Profitability is an elusive goal. Firms often find that it’s not always enough to build a better mousetrap or to sell it to more people. They often determine that they need to reduce overhead, and one of the common ways to approach that strategy is to move operations to another country where taxes, rents, wages, utilities, and other costs are lower. In recent years, Mexico has been the go-to destination for many firms looking to expand their operations..
At first glance, it can be a successful plan, but in some situations, managers and owners have found that they are overlooking some of the costs and adjustments necessary for a move, and the transition has consequently been more difficult than necessary.
Avoiding these growing pains isn’t impossible. With the right strategy, any firm planning to relocate to Mexico can easily make a smooth transition that enables them to quickly realize the economic benefits of a change of scenery.
Getting Expert Help
The first thing to do is to seek assistance from a company that has helped others in this situation. Working with shelter companies in Mexico enables you to avoid re-inventing the wheel. They’ll take you under their wing and get your manufacturing operations up and running quickly and smoothly. If you operate under a shelter company, there is no need to establish a legal presence in Mexico for the firm moving south of the border.
Factors such as finding the right location, improving or retrofitting the actual building, handling the importation of raw materials and all the other nuts and bolts are handled by an already established Mexican parent corporation. Use the experience and knowledge base of these companies to make sure you carefully structure your move to maximize the chances for success.
Considering Logistical Issues
An international move requires more than just an understanding of the complex issues. Many times, companies get tripped up by the minor things such as time zones. If you you move from the U.S. east coast to the Pacific side of Mexico, for example, you’ll need to be sure that your operations can compensate for the three-hour time difference.
Other small issues such as language barriers, local customs and traditions and different holidays can become stumbling blocks. A local entity can help smooth these over.
Deciding Based On Long-Term Criteria
One of the most common strategies for U.S. cities and states to recruit industries is tax incentives. They offer some form of property tax exemption, occupational tax exemption, or other tax credits to get a firm to choose their location over competing cities.
They often succeed, but only temporarily. Ultimately, the goal of recruiting industry is to attain tax revenue from the employer. Consequently, any tax incentives will ultimately expire, and it is often at that point that the industry relocates yet again, making the selling point almost worthless.
Any firm that makes a move based on these fleeting opportunities is making a mistake. That’s the value of a move to Mexico. The things that are attracting companies–lower wages, cheaper land, better weather–won’t change anytime soon, if ever. When a move is made for these durable reasons, it works out.
Relocating a company or conducting an expansion in another country is a major decision. There are a lot of things that can go wrong. However, such moves are becoming ever-more common, which means that there are more resources available and a growing knowledge base generated by the good and bad decisions of other companies. Drawing on all those resources will make it more likely that your potential move will be designed, built, and maintained in a sustainable way.