Mexico Textiles Apparel Nike

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Mexico Textiles Apparel Nike

  1. 1. Mexico - Textiles/Apparel - Nike June 5, 2009
  2. 2. <ul><li>Molly OLeary </li></ul>Presenter
  3. 3. <ul><li>Introduction </li></ul><ul><li>Country Analysis </li></ul><ul><ul><li>- Social - Economical </li></ul></ul><ul><ul><li>- Cultural - Political </li></ul></ul><ul><li>Textile/Apparel Analysis </li></ul><ul><li>Nike Analysis </li></ul><ul><li>Overall Assessment </li></ul>Agenda Agenda
  4. 4. Introduction Note size of Mexico
  5. 5. <ul><li>Mexico is a developing country with a wealth of potential!! </li></ul><ul><li>Climate- tropical to desert </li></ul><ul><li>Leading Natural Resources: </li></ul><ul><ul><li>- petroleum - lead </li></ul></ul><ul><ul><li>- silver - zinc </li></ul></ul><ul><ul><li>- copper - natural gas </li></ul></ul><ul><ul><li>- gold - timber </li></ul></ul>Introduction con’t
  6. 6. <ul><li>Population = 100,349,766 </li></ul><ul><li>Population growth rate = 1.53% </li></ul><ul><li>Life expectancy: </li></ul><ul><ul><li>71.49 years (total) </li></ul></ul><ul><ul><li>68.47 years (males) </li></ul></ul><ul><ul><li>74.66 years (females) </li></ul></ul>Introduction con’t
  7. 7. <ul><li>Environmental Concerns: </li></ul><ul><li>Serious levels of soil erosion from cattle raising & agriculture </li></ul><ul><li>Irreparable water and fishery damage from inadequately regulated petroleum industry </li></ul><ul><li>Mexico City - one of the most polluted urban areas in the world </li></ul>Introduction con’t
  8. 8. <ul><li>Mexico…A country rich with opportunities for foreign investment??? </li></ul><ul><li>YES!! Because… </li></ul><ul><ul><li>Improvements in social, economic, and political climates </li></ul></ul><ul><ul><li>Opportunities will benefit the companies AND local Mexicans </li></ul></ul>Introduction con’t
  9. 9. <ul><li>Class disparity by income & education level </li></ul><ul><li>Healthcare </li></ul><ul><ul><li>Quality based on ability to pay </li></ul></ul><ul><li>Literacy rate 89.6% </li></ul><ul><ul><li>91.8% males </li></ul></ul><ul><ul><li>87.4% females </li></ul></ul>Social
  10. 10. <ul><li>Religion: Catholic </li></ul><ul><li>Class structure </li></ul><ul><ul><li>Lack of mobility </li></ul></ul><ul><ul><li>Status of women </li></ul></ul><ul><li>Poor </li></ul><ul><ul><li>Cycle of subordination and poverty </li></ul></ul><ul><li>Child labor </li></ul><ul><ul><li>Often not enforced by government </li></ul></ul>Social
  11. 11. <ul><li>“ 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” </li></ul>Social
  12. 12. <ul><li>Language- Spanish </li></ul><ul><ul><li>Nonverbal communication </li></ul></ul><ul><li>Personal Space </li></ul><ul><ul><li>More comfortable with close physical contact </li></ul></ul><ul><li>Perception of time </li></ul><ul><ul><li>Slower paced </li></ul></ul>Cultural
  13. 13. Dimensions of Culture Negative Confucian Dynamic High Uncertainty Avoidance Masculine Masculinity Highly Collective Individuality vs Collectivism High Power Distance
  14. 14. <ul><li>Currency crisis mid 1990’s </li></ul><ul><ul><li>High interest rates </li></ul></ul><ul><ul><li>Devaluation of the peso </li></ul></ul><ul><ul><li>Stock market lost half it’s value </li></ul></ul><ul><ul><li>Consumer interest up to 80% </li></ul></ul><ul><ul><li>Inflation rose from 6% to 50% </li></ul></ul><ul><ul><li>Unemployment 5.5% vs 10.4% </li></ul></ul>Economy
  15. 15. <ul><li>Recovery </li></ul><ul><ul><li>Steady growth rate for all sectors </li></ul></ul><ul><ul><li>Inflation lowered </li></ul></ul><ul><ul><li>Interest rates modified </li></ul></ul><ul><ul><li>Restructuring of debt </li></ul></ul><ul><ul><ul><li>Longer payment periods </li></ul></ul></ul><ul><ul><ul><li>Lower interest </li></ul></ul></ul>Economy
  16. 16. <ul><li>Status 2000 </li></ul><ul><ul><li>Mexican peso strengthened </li></ul></ul><ul><ul><ul><li>Increases in oil income </li></ul></ul></ul><ul><ul><li>Inflation reduction to 9.73% </li></ul></ul><ul><ul><li>Debt rated by Moody’s as investment grade </li></ul></ul><ul><ul><li>Exchange rate $1=7.7519999 peso </li></ul></ul><ul><ul><ul><li>Floating vs Fixed </li></ul></ul></ul>Economy
  17. 17. <ul><li>Income Distribution </li></ul>Economy 26% income 60% population Lower income 36% income 30% population Middle income 38% income 10% population Upper income
  18. 18. <ul><li>Trade Agreements </li></ul><ul><ul><li>1994 NAFTA </li></ul></ul><ul><ul><ul><li>Progressive elimination of tariffs </li></ul></ul></ul><ul><ul><ul><li>Reduced impact of recession </li></ul></ul></ul><ul><ul><ul><li>Mexican exports increased 113% in first four years </li></ul></ul></ul><ul><ul><li>1994 NAALC </li></ul></ul><ul><ul><ul><li>International linking of labor standards and trade </li></ul></ul></ul><ul><ul><ul><li>Accountability to non governmental organizations </li></ul></ul></ul>Economy
  19. 19. <ul><li>Other trade relationships </li></ul><ul><ul><li>Columbia-Venezuela-Bolivia-Costa Rica-Chili-Nicaragua-Honduras-Guatamala-El Salvador-Panama-Ecuador-Peru-Belize-Trinidad-Tobago-Mercosur-European Union-Israel </li></ul></ul>Economy
  20. 20. <ul><li>President – 6 year term: no re-election </li></ul><ul><li>Institutional Revolutionary Party – 71 yrs </li></ul><ul><li>National Action Party </li></ul><ul><ul><li>New president: Vicente Fox </li></ul></ul><ul><ul><li>Advocates private sector oriented policies </li></ul></ul><ul><ul><li>More honesty in government </li></ul></ul>Political
  21. 21. <ul><li>Foreign policy philosophy </li></ul><ul><ul><li>Respect for international law </li></ul></ul><ul><ul><li>Judicial equality for states </li></ul></ul><ul><ul><li>Respect for sovereignty and independence of nations </li></ul></ul><ul><ul><li>Peaceful resolution of conflicts </li></ul></ul><ul><ul><li>Collective security thru participation in international organizations </li></ul></ul>Political
  22. 22. <ul><li>31 States plus the Federal District </li></ul><ul><li>President: simple majority vote </li></ul><ul><li>Senate & Chamber of Deputies </li></ul><ul><li>Legal System based on Spanish Law </li></ul><ul><ul><li>Strict adherence to legal codes </li></ul></ul>Political
  23. 23. <ul><li>The Fox Future </li></ul><ul><ul><li>Promotion of free movement of people across borders </li></ul></ul><ul><ul><li>Movement toward a North American common market </li></ul></ul><ul><ul><li>Reduction of corruption </li></ul></ul>Political
  24. 24. Industry Analysis <ul><li>5 Sectors Associated w/ Textile Industry: </li></ul><ul><li>Fibers production - Natural products such as cotton, wool, jute and hard fibers. Manmade/synthetic fibers. </li></ul><ul><li>Spinning - Preparation, opening, carding, drawing, and spinning the fibers. </li></ul><ul><li>Fabric manufacturing of non-woven fabrics - Weaving, knitting, and tufting </li></ul><ul><li>Fabric finishing - Dyeing, printing, and product finishing </li></ul><ul><li>Clothing Manufacturing – Cutting and sewing </li></ul>
  25. 25. Industry Analysis <ul><li>Mexico’s Textile/Apparel Industry: </li></ul><ul><li>400-500 foreign firms in the industry </li></ul><ul><ul><li>Levi, Fruit of the Loom, Carhartt, Dupont, Walls, Ralph Lauren </li></ul></ul><ul><li>Majority of workers are young women </li></ul><ul><li>Competition : China, Hong Kong, Canada, & Taiwan </li></ul>
  26. 26. Industry Analysis <ul><li>Total Investment (from 1994 - 1997) : </li></ul><ul><ul><li>Over a half billion U.S. dollars </li></ul></ul><ul><li>Non-maquiladora Export Earnings: </li></ul><ul><ul><li>$499 million in 1990 </li></ul></ul><ul><ul><li>$890 million in 1992 </li></ul></ul><ul><li>Import Earnings: </li></ul><ul><ul><li>Almost $2 billion in 1992 </li></ul></ul>
  27. 27. <ul><li>Maquiladoras (“in bond&quot; or &quot;twin&quot; plants): </li></ul><ul><li>Manufacturing facilities located in Mexico that process imported materials or commodities for re-export to the U.S. </li></ul><ul><li>Businesses transport goods for repair or components for assembly to Mexico duty free. </li></ul><ul><li>Once the goods are repaired or assembled, they are exported to the U.S. with a duty or tariff on the value added. </li></ul>Industry Analysis
  28. 28. Industry Analysis
  29. 29. Products/Goods
  30. 30. <ul><li>Bridge to Latin America </li></ul><ul><li>2nd fastest growing region in the world </li></ul><ul><li>Modern infrastructure and efficient communications </li></ul><ul><li>Competitive work force </li></ul><ul><li>Experienced labor </li></ul>Investment Advantages
  31. 31. <ul><li>1/2 of domestic production is purchased by customers abroad </li></ul><ul><li>Powerful trade agreements </li></ul><ul><li>Competitive quality and prices </li></ul>Investment Advantages
  32. 32. <ul><li>Unsophisticated marketing techniques </li></ul><ul><li>Limited up-to-date technology </li></ul><ul><li>Weak integration of production processes </li></ul>Investment Disadvantages
  33. 33. <ul><li>Globalization- </li></ul><ul><li>Key to today’s textile/apparel markets </li></ul><ul><li>Growing consumer preference for casual clothing, increasing demand for cotton products, and a high demand for high performance fabrics used in activewear. </li></ul>Future Directions
  34. 34. <ul><li>Technological Developments - </li></ul><ul><li>Key to future success </li></ul><ul><li>Provide new innovations </li></ul><ul><ul><li>e.g. nylon, wash-n-wear, hi strength aramid fibers </li></ul></ul><ul><li>Increases production efficiency </li></ul><ul><li>Continuous technological advancement is the key to competitiveness!! </li></ul>Future Directions
  35. 35. <ul><li>New Ground Rules - </li></ul><ul><li>Large scale, mass production methods no longer ensure competitiveness </li></ul><ul><li>Customers demand: </li></ul><ul><ul><li>High quality </li></ul></ul><ul><ul><li>Competitive prices </li></ul></ul><ul><ul><li>Wide selections </li></ul></ul><ul><ul><li>Quick responses to changing needs </li></ul></ul>Future Directions
  36. 36. <ul><li>Worldwide - 704 factories in 50 countries </li></ul><ul><li>Americas Region - 165 apparel and equipment factories </li></ul><ul><li>Americas Region - $536.7 million total revenue (6.4% of total Nike brand revenue) </li></ul><ul><li>Mexico - 35 factories - 90% manufacture apparel - 75% workers are women </li></ul>Nike - Statistics
  37. 37. <ul><li>“ 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.” </li></ul>Nike - America’s Region
  38. 38. <ul><li>Contract Manufacturing </li></ul><ul><ul><li>Nike contracts with local factories </li></ul></ul>Nike - Method of Foreign Investment
  39. 39. <ul><li>Maquiladoras - established by the Mexican government </li></ul><ul><li>Duty free imports for assembly and finishing for re-export </li></ul><ul><li>Phased out by 2002 </li></ul>Nike
  40. 40. <ul><li>Advantages of Contracting: </li></ul><ul><li>No direct investment </li></ul><ul><li>No ownership risk </li></ul><ul><li>Avoid some political/economic problems </li></ul><ul><li>Disadvantages of Contracting: </li></ul><ul><li>Loss of control </li></ul><ul><li>Need for monitoring </li></ul><ul><li>Media allegations against Nike </li></ul>Nike
  41. 41. <ul><li>Produce and dye fabrics </li></ul><ul><li>Located in Puebla </li></ul><ul><li>60 people employed </li></ul><ul><li>Owned and operated by Mexican firm </li></ul>Nike Factory - #1
  42. 42. <ul><li>Produces clothing </li></ul><ul><li>Located in Puebla </li></ul><ul><li>105 people </li></ul><ul><li>75% capacity used for Nike products </li></ul><ul><li>Owned and operated by Mexican firm </li></ul>Nike Factory - #2
  43. 43. <ul><li>Located in Atlixco </li></ul><ul><li>650 people employed </li></ul><ul><li>Sewing and Knitting </li></ul><ul><li>85% capacity used for Nike products </li></ul><ul><li>Complimentary Cafeteria </li></ul><ul><li>Owned and Operated by South Korean firm </li></ul>Nike Factory - #3
  44. 44. <ul><li>Recommendations: </li></ul><ul><li>Establish Safety Committee </li></ul><ul><li>Ensure Aisles clear for emergencies </li></ul><ul><li>Findings: </li></ul><ul><li>Long work days - 10 hours </li></ul><ul><li>Occasional underage worker </li></ul><ul><li>Normally clean, good environment </li></ul>Nike - Factories
  45. 45. <ul><li>International currency fluctuations </li></ul><ul><li>Maintain good relations in local areas </li></ul>Nike - Foreign Investment Considerations
  46. 46. <ul><li>Geography </li></ul><ul><li>People aren’t Mobile </li></ul><ul><li>Young Population </li></ul><ul><li>Trading Agreements </li></ul><ul><li>Political Environment Encourages </li></ul><ul><li>European Venture Capital Available </li></ul>Mexico Advantages for Foreign Investment
  47. 47. <ul><li>Overall, Mexico will be a strong force in the world economy! </li></ul>Conclusion
  48. 48. <ul><li>We now invite any questions or comments </li></ul>Thank You!

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