Why American companies bother hanging around in Mexico
By Thomas P.M. Barnett
FEATURE: "Business Is Standing Its Ground," by Pete Engardio and Geri Smith, BusinessWeek, 20 April 2009.
Juarez, a city of 1.4m, has seen over 2,000 turf-war killings over the last year, and yet the American companies stay. Why? China's too far away and they steal your IP. In short, American companies can exert more control in Mexico, so they stay. A recent survey of U.S. manufacturers says 15% expect to cut production in China, but only 5% plan to do so in Mexico. In terms of expansion, companies planning to grow in Mexico outnumber the cutters 5 to 1. In China, that ratio is only 2 to 1. Outsourcing is being trumped somewhat by near-sourcing--as they say. The same is starting to happen with Mexican engineers versus Indians. Mexicans cost a bit more but they perform at high levels, so once you strip away the lengthier transaction costs with the Indians (distance still mattering), it's a wash. |
