Professional Documents
Culture Documents
Pest Analysis
Pest Analysis
POLITICAL FACTORS
EXTERNAL CONFLICTS
It is worth noting that this is the second time in six months that Peru has declared a
Mexican authority persona non grata, which has never happened before in the history
of the bilateral relationship. The first case occurred on December 20, 2022, when
Mexican Ambassador Pablo Monroy had to leave his post in Peru after President
López Obrador expressed support for his counterpart Pedro Castillo. The Mexican
president has granted political asylum to Castillo's wife and children, following Mexican
diplomatic tradition, and claims that Castillo was the victim of a coup by the Peruvian
oligarchy. However, he ignores that Castillo's actions were unconstitutional and insists
that Boluarte's presidency is illegitimate because she was "imposed" in the Peruvian
government.[1]
The diplomatic crisis has had an impact on the Pacific Alliance, a regional trade bloc
that includes Mexico, Peru, Chile, and Colombia. The alliance was created to promote
economic integration and free trade among its members, but the current conflict has
put a strain on its objectives. The Pacific Alliance has been successful in promoting
trade and investment in the region, but the current crisis threatens to undermine its
achievements. It is essential for both Mexico and Peru to resolve their differences and
work towards strengthening the Pacific Alliance. [1][2]
AMLO insists that Mexico mediate for peace between Russia and Ukraine
The president, Andrés Manuel López Obrador, expressed that Mexico could get
involved in mediation processes aimed at seeking peace in the conflict between Russia
and Ukraine, as long as both nations support that initiative. During his conference, the
president said that wars are highly irrational and cause great suffering to the civilian
population, since they imply the loss of lives to benefit the strengthening of the war
industry and the use of weapons.[3]
"The Ministry of Foreign Affairs affirmed that Mexico reaffirms its commitment to full
respect for international law, international humanitarian law and the Charter of the
United Nations. In addition, it supports the idea of addressing these issues at the UN
with the participation of all parties involved.[3]
During his conference, President López Obrador mentioned that in the past, Mexico
proposed a peace initiative that would be mediated by Pope Francis, UN Secretary
General Antonio Guterres, and Indian Prime Minister Narendra Modi. . "This is the
commission that we are proposing to intervene in the talks between Russia and
Ukraine, seeking to establish a dialogue and a negotiating table with the aim of
achieving peace."
Finally, the president of Mexico pointed out that this war is costing people's lives a lot
of suffering and that it generates a strong negative impact on the economic and
political sector.[3]
The four-letter cartel has managed to expand its criminal activities to more than
half of the Mexican territory.
The members of the Jalisco New Generation Cartel (CJNG) involved in drug trafficking
activities and hitmen, this cartel is involved in kidnappings, hitmen, homicides,
international drug trafficking, extortion. During the government of President Lopez
Obrador, the CJNG strengthened its operations and became the most powerful cartel
in Mexico. This internal conflict generates a situation of violence between the state and
an armed group where prolonged armed confrontations occur. Consequently, this
affects the lives of people who participate and those who do not participate.
Government stability does not allow the probability of business expansion to decrease
due to the high rates of robberies and assaults.[4]
The environment of fear and impunity that prevails in the nation has led to the
trivialization of everyday violence, which has experienced a significant increase. Our
findings confirm that violence associated with drug trafficking has had a negative
impact on labor productivity. The decrease in productivity is attributed to the effect that
crime has on the creation of new businesses and capital accumulation, mainly due to
the high levels of uncertainty it generates.[5]
The cartel led by 'Los Chapitos' and 'El Mayo' remains the main criminal
organization in Mexico
According to the non-governmental organization's report, the Sinaloa Cartel prevailed
in coverage during the year 2023 primarily due to one specific reason: the production
and distribution of fentanyl. This activity was rejected by 'Los Chapitos' towards the end
of the same year.[6]
"The group strengthened its position as the main trafficker of fentanyl from Mexico.
Although the 'Los Chapitos' faction banned the production and trafficking of fentanyl in
Sinaloa, the circulation of the drug apparently doubled throughout the year. anus".
Although InSight Crime admits that the Sinaloa Cartel experienced weakening after the
extradition of Ovidio Guzmán López, also known as 'El Ratón', considered one of the
most significant since that of 'El Chapo', it still remains the main focus of the Justice
Department. This agency blames the cartel for the notable increase in overdose deaths
associated with the synthetic opioid.[6]
This generates uncertainty due to the internal confrontation in the country because this
group (CARTEL) has territorial and economic dominance, criminal alliances and
structures, which has an impact on companies not wanting to enter the Mexican market
for fear of reprisals.
GOVERNMENT STABILITY
The ruling party intensifies the attacks against the autonomy and effectiveness
of the National Electoral Institute,
From three different perspectives: the attempt by the government and Morena (politic
party) to influence the appointment process of four electoral councilors with alignment
of similar profiles (in the first three months of the year), the operational and
management challenges derived from the approval of the legal reform that reduces and
modifies the structure of the body, and legal disputes related to the implementation of
the reform (before the Supreme Court, the Electoral Court and labor courts), the risks
associated with government ineffectiveness, the accumulation of power and legal
uncertainty.[7]
This brings a lot of uncertainty for companies, because it directly attacks the Mexican
democratic system, since it places it in a risk situation. In addition, accusations directed
towards authority from government agencies are observed, as well as threats and
attacks directed at electoral officials. There are budget cuts that seek to undermine
autonomy, and there is the possibility of electoral reform aimed at intensifying
government controls.
The attacks on organizations with autonomy from the Executive Branch increase
in intensity
In line with the intensification of President López Obrador's radical speech, which
seeks to accentuate polarization and discredit his counterweights in the face of the
2024 elections, it is foreseeable that the ruling party will intensify his verbal attacks
against autonomous institutions such as the National Electoral Institute (INE), the
Federal Economic Competition Commission (Cofece), the Federal Telecommunications
Institute (IFT), the National Transparency Institute (INAI), the Energy Regulatory
Commission (CRE ). ), the National Hydrocarbons Commission (CNH) and even the
National Autonomous University of Mexico (UNAM). In the cases of organizations that
renew management positions (particularly the UNAM, which will elect a new rector, and
the INE, with the election of four councilors), the ruling party will seek to influence the
appointment of similar profiles, which will increase the risk of concentration of power.[8]
This has repercussions because it generates negative political stability in terms of
companies not wanting to invest for fear of the elimination of these important
organizations, or relocating their productive company since wanting to eliminate all
these ministries only generates fewer jobs.
Mexico, despite the fact that it has followed the recommendations of development
economics, which include guaranteeing macroeconomic stability, the opening of trade
and investments in human capital. Unfortunately, however, the regulations, which were
intended to help small businesses and protect the workforce, have had significant
detrimental consequences. They have affected large, more innovative and productive
companies, forcing companies to avoid regulations that suffocate them, maintaining
their small size or hiring workers on non-salaried contracts that are not subject to such
regulations, but that limit the capacity of companies. to grow and innovate. As a result,
currently more than 90% of companies and 55% of total employment in Mexico operate
in the informal sector.
This situation has generated a challenging environment for the country's economic
growth, since the prevalence of informality has negatively impacted the innovation and
productivity of companies. Fighting corruption and reviewing regulations to foster a
more equitable business environment conducive to development are crucial aspects
that must be addressed.
It is important to rethink economic strategies and regulatory policies to enable
sustainable and inclusive growth, giving workers, both low-skilled and high-skilled, the
opportunity to access higher wages and advance their careers. (10) This approach not
only benefits workers, but also contributes positively to the country's economy as a
whole.
Example:
Walmart de México reported that it paid 8,079 million pesos to the Tax Administration
Service (SAT) in order to settle its tax obligations related to the sale of El Portón and
Vips to the Alsea group. (12)
MasAgro has demonstrated success by integrating efforts from various actors at the
national and international level, involving both the public and private sectors. The active
participation of farmers, researchers, input suppliers, and individual and organized
actors in the corn and wheat agri-food chains is essential to meet the program's
objectives. This coordination, supported by the availability and access to food policies
promoted by SAGARPA, state and municipal governments, without providing direct
support, complements and strengthens actions to achieve sustainable intensification in
the production of these grains in Mexico. (15)
These strategies not only drive agricultural development, but also contribute
significantly to the country's overall economic progress, fostering prosperity in rural
areas and strengthening the economic base of the agricultural sector.
EXAMPLE:
(2018) Mexico - Europe
Mexican fresh food producers achieved sales of USD 150.66 million in the European
market. The Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food
(Sagarpa) supported producers and agribusinesses from 13 federal entities in the
marketing of national fruits and vegetables at "Fruit Logistica 2018" in Berlin, Germany.
The Mexico Pavilion had an area of 432 m2, where producers had the opportunity to
showcase foods such as Persian lime, mango, coconut, avocado, grapefruit,
asparagus, berries, banana, different varieties of pumpkin, onion, garlic, table grapes,
dates, among others.(16)
México remained the top trading partner of the United States in the exchange of goods,
excluding services, in September 2022, as reported by the Census.(17)
On May 18, 1994, Mexico became the 25th member of the OECD. The permanent
representation of Mexico in this organization is tasked with disseminating the country's
economic vision, ensuring that the priorities and interests of the Mexican government
have a place in the decision-making processes of the OECD. (18)
Trade restrictions
EXAMPLE
TRADE RESTRICTIONS INCREASE SHORTAGES: WTO
According to the WTO report, there were still 52 restrictions on the export of food, feed,
and fertilizers in effect. Furthermore, 63% of the export restrictions related to the
pandemic were maintained by the G20 economies, which include Argentina, Australia,
Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy,
Japan, the Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the
United Kingdom, and the United States.
The establishment of the National Customs Agency of Mexico (ANAM), the new
requirement of the CFDI with the waybill complement, the new formats and electronic
notifications within the customs system created by the ANAM, and the pilot program of
Compliant Companies ECCE. (21)
Mexico imposes new tariffs that will impact imports from China, India, and South Korea.
Mexico has amended its import tax law to impose tariffs on products from countries
with which it does not have a free trade agreement. Tariff rates range from 15% to 25%
and apply to industries such as footwear, plastics, glass, and ceramics, among others.
Experts warn that this will impact countries like China, South Korea, and India, which
have become some of Mexico's major trading partners, even without a signed
agreement.
During the year 2022, Mexico's Gross Domestic Product (GDP) reached 1,465,854.09
Million USD[23], representing an economic growth of 3.9%.[24] This solid increase in
GDP signals a favorable performance in the country's economic activity,
complementing the outstanding 3.3% growth in secondary activities and the 2.8%
increase in commerce and services. Likewise, the primary sector contributed with a
growth of 2.7%, evidencing a robust and diversified economic outlook in various areas
during said period. However, despite the sector's good performance, its ability to
significantly boost the national economy is limited, since its contribution to the total
Gross Domestic Product (GDP) is still below 5 percent.[25]
In 2022, GDP per capita was 11,496.5 USD [26], with a growth of 3.2% [27]
GDP per capita, which evaluates the average amount of economic resources per
inhabitant in Mexico, has experienced a recovery and reached a record level. Although
the Mexican economy has restored its pre-pandemic levels, public policies and
proposals are now required that address the stagnation of years and, above all, that
promote improvements in living conditions in the medium term, covering aspects such
as health, education and infrastructure.
Since 2015, the GDP for each inhabitant in Mexico has ranged between 9,000 and
10,000 dollars. Over the last few decades, this indicator has lagged behind other
economies, mainly due to low dynamism. To reverse this trend and promote
sustainable growth, it is crucial to implement strategies that not only strengthen
economic activity, but also promote access to improved living conditions for the
Mexican population in the long term.[28]
For 2022 the exchange rate to USD was 20.7MXN/USD [29] this amount refers to the
amount of pesos that Mexicans must pay to acquire 1 dollar, however we can see how
since 2015 a large increase began, reaching its highest peak in 2020. These increases
have been due to the difference in inflation between Mexico and the United States, and
are also associated with external negative events. such as the Election of Donald
Trump and the Covid-19 Pandemic [30]
However, since 2021 and 2022 the exchange rate has remained stable.
Inflation in Mexico in 2022 was 7.9 [31], this being the highest peak in the last 22 years,
this was due to the increase in basic products. However, to control this increase, the
president of Mexico implemented a measure called "Package against inflation and
shortages" (Pacic) in May 2022, which included more than 300,000 million pesos
(about 15,000 million dollars) in tax subsidies to the fuel. [32]
For the year 2022, the active interest rate was 8.2%, rising considerably compared to
2021[33]. This percentage indicates the average cost of loans granted by banks in
Mexico. The main reason for this increase was due to a strategy used by the Bank of
Mexico to control the rise in inflation. Although this measure may result in an increase
in the cost of credit, which in turn could result in a slowdown in economic activity, it is
considered a crucial tool to stop the inflationary spiral. This approach involves a
delicate balance, since rising credit prices can affect consumption and investment, but
at the same time, it seeks to stabilize prices and preserve the general health of the
economy in the long term.[34]
The trade balance in Mexico in 2022 was -41.44 million [35] This represents a deficit,
which means that the country has spent more foreign currency than it has earned, as
seen in the table, this fall has been very pronounced compared to previous years.
The deficit in the trade balance intensified because the increase in imports of
petroleum products exceeded the growth of exports in this sector. This disparity
contributed significantly to the worsening of the deficit situation in the trade balance,
since the higher levels of imports compared to exports generated an economic
imbalance in this area.[36]
Ethnic origin:
Diversity in racial and ethnic backgrounds in Mexico has experienced a
significant surge in the past ten years. The most recent data indicates the
following composition:
Approximately 62% Mestizo (of Amerindian-Spanish descent), 21%
predominantly Amerindian, 7% Amerindian, and 10% other (largely of European
origin) (estimated as of 2012).[38]
It's important to note that Mexico does not gather census information
specifically on ethnicity.
Individuals below the age of 14 account for 23.76% of the overall population,
comprising 15,844,300 boys and 15,009,047 girls.
Those aged 15 to 64 constitute 68.22% of the population, consisting of
43,086,673 men and 45,518,891 women.
The elderly, aged 65 and above, make up 8.02% of the projected population for
the year 2023, with 4,560,225 men and 5,856,393 women. [39]
During 2022, the average quarterly income per household stood at 63,695
pesos, equivalent to 3,695.96 US Dollar. The main source of income was
wages from work, totalling 41,860 pesos, equivalent to 2,428.96 US Dollar,
representing 65.7% of total income. This was followed by transfers with an
amount of 10,928 pesos, equivalent to 634.11 US Dollar, contributing 17.2%.
Estimates for housing rentals amounted to 7,540 pesos, equivalent to 437.52
US Dollar, representing 11.8%. Likewise, income from rental property
contributed 3,312 pesos, equivalent to 192.18 US Dollar, equivalent to 5.2%.
Finally, other current income was reported in the amount of 56 pesos,
equivalent to 3.25 US Dollar, representing 0.1% of total income.
Food tendencies
The rise in popularity of vegan and vegetarian diets in Mexico is attributed to the
general trend towards healthier eating habits. This shift is partly related to the
high rates of obesity in children and adults in the country. According to a report
by Global Health Action, 34% of children in Mexico are classified as overweight
or obese. [42]
Fresh food
Fresh food is the most preferred food in Mexico, according to the latest data
from Deloitte's Consumer Dashboard. This report reveals that 50% of Mexican
consumers allocate most of their food budget to fresh produce. [44]
According to the same source, by the end of March 2023, the distribution of
eating patterns in Mexico will be as follows: [45]
In addition, 40% have stopped buying certain products due to price increases,
demonstrating a sensitivity to economic variations. 38% of consumers compare
prices in various establishments before making their purchases, showing a
more reflective approach to their purchasing decisions. [46]
According to the EY Future Consumer Index analysis, 68% of shoppers in
Mexico demonstrate a higher level of awareness and caution in relation to their
spending. In addition, according to data provided by PWC, 45% of consumers
make comparisons between different websites to check product availability
before making purchases. [47]
Labelled.
In addition to demanding healthier products, consumers are increasingly
interested in the components of processed foods when making purchasing
decisions. In the context of Mexico, 47% of survey respondents revealed the
significant importance they attach to knowing what ingredients are present in
their food (Nielsen, Global Health and Ingredient Perceptions Study, 2016). In
this context, they are looking for products that are less processed, have more
transparent labeling, contain more natural ingredients or have a lower presence
of unhealthy components such as additives, colourings and preservatives. [48]
TECHNOLOGICAL FACTORS
A crucial element that has contributed to the strengthening and integration of Latin
America with the rest of the world is investment in infrastructure and the adoption of
cutting-edge technology. This has generated an increase in the flow of cargo through
the region's ports.
[51]
Example:
VUCEM
It is a virtual platform that helps customs agents and individuals a lot, and in
practice it has proven to be very effective by relying on software in the digital
world; The data of importers and exporters around the world is constantly
updated to adapt to customs laws when it is going to be used for foreign trade.
An advantage is that it makes the import and export process simpler where it is
reflected in a document. with all the necessary data. [52]
There are advantages that make the vucem one of the best tools in foreign
trade which are the following: [53]
- The software saves time in collecting documentation.
Tariff classification
Those who carry out the import and export activity will already be familiar with
the commonly used tool, which brings many advantages such as the following:
TECHNOLOGY IN PORTS:
The port of Manzanillo has implemented new technologies such as TradeLends, which
would be a platform designed by the companies IBM and Maersk in the application of
Blockchain for supply chain management, Tideworks Technology is added to provide a
variety of solutions safely . and efficient in the terminal.
[55]
The port of Manzanillo is one of the most important ports for international trade. The
implementation of technology generated many benefits, at a logistical and commercial
level, allowing international trade to be facilitated and costs to be accessible without
affecting the final consumer. [57]
ADVANTAGES: [58]
1. Integrate technology that will improve the digital business experience in the
industry, for efficient supply chain management.
2. The TOS (Terminal Operating System) will visualize key operational events
and manage content logistics and supply chain through the TRADELENDS
platform.
The Manzanillo port has presented an economic benefit since it has been able
to handle greater merchandise capacity (imports) since from January to October
1 million 547 teus arrived, representing 5.4%. in economic value in Mexican
pesos 5,686,630 million. [59]
Serious alternatives for its producers to increase the income of the program that
is being implemented driven by young students in the face of a strategic
achievement. [61]
Even the months where Mexico does not produce garlic (low production) (November-
December) due to the massiveness produce more, however, demand also increases.
Generating that the Mexican market does not supply this demand and they must import
from other countries.[63]
In the garlic market there is no economy of scale on the demand side because
customers have the ability to change from one company to another since this
product is not exclusively linked to a specific set of companies, which prevents
formation. of a network in which a consumer's willingness to pay for a given
amount of garlic would increase only if others choose to purchase it as well.[66]
For example: if a consumer (X) wants to buy garlic from a company (B) and
cannot find it (X), he could buy (garlic) from a company (C) so easily since, on
the demand side in economies of scale , the network operate by increasing the
customer's willingness to pay rather than reducing the average cost to the
provider. which tells us that there is no barrier to entry in the garlic market.[66]
-Government policies
To introduce products to Mexican territory, such as food, current health
legislation must be complied with for their marketing and distribution. All of
these regulations are important since they can have economic repercussions on
international trade, generated in the volume of transactions/prices. In addition,
garlic will have quotas, seasonal considerations and partial tariff reductions. In
the months when Mexico does not produce garlic. The duly required certificates
must be presented, proof of payment of duties in terms of federal law, certificate
of free sale for comparison and return of the original, physicochemical and
microbiological analysis of each batch as well as the label of origin and the
label. in Spanish. with which it will be marketed in Mexico.[68]
Finally, regarding the presence of Peruvian supply in the market, it increases from
November to January because during this period they can be exported duty-free. The
main points of sale are the warehouses of the supply center in the city of Mexico, in
charge of distributing to the entire Mexican territory, to retailers and to the HORECA
channel.[71]
Of the fresh garlic that is destined for the national market, 10% is sold directly to
self-service stores, the rest of the production goes to supply centers, influencing
the price and supply of the product. The main supply centers are: Federal
District, Guadalajara and Monterrey.
Due to a high percentage in fresh garlic supply centers, self-service chains
satisfy their supply needs in these markets. This choice is no coincidence, since
markets of this type present benefits for both producers and self-service stores,
since they guarantee the constant availability of garlic throughout the year.[72]
It is suggested that the marketing of fresh Peruvian garlic not be marketed
through its own means, that is, that a marketing entity distributes the product
with the objective of exercising more effective control over quality, price, service
and the market. Only through the comprehensive management of these four
distinctive elements will it be possible to compete directly with the already
established marketing channels.[72]
For example, to sell from Walmart in Mexico, no fees are applied either at the
beginning of the sale or on a monthly basis. Only a percentage of your sales will
be charged, which will vary depending on the category in which you make your
sales. But, Walmart's entire strategy, which is detailed from the beginning of its
manual, focuses on offering low prices to its customers. How does this impact
your role as a salesperson? It means you'll make smaller profit margins.[73]
Switching costs
The consumer faces few switching costs
The effect of influence on switching costs can be significant. In situations where
switching costs are minimal, buyers have greater freedom to switch suppliers. In
such circumstances, suppliers are likely to be forced to reduce prices or
improve product quality to retain their clientele.[74]
In the case of garlic, there are no additional costs for buyers when changing
suppliers because they can simply switch (buy) from one place to another. The
garlic industry establishes shared regulations and practices that simplify the
incorporation of new suppliers without the need for major adaptations. In
addition, the logistics and transportation process for the supply of garlic is
efficient, which does not have such a great impact since it minimizes any
additional expenses related to changing suppliers. In this context, buyers have
the flexibility to purchase from various brands of garlic without incurring extra
costs.
In conclusion, the threat of new participants in the garlic industry could have a
somewhat complicated entry since garlic production has grown exponentially in the last
5 years, but in the months in which Mexico does not produce garlic, it is possible to
enter the market and compete. because Mexico cannot supply this demand, but if we
refer to economies of scale in supply, the main reason lies in the cost, since due to
economies of scale in supply, Chinese garlic is the cheapest, producing a limitation on
export growth. .
However, when we refer to economies of scale on the demand side in the garlic
industry we will realize that they do not exist since any consumer can easily go from
one brand to another because garlic, being a food, does not It is linked to a certain
brand. set of companies.
In the case of garlic, there are no additional costs for buyers when changing suppliers
because they can simply switch (buy) from one place to another. What does not impact
(affect) them as consumers
Celery
It is a plant grown in Guanajuato, Baja California, Sonora, its shape is thick stalk with
wedged green leaves, one of its characteristics that can be highlighted can be added to
different Mexican foods depending on the consumer's taste and preference, such as
soups. and stewed with meat.[75]
For the product to be accessible at an industrial level, there has been an increase in
production yield over the years. In 2020, celery production amounted to 84,075 tons
with 1,994 hectares harvested with a yield of 13.7%; It can be said that the product will
be accessible nationwide for all businesses that need it.[76]
There is no price difference, as you can see, but it must be highlighted that it cannot be
replaced in its entirety since it is differentiated by being aromatic and fresh, another
serious thing is that it is accessible in markets and supermarkets..[77]
Celery can be said to be consumed in Mexico in salads and in dishes such as julienne
soup, sautéed celery, celery sofrito, celery chutney; Celery is eaten raw where it
provides an aromatic flavor and is also used to prepare alcoholic drinks such as Bloody
Mary instead of fresh garlic. A mild and subtle flavor is used in Mexican dishes as
condiments, for example, chicken garlic, salmorejo cordobes and Castilian soup; It
cannot be said that both who is the best depends on the Mexican consumer how he
adapts it to the dishes. In conclusion, it can be said that both are important in Mexican
food in general.[78],[79]
celery[81]
Cumin
Cumin has a Mexican characteristic. Currently, the variety of dishes is immense, such
as in the north of the country, chimichangas, Veracruz-style tacos, “carne enchilada”,
chicken broth, etc.[82]
The main cumin producer Guanajuato has become the leader in cumin cultivation with
a value of 20,940,993 million Mexican pesos, allowing various supermarkets such as
Walmart, Soriana, Chedraui.[83]
For the production of cumin it is a whole process such as seeds of the product in the
crops that includes phosphorus for the plants and study of the soil if it is indicated for it,
if everything goes correctly the yield will be adequate for the acquisition of the product
in the different super markets in Mexico.[84]
Cumin is an important part of the general culture of Mexican food. It does not combine
with all Mexican dishes. Its main objective is to provide colors and flavor.
Cumin can replace fresh garlic in the following dishes such as chickpea hummus,
lentils with rice and stewed vegetables; ras el hanout, beef durum there are countless
dishes but he concentrated on those in which cumin stands out the most.[85]
It cannot be said specifically which is the best since it depends on the perspectives, for
example, fresh garlic provides an aromatic and intense flavor in Mexican dishes
compared to cumin, an earthy and light sweet flavor, in general there is a low
probability of that the garlic be replaced in its entirety.[86]
Cumin[88]
Onions
It is characterized by providing a fresh flavor and a slight sweetness that can be
combined with different Mexican dishes and is very popular in the country.[89], [90]
National production is mainly Guanajuato all year round, allowing various supermarkets
such as Walmart, Soriana, Chedraui.[91]
The country produces 1.4 million tons of fresh onions every year. These production
levels are enough to cover almost 43,000 hectares of land. The country also stands out
in the export field, according to the latest data from the Ministry of Agriculture,
Livestock, Rural Development, Fisheries and Food (SAGARPA), onion exports amount
to 313,913 million dollars, an amount that places the country as the first world level in
this area, higher than that of China, India and the United States. However, according to
SAGARPA data, in the same period 353,780 tons of onions were sold in the
international market, making Mexico the third largest exporter in the world after China
and India.[91]
The onion production that was sold in the international market was 353,780 tons for
said period, making Mexico the third largest in the world in terms of export volume,
behind China and India.[91]
This vegetable is probably one of the most important ingredients in national cuisine.
This ingredient is used to flavor countless preparations and dishes, making it an
important component of the Mexican family diet; It is estimated that an average family
of four people in our country consumes at least one kilogram of onion per week, which
means that capita consumption is 12 kilograms.[91]
Fresh garlic is quite in demand, it is consumed in Mexico as condiments in dishes in
general, onions are quite accessible,The Mexican dishes that require onions can
replace fresh garlic are the following chile agua, cochinita pibil, panuchos,
enchiladas[92] and chilaquiles[93]. It is necessary to inform you that Mexican culture
has a variety of dishes that only require onion and other condiments. [94]
Garlic and onion are used more in Mexican cuisine to define which is the best. It is
something complete but each one has different properties and different flavors that
apply to Mexican food. They are good alternatives in case of quality, both are good for
medicinal use, the probability of being replaced is low since both are important and
relevant to Mexican culture.[95]
Onions[97]
Therefore, there are other varieties on the Mexican market such as Pink
Garlic, Violet Garlic, Red Garlic (Ajo Colorado), Brown Garlic and Black
Garlic.[100]
In the case of garlic, switching between suppliers does not imply additional
costs for buyers. The garlic industry has established common standards and
practices that facilitate the integration of new suppliers without significant
adaptations. In addition, the logistical and transport process for garlic supply is
efficient and well established, which minimizes any additional costs associated
with switching suppliers. In this context, buyers have the flexibility to explore
different options without incurring additional costs, which strengthens their
bargaining power by giving them the freedom to select suppliers based on
criteria such as quality, price and other relevant factors without significant
financial constraints.
completely vertically integrated in garlic, from its seed program with full
processing to consumer products.
The Central de Abasto holds the distinction of being the largest wholesale
complex globally. Comprising eight specialized sectors, it encompasses
Groceries and Grocery, Fruits and Vegetables, Flowers and Vegetables,
Auction and Producers, Empty Packaging, Poultry and Meat, Overnight Area,
and Transfer Warehouses. [106] [107]
Buyers are companies and the quality of what they sell is not very much
affected by what they buy from the industry
According to information obtained from the Peruvian Export and Tourism
Promotion Commission (PROMPERÚ), the main center for garlic transactions in
the Mexican market is managed by the Central de Abasto, located in key urban
areas across the country. Notable examples include La Central de Abastos in
Mexico City. This central facility efficiently distributes garlic nationwide, meeting
the demands of various retail establishments. These entities not only acquire
garlic for direct consumer sales in their outlets but also function as suppliers to
local dining establishments. [110]
Impact on profitability: The quality of garlic directly affects the quality of dishes
prepared by catering establishments and products sold by retail establishments.
If companies compromise on garlic quality for cost reasons, this can negatively
impact the taste and overall appeal of their offerings. Conversely, if they obtain
good quality garlic at a reasonable price, this has a positive impact on the
perceived value of their products, which can translate into increased sales and
customer satisfaction.
The common methods of selling garlic in Mexico include wholesale and export.
Mexico is a significant producer and exporter of garlic, at the time of garlic
entry, several crucial certifications must be obtained to ensure compliance with
quality standards, as per the product's condition such as British Retail
Consortium Food, Hazard Analysis and Critical Control Points and Norma ISO
22000 - Food Safety. Similarly, the buyer's specific requirements include
[111]
Dual role as suppliers: The information indicates that these entities not only sell
garlic directly to consumers, but also function as suppliers to local catering
establishments. This dual role highlights the interconnectedness of the supply
chain and the importance of obtaining garlic at a price that allows for both retail
and wholesale transactions.
CONCLUSION
In conclusion, the bargaining power of wholesale customers in the garlic
sector in Mexico can be considered moderate. Consumers' perception of
the quality, performance or characteristics of garlic imported by various
companies, including those mentioned above, reveals minimal
differentiation. These products share common attributes, such as size,
color, shape and taste, which generates a perception of
interchangeability, irrespective of the source of origin. In this context,
consumer attention tends to focus primarily on price. Competition
focuses on offering a standard product in terms of physical attributes,
which reinforces the view that these garlics are essentially equivalent,
and the choice is mainly based on economic considerations. However,
the presence of multiple importers and competitive pricing mitigates their
power to some extent. This phenomenon highlights the importance of
differentiation strategies that go beyond the physical characteristics of
the product, such as sustainable farming practices, organic certifications
or other aspects that add perceived value for consumers.
During the year 2007, a total of 80,896 tons of garlic were produced. The
Arequipa region had the highest contribution with 74%, followed by the
Cajamarca region (7%), La Libertad (6%), Lima (6%), Ayacucho (2%),
Junín (2%), and other regions each contributing 3%.
Differentiation:
There exists organic garlic in the market and also the area in which it is
cultivated and harvested but since our main focus is on 0703.20.90.00
GARLIC, FRESH OR CHILLED, EXCEPT. FOR PLANTING, this won’t
be a problem for our company.
Substitutes [119]
Inputs 1: Garlic
Since we are a company that exports, no substitutes for this product will
be used, since we only need fresh garlic.
Inputs 2: International transportation
The first and most viable option will be maritime transport to mexico,
which is always the cheapest but also kinda slow [121]
The substitute of this will be air transport but since we are dealing with
fresh products, a reefer will be needed, and the total cost of will be much
more expensive than the traditional maritime transport, which we will be
using no doubt
Possible Vertical Integration (Threats) [120, 121 and 122]
Loss of Key Suppliers: The potential threat of vertical integration by the
farmers could elevate their bargaining power, offering them the option to
sell directly to markets and thereby diminishing my standing as the
exclusive buyer.
Supply Instability: The farmers' potential shift towards vertical integration
might introduce supply instabilities, granting them more control over the
availability of fresh garlic and affecting my ability to meet contractual
obligations.
Price Negotiations: With vertical integration, farmers may seek better
prices by selling directly. This could alter price negotiation dynamics,
giving them more influence in determining rates and contract conditions.
Direct Competition: If farmers decide to sell directly in the market, I could
face direct competition with them. This would broaden their influence by
making them not only suppliers but also competitors.
Need for Supplier Diversification: Faced with the threat of losing current
suppliers, it's crucial to diversify sources of supply to reduce dependence
and, consequently, decrease the bargaining power of the farmers.
Reassessment of Market Strategies: The threat of vertical integration
would necessitate a reassessment of market strategies to adapt to the
new conditions. Adjustments in sales tactics, exploration of new markets,
or product differentiation might be necessary to maintain a competitive
position. [122, 123 and 124]
COMPETITIVE RIVALRY
The graphs show the FOB value and the percentage market share of the
companies that will export garlic to Mexico in the year 2023[126]
Firstly, the companies and their participation by country were evaluated. their
concentration is relatively low; although there are a few companies that lead the
market, there are many small companies that are competing too
Industry Growth
In 2020, global garlic production reached a total of 28.1 million metric tons,
which represented an approximate increase of 3.9% compared to 2018.
This increase in the extent of cultivation and production is attributed to the
growing demand for garlic, driven by its various applications in the food and
healthcare industries, generating a positive impact on the market worldwide.[127]
The garlic market is expected to grow from USD 525.17 million in 2023 to USD
600 million in 2028, with an annual growth rate of 2.70% during the forecast
period. This increase is due to the growing demand for healthy and convenient
foods, as well as garlic's ability to remain shelf-stable in flavor. Demand is also
increasing in industries such as food processing[129]
These forecasts benefit the demand and consumption of garlic in Mexico
Exit Barriers
Cultivation periods and phases: Garlic has a particular cultivation cycle that
requires careful planning to guarantee a successful harvest. It is harvested 8
months after being planted. This harvesting process generally takes place in the
month of August.[130] Abandoning agriculture could mean losing an entire crop
cycle and requiring a time to recover investments in the next season, however,
if this case were to happen, there are preceding crops that can be used for
harvesting on the same land such as wheat, barley, rapeseed. , potato, lettuce,
cabbage and pepper. [131]
This means that the garlic industry has fairly low exit barriers.
Actors aspire to lead the industry not only for economic reasons
The actors that aspire to lead the industry not only for economic reasons are
mainly the strategic sectors, and in Mexico they are: Automotive, Electrical-
Electronic, Energy, Maquila and, industrial warehouses, Transportation and
logistics, Tourism, Aerospace, Mining-Metallurgical, Telecommunications.[132]
In the list, the agricultural industry is not mentioned, this means that this sector
is not considered a strategic sector, which is why the actors aspire to lead the
industry for mainly economic reasons.
This can provide less intensity to competitive rivalry
Product differentiation
Because garlic is a commodity, it is usually difficult to obtain a pronounced
differentiation, since the offer is standard, the conventional ways that try to
"differentiate" it are: according to commercial type, according to quality and
according to calibers.[133]
However, currently there are new proposals that aim to provide greater
differentiation to garlic, through varieties of production, harvest, and
environment, since these factors can partially modify the product, depending on
its use, being able to be spicier to give that flavor, more soft for kitchen use, etc.
Not all garlic is identical, thanks to technology and laboratories there is ample
opportunity to stand out from the competition.[134]
This factor could increase the possibility of price competition
If fixed costs are high and marginal costs are low
The average production costs of garlic are as follows [135]:
According to these data, it can be identified that the marginal costs are labor,
agricultural machinery per hour, inputs, and internal freight, these costs
represent 92.88% in total while the land rental and the moto-fumigator that are
the fixed costs, they represent only 7.12%
However, it is important to consider that Fixed and variable costs in the industry
depend on whether production is through the traditional or modern channel. In
the modern channel, costs are higher since they carry out value-added
activities, linked to transportation, more sophisticated packaging, and guarantee
of product traceability.[136]
This means that marginal costs are much higher than fixed costs, which means
that large sales are not needed to break even point, so price competition based
on this criterion is very unlikely.
Capacity expansion
The amount of seed needed to plant one hectare, It is between 1,000 and 2,000
kilos [137]
And the productivity per hectare depends on the type of garlic to be grown:
Chinese garlic (white) 20 tons, Masone 18 tons, Napurí 15 tons and Moradoro
Arequipeño is 8 per ton.
Generally, producers sell and export in boxes of 10 kilos or in meshes of 20 kg.
[138]
Perishability
If stored properly, garlic has an extended shelf life, as it not only takes longer to
deteriorate, but also retains its properties and flavor. You can expect garlic to
stay fresh for about six months.[139]
This generates a benefit for players in the industry since they can keep
products stored for longer, or always have a stock available with little chance of
spoilage, it also reduces price competition.
Strengths
1. Spanish as our native language, when exporting to Mexico, proficiency in
Spanish is crucial to access valuable resources, market research and best
practices, as Spanish continues to be the predominant language in Mexico.
2. Theoretical knowledge of the garlic market in Mexico (consumer behavior).
3. Accessibility to obtain the raw material (fresh garlic) as it is an input produced in
our country, in different parts of Peru such as Arequipa, Cajamarca, Junín,
Ayacucho and Libertad.
4. Have all distribution channels open to be able to market garlic
5. High positioning in the world market: Peruvian garlic enjoys an excellent
reputation thanks to quality, diversity of varieties and sustainable management
of production
6. Exists flexibility in production volume, it is possible to adjust production
according to the demand of the Mexican market, depending on the capacity of
expansion
7. Ease of maintaining good relationships with Clients and Distributors in Mexico
8. Easily diversify the offer of agricultural products in addition to garlic, taking
advantage of the demand for other products in the Mexican market.
Weaknesses
1. Constrained resources pose a challenge for the company since we will be
starting a new one, making it difficult to compete in the export market that often
demands substantial investments.
2. Lack of connections in the food industry or international trade hinders the
facilitation of access to potential business partners and clients.
3. The lack of experience in export processes.
4. New market entrant: As a newly established company, our lack of established
presence and brand recognition in the Mexican market may pose initial
challenges in gaining trust and market share among consumers and
competitors.
5. Limited access to financing: Due to our status as a new entrant, securing
adequate financial resources may be challenging, potentially restricting our
ability to invest in essential infrastructure, marketing, and operational aspects
necessary for a successful garlic export business to Mexico.
6. Dependence on external factors, vulnerability to external factors such as
adverse weather conditions in Peru that could affect garlic production.
7. Lack of investments in agricultural technology and information systems that
could limit the company's efficiency