1. Market Analysis of your company
Before we make together an assessment whether any expansion should be carried out, we would like to get to know you and your company better in a personal or virtual meeting.
Setting up a company thousands of miles away is not to underestimated and the processes must be looked at it very detailed. We want to understand your business by going through the framework below “Core 9” in which we discuss factors like your industry, short- and long-term strategy, USP’s, strengths, weaknesses, opportunities, competition as well as your reasons why you take an expansion into consideration. So, we will assess whether it makes financial and strategic sense to carry out an expansion.
In a second step, we will analyze in the “Feasibility Study” whether resources and infrastructure are available in Mexico to execute your activities. Please note that all those conversations and analysis will be free of costs.
Our “Core 9” framework
1. Reasons for an Expansion
We would like to understand your motivations of your expansion plans. Beside decreasing production or labor costs, there are many other reasons for an expansion.
- improving your customer service level
- build a distribution center close by the United States
- decrease costs in the supply chain
- faster return service or benefiting from synergies of new skilled labor.
- diversification of your production portfolio
- new sales market
- decrease production and labor cost
- closer to its clients
- attract talents from the continent America
We want to become an overview in what industry you are operating in, who are your customers, or what potential sales demand and sales market you will have in the future.
- market size
- projected growth.
- potential demand in the future.
- saving costs
- legal restrictions
- future sales potential
- target market location
3. Product / Service
For legal aspects, import and export calculations, and many other factors, we would like to know your product / service better
- what do you want to produce abroad
- where is the raw material come from
- will it be an assembling center
- what tasks should be executed at the new location
- Is a return service also offered
4. Strategy & Finance
A due dilligence must be done to evaluate what must be invest for an expansion and whether it makes sense to expand or not.
- how I will control the branch
- Do i have the capital to execute the expansion
5. Skilled Workforce
Another critical success factor is to assess what labor force with which skills and education are required to execute the activities
- What skills do I need to execute the tasks
- Can I only process certain tasks abroad
6. Infrastructure & Logistic
Beside the human capital, we have to look at your infrastructure and logistic requirements.
- how much logistic space is required to store product
- any dangerous goods
- how much square meter to produce
- do the products need any special storage?
- Certain climate rooms for specific goods?
- Special distribution center facilities?
- Special elevator technology
7. Values & Culture
Every country has its own culture and values – you cannot emphasize it enough, especially nowadays where the globalization prevails the standards. Implementing your values into a new culture can be challenging as you are not locally present.
We will analyse together how your values and culture can be implemented into the Mexicos' culture.
Apart from that, there are also differences in language, emotionality, religion, power or individualism within a new culture.
8. Process Improvement
An expansion to another country opens companies to implement new process to optimize operations as you do not have any resistance to change. We will analyse what processes could be improved.
An expansion to another country opens you the door to exactly do this kind of experimentation without having the fear that people will resist to change. You will hire new workforce oversea with a new mindset, people who are willing and are interested in new ways of working. In addition, running new processes are not that costly due to the cost structure of Mexico.
9. (Future) Risks
Nowadays, we are living in a fast and disruptive world in which forecasts are very tough to estimate. We have to know what challenges you are facing at the moment as well as what potential risks will arise in the future which will affect your company – with and without an expansion.
An expansion brings a lot of new opportunities; however, it also contains various risks such as corruption, culture and language barriers, government issues or lack of control due to the distance.
2. Feasibility study: makes an Expansion sense?
Once we have analyzed your market, company and established a financial forecast, we will conduct a detailed feasibility study of a possible expansion to Mexico. The best strategy for recruiting is to find a local partner who understands the landscape, including wages, labor laws, and a typical office environment – and that’s us.
We help to navigate everything from renting office space to contract norms for employees. The same regarding the law firm; there are many rules and regulations in which you just must play by – and we will analyze together whether it is executable.
In addition, always bear in mind that we build with you and other partners an eco-system, so rents, freight costs, location, logistics and administrative tasks can be shared and accordingly save costs.
Which location fits to my company?
The location we choose together for your business is a critical success factor that needs to be carefully evaluated.
Based on your needs analysis from the Company and Market Analysis, we will provide you various locations to find the right one.
Not only the infrastructure or cost will be playing a vital role, but also aspects like labor skills, supply deliveries, traffic connection, tax advantages, size of warehouses or major storage space must be taken into consideration.
We have listed up some important factors to take into consideration.
Traffic connections to the United States
International airplane connections
Taxes of the cities
Infrastructure & Logistic
Our Locations in Mexico
We have done a detailed and comprehensive analysis to decide which locations in Mexico to focus on.
Mexico is a very modern country with particularly good road, and international air connections.
However, if our partners wish to take other cities into consideration as well, we are not reluctant to do that. Based on our analysis, we have decided to focus on the following locations.
Prices to rent or buy properties in Mexico
$4.45 per m2 is the average price to rent in Mexico
Mexico is up to 300% cheaper than in the United States
$63 per m2 is the average price to buy in Mexico
Mexico and Monterrey are the most expensive cities to rent or buy a location
What logistics and transportation will be needed?
Once the raw materials or goods have arrived in Mexico, it must be transported to the factory where it will be processed and then finally shipped to the end client.
We will do precise calculations in how many days the products can be shipped from Mexico to other countries in South America.
As you can extract from the graph, many deliveries from Mexico to anywhere in the United States can take between 1 and 3 days if there is a smooth process at the customs. Air Cargo will then be used more to the countries in the south part of America (Argentina, Brasil, Chile, Uruguay, etc.).
Here again it is so important to find the right, trusted and reliable partners – and we will help you in that matter.
Human Resources: Personnel availability in Mexico
Analysing whether the number of the right, qualified people can be found in Mexico to execute the activities of your organization is a critical success factor.
Together, we will look thoroughly at the various Human Resource standpoints and look what people will be needed.
Calculations of various Costs
Freight Charges Import / Export
Freight costs can lead to unpleasant surprises because you must pay attention to a lot of details. Especially when you have to import the raw material and export the finished good.
Together we will make a calculation of how much the freight to Mexico would cost. We will determine to which Incoterms (find further below a short description) the products will be shipped, which will ensure that the quality remains high after the arrival as well as there are no delays.
Bear in mind that the cost of containers will decrease with other partners who will also establish their production or distribution center in Mexico.
Factors to Calculate
- What kind of cargo to transport
- Raw material or finished products?
- Where does the raw material come from?
- Airline or ocean freight?
- How much is the value of the freight? Volume?Weight?
- How many transports yearly
- Do you already have a partner for freight?
- Insurance, Taxes, Document and Certifications
- Document & certificate costs
- Tax costs
The U.S. – Mexico – Canada Agreement (USMCA) is a trade agreement between the named parties and replaced the North American Free Trade Agreement (NAFTA) in 2020.
Mexico was the first country in Latin America to sign a partnership agreement with the European Union (1997). The “EU-Mexico Economic Partnership agreement” entered into force in 2000 and established a free trade area between the two parties.
USMCA & EU Agreements
USMCA eliminates tariffs between the countries and has built in agreements and legal processes, with international rights for business investors.
Based on your needs, we will make investigations and gather information to figure out and calculate what impact and costs has the USMCA for your goods which would be transferred to the United States or other countries.
This includes export cost, logistic procedure, and documentation. For example if there is good with a high risk (e.g. explosive), it will have a different charge and time procedure than just normal commodities.
More information will be given in the following page: https://www.cbp.gov/trade/priority-issues/trade-agreements/free-trade-agreements/USMCA/FAQs
The taxes in Mexico are around 30%, is though depending of each state.
Thanks to a specific program called IMMEX which was introduced by the Mexican Government, no raw material which will be imported, processed and then exported from Mexico, will not be charged any taxes
The IMMEX program in Mexico is aimed exclusively at legal persons, which is an individual with rights and obligations that exists, not as a natural person, but as an institution that has been created by one or more natural persons.
Companies that are eligible to take the advantage and the benefits of the IMMEX program must export a minimum of at least $500k worth of finished products on an annual basis or must have exports that account for a minimum of 10% of yearly sales.
Legal Compliances and Certifications
We will evaluate whether your goods or service need special regulations regarding laws. In addition, it is indispensable to familiarize with Mexico’s (labour) laws. As foreigners running business in Mexico need to be cautious of their hiring practices as they have strict labour laws in place to protect the employees.
A Mexican law firm will give us legal advice and help us to make sense of the (labor) laws of Mexico in questins like:
Creating a corporation
Setup the business
Advising on labor and tax law
Zoning and building permits
If any certifications or licenses are needed, we will analyze how to get them:
Environmental Health & Safety Certifications
Information Technology/ Computer Engineering Certifications
Mechanical Engineering Certifications
Quality Assurance (QA) Certifications
Together, we will draw the supply chain of the expansion process. On one side, there probably will be material which must be transferred from the company to the new location, on the other side there, raw materials might also be transferred from other locations.
Also, the process has to be defined when there are product returns. We will draw a plan how your supply chain will look like and what time will be needed for the whole process.