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MEXICO'S ECONOMICS
Term Paper ID:17037
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& possibility of developing marketing plan for selling fax machines. National debt; political, legal & socio-cultural aspects, product analysis, pricing, distribution. Table.... More...
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Paper Abstract:
& possibility of developing marketing plan for selling fax machines. National debt; political, legal & socio-cultural aspects, product analysis, pricing, distribution. Table.
Paper Introduction:
INTRODUCTION
This research develops an international marketing plan. The target country is Mexico. The product is facsimile transmission machines (fax). The first section of this plan provides a pre entry environmental analysis, while the second section includes both a product specific environmental analysis, and an examination of marketing in the target country. The last section ties together what has been learned from the first two sections.
PRE ENTRY ENVIRONMENTAL ANALYSIS
The pre entry environmental analysis is developed in three separate areas. The current economic environment is considered initially, followed by considerations of Mexico's political/ legal environment, and its sociocultural environment.
Current Economic Environment
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References A dwindling supply of migrants. The fax machines will be promoted in Mexico through both direct mailand print media advertising. The desperate character of Mexico's external economic relationscreates serious problems of both confidence and capacity in the domesticsector of the economy. This range is so widethat the upper-level, middle-income classification has relatively littleuseful meaning. In times of unusual andunexpected shocks (such as the decline in the world price of crude oil, andthe Mexico City earthquake), the debt load may become unsustainable,because (1) an attempt to sustain it will eventually wreck the economy, and(2), once the economy is wrecked, there exists no hope of continuing toservice the debt. Under existing conditions, such reductions could beeffected only through the application of stringent austerity measures to aneconomy in which the per capita GNP is only US$2, 8 per year, and where4 .6 percent of the country's total annual income flows to only 1 percentof the population (The World Bank, 1988). As the purposes for which cities are founded thrive, so then do thecities thrive and grow. The facts on fax. Within the existing import/exportstructure, Mexico has no hope of making any significant reduction in itstotal external debt. Paxton, J. The storm was weathered in 1988--by both the PIR and the country. The critical status of Mexico's externaleconomic relations demands that the foreign sector be examined first. Merrill Publishing. Not all cities, however, wither. The dominant politicalparty (itself a coalition) has enjoyed an uninterrupted reign since 1929,when the Institutional Revolutionary Party (PIR) was formed through acoalition of revolutionary factions to create political stability in thecountry. Friedman, H. Mexico's current economic environment cannot be considered outside ofthe framework of the country's enormous external debt. Sincethat time, the country has lost approximately US $55 million in foreignderived revenues for each one-dollar decline in the world price of crudeoil (Hartland-Thunberg, P., & Ebinger, 1986). A world of cities. MARKETING FAX IN MEXICO This section includes both a product-specific environmental analysis,and an examination of marketing in Mexico. It isadvantageous to marketers to have as short channels of distribution as isfeasible. The initial step which must be taken by a marketing organization inthe development of a pricing strategy is the establishing of pricingobjectives. Martin's Press. (Ed.). Four stages of the product life cycle arerecognized by most marketing analysts--introduction, growth, maturity, anddecline (Kotler, 1985). 191-192.) Consumers typicallyrecognize five distinctive product characteristics--quality level,features, styling, brand name, and packaging. (1986). The debt load of developing countries creates problems associated witheconomic stabilization in the best of times. Columbus, Ohio: Charles E. (1985). 55-98). Differentiation is one of the principal techniques bywhich product positioning is accomplished (Leavitt, 198 ). Onthe one hand, if the PIR retains power again through what opponentsconsider election fraud, the political structure may break down completely. Radio-electronics, LIX(11), 45-53. The physical distribution of products is accomplished through channelsof distribution. In a developing economy, such as that in Mexico, the demand for faxmachines will not be as great as that in a country such as the UnitedStates. With respect tofax machines, product differentiation is sought primarily through productfeatures. A last factor of significance in the development of product strategyis that of product positioning--what place will be sought for the productwithin the market. Mexico City is magnet cities within Mexico (A dwindling supply ofmigrants, 1986). These data are presented in Table 1, which may be foundbeginning below on this page. In 2 , Mexico City will account for 32percent of Mexico's total population. (1988, November). To place Mexico's external debt into a more easily graspedperspective, it presented in the context of selected macroeconomicaggregates. K. Profit-maximization pricing, which refers to the extraction ofthe maximum profit over the shortest possible time period. Some adapt, and evolveinto new types of cities; a process which continues to stimulate growth.Continued growth, however, does not, in and of itself, indicate success. (1988). It is obvious that the stage of the life cycle inwhich a product is situated will significantly impact the type of productstrategy adopted by a marketing organization. Ebinger (Eds.), Banks,petrodollars, and sovereign debtors (pp. Mexico is ranked as a middle-income country by The World Bank (1988), and, within that classification,as an upper-level (as opposed to a lower-level) economy. Mexico's per capita GNP of US$2, 8 places the country inthe second tier of this group of countries.Political/Legal Environment The 1988 general elections illustrated the fragility of thecontemporary political/legal environment in Mexico. The industrial revolution, together with the economics ofnineteenth century transportation, created the great cities of thedeveloped countries, and similar effects contribute to the creation anddevelopment of Third World cities in the twentieth century (Huddlingthrough, 1986). The political opposition on the leftwould, if they won, lead Mexico into a socialist political orientation.The political opposition on the right, should they win, would proclaimReagan-style free enterprise; however, the most likely outcome would be aright-wing Latin American government which would stifle all other politicalopinion.Socio-Cultural Environment Mexico is fast becoming Mexico City. New York:St. Thus, people congregate in cities, whichare located in places possessing some natural advantage--a port site, anenergy supply, a vital natural resource, and so forth. By 2 , Mexico City is expected to be the largest urban area inthe world. The marketing mix for fax machines in Mexicois considered within the contest of the four-Ps of marketing--product,price, place, and promotion. World development report. At that time, Mexico City's population is expected to top 3 million (The World Bank, 1986). External debt of developingcountries. Harvard Business Review, LVIII(1), 115-121. With respect to scheduled annual principal and interest payments onthe total external debt, these payments require (as indicated in Table 1)95.1 percent of Mexico's net exports. In Mexico,therefore, fax machines will be marketed as a new entry into the officeequipment field. (198 , January-February). In 1988, however, the PIR won its smallest majority ever, amidcharges of election fraud made by opposition on both the left and theright. New York: OxfordUniversity Press. A product is defined as "anything offered for exchange to anotherperson including physical objects, services, places, organizations, andideas" (DeLozier & Woodside, 1986, pp. Pricing tactics, on the other hand, is the task ofsetting the specific price levels, together with the conditions foraltering the specific prices, for specific products. PRE-ENTRY ENVIRONMENTAL ANALYSIS The pre-entry environmental analysis is developed in three separateareas. Eventually,the supremacy of the Aztecs caused the city to be a magnet for otherswishing to curry the favor of and profit from dealings with the Aztecs. The lastsection ties together what has been learned from the first two sections. (1989, February). Kotler, P. On the other hand, if an opposition party wins, the political orientationin Mexico will likely change dramatically. G. As indicated above, the PIR isitself a coalition of factions. The electronic media will not be employed. 4. The unchecked movement from the country side into Mexico Cityseverely restricts the abilities of urban and national planners to providenecessary services. As portions of the external debt arerolled-over in the future (as they must be to preclude default), scheduledinterest payments will increase, and the incentive for exporters willshrink even more. (1988). These objectives are (1) market share pricing,and (2) target pricing. The product is facsimile transmission machines (fax).The first section of this plan provides a pre-entry environmental analysis,while the second section includes both a product-specific environmentalanalysis, and an examination of marketing in the target country. Lexington,Massachusetts: Lexington Books. Later, the city developed as an industrial center, but, moreimportantly, as the seat of national government, it acted as a magnetbecause of the economic advantages that status gave it over other areas.Migrants were attracted by more jobs, more and better schools, affordableurban transportation, and decent health care (A dwindling supply ofmigrants, 1986). The Economist, 74 7, 73-74. The World Bank. The World Bank. To make the party work, liberal andconservative (for lack of better words) factions alternate in the controlof the presidency and other key ministries, within a framework which ismore or less in the political center. Out of a total population of 82million, 15 million live in the Mexico City metropolitan area (Paxton,1988). Mexico City was originally located where it is because it provided apleasant climate in which to live, and a land which was capable ofsupporting the agriculture necessary to feed its inhabitants. Theexamination of marketing in Mexico provides details of the plan formarketing fax machines in the country--marketing objectives, and marketingmix considerations.Product-Specific Analysis Facsimile machines provide a capability to transmit perfectreproductions of documents and other printed materials overtelecommunications systems (Friedman, 1988). Hartland-Thunberg, & C. Depending upon the type ofproduct involved--physical, service, and so forth, not all of thesecharacteristics will be applicable in each instance. Pricing strategy is the overall task of defining the price range andprice movement through the time period required to support theorganizational sales and profit objectives and to support productpositioning decisions. Marketing throughdifferentiation--of anything. INTRODUCTION This research develops an international marketing plan. Another factor involved in the development of product strategy is thatof the product life cycle. Target-profit pricing, through which a specific rate of returnon the organizational investment in the product is sought over a specifictime period. Of even greaterimportance is the fact that the external debt may be expressed as multiplesof Mexico's exports and net exports. International Monetary Fund. When those purposes founder, however, some citiestend to wither. Each of these factors is addressedseparately. Mexico's economic problems worsened significantly,when the world price of crude oil began to decline sharply in 1985. A marketing channel is composed of the set of organizations which isrequired to move a product from its manufacturer to the end user. In the marketing of fax machines in Mexico, two of these six pricingobjectives will be sought. Although facsimiletransmission machines data back to 194 , their current form and use placesthem in the introductory stage of the product life cycle. The per capitaGNP range for this group (middle-income, upper-level) ranges from US$1,6 (Brazil) per year to US$7,42 per year (Singapore). In general, such economics mean that it is cheaper to movegoods than it is to move people. W., & Woodside, A. SUMMARY ANALYSIS The economic environment of Mexico is uncertain--both now and for thefuture. K. Subsequent to the oil pricecrash, the point was quickly reached, when the nation could no longerservice its foreign debt. Market-share pricing, which is used by a marketing organizationwilling to forego some short-term profits for a long-term assurance ofmarket share. The utility of fax machines is suchthat a viable market may be developed in the business and professionalcommunities. This debt, in early-1989, stands at US$1 8 billion, on which principal and interest payments ofUS$14 billion per year are scheduled (The World Bank, 1989). DeLozier, M. Mexico's economicanguish. The external debt problem, ifnot effectively addressed, may inhibit future exports to Mexico. 2. Pricing objectives may be categorized as follows: 1. 6. Marketing management,third edition. Agriculture continues to account for an inordinate proportion of thecountry's employment (41 percent), with only 18 percent in manufacturing(The World Bank, 1988). (1986). %External debt as a percentage ofnet exports 733.3%Scheduled annual principal andinterest payments as a percentageof gross national product (GNP) 6.8%Scheduled annual principal andinterest payments as a percentageof gross domestic product (GDP) 7.3%Scheduled annual principal andinterest payments as a percentageof total exports 51.3%Scheduled annual principal andinterest payments as a percentageof net exports 95.1% [Sources: The World Bank, 1989; The World Bank, 1988;International Monetary Fund, 1989]=============================================================== As the data presented in Table 1 indicate, Mexico's total externaldebt exceeds 5 percent of the country's GNP and its GDP. The Statesman's year-book. Hartland-Thunberg, P., & Ebinger, C. (1986). Marketing Management, fifth edition. Thus, squatter settlementsdeveloped around the City, as did dualistic formal and informal economies.Mexico City, however, continues to act as a migrant city, because, evenwith its inability to absorb all of the migrants into its formal economy,its economic promise continues to be better than that of the country'shinterlands (A dwindling supply of migrants, 1986). Service and installation facilities will also be established inthese cities. The plan will be to concentrate themarketing effort in the country's major metropolitan areas--Mexico City,Guadalajara, and Monterrey. Promotional pricing, which is employed by marketingorganizations as a means of promoting an entire line of products,regardless of the impact which such pricing may have on the profitabilityof a specific product. Mexico City must deal with its growth on an ad hocbasis, moving from disaster to disaster, and from urban crisis to urbancrisis. Current-revenue pricing, which is a cash generating strategyfor firms requiring cash quickly and for which liquidity requirements aremore pressing than profitability goals. The utility of the fax machines will permit the development of abusiness and professional demand for the product; however, the personalsegment of the market may be expected to remain quite small.Marketing in Mexico The objective for the marketing of facsimile transmission machines inMexico will be to establish a significant presence in the business andprofessional segments of society. (1986). The enormity of the external debt of developing countries iscontinually chronicled in the popular press. 3. 5. The World Bank. The industrial sector in the country's three major cities,however, will likely continue to grow. Thus, the incentive to furtherdevelop the export sector is small. The current economic environment is considered initially, followedby considerations of Mexico's political/ legal environment, and itssociocultural environment.Current Economic Environment The current economic environment is assessed with respect to both thedomestic and foreign sectors. First, becauseof the obvious utility for business and professional users, and, second,because of the personal demand which can be generated in an economy inwhich individuals possess high levels of disposable income (Friedman,1988). Table 1 Mexico's External Debt Structure===============================================================Item Measure --------------------------------- --------------Total external debt US$1 8 billionScheduled annual principal andinterest payments US$ 14 billionExternal debt as a percentage ofgross national product (GNP) 52.4%External debt as a percentage ofgross domestic product (GDP) 56.4%External debt as a percentage oftotal exports 396. Levitt, T. Economist, 74 7, 8 . Soon after that (in the fall of 1985) thedevastating earthquake hit Mexico City, with its consequent human andeconomic impacts. Huddling through. In the case ofmarketing fax machines in Mexico, quality level, features, and brand namewill be of the greatest importance; however, both styling and packagingwill also be important factors. The targetcountry is Mexico. Significant decisions related to the physicaldistribution of products are concerned with: (1) the size of inventorieswhich will be maintained; (2) the locations of the inventories which aremaintained; and (3) the means by which products will be transported throughchannels of distribution. Washington: The World Bank. Mexico. New York:Oxford University Press.----------------------- 1 The aggregate numbers are solarge, however, that it is, at times, difficult to fully appreciate theirmeaning. The product-specificenvironmental analysis considers facsimile transmission machines in thecontext of the findings of the pre-entry environmental analysis. (1989, January). EnglewoodCliffs, New Jersey: Prentice-Hall. A major potential problem may develop, however, because thesemachines are produced in the United States. Continuedpopulation growth in Mexico City is more the result of desperation thanopportunity, and the city's capacity to accommodate the migrants is beingswamped. In P. Thenext general election, however, may result in a different situation. Loss-leader pricing is an example of promotionalpricing. Marketing channels also provide a means of transmittinginformation between manufacturers and end users and a means of transmittingpayment from end users to manufacturers. (1986, December 2 ). Annual inflation (consumer prices) exceeds 85percent (International Monetary Fund, 1989). For the marketing of American produced fax machines in Mexico, productdistribution centers will be established in Mexico City, Guadalajara, andMonterrey. InternationalFinancial Statistics, XLI(1), 291-295. Market skimming, which is a practice of exploiting a newproduct to the maximum, before competing products are placed on the market,or before fad interest in the product wanes. In a highly developedeconomy, a large market may be developed for such machines. Mexico City's industrial sector and its public sector, however, wereunable to absorb to magnitude of migrants.
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