Introduction
When companies enter foreign markets, there are many factors to consider. Even though the airline industry is quite profitable and in demand among people, the expansion of airlines may cause some issues due to the savings in transportation time. In particular, it is necessary to consider the labor legislation of foreign countries and the level of qualification of employees. Therefore, this paper will evaluate Southwest Airlines’ expansion into the Mexican market.
Country for Expansion
Because of its proximity, Mexico is one of the most common destinations for US companies to expand their operations. Business in Mexico has been primarily influenced by the American market and global trends (Silva Rodríguez de San Miguel, 2020). Moreover, Latin America is one of the critical destinations for Southwest Airlines. The airline operates 3 to 27 flights to and from Cancun, Los Cabos, Puerto Vallarta, and Cozumel (Southwest Airlines, 2023). However, most flights take between the US and Mexico, while the company’s expansion to Mexico could expand the number of destinations.
The expansion of Southwest Airlines could provide opportunities for domestic flights in Mexico and additional flights from Mexico to other countries in Latin America. Today, in Mexico, there is a need to meet the demands of the business and tourism markets, which cannot be met by local airlines (Tepexpa & González, 2020). The airline’s entry into the Mexican market would allow it to use Mexico City, Guadalajara, Tijuana, Monterrey, and other international airports in Mexico to increase passenger traffic and the company’s profitability.
In addition, Mexican airlines cannot meet some of their passengers’ needs. For example, Tepexpa and González (2020) report that local airlines are characterized by a lack of cargo and “consumer complaints due to the concomitant reduction of the services offered by the fee” (p. 134). On the other hand, although Southwest Airlines is considered a low-cost carrier, it provides its customers with an extended list of services (Southwest Airlines, 2023). Thus, the company’s expansion to Mexico has enough prerequisites and potential profits. However, it is necessary to consider the country’s legislation and potential challenges.
Human Resources Considerations
The predominantly Mexican labor market has evolved under the influence of global trends. Nevertheless, for foreign companies expanding into the Mexican market, there may be human resource considerations such as specific labor laws, company safety under the law, and a lack of skilled workers. For example, Article 123 of the Mexican Constitution “furnished protection for women and children and set forth the eight-hour work day and the concept of a living wage” (Silva Rodríguez de San Miguel, 2020, p. 3). This means that one of the main principles of the labor market in Mexico is the equality of all workers, regardless of gender. Moreover, by law, the company is responsible for harassment by colleagues and customers, which may create specific difficulties in resolving these conflicts.
Furthermore, the company must provide a safe and comfortable environment for employees. That includes mandatory paternity and maternity leaves for employees, severance payment for next of kin, and paid leave (Silva Rodríguez de San Miguel, 2020). In addition, the company must provide employees with all the social security benefits offered in conflicts. Consequently, the legislation protects the rights of workers, which can jeopardize the profitability and safety of the company.
Another issue is the possible discrepancy between the required qualifications of employees and their fundamental professional skills. That may perplex a company when finding qualified employees for jobs. Moreover, by law, companies must provide probationary and training periods for all employees and additional education to meet the company’s requirements (Silva Rodríguez de San Miguel, 2020). In addition, Mexico regulates the outsourcing of legal services, so companies must have a dedicated department.
Recommendations
The main recommendation is to apply international labor principles while considering the local features of doing business and relations between employees and employers. One possible strategy is to hire local lawyers to help the firm comply with the law, which will help the firm consider and comply with Mexican labor laws and secure the company in the legal field. Even though Mexican legislation establishes “increased penalties for employers who violate the letter of the Labor Law,” many foreign companies cannot be ignorant of all labor laws (Silva Rodríguez de San Miguel, 2020, p. 7).
Therefore, establishing a legal department responsible for compliance with the norms and principles of labor relations in Mexico should be one of the first points in the company’s expansion. In addition, employers can register their employees with the Mexican Social Security Institute (Silva Rodríguez de San Miguel, 2020). That will help secure the company and reduce the cost of social benefits to employees.
In addition, the problem of insufficient employee qualifications can be solved through an extended onboarding and training period for new employees. Southwest Airlines is committed to improving relationships between employees, customers, suppliers, and communities (Southwest Airlines, 2023). Therefore, it is necessary to ensure that new employees are familiar with and comply with this information to maintain the company’s high reputation. Moreover, to run a company in Mexico, it is necessary to form a leadership consisting of American and local leaders who share experience and jointly manage the company.
Conclusion
Thus, expanding Southwest Airlines to Mexico can bring profit and expand the company’s scope. However, for safety and to avoid fines, it is necessary to consider the peculiarity of Mexican labor law. For the most part, the labor market in Mexico aims to protect the rights of employees. Therefore, the best expansion solution is hiring qualified Mexican lawyers to help the company conduct business according to the law.
References
Silva Rodríguez de San Miguel, J. A. (2020). Labour relations in Mexico: change and continuity. Espacios, 41(10), 1-12. Web.
Southwest Airlines (2023). About Southwest Airlines. Web.
Tepexpa, M., Solís, S., & González, L. F. M. (2020). Mexican Airlines in the Current Situation of COVID 19. Evolution and Prospects. European Journal of Marketing and Economics Articles, 3(1), 132-144. Web.