ASSESSING THE POWER OF PORTER'S DIAMOND MODEL IN THE AUTOMOBILE INDUSTRY IN MEXICO AFTER TEN YEARS OF NAFTA
SALVADOR BARRAGAN
Master in Business Administration, IPADE Business School, 1996 BSc in Industrial Engineering, Universidad Panamericana, 1994
A Research Project Submitted to the School of Graduate Studies of the University of Lethbridge in Partial Fulfilment of the Requirements for the Degree
MASTER OF SCIENCE IN MANAGEMENT
Faculty of Management University of Lethbridge LETHBRIDGE, ALBERTA, CANADA
© Salvador Barragán, 2005
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Abstract
It has been ten years since the signature of the NAFTA agreement among Canada, U.S., and Mexico. For Mexico, this was a decisive step away from a protectionism model toward a
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10 2.2.1. The Doubled Diamond vs. a Single National Diamond ................................. 11 2.2.2. The Role of the Multinational Enterprises (MNE’s) as Empowering Developing Countries rather than Constraining their Growth.................................. 12 3. Research Setting: Why Use Mexico to Study Porter’s Diamond? ............................... 17 4. Research Questions....................................................................................................... 19 5. Methodology ................................................................................................................. 20 5.1. Positioning the International Competitiveness of the Industry.............................. 22 5.2. Addressing the Research Questions....................................................................... 23 6. Results........................................................................................................................... 28 6.1. The Competitiveness of the Automobile Industry in Mexico................................ 28 6.2. Positioning the Industry as Internationally Competitive ....................................... 29 6.3. Using Porter’s Diamond to Assess Sources of Competitive Advantage in the Automobile Industry in Mexico: 1993-2003. ............................................................... 39 6.3.1. Factor
After 27 months of negotiation, the North Atlantic Free Trade Agreement (NAFTA), a trade agreement between the three north American countries: Canada, United States, and Mexico, was put into effect on January 1st 1994. NAFTA was developed to increase trade among the three north American countries while simultaneously promoting each countries’ economy growth. However, the United States faces a new government, and President Trump believes that NAFTA should be renegotiated to modernize the trade agreement instead of removing U.S participation. Some of these renegotiations, include: Trade in goods, Investment, Digital Trade, Cross-Border Data Flows, Government Procedure, etc, take into account the changes in the economy since 1994. This new
Nonetheless, many analysts agree that NAFTA has made a mark. U.S.-Mexico trade continues to grow, and NAFTA and the promises it brings have lessened the impact of the Mexican recession and quickened its recovery. Healthy, growing bilateral trade, they say, depends on healthy, growing economies, and Mexico’s recovery and continuing economic liberalization should fuel that trend.
In 1994, the North American Free Trade Agreement (NAFTA) was enacted between two industrial countries and a yet still developing nation. This was an agreement that was the first of its kind due to the relationship that the countries had and the investment opportunities that it presented. The United States, Canada, and developing Mexico decided to work towards eliminating most tariffs and non-tariff barriers between the three in order to increase the flow of trade in goods and services. Since its enactment NAFTA has led to the providing of over 40 million more jobs throughout the countries, and it has also tripled merchandise trade between the three participants to an astounding $946 billion USD in 2008 (NAFTA Now). However even then it is still not very clear whether enacting NAFTA was worth the time and effort and in fact the United States may have been better off not having joined NAFTA.
The North American Free Trade Agreement, commonly known as the NAFTA, is a trade agreement between the United States, Canada and Mexico launched to enable North America to become more competitive in the global marketplace (Amadeo, 2011). The NAFTA is regarded as “one of the most successful trade agreements in history” for its impact on increases in agricultural trade and investment among the three contracting nations (North American Free Trade Agreement, 2011). Supporters and opponents of the NAFTA have argued the effects of the agreement on participating nations since its inception; yet, close examination proves that NAFTA has had a relatively positive impact on the economies of the United States, Canada, and Mexico.
With the United States under Trump, there has been renegotiating of NAFTA, an agreement that allows free trade between the United States, Canada, and Mexico. In the opinion article, “NAFTA talks should stick to helping consumers and taxpayers, not pet clauses,” economist, Mark Milke, attempts to persuade his audience to share his views on changing NAFTA and its free trade policies, as well as to explain what he believes should be considered when redrafting these policies. Milke comments on the three principles that he believes are most important when redrafting NAFTA using quantitative and statistical data, as well as his personal observations on situations to support his thesis that free trade should remain
The North American Free Trade Agreement (NAFTA) was enacted in November of 1993 with aims to facilitate the free flow of goods, services and labor between the United States, Canada and Mexico. The ratification of NAFTA created the world’s largest free market with roughly 390 million consumers and an estimated total output of $8.6 trillion. Clearly, this trade alliance has had a major influence on the financial service industries of the participating nations and will continue to do so in the future. However, the financial service provisions of NAFTA will have sufficiently greater implications for Mexico than either the United States or Canada. This is in part because Mexico is embarking upon a greater shift towards openness in its
The North American Free Trade Agreement between Canada, the United States, and Mexico continues to be greatly beneficial to Canada and its citizens after twenty-two years since the agreement came into effect in 1994. NAFTA has remained as one of Canada’s greatest assets, increasing trading traffic of goods and services. The free trade agreement benefits Canada because it creates more employment, provides Canadians with more selection in goods, and increases economic growth. The North American Free Trade Agreement brings Canada great leverage and will, in all likelihood, continue to benefit us in the future.
There is no easy solution to solve the problems of undocumented immigration between the United States and Mexico. The United States has no control on what other countries do and how they treat their people. If Mexico isn’t looking out for their people they will continue to migrate. United States has been the country where help is given and Mexico is very poor so they come here looking for the American dream. The North American Free Trade (NAFTA) Agreement’s history began in 1980.It’s purpose is to help with reduce trading costs, increase business investments in Mexico, Canada and United States. In 1984, Congress passed the Trade
Since the beginning of civilization, trade has been an important issue. Christopher Columbus sailed to the Americas in search of a faster and safer trade route to India. We as Americans fought for our independence over trade related issues, such as tariffs and rules on with whom we were allowed to export and import goods. Our people have always fought for the rights and ability to buy and sell what they want at a reasonable price. The North American Free Trade Agreement, or NAFTA, is yet another attempt at this. NAFTA was signed on December 17, 1992 and put into effect on January 1, 1994 (SICE). It is a trade agreement between Canada, the United States, and Mexico. This paper will explain all the finer points of the agreement, its
By 1997, three years after the ratification of NAFTA, 47% of Canadian manufacturing plants that existed in 1988, which accounted for 28% of the jobs in the economy, had closed. To add on, 350,000 manufacturing jobs from 2002 -2008, were lost due to industrial plants moving to Mexico. This drastic drop in factory/plant numbers can be attributed to the fact that companies put their bottom line first - moving facilities to Mexico because Mexican minimum wage is only $5.10 compared to a minimum wage of $11.00 in Ontario. As a further incentive to relocate south, because of NAFTA, corporations don’t have to pay tariffs on products shipped back to domestic markets. Therefore, it is evident that NAFTA has resulted in many industrial firms/plants moving to Mexico for cheaper labour, and the impact of such actions has cost thousands of Canadians their jobs.
economy, following its cycles and trends since NAFTA agreement signed in 1994 by United States, Mexico and Canada as established a strong economical and political cooperation between these countries.
Many experts agree that NAFTA has played a major role in the modernization of Mexico. For one, manufacturing exports have grown at an annual rate of 16% since 1994 (Salas, 2001). In addition, NAFTA has allowed Mexico to trade freely with more industrialized nations, namely the United States and Canada. Mexico has now become the fourth largest supplier of goods to Canada growing at an annual rate of almost 16% (Campbell, 2001). In addition, Mexico has replaced Japan as the second largest trading partner with the United States, growing at an annual rate of 17.5% (Salas, 2001). This activity stimulates industrial and economic growth as more and more the positives of maintaining a modern nation are realized. In addition, with more capital flowing into Mexico, more jobs were created in the industrial and manufacture sectors of the economy.
Canada, Mexico and the United States were all involved in NAFTA, the North American Free Trade Agreement. This agreement had really helped improve Canada’s economy and raised the standards of living in Canada. NAFTA had also proved itself to be a solid foundation to building Canada’s prosperity which is good for Canada’s independence as well (North, 1). After the free trade agreement, there were many positive effects in the Canadian economy. John F. Kerry, an American politician had once said, “NAFTA recognizes the reality of today's economy - globalization and technology.”(John, 1) This agreement states that Canada is helping in globalizing the economy of not only America but Canada and Mexico as well. In this case, the agreement is improving and benefiting the Canadian economy very well which is great for Canada's independence. It shows that Canada can make its own decisions with other countries to benefit their own country in many ways economic wise as well as independence wise. This also shows that although Canada and America are important trading partners, it doesn't necessarily mean that one country is a step behind the other. It means that if they work together, they can benefit each other and help improve one another's growth as
In 1992, Canadian Prime Minister Brian Mulroney, Mexico’s President Carlos Salinas and U.S. President George H. W. Bush signed a North-American Free Trade Agreement (NAFTA). All three countries government later on gave consent to this agreement. It went into effect on January 1st, 1994. However, before all North American countries were involved in this trade bloc, it was just a bilateral trade bloc between Canada and USA. Mexico was interested and wanted to join the Free Trade Agreement (FA), which superseded it and became NAFTA. Free Trade in international markets means there are no restrictions on exports and imports between countries. NAFTA had elements in this trade, which were written and agreed between all the leaders. The most important
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF DIPLOMA IN BUSINESS STUDIES (DBS)