International Business Across Borders: PESTLE Analysis and Competitive Advantages in Mexico

This study focuses on the external environment of Mexico by using PESTLE analysis and analyses the competitive advantages of the business organizations. It also discusses the impact of foreign currency, existing trade policies, system, barriers and incentives of the country.

Running head: INTERNATIONAL BUSINESS ACROSS BORDERS
International business across borders
Name of the Student
Name of the University
Author note

1INTERNATIONAL BUSINESS ACROSS BORDERS
Executive summery
In the above study, it has been identified that the government of Mexico has introduced
various strategies in order to bring the development in the Mexican business industry.
However, due to lack of political and Economic support in every places the business
organizations may face various challenges. In this study, the external environment of the
country has been discussed by using PESTLE analysis. On the other hand, competitive
advantages of the business organizations have been analysed. It has been suggested that if the
government takes the firm step towards handling the political violence in the country, it will
attract the foreign investors towards investing in the Mexican market.

2INTERNATIONAL BUSINESS ACROSS BORDERS
Table of contents
Introduction................................................................................................................................3
Country overview.......................................................................................................................3
PESTLE analysis........................................................................................................................4
Competitive advantages.............................................................................................................7
Influence of foreign currency...................................................................................................10
Existing trade policies, system, barriers and incentives of the country...................................11
The existing level of foreign direct investment........................................................................11
Recommendation......................................................................................................................12
Conclusion................................................................................................................................12
Reference list............................................................................................................................13

3INTERNATIONAL BUSINESS ACROSS BORDERS
Introduction
The international business procedure is getting affected due to the geographical
location of the country. As stated by Miranda-de la Lama et al., (2018), especially the
business rules and regulation in the border area. Due to its location in between the south and
North America, the business industry of Mexico gets influenced by both the countries. Here
the study has focused on Mexico, which is situated in the southern portion of North America.
In this study, the external environment of the country has been discussed by using PESTLE
analysis. On the other hand, competitive advantages of the business organizations have been
analysed. The existing trade rules and regulation of Mexico have been highlighted in this
study. Impact of foreign currency in the business industry has been discussed. Depending on
this the rate of foreign investors and their interests towards business development in Mexico,
the study has discussed the position of the country in international business industry. At the
end of the study, depending on issues in the market required suggestion have been provided.
Country overview
Business industry of Mexico has the higher level of contribution in the economy of
the country. As per the GDP, it is in the 15th position in the world. Large portion of the
Mexican GDP comes from service and industry sector (Grande, Islas & Rios, 2015). Mexico
has the significant business market for the food and beverages, aerospace, motor vehicles,
clothing, tobacco, mining and petroleum industry. In the year 2017, GDP rate of the country
was $1.147 trillion. It has been identified from a recent report that it has second largest
economy in Latin America. However, due to various socio-cultural gaps, the Mexican people
are facing various challenges regarding its business development. The economic condition of
the country is good is few places, but in the case of rural areas, people are facing many
challenges due to lack of financial backup (Aguilar et al., 2015). As the country is located in

4INTERNATIONAL BUSINESS ACROSS BORDERS
between the North and South America, therefore both the continents have influenced the
business environment of this country. However, mostly in the case of technological
development, the European influences have been shown.
PESTLE analysis
Situation Positive impact Negative impact
Political The Mexican government
has taken different initiative
for making the stable
political situation in Mexico
(Walker, 2015). However,
the initiative has faced the
failure in the rural areas. By
taking the advantages of
this, few local organizations
have increased the price of
the products and earning
huge from the rural market.
As the study has discussed
that the political situation of
the country is not in the
stable condition. This has
been identified recently
large number of people have
died due to gang violence.
Therefore, this can be said
that the political situation is
not in favourable condition
for the foreign investors.
Economic The GDP rate in the country
is $1.147 trillion. Which
indicates the stable
economic condition (Valdés
Vázquez & Fraire, 2017).
Therefore this can be
understood from the GDP
rate is the business
On the other hand, this has
been discussed in this study
that although the economic
condition of the country is
good, however, it is not
equal in every portion of the
country. In rural areas, the
people face different

5INTERNATIONAL BUSINESS ACROSS BORDERS
opportunities in the country
is very high. Due to this
reason, the small business
organizations will get the
chance to enter the market.
At the same time rate of
employment will also
increase.
problems due to lack of
financial support. They do
not get any chance to
develop any kind of business
in the Mexican market. On
the other hand, due to
economic development
labour wages increases. This
creates challenges for the
small organizations to
appoint employees in low
range.
Social Due to economic
development in Mexico, the
standard of living of the
people also increases
(Valdés, Vázquez & Fraire,
2017). It impacts on the
purchasing power of the
people. It helps the business
organizations to develop the
pricing strategy as per the
requirement.
On the other hand, the social
status is not same in every
place of Mexico. This can be
said that due to an unstable
social situation. This is very
difficult for the
organizations to develop
business in Mexico.
Technological From the ancient period, the
Mexican civilization is
Due to technological
development, the local

6INTERNATIONAL BUSINESS ACROSS BORDERS
famous for their
mathematics, technology
and astronomy. In the
current scenario, the country
has introduced modern
technology in the business
industry. Due to the
introduction of software and
hardware in the business
industry, the online business
trend has been introduced.
On the other hand, if the
foreign technology will be
developed in this country, it
will be more beneficial for
developing business
organizations in Mexico.
investors are not able to
compete with the foreign
competitors due to their
technological support.
Legal The Mexican government
has introduced various
policies for foreign investors
in order to develop business
in the country. In the
emerging market, the
foreign investors are getting
the chance to enter without
On the other hand, due to
easier business policies, the
foreign investors can easily
grab the Mexican business
market. This will bring the
difficulties for the local
organizations, which are
trying to develop their

7INTERNATIONAL BUSINESS ACROSS BORDERS
any complication. Therefore,
this can be said that the legal
condition of Mexico is in the
favourable condition for the
foreign investors.
business in the Mexican
market.
Environmental The Mexican government
has introduced various
environmental laws in order
to develop the waste
management system in this
country. In order to reduce
the rate of pollution from the
environment, this is
considered as the wise step
taken by the government
On the other hand, due to
strict environmental laws,
the business organizations,
which are trying to enter in
the Mexican market need to
bring the changes in their
packaging materials and
waste management (Charter,
2017). Therefore, this can be
said that the strict
environmental laws can
bring difficulties for the
foreign organizations.
Competitive advantages
The term competitive advantage indicates the advantages which are being taken by an
organization or country over the competitors for achieving customers’ attention. Hence, this
can be said that competitive advantage is an important part of market analysis. By using
Ansoff Matrix, the competitive advantage of Mexican business industry in the international
market has been highlighted.

8INTERNATIONAL BUSINESS ACROSS BORDERS
Figure: Ansoff Matrix
(Source: Yin, 2016)
Market penetration
Market penetration strategies being adopted in the case of developing existing product
in the existing market (Yin, 2016). Through this strategy, the market share of the company is
being increased on the market. Depending on the market segment the market share is being
increased. This also helps the organization to grab the attention of new customers in the
existing market. In order to implement the strategy, the organizations bring changes with its
pricing strategy. By decreasing the prices of the existing products it tries to grab the attention
of the customers. On the other hand, the promotional strategy of an organization gets changed
for introducing existing product in the existing market in the better way. However, in this
study, the market penetration strategy cannot be adopted because in this case, the study has
discussed that due to rapid economic growth in Mexican market, the business organizations
have decided to enter in the New Mexican business market.
Market development

9INTERNATIONAL BUSINESS ACROSS BORDERS
The strategy of market development is being adopted in the case of expanding business in a
new market (Filippov, 2017). In this case the business organizations select various customer
segmentation for entering the new market. These strategies are mostly taken by the
organizations, which try to enter the foreign market. Though the market research the rules
and regulation in the external market are being analysed by the company. By identifying the
competitors in the market, the business strategy is being developed. The business
segmentation gets influenced by the economic condition of the country. Here the study has
focused on the strategy of market development as the business organizations are trying to
enter in the Mexican market. In order to develop the business in the foreign market, the
business organizations focus on the needs and demands of the market. As well as it also
analyses the position of the competitors for understanding the competitive advantages.
Product development
The strategy of product development is being adopted in the case of developing the
new product in existing market. In this case, the organizations try to introduce new product or
service in the market. In this case, the organization needs to focus on research on the market
for understanding the needs and demands of the customers. On the other hand, in the case of
new product development, different strategies can be adopted such as purchasing a product
from the market and branding it, the joint development by connecting with other
organizations and manufacturing the old product by adding more features and the new look.
In the case of this study, this strategy cannot be adopted, because in this case, the Mexican
market is totally unknown for the business developer.
Product diversification
As stated by Yin (2016), the strategy of product diversification is being adopted in
the case of developing new product in new market. This strategy is being adopted by the

10INTERNATIONAL BUSINESS ACROSS BORDERS
organization for increasing market share. It has been identified in this study that, in order to
develop the strategy the organizations give strong effort for developing the market fist.
Depending on the segmentation and target market, the product and its pricing strategy is
being developed. In this situation the organizations adopt vertical and concentric
diversification strategy for entering in the market with new products.
Influence of foreign currency
Foreign currency has the higher level of impact for developing business in any country. In
the case of Mexico, in 2017, the Central Bank of Mexico has taken a drastic step towards
increasing the interest rate of the country to near about 3.75% (Jensen, Quinn & Weymouth,
2015). Here the government of Mexico has decided for selling the American dollar to the
buyers directly in the market. Due to this reason, the value of PESO has fallen 17% in last
year compared to the dollar. In this year, the PESO has recovered near about 17.81 to the
dollar. As stated by Subedi (2016), after this recovery situation the volatility of Mexican
PESO in the international market has increased. This has deteriorated the economic condition
of Mexico in international trade industry. The chances of inflation can bring higher level of
impact in the business market. The government is trying to bring the possible changes in
order to stop this. The exchange rate will bring strong impact on the customer prices. From a
recent report, it has been identified that in the year 2014, the PESO was about 12.5 to 13.3
US dollar (Wilson, 2015). This was a significant movement taken by Mexican government.
In 2015, PESO was 14.7 against 1 dollar.
As opined by Cavusgil et al., (2014), due to the movement in currency exchange
market, the business of the country gets affected. The payment of supplier gets affected due
to this reason. On the other hand, employee wages also gets affected. As opined by Cavusgil
et al., (2014), the sale forecasting report also gets influenced due to the influence of foreign

11INTERNATIONAL BUSINESS ACROSS BORDERS
currency. It becomes unpredictable for the financial experts. On the other hand, the study has
highlighted the broader economy of the country, which is considered as the sensitive area and
which mostly controls the export and important business, will get affected.
Existing trade policies, system, barriers and incentives of the country
According to Kollmann (2016), the Mexican government has introduced liberal trade
policies for the business organizations, which are trying to enter in the business market of
Mexico. As stated by Martín & Meza (2015), wide range of trade agreements has been done
by the government in order to reduce the tariff of goods. The country has taken membership
in WTO in order to deal with the global rule and trade in the international market. The trade
policies have been developed by the government in order to manage the export and import in
Mexico. As stated by Subedi (2016), the government has also reduced the price for attracting
a large number of investors. The trade system which is being followed by the business market
is outward-oriented development business strategy. As the export and important business has
highly contributed the GDP rate. Therefore, by following the macroeconomic policy, the
trade movements are being analysed by the government.
Although the government has taken various initiatives in order to bring the changes in
the business industry, but due to the improper distribution in both the political and economic
facilities in all over the country has created barriers for adopting the business policies
(Walker, 2015). In order to motivate the foreign companies towards investing, the
government has also introduced exciting incentive policies. Mexico follows the Maquiladora
investment incentive policy, in which attractive incentives are being provided to the
organizations which enter the Mexican market (Petras & Veltmeyer, 2016).

12INTERNATIONAL BUSINESS ACROSS BORDERS
The existing level of foreign direct investment
Mexico is considered as one of the popular country where the scope of foreign direct
investment is very high. On the other hand, Mexico is being considered as the 15th largest FDI
recipient. From the report of 2018, it has been identified that USD 93 billion has been
invested in the Mexican trade industry. The investment has done directly in the Mexican
industry through different foreign companies. If the foreign direct investment in Mexican
industry will be analysed, it will be identified that in the year 2014, the FDI inward flow was
27508 and FDI stock was 37.5% (Petras & Veltmeyer, 2016). On the other hand, in 2016,
FDI inward flow was 26,739 and FDI stock was 45.3% (Salacuse, 2017).
Recommendation
From the above study, it has been identified country is facing the challenges due to
lack of proper control on political situation. Therefore, this can be said that if the government
takes strong step towards handling the political violence in the country, it will attract the
foreign investors towards investing in the Mexican market. On the other hand, it has been
identified in this study that due to improper economical distribution in the country, people
from rural areas are facing different challenges. Therefore, this can be said that if the
government notices the situation by providing financial support or providing job opportunity,
the condition of the people in those areas can be improved.
Conclusion
In the above study, it has been identified that the government of Mexico has
introduced various strategies in order to bring the development in the Mexican business
industry. However, due to lack of political and Economic support in every places the business
organizations may face various challenges. On the other hand, the liberal trade policies are
also very influencing in the case of influencing the foreign investors towards the business

13INTERNATIONAL BUSINESS ACROSS BORDERS
market. It has been suggested in this study that if the government notices to solve the internal
situation of the country, this will be helping the government in order to attract the foreign
investors towards contributing in the Mexican economy.

14INTERNATIONAL BUSINESS ACROSS BORDERS
Reference list
Aguilar, J. O., Xaman, J., Alvarez, G., Hernández-Pérez, I., & López-Mata, C. (2015).
Thermal performance of a double pane window using glazing available on the
Mexican market. Renewable Energy, 81, 785-794.
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L.
(2014). International business. Pearson Australia.
Charter, M. (Ed.). (2017). Greener marketing: A responsible approach to business.
Routledge.
DesJardins, J. R., & McCall, J. J. (2014). Contemporary issues in business ethics. Cengage
Learning.
Filippov, D. V. (2017). Positioning of the Organization in the Target Markets Using the
Modified Three Dimensional Matrix Model on the Example of Transport Education
Market of the Republic of Sakha (Yakutia) of the Russian Federation. Advanced
Science Letters, 23(10), 9861-9865.
Grande, G., Islas, J., & Rios, M. (2015). Technical and economic analysis of Domestic High
Consumption Tariff niche market for photovoltaic systems in the Mexican household
sector. Renewable and Sustainable Energy Reviews, 48, 738-748.
Jensen, J. B., Quinn, D. P., & Weymouth, S. (2015). The influence of firm global supply
chains and foreign currency undervaluations on US trade disputes. International
Organization, 69(4), 913-947.
Kollmann, R. (2016). Forthcoming in: International Journal of Central Banking (special issue
on 2015 Annual Research Conference of the IJCB held in Mexico City, November

15INTERNATIONAL BUSINESS ACROSS BORDERS
23-24, 2015) Discussion of" Financial Intermediation in a Global
Environment"(Victoria Nuguer, Bank of Mexico).
Martín, A. F., & Meza, F. (2015). Informal Employment and Business Cycles in Emerging
Economies: The Case of Mexico (No. 6780). Inter-American Development Bank.
Miranda-de la Lama, G. C., Estévez-Moreno, L. X., Villarroel, M., Rayas-Amor, A. A.,
María, G. A., & Sepúlveda, W. S. (2018). Consumer Attitudes Toward Animal
Welfare-Friendly Products and Willingness to Pay: Exploration of Mexican Market
Segments. Journal of Applied Animal Welfare Science, 1-13.
Petras, J., & Veltmeyer, H. (2016). Multinationals on Trial: Foreign Investment Matters.
Routledge.
Salacuse, J. W. (2017). BIT by BIT: The growth of bilateral investment treaties and their
impact on foreign investment in developing countries. In Globalization and
International Investment (pp. 25-45). Routledge.
Subedi, S. P. (2016). International investment law: reconciling policy and principle.
Bloomsbury Publishing.
Vagts, D. F., Koh, H., Dodge, W. S., & Buxbaum, H. L. (2015). Transnational business
problems. West Academic.
Valdés, A. L., Vázquez, R. D., & Fraire, L. A. (2017). Conditional correlation between oil
and stock market returns: The case of Mexico. Revista Mexicana de Economía y
Finanzas Nueva Época REMEF (The Mexican Journal of Economics and
Finance), 7(1).
Walker, D. W. (2015). Kinship, Business, and Politics: The Martinez del Rio Family in
Mexico, 1823-1867 (Vol. 70). University of Texas Press.

16INTERNATIONAL BUSINESS ACROSS BORDERS
Wilson, J. H. (2015). American Business and Foreign Policy: 1920--1933. University Press
of Kentucky.
Yin, N. (2016). Application of AHP-Ansoff Matrix Analysis in Business Diversification: The
case of Evergrande Group. In MATEC Web of Conferences (Vol. 44). EDP Sciences.