Purpose
The purpose of the given executive business plan is to demonstrate the underlying ideas, market features, and business approach of exporting vehicle or auto parts from US to Mexico. Therefore, the latter country will be analyzed and overviewed in detail, because it is a target market. In order to properly execute the plan, it is highly important to be able to fully understand vehicle parts market in Mexico and its political, cultural, and economic environment, which differ significantly from the US market.
The modern automobile market, both primary and secondary, is going through hard times. Decrease in cash savings in the population, decrease in income. A large increase in prices and therefore the percentage of sales is falling. The auto parts market is quite inaccessible for in-depth study, due to the considerable volumes of fake and counterfeit products. In 2018, more than 47.8 million cars were registered in Mexico, which is one fifth more than was registered in 2015 (“Number of motor vehicles,” 2019).
Machines of the old year of manufacture imply a considerable demand for spare parts, since older machines are much more often in need of repair and replacement of components. Meanwhile, buyers’ financial condition has noticeably changed in recent months. The economic situation in Mexico has played a role in this, and as a result, the demand of the secondary market has grown. When choosing spare parts for repairs, drivers are increasingly refusing to buy expensive parts from well-known manufacturers, buying spare parts of secondary quality, which have more affordable prices. Therefore, the executive business plan will aim to adjust the current Mexican market of vehicle parts by conducting detailed research of the Mexican political, economic, and cultural factors.
Executive Summary
It is important to understand that the structure of the modern spare parts market in Mexico, then one of the largest suppliers among global manufacturers is China. The reasons are understandable and this is a low labor cost and well-built logistics. However, the fact that the part was made in China does not mean that it is of poor quality, because many well-known brands such as Ford, General Motors, Hyundai, Bosch, Continental have their own factories in this country.
There is a significant opportunity to successfully enter Mexican market of auto parts. The main reason is the fact that there is an estimated growth the given market by a substantial margin (“Automotive aftermarket in Mexico,” 2020). The situational analysis shows that there is a need for high-quality auto parts due to the overwhelming number of medium to low-quality products coming either from China or other places.
The local cultural factor in regards to automobiles and the related products, such as vehicle parts, is shifting towards dual framework. It is due to upper class’s demand for high-quality auto parts, and lower and middle class’s need for cheaper alternatives. Political environment also plays a major role in determining the success and viability of the given business plan. The local policies are favored towards the US and China, because these are two main importers of the product (“Value of auto parts imports,” 2020).
It is critical to design export marketing plan is such a way that it mainly targets middle- and upper-class automobile owners, because American products are generally perceived as having more quality than cheaper alternatives from China. In addition, economic development in Mexico is a critical factor, which will directly affect the execution process of the given business plan. Mexico is a major exporter nation in world and its main receiver is the US. The nation exports a significant portion of automobiles to US and other countries (Amadeo, 2019). Therefore, the market of vehicle parts is prospective one because it is tightly interlinked with the main Mexican export products.
Research
Introduction
The current stage of development of the world economy is characterized by an intensive expansion of international business. Such activity involves mutually beneficial cooperation of several countries in the field of trade and production. The main stimulus for the activation of partners in international business was the possibility of increasing the efficiency of entrepreneurship and expanding its borders by diversifying economic activity and using new sources of necessary material resources, especially investment. Entrepreneurs engaged in international activities have a number of competitive advantages over domestic business.
Large companies are trying to transfer the production of their products to countries where they do not have their own assembly shop and there is high demand. This approach allows exporters to reduce the cost of transportation of parts and quickly adapt to changes in the economy of the state. Mexico is also among these countries – there are not only a lot of automotive assembly plants, but also factories for the production of spare parts and even basic components and assemblies. In addition, Mexico’s population is diverse, which means that there is a need for both high-quality products and low-cost ones. The fact that the vehicle parts will be exported from the US, the target market will be people with higher income, who are willing to acquire original auto parts for American cars.
Situational Analysis
In order to possess a full comprehension of the Mexican market for automobile parts, the situational analysis needs to be conducted. It is important to note that analysis of Mexican online car dealers and used cars websites showed that there is a substantial ownership of American cars, such as Ford and Chevrolet (“Used cars for sale in Mexico,” 2020). It is quite reasonable to assume that the seller, armed with the full knowledge not only of specific spare parts, but also of the device of the car as a whole, will cause more confidence from the buyer. A seller who does not know the device of the car, even if he knows specific spare parts, cannot build a confident communicative interaction with the buyer and most often tries to remain silent and reduce communication to a minimum.
Naturally, it is simply implausible talk about any active sales, all the more, there is no high-quality auto parts sold, which involves not only communication with the client, but also his competent consultation. The specifics of the market for the sale of spare parts is such that the client either repairs his car or understands its repair at the level of an advanced user. The process of selling spare parts makes rather high demands on the professionalism of the seller. This is primarily due to the specifics of the product itself, which is becoming more and more diverse. Especially if the service offers spare parts for various models and brands of cars.
Studying the parts themselves and their features requires basic knowledge, as well as a lot of time and effort. At the same time, the seller must know the features of the spare parts in order to sell to the customer exactly what he needs. The matter is even more complicated when the seller not only releases the goods, but claims to act as a sales consultant. This role implies answers to customer questions and moreover, the questions are very diverse and unpredictable.
Cultural Overview
Mexican culture in regards with automobiles and its auto parts is mostly dual in its nature. The main suppliers of these products are US and China, which means that there is an already established cultural familiarity for American vehicle parts (“Value of auto parts imports,” 2020). It is evident, that majority of consumers who use Chinese products are seeking lower cost and medium quality products.
Therefore, as an American exporter, it is critically important to target the parts of population with a demand for higher quality auto parts. In other words, there is an opportunity to occupy the niche, where consumers are willing to spend more on vehicle parts in exchange for quality. The client is more inclined to buy from that auto parts buyers are full of myths and misconceptions that have a direct impact on decision-making on the purchase of a particular spare part.
The seller often finds himself in a situation where he must not only inform the buyer, but also work with the prejudices and misconceptions of his customers, and this only increases the requirements for his knowledge and professionalism. These are the conditions under which a modern seller of parts has to operate in Mexican conditions. The buyer is becoming more discriminating and capricious and he has every right to do so, thanks to market competition.
If he still does not fully use this right, then tomorrow the service factor may become decisive in the competition. Used parts can be in great demand than the original ones and these are parts that are removed from used cars and are subject to further sale.
The main advantage of contracted spare parts is that, by purchasing such spare parts, a client gets an original part made at the manufacturing plant for a particular brand of car. Another advantage is that contracted spare parts are several times cheaper than original spare parts. Evidently, one needs to understand that contract parts are still used parts, but their quality is incomparable with the quality of spare parts coming from disassembly.
Contracted auto parts are several times cheaper than the original ones. Given this circumstance, it is sometimes easier, more reliable and more expedient to replace the entire damaged unit with the help of the supported parts than to purchase separate new components.
Political Environment
Political environment in Mexico can be considered feasible due to the fact that US and Mexico have an already established partnership in both political and economic arenas. The local legislations are favorable for American exporters, because a significant number of Mexican car owners have American cars. The reason is that Mexico manufactures automobile as its primary export product, because the major car companies moved their production sites to Mexico.
In this regard, the territorial and cultural proximity of countries begins to play a role because potential importers of capital are present. At the same time, it is quite possible to rank these factors by the level of competitive advantages adequate to them, such as capital mobility, which determines the lowest level of advantages such as investment movement. The short life cycle is no longer associated not only with the movement of investments, but with the movement of innovation, so it involves the advantages of a mixed type.
Finally, low cultural barriers to the movement of capital indicate the highest level of competitive advantages such as the movement of investments, mixed not so much with the innovative component as with the movement of collective human resources. A constantly changing correlation of factors mobility, life cycle, and cultural barriers is characteristic for the production of spare parts for automobiles.
Export Marketing Plan
In order to properly design export marketing plan, it is highly important to be able to identify the relevant market segment with demand that matches the product being introduced. As an American exporter of vehicle parts, the component of duality needs to be considered. The local population with cars mainly purchases either American or Chinese auto parts, which means that there are two social classes with different necessities.
Chinese vehicle parts are mostly cheap and they have medium to low quality, whereas American products generally tend to be more costly and have better quality. After a certain period of time, the car is removed from the warranty. After that, in most cases, car owners do not repair it at authorized dealers, but choose independent service stations and car services for maintenance, since the prices in these sales channels are much lower, and at the same time, the requirements for servicing a used car are reduced.
The secondary market is the most difficult segment of the market, the technology of promoting the product decides everything and many components of the marketing mix are of maximum importance. Of decisive importance are the following factors such as price, quality, choice of a channel for promoting a product, methods used in promotion. The main factor that affects the viability of the auto parts market is the individual because today, people are not able to give up their personal car. This is now not just a way of moving from home to work, but also a certain social status, having acquired which a person is unlikely to want to lose.
Many people want to move along good roads, which means that their construction will always be necessary, and, therefore, someone must service the construction equipment. They want to live in a good house, which someone also had to build, and again the equipment will need maintenance. In the current economic situation, large companies selling and installing auto parts need to further develop their business.
Economic Development
Considering the economic development of nation can be a determining factor in setting the functional and profitable business plan. Mexico is a developing nation, but it is also a 15th largest economy in the world, which is mostly dependent on its oil-reserves and automobile exports (Amadeo, 2019). This means that besides fossil-fuels, the country builds and manufactures automobiles of non-local companies for export. The given factor can directly influence the success of vehicle part business, because the latter in interlinked with Mexican products.
American auto parts manufacturers are facing fierce competition from foreign manufacturers whose marketing strategies are geared towards global competition, which automatically implies competition with American manufacturers. There can be two main types of competition from foreign manufacturers: either competition from import supplies of auto parts manufactured in other countries, or competition from products manufactured by American subsidiaries of foreign manufacturers. The first factor influencing this business plan is the complexity of the product.
All auto parts are complex products of one manufacturer, and therefore, pricing and profitability of sales are directly related to the position of the manufacturer’s brand in a particular market segment. They will depend on a number of the same factors as the sale of a car of this manufacturer. The second factor influencing income opportunities is the maturity of the product or market. Thus, primary or secondary auto parts markets have associated pricing.
This includes the fact that pricing tactics depend not only on the needs of target groups and market capacity, but also on production volumes, stocks and enterprise resources. Respectable customers are not only the image and value of the brand, the advantage of a marketing policy that uses a collective image of the consumer, but also the guarantee of the quality of the product or service.
Customer value is the success of the company, expressed in business value. In transactional sales, a product or service is standard, has analogues, for a client, the main selection criteria are price and ease of purchase. In consulting sales, a product or service is complex, can be adapted to the needs of a particular client. Therefore, the seller in consulting sales must determine the needs of the potential client and competently position the product or service, accordingly developing the value proposition of the product.
Corporate sales are carried out in the process of interaction between the seller and the buyer, in which the product or service is created together and which requires knowledge of the buyer’s strategy. Corporate sales are especially important in the auto parts sales sector, as they make it possible to form long-term relationships in the niches of the industrial market. The main thing here is not the financial factor, but the quality and prospect of strategic interactions between the seller and the buyer, the opportunity.
Summary
In summary, exporting American vehicle parts to Mexico is feasible and potentially profitable business, which can be highly successful with correct execution. The situation in the nation is manifested in the notion that there is a need for both high-quality products from US, and cheaper alternative from Chine. Since both nations are major contributors in Mexican market of vehicle parts, the political environment is already established and open.
It is strengthened by the fact that US and Mexico are economic partners and strategic allies, which inevitably leads to an active exchange of resources and products. The vehicle parts from US should properly target the relevant consumers, who seek higher quality products, and thus, it can be a basis for export marketing plan. In addition, economic condition of the nation favors auto parts businesses due to Mexico’s largest export being manufactured automobiles of foreign companies.
Reference List
Amadeo, K. (2019). Mexico’s Economy Facts, Opportunities, and Challenges. The Balance. Web.
Automotive aftermarket in Mexico to grow more than 6% annually. (2020).
Number of motor vehicles in circulation in Mexico between 1980 and 2018. (2019).
Used cars for sale in Mexico, ME. (2020). Web.
Value of auto parts imports into Mexico in 2018, by source country. (2020). Web.