
In conclusion, the best foreign market for doing business is Mexico. The country actively introduces reform and works on enhancing conditions for business. Today, Mexico has positive macroeconomic indicators. It also has become one of leading exporters in the world. On the other hand, the country still has quite high corruption rate. Besides, Mexico is characterized by violations of human rights and high impunity rate. Another issue is dependence on American demand for Mexican products. The BMWGroup should develop and make workers follow the guidelines regarding bribes, human rights and reporting crimes. Besides, the company should use Mexican plant for producing cars for American market. Another strategy is considering the rights of local communities while creating a project.