The Rise of Multinational Corporations[1][2]Entrega Final

8/3/2019 The Rise of Multinational Corporations[1][2]Entrega Final

http://slidepdf.com/reader/full/the-rise-of-multinational-corporations12entrega-final 1/13

EAFIT University

School of Administration

International Business Department

THE RISE OF MULTINATIONAL CORPORATIONS IN MEXICO

Organizations and Culture

Presented to

Cristina Robledo

By

Vanessa Carmona Isaza Cod 200610048002

Laura Valencia Posada Cod 200610034002

Medellín, Antioquia, Colombia

September 2010

1



Index

1. GEERT HOFSTEDE’S CULTURAL DIMENSIONS IN MEXICO…….3

2. ORGANIZATIONAL CULTURE…………………………………………4

3. MANAGEMENT STYLES IN MEXICO………………………………….5

4. THE RISE OF MULTINATIONAL CORPORATIONS

4.1 Introduction……………………………………………………………5

4.2 Origins of Multinational Corporations………………………………6

4.3 Multinationals and Capitalism ………………………………………7

4.4 Interrelation between Multinational Corporations…………………8

4.5 The rise of multinational corporations in Mexico………………….9

5. CONCLUSIONS…………………………………………………………..12

6. REFERENCES……………………………………………………………13

2



GEERT HOFSTEDE’S CULTURAL DIMENSIONS IN MEXICO

“Mexico's highest Hofstede’s Dimension is Uncertainty Avoidance (UAI), indicating

the society’s low level of tolerance for uncertainty. In an effort to minimize or

reduce this level of uncertainty, strict rules, laws, policies, and regulations areadopted and implemented. The ultimate goal of this population is to control

everything in order to eliminate or avoid the unexpected. As a result of this high

Uncertainty Avoidance characteristic, the society does not readily accept change

and is very risk adverse”. 1

Mexican’s way of working is more collectivist than Individualist. As Mexico is a

culture driven by relationship, Mexican can work better as a group than as

individuals and even better if the members of the team have a good relationship

between each other.But if members are all unknown, they will surely take a while to build relationship

basis and strength bonds.

Once teams are formed it is better to keep developing working with the whole team

than dismantling it and starting a new one.

Mexico manages a high degree of gender differentiation, due to the fact it is a

“Machismo” culture. Male gender dominates the major part of the powerful

structures in the society.

This situation makes female become more competitive resulting good when

dealing with executive females, as will encounter few or any problems at the timeof doing business.

The graphic below shows the Hofstede’s dimensions in Mexico, being

PDI: Power Distance

IDV: Individualism

MAS: Masculinity

UAI: Uncertainty Avoidance

1 http://www.geert-hofstede.com/hofstede_mexico.shtml , September 22, 2010.3

http://www.geert-hofstede.com/hofstede_mexico.shtml




(http://www.geert-hofstede.com/hofstede_mexico.shtml , September 22, 2010.)

The high level of Power distance shows the level of inequality of power and wealth

in the society, being a condition accepted by the whole culture.

“Within the Mexican family, the father is the undisputed authority figure. It is the

father who makes the major decisions and sets disciplinary standards. While

children are protected and loved, they are very dependent on both the moral

support of the family as well as the authority figure to make the decisions. As a

result, the maturing child entering the work place expects supervisors to take

responsibility, and assume all accountability. In essence, the employee expects

father-like behaviors.”2

ORGANIZATIONAL CULTURE

“Mexican culture tends very much towards the hierarchical in both personal

interactivity and the way in which business is structured. It is best to expect that the

organization you are dealing with will have a very centralized decision-making

approach with all decisions of any importance being made by a few key individuals

at the top of the company”.3

It is important to be sure of matching the right level of seniority during the

interactions, due to avoid insult Mexican to deal with a junior employee.

2 Tom Morris and Cynthia M, Management Style and Productivity in Two Cultures in Journal of International Business Studies, Vol. 23, No. 1 (1st Qtr., 1992), pp. 169-179.3 “Mexican Business Structures” in Worldbusinessculture.com, available inhttp://www.worldbusinessculture.com/Mexican-Business-Structures.html, September2010.

4


http://www.worldbusinessculture.com/Mexican-Business-Structures.html






Sending a junior to negotiate with Mexican will show a lack of interest from them.

MANAGEMENT STYLES IN MEXICO

• Mexican management styles tend to be strongly hierarchical.

• Even though the decisions and orders are given in a hierarchical way, the

managers tempt to be concern about the subordinate’s well-being and their

dignity.

• Managers are authoritative but not authoritarian.

• There is no tradition of delegation of authority.

• Power and authority are concentrated in the high levels of the organization.

• “Mexican workers are characterized as expecting an authority figure to make

decisions and assume responsibility. Yet, because of the strong familyorientation, paternalism is also a desirable managerial characteristic in

Mexico”.4

• Managers let subordinates know that they are in control at work, but at the

same time they try to keep a warm environment and are concerned with the

human touch.

• Managers give instructions in a clear and precisely way in order to avoid

confusions, and to diminish error with the subordinates’ work.

• Subordinates tempt to follow managers’ orders with little or no discussion.

• In Mexico relationships bonds are deep and strong and that is why

managers are always expecting honesty and loyalty from the subordinates

and from the rest of the crew.

• In order to warranty strong relationship bonds, managers and subordinates

tend to look after others’ interests.

THE RISE OF MULTINATIONAL CORPORATIONS

Introduction

Nowadays the fact that multinational corporations have a big influence in day today life of people and states is well known.

4 Tom Morris and Cynthia M. Pavett, Management Style and Productivity in TwoCultures in Journal of International Business Studies, Vol. 23, No. 1 (1st Qtr., 1992), pp.169-179.

5



In economic terms the most largely economies of the world are driven by big

companies meanwhile some states have minor impact and profit in sales and GDP,

compared to big multinational corporations all around the world.5

In this “corporate – led globalization” tendency, low income people do not agree

with the increasing power of big companies. Thus, protests and resistance arebecoming more often and bigger every day.

However, developing countries find as well a great opportunity to improve their

incomes by developing and creating multinational corporations. In this sense,

developed countries play an important role in helping those countries with the

transfer of technology and managerial issues that make them the perfect leaders

which others want to follow in a “catch up process” that explain why countries like

Mexico tend to converge in productivity, resource management and organizational

culture to leader countries such as the United States (US).

Therefore, the question about how corporations got such power in the first place,

its relationship with capitalism, the way they are managed and interconnected

worldwide especially in Mexico where multinationals have been consolidating in the

marketplace during the past century, are going to be discussed here.

Origins of Multinational Corporations

The multinationals as we know nowadays have been working since the sixteenth

century especially in England, Holland and west Europe.

Some scholars argued that a corporation is a “social invention of states” 6 because

a state grants a corporate charter, permitting private financial resources being used

for public purposes. Indeed, in the past corporations helped countries in pursue of

territorial expansion and war, in which imperial interests were essential.

However the increase of the privileges shared by multinationals in the economic

field has been criticized by some scholars and even heads of states who think that

corruption can easily appear within organizations that become more powerful over

time creating a decrease in the money power of the country. Adam Smith, in his

famous book the Wealth of Nations, the “bible” of capitalism, was also critical of

5 In comparative perspective of the 100 largest economies in the world, 51 arecorporations while only 49 are countries. SHAH Anup, The Rise of Corporations inGlobal Issues, in http://www.globalissues.org/article/234/the-rise-of-corporations ,September 2010.6 ROBBINS Richard, Global Problems and the Culture of Capitalism (Allyn and Bacon,1999). Pp 98.

6

http://www.globalissues.org/article/234/the-rise-of-corporations




some aspects of corporate activity. “He saw corporations as working to evade the

laws of the market, trying to interfere with prices and controlling trade etc.”7

Therefore, it was at this point when the multinationals began to increase their

power and when states tried to improve the rights of corporations even above

individual rights, where governments realized that the influence of multinationals inthe worldwide economies could not stop any more.

Multinationals and Capitalism

The new influence of multinationals around the world, led to “cultural and economic

ideologies known by numerous names such as “corporate libertarianism”,

neoliberal, libertarian economics, market capitalism, market liberalism etc.”8

This group of ideologies created a spillover effect in the economies of the world,which nowadays can be named as free trade globalization. Thus, despite it has

been criticized especially in the way they drive the profit and the high amounts of

money they received in contrast with the social good and collective wealth, the

influence of multinational corporations are not as bad as it seen. There are a lot of

advantages surrounding the topic such as the idea of corporations as engines of

positive change. Indeed this influence does not act alone as it is proved that the

consumerism is increasing as well as the western culture and the need to the

access of different resources.

Corporate influence can reach various parts of societies through various means,which many other entities don’t have the ability to do, as they lack the financial

resources that corporations have:9

• Influence on general populations via advertising and control and influence in

the mainstream media.

• Influence on public policy and over governments, as hinted to above. This

can range from financing large parts of elections, to creating corporate-

funded think tanks and “citizen” groups, to support from very influential

political bodies such as the Trilateral Commission, the Council on Foreign

Relations and the Bilderberg group, etc.

7 SHAH Anup, The Rise of Corporations in Global Issues, inhttp://www.globalissues.org/article/234/the-rise-of-corporations , September 2010.8 Ibídem.9 The following information was taken from: SHAH Anup, The Rise of Corporations inGlobal Issues, in http://www.globalissues.org/article/234/the-rise-of-corporations ,September 2010.

7

http://www.globalissues.org/HumanRights/Media/Corporations.asp





http://www.globalissues.org/HumanRights/Media/Corporations.asp



• Influence on international institutions, such as the World Trade

Organization, as well as international economic and political agreements.

Finally, the increase on the power and influence of corporations cannot be denied

and it is indeed one of the most important characteristics of nowadays corporate

globalization. Nevertheless, some other organizations and groups such as

environmental and social movements, NGOs etc.., have increased their power and

influenced as well, and thus one can infer that the role of rising multinational

corporations is not a unique case.

Interrelation between Multinational Corporations

The interrelation between multinational corporations can be explained in severalways. However, comparative issues such as in the productivity field are some of

the main important facts to be taken into account.

There is a convergence theory explaining how differences in productivity and

technology from one developed state (leader) to another (developing country) take

companies to improve their process and management. “Those laggard countries

that are not too far behind the leaders will be in a position to embark upon a catch

—up process. This catch-up process will continue so long as the economies that

are approaching the leader's performance continue to have the possibility of

learning from the leader.”10

However, there are some countries whose economiesare so weak that cannot easily follow leader countries. This is the case of the

poorest developing countries that cannot profit in a significant way from developed

countries and tend to go even further behind.

The transfer of technology has been the key issue in this process. Multinationals

are the main channel spreading this transfer all around the world through

arrangements, marketing contracts, management contracts, technical services

among others.

This convergence theory can be applied to the case of Mexico. Multinationals in

Mexico have been learning from “leader” countries such as the United States (US)

and thus its knowledge and profits have improved.

10 Magnus Blomstrom, Edward N. Wolff, “Multinational Corporations and Productivity Convergence in Mexico", Cambridge USA. Pp 5.

8



The Rise of Multinational Corporations in Mexico

“Entrepreneurship in Mexico has become more dynamic as a result of structural

reforms introduced in the last 20 years”. 11During the period of 1994 – 2003 there

were created more than 162,000 new businesses per year, more than in any other

of the Latin-American countries.

Government support for creation of business was weak, providing only limited

support but with budget restrictions due to the collapse of the financial system in

1994; and for this reason pushed entrepreneurs to pursue and developed new

ventures by their own financial networks. This lack of helped raise variety of

enterprises, as there were some of them more modernized and developed that

other ones with low economy.

Mexico is the United State’s second most important trading partner after Canada,

and it is now competing with China, which is the third partner for the United States.

This economic liberalization resulted in a huge transformation for the country in

terms of structure and trade.

The opening of the economy, being Mexico part of the NAFTA (North American

Free Trade Agreement) and the collapse of the central government promotion

policies, encouraged the entrepreneurs in Mexico. In the year 2000, were there

was a changing in the administration and new rules that were re-designed, public

sector in economy started to play a new role.

One of Mexican objectives when signing up to NAFTA was to make manufacturing

the driving force of economy, which was not as good as they thought it would bedue to a low productivity growth rate of 3,6. “As NAFTA gains are exclusively

relegated to reallocation between and within sectors, rather than corresponding to

an increase in technical efficiency. Indeed, this is what economic theory would

predict: first, reallocation effects based on changes in relative prices, then micro

level increases in efficiency based on learning and innovation. A second –

generation of NAFTA agenda would focus on achieving dramatic increases on the

rapid firm-level productivity growth”.12

To survive in a time marked by crisis, the largest and most powerful enterprises in

Mexico became multinational, increasing not only their national production but alsoexpanding their sales in broad markets.

Large firms in the middle-tech and high-tech segments became strongly

competitive in the international market. Some of the industries with more

11 Victor Lopez, Villafane and Clement Ruiz Duran, The rise of Mexican multinationals:Driving forces and limiting factors. Page 16312 Ibídem.

9



successful are telecommunication, engineering services, food, industry, financial,

media and entertainment.

“Trade openings pose a problem for countries like Mexico interested in introducing

reform while dedicated to not losing the capitalist base they have already achieved.

Emphasis has been placed on the need to change regulation of foreign investmentin order to increase Mexico's attraction to multinational enterprises, and to a great

degree this has been accomplished”.13

“Mexico has consolidated its position in the global marketplace and most

significantly, its importance to North American market growth. If anything, the sheer

amount of foreign investment the nation has attracted in recent years, and will

surely continue to attract, attests to the enormous confidence that investors have in

Mexico's future.”14 Mexico has been ranked in 2001 as the fifth-most attractive

investment destination in the world. Three mean reasons support this position and

even today remain strong facts of the increasing economy. The stability of thepeso, privatization and political reforms have helped Mexico in pursuing its

economic goals, especially for multinational corporations. Nevertheless, some

problems relating with corruption and social issues cannot be denied but even

when they have been the main negative force surrounding the growth of Mexico,

they have not had enough capacity to take Mexico further behind.

Some scholars agree on the idea that Mexico can be considered as “one of the

fastest growing "production sharing" countries in the world”15 [McCray and

Gonzalez 1989]. Its strong relationship with Northamerica, especially with the US

has provided an important amount of legacies in terms of culture, technology,resource management, etc.., making Mexico´s multinational corporations owners of

competitive advantages which some Latinamerican countries do not have.

Hundreds of U.S. companies have taken their labor-intensive operations to Mexico.

“The rapid increase in the use of Mexico as a production partner has occurred in

part because of the Mexican government's liberalization of certain tariff laws and

laws pertinent to foreign ownership of manufacturing enterprises”16. However, this

kind of partnership does not only provide advantages for Mexico but for the US

13

"Multinationals in Mexico”, available inhttp://www.lotsofessays.com/viewpaper/1694772.html, September 2010.14 GOWER Matthew, “Mexico's top 50 foreign companies: Once more, business Mexicobrings you its ranking of Mexico's top 50 foreign companies, with a retrospective on the

year 2000 and a look at things to come”. Available inhttp://www.allbusiness.com/north-america/mexico/833377-1.html, September 2010. 15 Tom Morris and Cynthia M. Pavett, Management Style and Productivity in TwoCultures in Journal of International Business Studies, Vol. 23, No. 1 (1st Qtr., 1992), pp.169-179.16 Ibídem.

10

http://www.lotsofessays.com/viewpaper/1694772.html

http://www.allbusiness.com/north-america/mexico/833377-1.html





which can become disadvantages in the long term for multinational corporations in

Mexico.

ADVANTAGES DISADVANTAGES

Due to the increasing competition

that emerging nations are facing in

the market place, the transfer of

technology and knowledge from

“leader” countries such as the US is

a good option for MNC.

The kind of help that developed

countries are “free willing” to provide,

can have hidden political and economic

interests. The need for secure

resources and cheaper labour force

lead developed countries to exploit and

take advantage of this situation, paying

lower salaries and buying at very low

costs.

New multinationals are expected to

become more prominent in the

future, providing a host of

opportunities for infrastructure and

business service firms in developed

economies. Some will become

international powerhouses of the

future requiring high levels of

support services around the world.

For example TELECOM Services.

Reliance on multinationals, however,

can create problems when those

multinational companies investing in

Mexico experience problems elsewhere.

CONCLUSIONS

The rise of multinational corporations has always had drawbacks and benefits.

Since its very beginning in the sixteenth century states have been one of the main

actors criticizing their rapid growth and its capitalism purposes. However, the

influence of multinational corporations all around the world has made possible the

11



development of some market theories that explained the spillover effect in the

economies of the world, which nowadays can be named as free trade globalization.

The free trade globalization has influenced the economies of the world, especially

for developing countries which find some “economic leaders” that show them how

to implement productivity techniques and successful management styles. This isthe case of Mexico. The rapid growth of multinational corporations in Mexico is

possible thanks to the tied relationship it has with the United States. Nowadays,

economic profits all around the country have been increasing due to the

involvement of US’ enterprises in day to day life of Mexico. However, this

influenced has been criticized for states, NGOs, and different groups that see how

the advantages for the US are bigger in a larger proportion than those received by

Mexican multinational corporations and the peoples of the country.

Therefore, they have not only been criticized for their rapid growing but also for

their way of exploiting the resources in where they operate, because they not onlyuse them in large quantities but also they dismiss the junk products without taking

into account the environmental consequences it developed, due to the fact that the

major part of the dismissed materials are chemicals and toxic acids that as it

affects environment it affects even worse the people’s genetic living in the zone.

Thus, despite it has been criticized because of the way that multinationals raise

their profit; it is not as bad as it seems. Having multinational’s investment in a

society brings a lot of benefits as well. Not only the creation of more job vacancies,

but also the increase of life quality of people working in and for them in an

economical way, it develops the country in terms of acquiring new and moderntechnology, it brings different culture and new ways of managing styles and it

improves the image of the country in an international context letting it be more

attractive for foreign investors.

REFERENCES

GOWER Matthew, “Mexico's top 50 foreign companies: Once more, business Mexico

brings you its ranking of Mexico's top 50 foreign companies, with a retrospectiveon the year 2000 and a look at things to come”. Available in

12



http://www.allbusiness.com/north-america/mexico/833377-1.html , September 2010.

Magnus Blomstrom, Edward N. Wolff, “Multinational Corporations and Productivity

Convergence in Mexico", Cambridge USA. Pp 5.

“Mexican Business Structures” in Worldbusinessculture.com, available inhttp://www.worldbusinessculture.com/Mexican-Business-Structures.html ,September 2010.

"Multinationals in Mexico”, available in

http://www.lotsofessays.com/viewpaper/1694772.html , September 2010

ROBBINS Richard, Global Problems and the Culture of Capitalism (Allyn and Bacon,1999). Pp 98.

SHAH Anup, The Rise of Corporations in Global Issues, in

http://www.globalissues.org/article/234/the-rise-of-corporations , September 2010.

Tom Morris and Cynthia M. Pavett, Management Style and Productivity in Two Cultures

in Journal of International Business Studies, Vol. 23, No. 1 (1st Qtr., 1992), pp.

169-179.

Victor Lopez, Villafane and Clement Ruiz Duran, The rise of Mexican multinationals:

Driving forces and limiting factors. Page 163

http://www.geert-hofstede.com/hofstede_mexico.shtml , September 22, 2010.

13











Documents

The Rise of Multinational Corporations[1][2]Entrega Final