Running head: COUNTRY RISK AND STRATIGIC PLAN PAPER

Country Risk and Strategic Plan Paper Louie Aguayo, Ana Herrara, Paty Moreno, Margret Shannon MGT 448 May 9th 2012 John Trout

COUNTRY RISK AND STRATIGIC PLAN PAPER

Abstract

COUNTRY RISK AND STRATIGIC PLAN PAPER

Country Risk and Strategic Plan Paper Coca-Colas plan to move into Mexico was a major decision making process. Many issues needed to be researched and actions plan put into place to ensure that the company would not be at risk by Moving into Mexico. Coca-Cola researched risks including the legal and political climate in the country, social and cultural risks and many others before proceeding to open business in Mexico. Mexicos political risk is moderate. Felipe Calderon is the current President elected in 2006. Their relationship with the other two countries involved in NAFTA, United States and Canada, is very strong. The narcotic trade and corruption caused economic instability in Mexico. However Mexico is able to maintain revenue with their oil sector. (Amb Country Risk Report, 2011). The Mexican legal system is composed of a distinct legal system. Some include: The institution of Amparo protects companies from illegal conduct from public authorities. The social rights is the individual rights of workers. (The Best Mexican Website, 2004). Regulations for importations and exportations consist of a pedimiento which is an application processed with the customs authority. In order for a company to import or export, the company must first register with the Mexican customs authority and wait for approval. Charges also apply. For example, in order to qualify an export to Mexico from the United States through NAFTA, the product must be verified through the Foreign trade Division of the U. S. Census Bureau. After the approval the Mexico desk officer at the U. S. Department of Commerce provides a rate for the import. (Penner & Associates - Mexico Law Firm And Business Consulting For Mexico, YYYY). For the exchange and the repatriation risks in Mexico, the Mexican Government has authorized a tax reward for those who produce outside of Mexico but

COUNTRY RISK AND STRATIGIC PLAN PAPER

invest their profit in the Mexican economy. Taxpayer pay between 4 and 7 percent of gross tax repatriated to Mexico. (Baker & Mckenzie, YYYY). The distribution of and supply chain has been affected by Mexicos drug war. A High amount of investment has been made by companies towards different types of security to protect those who work or travel to and from Mexico. Some companies invest in trained sniffing dogs to make sure drugs are not maliciously. Distribution and supply chain risks can involve the Cartel getting involved in the program. If this were to happen the Cartel wars could affect deliveries of supplys and product to the being delivered in a timely manner or at all in some cases. The other risk with distribution is that the trucks would be using the roads that the Mexican Police monitor. Knowing that some of the Mexican Police are corrupt the Coca-Cola company may be extorted keep the business running smoothly and for protection on the roadways. To ensure that the Cartel and the Mexican Police are not an issue meeting with the heads of both of these organization and setting guidelines as to how the business will run before heading proceeding to start this venture. It is a well-known fact paying off both of these organizations can keep them out of the process. The biggest physical and environmental challenges that Coca-Cola is up against would be the water conditions in the country. Putting in a water treatment system within the Coca-Cola plant would keep the poor water quality of the country out of manufacturing process. This would accomplish two things the first being keeping the quality of the Coca-Cola product to the standards the company is used to. The other is that it will ensure the product that they are manufacturing will not cause illness throughout the country. The Two main Social and cultural risks involved in moving into Mexico is would be the that the corrupt political environment that the country has will make doing business in the

COUNTRY RISK AND STRATIGIC PLAN PAPER

country a bit more difficult. The class structure of the country is quite different from ours. Mexico does not have the normal middle class like most countries thus marketing may need to be adjusted to accommodate the lower class. Mexico had been ranked as a third world country for many years but in the past few decades they have started to turn this around with bringing in many new business to the country. Thus they have brought the country in the the Cyber and technological era So this should not have any major impacts on company moving into the country. To expand successfully into Mexico, an analysis of the economy and consumer base must be analyzed. After performing and summarizing a SWOT analysis of the country, we have identified that our strength would be our product and its overwhelming reputation. Our product is easily identified by brand and logo. Coca-Cola has a global presence, due to that reputation a weakness that has been identified is the price compared to local "mom and pop" brands which are significantly lower in price than our product. These generic brands target Coke and their prices. By identifying our weakness in pricing, it gives us a point to focus on and make it our opportunity to remain competitive. By focusing on our products pricing, setting it to about even of other local brands, it allows the consumer to make the ultimate decision of their preferred beverage. We strongly believe at this point our products reputation and quality will overshadow all other brands and sales will remain strong. Since Coca-Cola is already globally marketed product, expanding into Mexico seems fairly straight forward and simple. We plan to begin distribution in all states and markets, sales are expected to be steady at first then gain momentum over time. If sales are not to our expectations, our contingency plan would be to scale back the rollout to select markets until 70% market share is reached locally.

COUNTRY RISK AND STRATIGIC PLAN PAPER

The risk assessment that Coca-Cola used to research all the risks involved in moving its company into the country of Mexico was complex and spot on. The risk have been minor and the Coca-Cola company has thrived since it opened business in the country of Mexico. Any company wanting to move to another company should do exactly what the Coca-Cola company did before proceeding.

COUNTRY RISK AND STRATIGIC PLAN PAPER

Referances

AMB Country Risk Report. (2011). Retrieved from http://www3.ambest.com/ratings/cr/reports/Mexico.pdf

The Best Mexican Website. (2004). Retrieved from http://www.mexlaw.com/best_websites/1_introduction.html

Penner & Associates - Mexico Law Firm and Business Consulting for Mexico. (YYYY). Retrieved from http://www.mexicolaw.com/LawInfo05.htm

Baker & McKenzie. (YYYY). Retrieved from http://www.bakermckenzie.com/files/Publication/1759ed14-b8ab-46ba-a9659f4aa0a7074f/Presentation/PublicationAttachment/407055f4-797e-4ba1-bc9ba99973bbbd48/memo_mexico_undeclaredfundswebinartaxamnesty_oct09.pdf \

ndustry Week. (1998-2011). Retrieved from http://forums.industryweek.com/showthread.php?t=18711