Mexico - Textiles/Apparel - Nike
April 10, 2023
Molly OLeary
Presenter
• Introduction• Country Analysis
- Social - Economical
- Cultural - Political
• Textile/Apparel Analysis• Nike Analysis• Overall Assessment
AgendaAgenda
Introduction
Note size of Mexico
Mexico is a developing country with a wealth of potential!!
• Climate- tropical to desert
• Leading Natural Resources:
- petroleum - lead
- silver - zinc
- copper - natural gas
- gold - timber
Introduction con’t
• Population = 100,349,766
• Population growth rate = 1.53%
• Life expectancy: – 71.49 years (total)– 68.47 years (males)– 74.66 years (females)
Introduction con’t
Environmental Concerns:
• Serious levels of soil erosion from cattle raising & agriculture
• Irreparable water and fishery damage from inadequately regulated petroleum industry
• Mexico City - one of the most polluted urban areas in the world
Introduction con’t
Mexico…A country rich with opportunities for foreign investment???
YES!! Because…
– Improvements in social, economic, and political climates
– Opportunities will benefit the companies AND local Mexicans
Introduction con’t
• Class disparity by income & education level
• Healthcare– Quality based on ability to pay
• Literacy rate 89.6%– 91.8% males– 87.4% females
Social
• Religion: Catholic
• Class structure– Lack of mobility– Status of women
• Poor– Cycle of subordination and poverty
• Child labor– Often not enforced by government
Social
• “The relatively affluent middle and upper income groups enjoy the amenities of urban life and control most of the social, political, and economic activity of the country”
Social
• Language- Spanish– Nonverbal communication
• Personal Space– More comfortable with close physical
contact
• Perception of time– Slower paced
Cultural
NegativeConfucian Dynamic
HighUncertainty Avoidance
MasculineMasculinity
Highly CollectiveIndividuality vs Collectivism
HighPower Distance
Dimensions of Culture
Currency crisis mid 1990’s
– High interest rates– Devaluation of the peso– Stock market lost half it’s value– Consumer interest up to 80%– Inflation rose from 6% to 50%– Unemployment 5.5% vs 10.4%
Economy
Recovery
– Steady growth rate for all sectors– Inflation lowered– Interest rates modified– Restructuring of debt
• Longer payment periods• Lower interest
Economy
Status 2000
– Mexican peso strengthened• Increases in oil income
– Inflation reduction to 9.73%– Debt rated by Moody’s as investment
grade– Exchange rate $1=7.7519999 peso
• Floating vs Fixed
Economy
• Income Distribution
26% income60% population
Lower income
36% income30% population
Middle income
38% income10% population
Upper income
Economy
Trade Agreements– 1994 NAFTA
• Progressive elimination of tariffs• Reduced impact of recession• Mexican exports increased 113% in first four
years
– 1994 NAALC• International linking of labor standards and
trade• Accountability to non governmental
organizations
Economy
Other trade relationships
– Columbia-Venezuela-Bolivia-Costa Rica-Chili-Nicaragua-Honduras-Guatamala-El Salvador-Panama-Ecuador-Peru-Belize-Trinidad-Tobago-Mercosur-European Union-Israel
Economy
• President – 6 year term: no re-election
• Institutional Revolutionary Party – 71 yrs
• National Action Party– New president: Vicente Fox– Advocates private sector oriented policies– More honesty in government
Political
Foreign policy philosophy– Respect for international law– Judicial equality for states– Respect for sovereignty and independence
of nations– Peaceful resolution of conflicts– Collective security thru participation in
international organizations
Political
• 31 States plus the Federal District
• President: simple majority vote
• Senate & Chamber of Deputies
• Legal System based on Spanish Law– Strict adherence to legal codes
Political
The Fox Future
– Promotion of free movement of people across borders
– Movement toward a North American common market
– Reduction of corruption
Political
Industry Analysis
5 Sectors Associated w/ Textile Industry:
• Fibers production - Natural products such as cotton, wool, jute
and hard fibers. Manmade/synthetic fibers.
• Spinning - Preparation, opening, carding, drawing, and spinning the fibers.
• Fabric manufacturing of non-woven fabrics - Weaving, knitting, and tufting
• Fabric finishing - Dyeing, printing, and product finishing
• Clothing Manufacturing – Cutting and sewing
Industry Analysis
Mexico’s Textile/Apparel Industry:
• 400-500 foreign firms in the industry– Levi, Fruit of the Loom, Carhartt, Dupont, Walls, Ralph
Lauren
• Majority of workers are young women
• Competition: China, Hong Kong, Canada, & Taiwan
Industry Analysis
• Total Investment (from 1994 - 1997):– Over a half billion U.S. dollars
• Non-maquiladora Export Earnings:– $499 million in 1990– $890 million in 1992
• Import Earnings:– Almost $2 billion in 1992
Maquiladoras (“in bond" or "twin" plants):
• Manufacturing facilities located in Mexico that process imported materials or commodities for re-export to the U.S.
• Businesses transport goods for repair or components for assembly to Mexico duty free.
• Once the goods are repaired or assembled, they are exported to the U.S. with a duty or tariff on the value added.
Industry Analysis
Industry Analysis
Products/Goods
TEXTILES APPAREL OTHER
fiber, yarns, cordsand fabrics from:
cotton jute sisal and
coconut acetate nylon polyester acrilyc polypropilene blue denim non wovens torched yarns corduroy
fiber, yarns, cordsand fabrics from:
cotton jute sisal and
coconut acetate nylon polyester acrilyc polypropilene blue denim non wovens torched yarns corduroy
trousers of diversetextile materials
t shirts of diversetextile materials
sweaters of acrylic panty hose and
night wearbrassieres
curtains suits, jackets and
blazers of woolshirts
• Bridge to Latin America
• 2nd fastest growing region in the world
• Modern infrastructure and efficient communications
• Competitive work force
• Experienced labor
Investment Advantages
• 1/2 of domestic production is purchased by customers abroad
• Powerful trade agreements
• Competitive quality and prices
Investment Advantages
Investment Disadvantages
• Unsophisticated marketing techniques
• Limited up-to-date technology
• Weak integration of production processes
Globalization-
• Key to today’s textile/apparel markets
Growing consumer preference for casual clothing, increasing demand for cotton products, and a high
demand for high performance fabrics used in activewear.
Future Directions
Future Directions
Technological Developments-
• Key to future success• Provide new innovations
– e.g. nylon, wash-n-wear, hi strength aramid fibers
• Increases production efficiency
Continuous technological advancement is the key to competitiveness!!
Future Directions
New Ground Rules-
• Large scale, mass production methods no longer ensure competitiveness
• Customers demand:– High quality– Competitive prices– Wide selections– Quick responses to changing needs
• Worldwide - 704 factories in 50 countries
• Americas Region - 165 apparel and equipment factories
• Americas Region - $536.7 million total revenue (6.4% of total Nike brand revenue)
• Mexico - 35 factories - 90% manufacture apparel - 75% workers are women
Nike - Statistics
“Our America’s consumers are starting to see Nike as an authentic alternative to their local brands and previous favorites. Nike was once a product to aspire to. Now it is a product to own. And when you do own a pair of the shoes, you save them for your game. You wear your “other brands” to the court and then lace up your Nikes.”
Nike - America’s Region
• Contract Manufacturing
– Nike contracts with local factories
Nike - Method of Foreign Investment
• Maquiladoras - established by the Mexican government
• Duty free imports for assembly and finishing for re-export
• Phased out by 2002
Nike
Advantages of Contracting:• No direct investment• No ownership risk• Avoid some political/economic problems
Disadvantages of Contracting:• Loss of control• Need for monitoring• Media allegations against Nike
Nike
• Produce and dye fabrics
• Located in Puebla
• 60 people employed
• Owned and operated by Mexican firm
Nike Factory - #1
• Produces clothing
• Located in Puebla
• 105 people
• 75% capacity used for Nike products
• Owned and operated by Mexican firm
Nike Factory - #2
• Located in Atlixco
• 650 people employed
• Sewing and Knitting
• 85% capacity used for Nike products
• Complimentary Cafeteria
• Owned and Operated by South Korean firm
Nike Factory - #3
Recommendations:
• Establish Safety Committee
• Ensure Aisles clear for emergencies
Findings:
• Long work days - 10 hours
• Occasional underage worker
• Normally clean, good environment
Nike - Factories
• International currency fluctuations
• Maintain good relations in local areas
Nike - Foreign Investment Considerations
• Geography
• People aren’t Mobile
• Young Population
• Trading Agreements
• Political Environment Encourages
• European Venture Capital Available
Mexico Advantages for Foreign Investment
Overall, Mexico will be a strong force in the world economy!
Conclusion
We now invite any questions or comments
Thank You!