1. During the 1990s, many North American, European, and Asian MNEs set up
operations in Mexico, tapping into its location-specific advantages such as (1)
proximity to the world’s largest economy, (2) market-opening policies associated
with NAFTA membership, and (3) abundant, low-cost, and high-quality labor. None
of these has changed much. Yet, by the 15th anniversary of NAFTA (2009), there
is a significant movement for MNEs to curtail operations in Mexico and move to
China. Why?
Yes, definitely regional agreement between three countries USA, Canada and Mexico has
helped to boost up the economy of Mexico in terms of GDP. But it has its adverse effect
on the overall development of Mexico. Because of US dumping of its agricultural products
in Mexico, farmers found themselves unable to make a living. Mexicans are living in food
poverty as around two million have been forced to leave their farms since NAFTA. 25%
of total population does not have access to basic food whereas 5% are suffering from
malnutrition.
Mexico’s economy is going down by prohibiting protective tariffs, supporting for strategic
sectors and other financial controls. This has been proved to be blockage for the overall
development of the nation. As most of the people are under poverty line there is increase
in organized crime recruitment and the breakdown of communities. Similarly increased in
border activity has facilitated smuggling arms and illegal substances.
Therefore because of neo–liberal, anti– development economic policies most of the MNEs
had to leave Mexico for better.
MNEs saw opportunities in one of the emerging economy China. They saw their market
opportunities and figured out the possible returns from investing in China. Unlike Mexico,
China is a communist country. Although China may be communist country, but they have
capitalist view when it comes to economy. They believe in development of the country
through economic growth. China welcomed FDIs and implemented industrial and
development policy which helped to foster the MNEs entering in the country.
Not only this, most of the MNEs profited from the low labor cost and gained maximum
competitive advantage over their competitors. There was proper utilization of the available
resources and capabilities as well. They were able to create valuable, rare, inimitable
products in an organized system in China. Due to all these positive factors, MNEs planned
to set up their plant in China leaving Mexico behind.
2. Compare and contrast first-mover and late-mover advantages and disadvantages.
First-mover advantages: Benefits that accrue to firms that enter the market first and those
late entrants do not enjoy.
i. First movers may gain advantage through proprietary
technology. ( Apple’s ipod, ipad and iphone)
ii. First movers may also make pre-emptive investments. A
number of Japanese MNEs have cherry picked leading local suppliers and distributors in
Southeast Asia as new members of the expanded keiretsu networks (alliances of Japanese
