Jose Ruiz

By Jose J. Ruiz

In 1996, Dr Elisabeth Marx conducted a study, analyzing the backgrounds of the CEOs of the FTSE 100 Companies. In 2007, Dr Marx also explored the CEO profiles of the Fortune 100 Index, allowing for the first time a transatlantic comparison of top business leaders. This study provides a compelling snapshot of the top CEO’s in Mexico and compares the results to those obtained by Dr Marx.

These Chief Executives populate the financial and social pages of newspapers and magazines in the country. They make decisions that routinely affect millions of people, influencing economic, social and environmental outcomes. So who are they today and who will they be tomorrow? What are their common characteristics and how are those characteristics changing?

As the country continues to change rapidly, what is already defining the new breed of CEO’s in Mexico?

Two numbers are presented for Mexico’s CEO’s in order to identify current trends. We show the totals and have also isolated the numbers for the newest CEO’s: A group of 47 with 5 years or less on the job.

Broad Market and Industry Trends

In the past few years we have seen dramatic market and economic driven changes in the strategic direction of many organizations. The great recession and the intense competition have forced many companies to focus on vertical industries in order increase their level of innovation as well as product and market expertise. This

has brought consolidation in many industries and a need toincrease global reach in order to achieve the volumes required to provide competitive prices. These changes have shifted the focus from regions to industries demanding executive talent with specific industry and product expertise that can perform across borders. There are already instances o foreign companies in the Expansion 500 that no longer have a country managing director and instead have leaders for specific business units reporting directly into regional or global heads.

Talent Trends

Let’s look at how these broad trends are reflected in the results of the study and how they translate into current and future talent and leadership requirements for executives in Mexico.

Global executives

The term globalization has been thrown around for decades but it has never applied as much as it has in recent years as organizations become more focused and specialized within a specific industry or product and reach beyond their traditional regions of business. Just looking at the numbers can be a bit misleading. One can assume that the increase in foreign nationals running the Expansion 100 companies is a sign of Mexican nationals losing control. However it is clear that the new breed of CEO’s and executives in Mexico are better prepared and better educated in a global environment than ever before. 54% of the newest CEOs have performed assignments outside of Mexico and 53% hold Master’s degrees from institutions outside of Mexico.

Executives who have been successful in international assignments have usually excelled in understanding the environment, leading visionary change, leading results and mastering complex business problems. Competencies that coupled with already acquired industry expertise translate into a small learning curve and quick results.

Senior executives are a more diverse group than ever before and the impact goes beyond the leadership teams. Middle managers and staff members are being exposed to global management techniques, metric driven environments and matrix organizations that are preparing them to be the next generation of leaders in or outside of Mexico.

Increased focus on key industry and market expertise

One of the most surprising trends is an increase of CEOs in Mexico that are being promoted from within the company with great importance given to company culture,  industry specific experience and the leadership skills that are acquired while working abroad. It is important to note that internal promotions don’t necessarily mean internal to Mexico or the region.

The study performed in 2007 by Dr Elisabeth Marx suggests that:

”… the FTSE 100 Companies in the UK and Fortune 100 Companies in the US take a very different approach to CEO selection. Whereas Fortune 100 Companies seem to value wisdom, develop better internal grooming and succession planning and have higher educated CEOs, FTSE 100 Companies put greater focus on international experience, welcome foreign talent and give ‘young guns’ a chance”

Our results suggest that the Expansion 100 companies share a bit of both with a high value on wisdom as evidenced by an average tenure higher than both the Fortune 100 and the FTSE 100 and strong internal grooming and succession planning that begins early and includes elite foreign education and opportunities to gain international experience.

The Expansion 100 companies have more Super CEOs (45 and younger) than both the Fortune 100 and the FTSE 100 put together but they have been well groomed and prepared for succession.

Elite education playing a big role

There is no denying that advanced degrees from foreign institutions play a big role in the development of the new breed of CEO’s. 60% of the newest CEOs hold Master’s degrees or PhDs from foreign universities. The surprising trend is the rise of the PhD educated CEO. All of the CEOs with a PhD are part of the newest CEOs group.

Women on the rise

Perhaps the common trait between the US, England and Mexico is the one that we can brag the least about. A very small number of Women occupy the top job.

In Mexico only Nicole Reich (Scotiabank Inverlat), Carmina Abad (Metlife) and Grace D. Lieblein (General Motors) make the distinguished list in the Expansion 100 but Paula Santilli (PepsiCo Beverages) is not too far behind. Women are on the rise and while the numbers remain very low the trend is positive. All four were internally promoted and all four have extensive international experience with strong ties to Latin America.

Preparing for the future

The motivation behind the research presented in this article is part of our role as a leadership advisory firm providing senior-level executive search and leadership consulting services, including succession planning, executive assessment and development, talent retention management, transition consulting for newly appointed executives, and M&A human capital integration consulting. For almost 60 years, we have focused on quality service and built strong leadership teams through our relationships with clients and individuals worldwide.

| Download PDF

Career Development, Drive It (Book), Leadership, Mexico Executive Search CEO, Maquiladora, Mexico, Mexico Executive Search, Recruiter, Recruiters

What can we expect in 2010 as we continue to see signs the economy is beginning to recover and expand?  Uncertainty is gone. We’re certain it’s going to be a tough year but challenges will be different from those we encountered in 2009.
By Jose Ruiz

When 2009 began uncertainty filled the air and the economy paralyzed. It was like driving in dense fog. Trying to sort out what was around us, while we attempted to move forward with caution, hoping nothing would come out of nowhere and hit us. Swine flu did just that and it was not until June that the fog began to lift. We hit bottom, and it became evident that the recovery was going to take time and it was going to be tough.

Let’s take a broad look back at what happened from the perspective of Connie Consumer and Pete Producer. Back in 2006 Connie Consumer was flying high with a steady job, a house, retirement and investment accounts with values that were growing well beyond inflation. The Consumer family’s net worth was growing at a steady pace and they felt comfortable making major purchases. Pete Producer was doing very well struggling to keep up with demand. Pete and Producer Inc. hired more employees and made investments with an eye to the future. He needed to expand to not lose market share.

In 2008 Connie Consumer began to see her net worth slip as house prices began to drop. The foreclosure of her neighbor’s house put downward pressure on the price of her home and her investments were not performing well. The Consumer family is a responsible consumer so they began to hold back on some spending. Pete producer began to notice the Consumers where not spending as much as before and began to see his demand fizzle. Producer Inc. was already set for higher output. Pete producer made small adjustments but his inventory began to accumulate. Pete felt he had increased capacity too aggressively betting on the come and allowed his costs to get out of control. Towards the end of 2008 he had no choice and began to make cost adjustments and had to let some employees go.

By the start of 2009 Connie Consumer was facing a pay-cut and was uncertain about her own job. She could no longer count on the safety net of her home equity or her investment accounts. If she lost her job she would have a hard time making ends meet. The Consumer family hunkered down and increased their savings trying to spend only on the essentials. Pete Producer felt the pressure as his products stacked up in his warehouse. Producer Inc. had no choice and made deeper cost cuts, letting more people go and shutting down plants. Pete was in trouble. His costs were climbing and his product was not selling. Pete needed cash at a time when his bank reduced his credit line. He knew that increasing his prices would be suicide. In fact he had to provide discounts to empty his shelves. He accepted losses to guarantee cash flow.

At the end of June 2009 Connie felt a bit more secure at her job. Layoffs appeared to be over. The Consumer family was still dealing with lower pay because of the pay-cuts but they felt a bit more comfortable spending. Government programs had helped Pete reduce his inventory and Producer Inc. began to see demand come back.

So this is where we are today. Connie Consumer is cautious but spending. Pete Producer has his production lines working again. His reduced capacity is almost at its limit.

The uncertainty is gone but now comes a tricky recovery.

Pete Producer is seeing demand increase but he is very reluctant to increase capacity. His fear of loosing market share is outweighed by his fear of letting his costs get out of control. He will accept losing some customers to guarantee that he will stay afloat and profitable. Pete will grow at a very slow pace keeping a close eye on the Consumer family betting very little on the come.

Connie Consumer will probably get her full pay back by the end of the year. But her employer will be thinking along the same lines as Pete and will keep pay increases in check. In 2010 Connie will likely earn the same salary she did in 2008.

Now say hello to my little friends: inflation and loss of purchasing power.

2009 was a year characterized by the elimination of excess inventory and capacity (supply). When I talk about capacity it’s not only manufacturing capacity. Restaurants, dealerships and stores were closed, production lines were shut down. Overall, capacity to provide goods and services was reduced in reaction to a dramatic drop in demand. Prices remained mostly in check because supply outweighed demand.

Through the reminder of 2009 and 2010 demand will continue to grow at a slow pace. Supply and demand will even out and we will very likely see inflation levels above those that we saw in 2009. 

Higher inflation levels and a virtual freeze in salaries equals a loss in purchasing power adding another element to the already strong argument of a slow recovery.

2010 will be a year of recovery. But a slow and difficult recovery as Connie Consumer and Pete Producer keep an eye on each other before taking any steps, both protecting their cash and taking nothing for granted.

About Heidrick & Struggles International, Inc.
The world’s premier provider of senior-level executive search and leadership consulting services. The firm’s executive recruiters and leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. In Mexico, Heidrick & Struggles operates offices in Mexico City and Monterrey. For more information about Heidrick & Struggles please visit www.heidrick.com

Economy, Mexico Industry Economy, Jose Ruiz, LinkedIn, Manufacturing, Maquiladora, Mexico Executive Search, Mexico Recruiter, Mexico Recruiters, Recruiter, Recruiters

You Corp.
Succeed by applying to your personal life and career the same principals that propel leading corporations.

by Jose Ruiz

The exact definition of business is a matter of debate.  But without getting into much detail or controversy a business is a legally recognized organization designed to provide goods and/or services to consumers.  Formed to earn profit that will increase the wealth of its stake holders and grow the business itself.
 
If you are reading this there is a high probability that you work, you are either an employee or an entrepreneur.  It really does not matter.  In the end, you do something (your product) and someone pays for it.  People who surround you or depend on you such as your wife, kids, parents are affected by how you do it and what you get. They, along with you, are stake holders. I’m pretty sure that you and your stake holders have felt the need to increase your wealth. You are a business.
 
Working in executive search I speak to many managers and directors from Fortune 500 organizations. They are masters of business strategy and execution yet, most of the time, I get a strange look if not a blank stare when I ask how they have applied those concepts to their person and how they have used those concepts to get to where they are. I truly can’t say they got there by chance. But I’m also not sure it was always something that was planned and mapped out. There are moments in time which change the course of events, alter the paths of your career and change your professional life. Some are positive and some are negative and for most of us the majority of these events are unexpected.
 
When I ask people who have had successful careers what the secret is, the most common response is “hard work and perseverance”. Check! You won’t be successful without them. But I also know many people who have worked hard, been relentless and have fallen short of their goals. There are no guarantees that you will be successful and achieve all of your goals, but I bet you can increase your chances by applying the same business concepts great corporations use. You might already work for one and apply them everyday, you just might not be applying them to yourself.
 
Identify and understand your stakeholders
People who surround you or depend on you such as your wife, kids, parents are affected by how you do it and what you get. What are their needs today and what will they be tomorrow? Your needs and those of your other stakeholders should be your big objective.
 
Know, understand and develop your product/service 
Know what makes you valuable and think about how your current job or activities will affect that value. In the end, your employer is your client. How many potential clients do you have? Be strategic. Everything you do should be part of the creation of a unique and valuable position. A good strategy may require you to make trade-offs – Your resources are limited. Choosing what not to do is just as important as choosing what to do.
 
Create and propel your personal brand
Yes, you are a brand. Distinguish yourself and make sure you never forget that perceptions matter. People remember you and what you are by what you do and what you reflect. Work on a positive brand.
 
Apply The Hedgehog Concept (Simplicity within the Three Circles)
Good-to-Great companies do what they can do best (as opposed to what they want to do best), what they are deeply passionate about, and they focus on what drives their economic engine.
 
Be effective: Plan and execute seamlessly
Know where you want to go, plan how you are going to get there and when. Be visionary. Spot trends but stay focused and constantly reassess everything.
 
Focus, document and measure relentlessly
Use a central score board and share it with your stakeholders. Goals slip when progress is not being measured…and measured against time. Set milestones at frequent intervals. When gaps occur, question what went wrong and apply corrective actions.
 
Be ruthless with resources and stay financially flexible
We live in a world of cycles. Recessions and economic crisis will happen and most likely a few times in our lifetime. Be prepared, don’t lose focus and be sustainable. Plan long term.
 
Don’t B.S. yourself
B.S. your clients or your stakeholders and it will have an impact on your personal brand. B.S. yourself and you will be on a direct path to failure. Believe your own B.S. and you are done.

Jose Ruizis a Principal in Heidrick & Struggles’ Monterrey office. As an executive recruiter he has worked on executive search projects for multinational clients in industrial sectors and consumer markets. He can be reached at +52 (818) 8625-6521 or jruiz@heidrick.com

About Heidrick & Struggles International, Inc.
The world’s premier provider of senior-level executive search and leadership consulting services. The firm’s executive recruiters and leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. In Mexico, Heidrick & Struggles operates offices in Mexico City and Monterrey. For more information about Heidrick & Struggles please visit www.heidrick.com

HR Management in Mexico, Leadership, Mexico Executive Search Executive Recruiters, Jose Ruiz, LinkedIn, Manufacturing, Manufacturing Recruiter, Manufacturing Recruiters, Maquiladora, Maquiladora Recruiter, Maquiladora Recruiters, Mexico, Mexico Executive Search, Mexico Manufacturing, Mexico Recruiter, Mexico Recruiters

By Jose Ruiz

Monterrey,  Mexico (August 5, 2009).- I’ve said it more than a few times: A full manufacturing recovery in Mexico will be slow and very dependant on the automobile industry which makes up 20 percent of Mexico’s industrial production and it looks like we are headed in the right direction.

Factory orders in the US rose in June for the fourth time in five months, an unexpected gain and the latest sign that the ailing manufacturing sector is recovering

Cash-for-clunkers, the program in the US that gives up to $4,500 in rebates for trading in old gasoline chugging cars for newer fuel-efficient vehicles has injected new life into the automotive industry. Almost 250,000 consumers have taken advantage of the program.  This is not even close to a permanent solution, but it is certainly a life line for the automotive industry when it needs it the most. Dealerships had huge inventories going into the second half of the year when 2010 models start arriving. The program coupled with the automakers’ production cuts has slimed down inventories.

Dealers in the US have reported very slim inventories of the Jeep Patriot, Ford Focus, Fusion and Honda Civic. Some GM dealers are even reporting spot shortages of full size pick-ups.

This may not fix the overall demand issue but it has at least cleaned out the excess inventory of smaller models and given manufacturers a clean slate to plan production according to demand.

All of this is good news for Mexico’s automotive industry manufacturing facilities that supply parts and assemble small and compact vehicles.

Jose Ruiz is a Principal in Heidrick & Struggles’ Monterrey office. As an executive recruiter he has worked on executive search projects for multinational clients in industrial sectors and consumer markets. He can be reached at +52 (818) 8625-6521 or jruiz@heidrick.com

About Heidrick & Struggles International, Inc.
The world’s premier provider of senior-level executive search and leadership consulting services. The firm’s executive recruiters and leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. In Mexico, Heidrick & Struggles operates offices in Mexico City and Monterrey. For more information about Heidrick & Struggles please visit www.heidrick.com

Mexico Industry Executive Recruiters, Jose Ruiz, Manufacturing, Manufacturing Recruiter, Manufacturing Recruiters, Maquiladora, Maquiladora Recruiter, Maquiladora Recruiters, Mexico, Mexico Executive Search, Mexico Manufacturing, Mexico Recruiter, Mexico Recruiters

By Jose Ruiz

Monterrey,  Mexico (August 3, 2009).- Overall the free fall appears to have slowed but we are still falling.  In the US the stabilization of consumer spending, unemployment benefits and the housing markets, a lessening of financial turmoil and increased government spending all suggest the longest recession since the 1930s may be close to ending.
 
In the U.S. Manufacturing shrank in July at the slowest pace in many months and factories moved closer to stabilization. In a Bloomberg News survey, The Institute for Supply Management’s factory gauge increased to 46.5, from 44.8 in June (readings less than 50 signal contraction).
 
Federal Reserve Chairman Alan Greenspan believes the worst is behind us, “collapse, I think, is now off the table…I’m pretty sure we’ve already seen the bottom… In fact, if you look at the weekly production figures for various different industries, it’s clear that we’ve turned, perhaps in the middle of last month, the middle of July.” Greenspan said.
 
U.S. Recovery will be the first step for a recovery in Mexico but other concerns are looming.  A growing deficit and falling oil output may be sleeping monsters that can put added pressure on growth, the exchange rate and an already tricky inflation scenario.

Jose Ruiz is a Principal in Heidrick & Struggles’ Monterrey office. As an executive recruiter he has worked on executive search projects for multinational clients in industrial sectors and consumer markets. He can be reached at +52 (818) 8625-6521 or jruiz@heidrick.com

About Heidrick & Struggles International, Inc.
The world’s premier provider of senior-level executive search and leadership consulting services. The firm’s executive recruiters and leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. In Mexico, Heidrick & Struggles operates offices in Mexico City and Monterrey. For more information about Heidrick & Struggles please visit www.heidrick.com

Mexico Indexes, Mexico Industry Executive Recruiters, Jose Ruiz, Manufacturing, Manufacturing Recruiter, Manufacturing Recruiters, Maquiladora, Maquiladora Recruiter, Maquiladora Recruiters, Mexico, Mexico Executive Search, Mexico Manufacturing, Mexico Recruiter, Mexico Recruiters

By Jose Ruiz

Monterrey,  Mexico (July 23, 2009).-  Mexican manufacturers are seeing an end to steep declines in output as U.S. companies begin ramping up orders and reducing inventory.

Overall manufacturing activity is still declining but it is doing so at a slower pace. U.S. Manufacturing declined in June at its slowest pace since August of last year, a sign that the bottom is near in the U.S. and consequently in Mexico which is closely tied to U.S. activity. Mexico last year sold 80 percent of its $291 billion in exports to the U.S.

A full manufacturing recovery in Mexico will be slow and very dependant on the automobile industry which makes up 20 percent of Mexico’s industrial production. A number that is too large to be offset by other industries.

Production in that industry sank 42 percent during the first part of 2009 as General Motors and Chrysler adjusted factory production to match lower demand in the U.S.

Local recovery will depend less on internal factors and more on U.S. consumer demand where employers cut more jobs than expected in June threatening a decrease in consumer confidence and consumer spending which will be critical for an economic recovery.  It is expected that the unemployment rate in the United States will hit its worst point until early next year.

Other indicators pointing towards hitting bottom is the factory index from The Institute for Supply Management which rose in June for a sixth consecutive month to 44.8, after hitting its lowest point in December (32.9). An index below 50 indicates a contraction. So the trend, while still reflecting a contraction is positive as the contraction rate slows. 

_

Jose Ruiz is a Principal in Heidrick & Struggles’ Monterrey office. As an executive recruiter he has worked on executive search projects for multinational clients in industrial sectors and consumer markets. He can be reached at +52 (818) 8625-6521 or jruiz@heidrick.com

About Heidrick & Struggles International, Inc.
The world’s premier provider of senior-level executive search and leadership consulting services. The firm’s executive recruiters and leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. In Mexico, Heidrick & Struggles operates offices in Mexico City and Monterrey. For more information about Heidrick & Struggles please visit www.heidrick.com

Mexico Industry Executive Recruiters, Manufacturing, Manufacturing Recruiter, Manufacturing Recruiters, Maquiladora, Maquiladora Recruiter, Maquiladora Recruiters, Mexico, Mexico Manufacturing, Mexico Recruiter

ExecuNet’s Recruiter Confidence Index (RCI) surged 16 points higher in May, as the executive search industry’s outlook for the employment market improved for the third consecutive month amid signs that economic conditions are stabilizing. The RCI now stands at its highest level since June 2008.

Introduced in May 2003, the Recruiter Confidence Index is based on a monthly survey of executive search firms conducted by ExecuNet (www.execunet.com), a private network for business leaders. Designed to forecast job growth at the executive level, a reading above 50 percent indicates recruiters expect the number of search assignments in the next six months will increase. Independent analysis of the RCI has confirmed it is a leading indicator for the executive employment market.

According to May’s survey of 143 executive recruiters, 57 percent are confident or very confident the executive employment market will improve in the next six months – up from 41 percent last month. During this period of time, 67 percent of all executive recruiters expect at least a 10% increase in search assignments received from corporate clients.

| Read More

Mexico Executive Search Headhunter, headhunters, Manufacturing, Maquiladora, Mexico, Mexico Executive Search, Monterrey

It’s been a week headlined by swine flu as most of Mexico’s economic activity came to a screeching halt in unprecedented action to curb the spread of the disease.

Actions halted nonessential state services as well as the private sector from May 1 to May 5.

Mexican President Felipe Calderon is confident will soon return to normal and regain economic momentum. “Mexico is trying to return to normalcy as soon as possible,” Calderon said in a televised interview broadcast yesterday. The President said it is too soon to estimate the economic impact caused by the virus. “Some economic sectors may recuperate immediately,” he said.

Experts estimate the economic halt has cost 2 billion pesos ($150 million) of lost gross domestic product per day.

Health Minister Jose Cordova declared yesterday that the epidemic is in a “declining phase” and appears to have “contained itself”.

Activity in the country began to return to normal on May 6.

Jose Ruiz is a Principal in Heidrick & Struggles’ Monterrey office. As an executive recruiter he has worked on executive search projects for multinational clients in industrial sectors and consumer markets. He can be reached at +52 (818) 8625-6521 or jruiz@heidrick.com

About Heidrick & Struggles International, Inc.
The world’s premier provider of senior-level executive search and leadership consulting services. The firm’s executive recruiters and leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. In Mexico, Heidrick & Struggles operates offices in Mexico City and Monterrey. For more information about Heidrick & Struggles please visit www.heidrick.com

Mexico Industry Jose Ruiz, Manufacturing, Maquiladora, Mexico, Monterrey

By Harold L. Sirkin – Business Week

March 17, 2009 7:17AM

A big reason for the narrowing gap is the fact that Mexico has already absorbed the rapid increase in manufacturing wages that are just starting to hit China and other developing economies. The shrinking labor-cost advantage, coupled with the devaluation of the Mexican peso in the past year, is making Mexico even more competitive.

The question doesn’t really matter, but the answer for U.S. manufacturers always seems to be the same: China.
With good reason. China has a huge, low-cost, underutilized, and eager workforce unencumbered by outdated unions, labor laws, and expensive government mandates and regulations. China has a strong supply network that is getting better all the time. China understands the value of infrastructure and is investing heavily in it. National and provincial governments want to help business succeed, not tie its hands.

All this points to China as the wave of the future. But that doesn’t mean China is the only option for manufacturers — nor is it always the best one.

There are many other low-cost manufacturing alternatives: Brazil, India, Thailand, and Vietnam, to name some. Closer to home lies America’s third-largest trading partner, Mexico. If distant China is the Big Kahuna of low-cost manufacturing and sourcing, Mexico should be seen as El Pequeno Kahuna.

Mexico Is Growing More Competitive

As noted in a 2008 Boston Consulting Group report, Mexico’s Evolving Sweet Spot in the Globalization Landscape, the cost difference between low-wage Mexico and lower-wage China has been narrowing. In 1996, Chinese labor cost about one-third of Mexican labor. Today, Chinese labor costs are about half of Mexico’s — $1.69 per hour, on average, in 2007, compared to $3.46 per hour, according to the International Labor Organization [ILO]. In another year or two, according to estimates, hiring a Chinese worker will cost about 85 percent of what it costs to hire a Mexican worker.

A big reason for the narrowing gap is the fact that Mexico has already absorbed the rapid increase in manufacturing wages that are just starting to hit China and other developing economies. The shrinking labor-cost advantage, coupled with the devaluation of the Mexican peso in the past year, is making Mexico even more competitive.

Moreover, wage and exchange rates are not the only factors managers need to weigh. There’s also the cost of transoceanic shipping and the inherent risks of a long-distance supply chain. When these and other factors are taken into account, Mexico often looks better.

The fact that Mexico is our neighbor means a company often can place an order one or two weeks before delivery is needed, rather than four to six weeks in advance, as is typically necessary when sourcing from China. In times like these, when demand can fluctuate wildly, the ability to respond quickly to changing market conditions can be critical.

Shipping Savings Exceed Labor Edge

Mexico’s proximity to the U.S. also means less dependence on America’s crowded ports. It’s also faster and cheaper to move heavy products relatively short distances by truck than to do it over thousands of miles by ship, and then further by rail, truck, or both. As Mexico’s Evolving Sweet Spot noted, “in the case of a refrigerator — a very bulky product — manufactured in a low-cost Asian country and sold in the U.S. for $500, the cost of shipping represents up to $100 of the price tag, or 20 percent. Shipping it from Mexico would cost less than half that amount.”

If assembling each refrigerator takes four man-hours, a manufacturer would save just over $7 in labor costs per unit by manufacturing in China. If the company can save over $50 in transportation costs by manufacturing in Mexico, while paying seven or eight dollars more in labor, the advantage goes to Mexico, with net savings in excess of $40 per unit.

Without a supply base, manufacturing can’t be shifted to Mexico any more than it can be to China or elsewhere, but Mexico is taking care of that. For example, many of the world’s top manufacturers of industrial, commercial, and home refrigeration, heating, and air-conditioning equipment have formed an industry “cluster” to attract a supply base in and around Monterrey, in northern Mexico. The cluster grew by 9 percent in 2007. South Korea’s LG has had a manufacturing presence in Mexico since 1988; in addition to refrigerators, the company produces digital TVs, PDP modules, monitors, and mobile phones there.

Aerospace Is Clustering in Mexico

The Monterrey industrial cluster has drawn leading suppliers of parts and components as well. For instance, China’s Golden Dragon Precise Copper Tube Group — the largest producer of precision copper tube in the world — made an initial investment of $50 million in the area and eventually will employ 900 people there.

A second industrial cluster in Mexico also is attracting global attention, this time from the aerospace industry. Before the downturn, more than 160 companies were involved, employing nearly 17,000 workers.

Proximity offers other advantages as well. Being in the same general time zone means it’s easier for U.S. companies to conduct real-time business in Mexico. The majority of Mexican cities, for example, lie in the same zone as Chicago, just one hour behind New York. When you need to be on-site, there are frequent and direct flights from some 20 U.S. cities. Language also is less of a barrier, with native Mexican managers typically speaking English and increasing millions of Americans conversant in Spanish.

Just as China has disadvantages, so too does Mexico. According to the January 2009 Wall Street Journal-Heritage Foundation Index of Economic Freedom, corruption remains “pervasive” there and “Mexico’s rigid labor regulations continue to hamper productivity,” making it difficult to lay off workers when necessary. Mexico’s infrastructure remains woefully inadequate, slowing the flow of needed raw materials and intermediate goods. And battles with drug traffickers make some areas unsafe.

What To Look for Overseas

So what should U.S. executives considering global manufacturing or sourcing do?

1] Think globally. Competing successfully probably will require more, not fewer, locations. To succeed in the future, most companies will need a global network of manufacturing, assembly, design, and research and development facilities.

2] Pinpoint production. Facilities should be built where they’ll do the most good. The question managers need to ask is: What can be done best where? That’s where the work should be done.

3] Develop a portfolio. Your objective in choosing manufacturing locations is to maximize returns while minimizing risk. Ask yourself where markets can be developed or expanded. This will help you determine what the future portfolio should look like.

In addition to its appeal as a manufacturing hub, Mexico is the world’s eleventh-largest country and — prior to the recession — was experiencing a boom in domestic consumption [as were China and India]. This might make Mexico a better choice than a country with a smaller domestic market.

4] Act strategically. The decision to acquire or build a plant in China, or Mexico — or Missouri, for that matter — should be part of a long-term strategy, not an isolated decision. As with all long-term capital decisions, you need to consider both your next potential moves and long-term changes in your customer base and competitive environment.

Managing isn’t getting easier. It takes more knowledge of more things — and perhaps more chutzpah — than ever before. Competing with everyone from everywhere for everything is a different challenge than that faced by America’s captains of industry in the 19th and 20th centuries.

To maintain America’s leadership, business executives will have to be engaged far beyond our shores. Dozens of countries will play a role in our continued success. If we’re wise, Mexico’s role will be larger than most.

© 2009 Business Week Online

HR Management in Mexico, Mexico Industry Globalization, Jose Ruiz, Manufacturing, Maquiladora, Mexico

We are delighted to announce that Heidrick & Struggles, the world’s premier executive search firm  specialized in chief executive, board member and senior-level management search assignments continues its expansion in Mexico with a new office in Monterrey, Nuevo Leon.

Jose Ruiz has joined the firm as a Principal in our Global Industrial Practice to launch the office.

His professional experience includes over 13 years in engineering and operations management working for manufacturing organizations in the United States and Mexico within the aerospace, automotive, medical device and other industrial sectors. Prior to joining Heidrick & Struggles, Jose was a Managing Partner for a boutique executive search firm based in San Diego, CA.

Jose holds a bachelor’s degree in Mechanical and Electrical Engineering from the Instituto Technologico y de Estudios Superiores de Monterrey. He is fluent in English and Spanish.

We would welcome the opportunity to introduce Jose and other key members of our team to you, in order to discuss our perspective and experience on the most pressing talent challenges.

Ignacio Perez  
Partner-In-Charge Mexico  

Darcio  Crespi
Latin America Managing Partner, Industrial Practice

Mexico Executive Search Executive Recruiter in Monterrey, Executive Search Firm, Executive Search in Monterrey, Industrial, Manufacturing, Manufacturing Recruiter, Manufacturing Recruiters, Maquiladora, Mexico Recruiter, Mexico Recruiters