Nowadays, the world becomes global, integration processes and international division of labor deepen, and foreign investment grows rapidly. Businesses make decisions to place their productive forces not only in domestic markets but also overseas, based on the benefits of international diversification. The 18 Degrees Gourmet Frozen Yogurt Bar also follows this tendency and establishes its business in Mexico. However, the management of an international company is complicated by the need to incorporate national differences of economic, political, legal, and cultural order in the business organization. To adequately meet the demands of the changing international environment, the managers must pay special attention to the formation of a positive corporate culture, adaptation strategies, organizational structures, and forms of coordination and control over a specific environment. Thus, the paper analyses the trends in Mexico, its environment, culture, and peculiarities of Mexican employees, prevailing and necessary leadership style, as well as studies deployment and labor relations systems in order to understand how to adapt the foreign business in Mexico.
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Company 18 Degrees Gourmet Frozen Yogurt Bar
18 Degrees Gourmet Frozen Yogurt Bar is an international franchise that was established 10 years ago in Fullerton, California. The company provides a self-serve frozen yogurt with more than 200 flavors and a huge variety of toppings. The mission statement of the company is to develop an efficient business through coherence and hard work. The management of the entire company is done by the professional with 20 years of experience in retail trade who perceives the team as a driver of the company. Thus, the management style is democratic. It is a big company with locations in twenty US states and counting for more than 325 locations worldwide including Guam, Australia, Japan, Venezuela, UAE, and Thailand. Currently, the company wants to go further internationally in order to develop and to be the number one not only in the US but also worldwide.
When going further internationally, it was decided to open a new location of the 18 Degrees Gourmet Frozen Yogurt Bar in Mexico. First of all, the reason is the proximity to the USA. The developed road infrastructure, overland connection, and a short distance allow the company to easily transfer its business to Mexico. Additionally, there is a high level of bilateral trade and strong cultural and economic ties that connect both countries. Mexico is the United States’ third largest trading partner; while the United States is by far Mexico’s largest trading partner. Mexico ranks the third US imports market after China and Canada, and the second, after Canada, US exports market (Villarreal, 2016). Thus, the American product is widely known for the Mexicans, which positively affects the international management. The reason here is that there is no need to make additional efforts for introducing the American, business, culture, and the way of doing things to the Mexico citizens.
From the climatic point of view, Mexico is a very favorable country with the year-round summer and the temperature that usually does not fall below 18-20 degrees Celsius (The World Factbook, n.d.). Consequently, there are many year-round tourists that could be potential clients of the company. Besides, the frozen yogurt is exactly what is needed in a hot climate. Such climate also involves a wide variety of fruits that are basic ingredients in the frozen yogurts of 18 Degrees Gourmet Frozen Yogurt Bar. Therefore, this alleviates the problem with the resources and supplies.
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Besides, Mexico is one of the most economically developed countries in Latin America. This country claims to be in the group of so-called rising giants and new major global players. Mexico is considered to be the most suitable state for the business because of favorable taxes. Furthermore, nowadays, it is discussed there to lower the federal sales tax from 16 to 13 percent and the corporate tax from 30 to 25 percent (The World Factbook, n.d.). The country is able to create and maintain the environment where a competitive business occurs. Moreover, Mexico has currently one of the largest networks of tax and information exchange treaties and trade agreements. This brings it into the list of the world largest and most open economies (PwC Mexico, 2015). All these factors, naturally, have a great impact on the attractiveness of Mexico for the 18 Degrees Gourmet Frozen Yogurt Bar.
Additionally, in terms of population, Mexico is the 12th largest country in the world (The World Factbook, n.d.). Besides, there has been an increasing demographical trend in the country for the last decades. Thus, the population was only about 50 million in 1970; it was more than 97 million in 2000; and the current population is more than 123 million. In 2016, the population growth rate is 1.15 percent. However, the consequence of such demographic boom is high level of unemployment, which accounts for 4.4 percent (The World Factbook, n.d.). Mexico is also referred to the youngest countries in the world. For instance, the population aged under 14 years constitute 27.3 percent of the citizens, and the percentage of the population aged 15-24 is 17.72 (The World Factbook, n.d.). All the above demographic trends influence the international business of the company positively because there will be no challenges to recruiting. Besides, the small wages that are typical for Mexico allows the 18 Degrees Gourmet Frozen Yogurt Bar Company either to pay lower wages saving costs or to leave high American wages attracting more qualified personnel.
Moreover, there is a trend of educational development in the country. In Mexico, the number of educated people is increasing five times faster than the entire population, even in spite of domestic opportunities for them that are also left behind. Thus, there will be no problem with the educated skilled workers in the future.
Finally, there is a growing trend of awareness of the dairy products’ nutritional value in Mexico – the ones on which 18 Degrees Gourmet Frozen Yogurt Bar is based. It was caused by the growing middle class and urbanization. Mexican consumers are becoming more health conscious, leading the way for more healthy and balanced products that include lactose free, light, and low-fat dairy products. The dairy food consumption is growing especially among young generation, on which the business is oriented. Besides, there is a growing trend particularly in yogurt categories, which is driven by the preference for taste, flavor, and variety among Mexican customers. This trend influences the business as well as the international management positively because there will be no need for additional cadres that will pursue the value of yogurts in masses.
Being an expatriate manager, one will face the challenges of high migration trends. Every year, the lack of work and little income force tens to hundreds of thousands Mexicans to seek for a better life in the United States (about 10% of the population and 27% of the Mexican labor force live abroad, mainly in the US) (The World Factbook, n.d.). It will create challenges to find necessary staff. Additionally, there is a high level of corruption and crime that could occur in the workplace causing serious obstacles. There is also the mass poverty of the population caused, on the one hand, by non-presentable looking employees and, on the other hand, by inability of the population to visit bars. Finally, there is a strongly developed small entrepreneurship in the country that will create a competition for the company. For instance, there are many local shops selling handicraft ice cream of different kinds.
Mexico is a democratic, federal republic comprising states that are free and sovereign internally but united in a federation created according to the principles of the Constitution. The Mexican Law is well codified: the individual codes are adopted by almost all the major branches of the law. The system of codes is increasing complemented by the current legislation. Sufficiently large legislative powers are reserved to the states.
The country is working on improving its legal system. It now implements harsher penalties to criminals. Besides, there are better property rights now. In 1991, with the Mexican intellectual property law, the country dramatically improved technology rights. Currently, Mexico has a strong reputation for protecting international intellectual property, patent, and trademark rights and is a party to several international treaties including the World Intellectual Property Organization Copyright Treaty.
The codes of conduct in the country usually include respecting the rights of all people, obeying the laws of the country, impartial and professional behavior, not allowing personal feelings and prejudices to influence a decision, being honest, not using the position for personal benefit, respecting the confidentiality, never using excessive force or violence, etc.
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Political and Economic
First of all, there is a strong presence of political parties in Mexico that have significant power. Currently, The Institutional Revolutionary Party remains a significant force in Mexican politics though it lost its previous positions. Recently, a new president of the country, Felipe Calderon, was elected, who publicized his fight against the drug cartels that have control over areas in Mexico. Additionally, Mexico is a member of NAFTA. It provides the country with fewer restrictions to importing things that include the materials necessary in yogurt business.
However, the political environment of Mexico is quite unstable and undermined by bureaucracy. There is a high percentage of poverty (almost 53%) in the country that was mainly caused by political economy of Mexico (The World Factbook, n.d.). The structural adjustment policies were prescribed by the IMF and World Bank due to not carrying enough policies to encourage development. However, the government could not handle the situation because the money was lent providing the opening of the economy and cutting social expenditures to repay the loans, thus increasing the poverty.
Mexico is a newly industrialized country. Its GDP real growth rate is 2.5%, and GDP per capita is $18,400. Mexican labor force accounts for almost 53 million people, which is ranked the 13th in the world (The World Factbook, n.d.). Additionally, it is an industrial-agrarian country with fruits and dairy products in the list of the most developed agricultural products, and food and beverages business in the list of the most developed industries in the country. Besides, tourism is an important sector in Mexican economy. Finally, the economy of Mexico is strongly dependent on the USA. Mexico exports 81% and imports 47% of all goods to the US (The World Factbook, n.d.).
The first Hofstede’ cultural dimension is power distance index. Mexico is the country with high power distance. This means there is a large wage difference between the management and workers; promotions are done on the base of trust; training is done for obedience; management is selected on the base of social class; and there is a high supervision and coercion. The second dimension is individualism versus collectivism. The latter is inherent in Mexican people. This means people focus on group; the decision making is made by groups; the achievement and responsibility is group-based; and managers set group goals. The third dimension is masculinity versus femininity. In Mexico, there is high masculinity. It means a brilliant professional career is a drive; work is the motto of life; promotion is based on gender; managers make quick decisions with assertiveness and aggression. The last dimension is uncertainty avoidance index. In Mexico, it is high. High uncertainty is characterized by high activeness, impulsiveness, and impatience. For Mexican people, different means dangerous, so people seek security and avoid competition.
In contrast, there is a medium power distance, high individualism, more masculine culture, and medium uncertainty avoidance in the USA. This difference creates additional challenges for the management to adapt to new culture. The manager will have to change his/her actions especially due to the difference in level of individualism, to change its leadership to one that appeals to duty and commitment in particular.
Additionally, according to Trompenaars’ findings, the Mexicans’ more inherent ascription means they respect superiors; background and age are the main qualifications; and managers emphasize seniority. The people are also affective, which means strong emotional relaxedness and expectance of strong commitment to positions. Besides, Mexicans’ inherent particularism means trustworthiness, focus on relationships, and each case being treated due to circumstances. Finally, there is a diffuse orientation that implies ambiguous or evasive communication and directions by managers, mix private and business levels.
Mexicans are very religious nation with their most common religion being Catholicism. Beside Catholics, there are Protestants living in Mexico (about 3%). Moreover, there is a small but thriving Baha’i and Judaic communities (The World Factbook, n.d.). Family life is important to Mexicans. Family interests are valued over individual well-being. Families are large and tend to be paternalistic. Additionally, Mexicans do not organize their lives using strict schedules. Time is often not measured quantitatively but rather qualitatively. As it was previously told, Mexicans have positive attitudes towards change and negative ones to individualism. They also have likely positive attitudes towards material factors because of poverty and strong desire to immigrate to the USA for better life.
Thus, the strengths of Mexico are proximity to the US, young workforce, resources, and NAFTA membership. Its weaknesses are deep-routed political corruption, raging drug war, migration deficit, poverty, and dependence on the US economy. Further, the opportunities are growing economy, growing population, growing middle class, and potential agreements. Finally, the threats for Mexico are potential of US economy slowdown and unexpected hurdles in implementing reforms.
Native language of the majority of modern Mexicans is Spanish (93%) or rather its special version. There is also 5.7% of people speaking Spanish and indigenous languages, and 0.8% of population can speak indigenous languages only. The latter include various Mayan, Nahuatl, and other regional languages, the number of speakers of which is constantly growing (The World Factbook, n.d.).
Mexico is the country with a high context culture. Mexicans emphasize on how the information is communicated but not on the words said. Besides, the written rules are less important than the understood and unofficial ones. Thus, the high context culture provides the necessity to build personal relationships when doing business with people in Mexico. Without such personal relationship, substantive communication will unlikely happen (Victor, n.d.).
Mexicans use various non-verbal cues in their communication. They use gestures a lot as well as numerous movements of the torso and hands. They dress conservatively throughout the country with the shined shoes and well-groomed hair. Mexicans emphasize on words less but more on voice inflections that are usually friendly. Besides, they prefer to cut the space between them and the interlocutor. According to the events, specific non-verbal cues are used in particular situation. For instance, vocal cues are involved in more negative events, and the touch is a cue in more positive events.
There exist many stereotypes regarding Mexicans. First of all, people think that Mexicans relate to gringo badly. However, the research shows that people in Mexico are very friendly and nice. Besides, people think that Mexicans are very laud. Instead, they are quiet and peaceful people. Additionally, people say that all Mexicans speak the purest Spanish. However,, there is a language version of the Spanish language, which represents a group of dialects.
Thus, the only communication problem the manger will face in Mexico is the collision of different communication patterns among workers coming from the US and Mexican workers. The Americans may badly perceive the Mexican close communication and vice versa. The way out is to learn, to adapt, and to teach others.
The negotiation process consists of five stages: preparation, relationship building, exchange of task-related information, persuasion and concessions, and agreement (Deresky, 2011). At the first stage, the research is done about the collaborator to understand his culture and prevent any variables that may be encountered. In the second stage, the Chinese and Mexicans spend much time to build relationships; Americans consider it less important. At the third stage, while exchanging information, the Japanese make extensive requests for technical information; Americans give information directly and briefly; and Mexicans focus on information about the relationships rather than on technical details. At the fourth stage, the Japanese and Americans spend much time perceiving it as a very important issue, though Americans go to persuading earlier. At this stage, such dirty tactics as promise, threat, warning, reward, punishment, self-disclosure, command, refusal, interruption, etc may be used. The messages emanating from non-verbal behavior are difficult to deal with. Non-verbal behaviors are deeply rooted in all cultures and are not changed when negotiating. At the last stage, it is better to negotiate sequentially in America; not to agree upon first propositions in China and Russia; and vice versa in Sweden.
First of all, due to high power distance of the Mexican culture, Mexican employees will expect strong supervision from the management, authoritarianism, and inequality between the low- and high-level workers. They know their boss has to have power; it is a common thought for them. They will also expect much higher wages for higher positions. However, they will still value being treated with respect by employers. Once respected, the Mexicans create a strong relationship. They will also value the treatment that pursues their best interests. Mexican workers need the job and working environment that will positively affect their families. Thus, they need such requirements of productivity that will not affect their family time. Finally, Mexicans will appreciate the management that takes into account the goals and outcomes valued by them. Therefore, the workers are going to be respectful to the supervision, but they will also expect to be respected.
Additionally, due to the collectivist culture in Mexico, the Mexican employees will expect the focus on group morale and cohesiveness by the management. They will also expect a low turnover due to tight family ties in the company. Thus, it will be a big tragedy both for an individual losing a job and the whole collective (group). The Mexican employees will need their group goals to be set and the processes to established in such a way that the decision-making process will be done in groups. They will also need the emphasis on working in groups and being commonly responsible. The Mexican workers will value familistic attitudes from the management. They will value emotional support, advice, and reassurance. Furthermore, the workers are going to be ready to work in groups while not creating challenges for a friendly and family working environment.
Besides, due to the prevailing masculinity culture of Mexico, the Mexican employees expect males to be the managers of the company. They expect a strong male hand that will manage the staff with authoritarianism, strict supervision, and encouragement or penalties where necessary. The distinct definition of roles and positions within the company with men being supervisors for women is also expected. Thus, the Mexicans will value the preference of men over women, hence employing and designating the position as well as higher male wages. The Mexican employees will also need to be sure in the ability to develop as they are strongly career oriented individuals. This involves frequent cases of promotion, namely gender tracking. Besides, they need to know they are the best. Thus, the workers will be more likely of male gender and ready to work for the prosperity of their careers.
Moreover, due to high index of uncertainty avoidance in Mexican culture, the Mexican employees prefer to avoid uncertainty. They fear ambiguous or unknown situations, therefore expecting the management to prevent it by creating strict schedules, plans, etc. They have the emotional need for rules. Even if the rules are not effective, they will continue to work hard. They will expect the company to have rigid codes of conduct and ethics. Mexican employees will expect security provided by the management. They will also expect the management to uphold traditions and preserve family values. The Mexicans will also prefer known to unknown. They will value the ability to be confident about the future and that the job will not be lost unexpectedly as well as the absence or small competition on the working place. Therefore, Mexican employees are going to comply with the rules, be averse to risk, and be hardworking in order to save their jobs.
Thus, on the basis of the possible values, needs, and expectations of the Mexican employees stated above, there can be created a motivational package for the Mexican staff. First of all, it is necessary to motivate personnel on the assumption that people like their work and establish extrinsic and intrinsic rewards. Such motivational peculiarity will have to lower the power distance within the company. Secondly, it is necessary to motivate the Mexican staff on the assumption of the moral involvement focusing on group morale and cohesiveness. This will strongly motivate the employees because they work better in groups, as well as it will rally and unite the employees more. Thirdly, it is necessary to motivate the Mexican employees with the emphasis on performance and growth as well as on excelling to be the best. Besides, there must be the message communicated about the work being central to life and the job recognition being important. Such motivation will be effective in the masculine culture. Finally, it is necessary to motivate the Mexican staff with the emphasis on security but competition. This involves not threatening employees with losing their jobs due to high uncertainty avoidance as they may leave such conditions. However, this also involves creating competition in the working environment by providing rewards for the most productive workers, therefore increasing productivity of all personnel.
The prevailing leadership style in Mexico is autocratic. It means that the leader of the company makes the final decision. Besides, there is a high power distance in the country. Therefore, the managers could listen to the thoughts of their employees, but they do not consider them. However, currently, the views have shifted towards seeking for advice and opinions of the subordinates. Additionally, some leaders in Mexico may earn their positions due to simple inheritance. Despite this fact, they will have enough power in the eyes of employees if they try to develop more social networks. The Mexican leaders are not delighted with the split of their power due to the actions of their fathers. As a result, they prefer delegating the responsibility by placing particular assignments. Moreover, there is a high context communication culture in Mexico causing indirect communication because leaders or managers want to save their faces. The leaders do not treat giving a negative feedback as a fragile issue, so they do not suppose giving it in private.
This style seems to be an appropriate relative to the findings. First of all, it is supported by high power distance and high context communication culture. However, it can also be supplemented by the following facts. In a high power distance and masculinity in Mexican culture, the leadership style is based on the Theory X involving the belief that the employees are less intelligent and lazier than their supervisors as well as being authoritarian with close supervision. Besides, high uncertainty avoidance of people in Mexico also involves the task-oriented leadership style that is not flexible. Additionally, the low individualism of population in Mexico and their leadership style also appeal to duty and commitment. Thus, in general, the leadership style in Mexico is authoritarian and task-oriented with the appeal to duty and commitment.
However, such leadership style does not seem fully appropriate to conclusions regarding motivation and work attitudes in Mexico. The employees should be motivated through the employers’ help and close relations with them. The Mexican personnel will also be motivated if they are praised and feel affection and compassion. It is not involved by the autocratic and the authoritarian leadership style.
The major contingencies affecting the leadership situation are leader-member relations, task structure, and the leader’s position power. In terms of the first contingence, the relations between the leaders and employees are likely to be poor. Such authoritarian leadership style that exists in the country involves decision-making process at higher levels of management. The managers do not trust the opinions of their personnel. Thus, in its turn, there is no trust and confidence in leader from the side of the staff. It means the leaders in Mexico are in less favorable situation comparing with the leaders from other countries who are trusted more. However, the Mexican leaders still have a strong influence due to their high power distance. In terms of the task structure, the tasks provided by the leaders are clear and structured. It is involved by high uncertainty avoidance as it was previously told. Employees know clearly what and how they should do, therefore preventing the uncertainty and creating a favorable situation. However, the Mexican people may have sometimes little experience in solving problems that require special skills. The reason is the immigration of the skilled workers to the USA. Finally, the Mexican leaders have strong power over their subordinates. It is also due to the high power distance culture in the country. More power of leaders in Mexico means more favorable leadership situation.
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In such environment where exist poor relations between the leaders and workers, structured tasks provided by the leaders, and strong leader’s position power, the most effective traits and behaviors would be the ones of high LPC (least preferred co-worker). It means the leader can focus on building relationships first. In this case, the vertical and horizontal relationships are built on the basis of goodwill, openness, and attentiveness to one another (if reasonably). The leader trusts and respects the subordinates, and the subordinates show respect to the leader. Currently, many employees are guided by the favorable relationships in the working climate, and such model fully justifies their expectations. Besides, in the absence of tight relationships, the rejection of the leader’s authority by the employees, the development of negative relationships, and the violation of the climate within the team as a whole may appear.
Thus, the cultural profile of Mexico completely differs from the findings of the typical leadership behavior that will be the most effective. The best leadership behavior is to develop relationships in the working environment, but the Mexican culture has a high power distance involving minimum relations between superior and subordinate and a strong power of leader over employees as well as authoritarian leadership.
The polycentric staffing policy will be used for top-level managers. This involves recruiting the Mexican to manage 18 Degrees Gourmet Frozen Yogurt Bar in Mexico. He was chosen because there will be no adaptation problems and no language barriers, it allows continuous management, it is less expensive, there are less tensions between superior and subordinates, therefore, it allows building stronger relationships, etc.
For expatriates and their families moving to Mexico, it should be provided the training program on the knowledge of Mexico and its culture as well the management style prevailing in the country. They also must be taught the ways of preventing possible misunderstanding, how to work with local employees, and pass an in-country coaching. All these measures will not only train expatriates but also prevent the culture shock.
Labor Relations System
The labor relations system in Mexico has strong labor protections comparable to the industrialized countries. It stems from the “corporatist” view on society where there are the workers, peasants, employers, and the middle-class people. In Mexico, as well as in the US, people can freely unite in labor organizations and defend their rights; the unions have a strong bargaining power. In both countries, the worker participation management is present, though there are more restrictions within this field in Mexico. The difference in worker participation management causes the HR department of the company to adapt and make the management be done with a low participation level of simple workers.
Mexico is a favorable country to establish the 18 Degrees Gourmet Frozen Yogurt Bar. There is a trend of growing economy, growing population, growing middle class, educational development, and growing awareness of the diary products’ value. It has favorable political, legal, and economic environment. Thus, there is a high power distance, prevailing collectivism, masculinity, and uncertainty avoidance index. Besides, the Mexicans possess inherent ascription, particularism, diffuse orientation; and they are affective. It is also a high context country using many non-verbal cues in communication; and when negotiating, they strongly focus on relationships. Therefore, it is important to motivate employees using rewards system with a special focus on their group preference. Additionally, the leadership style prevailing in Mexico is autocratic and authoritarian. However, it will be better to use high LPC leadership tactics orienting on relations between the superiors and subordinates. Finally, before entering Mexico, it is necessary to provide training programs for expatriates and adapt the company’s HR management.