Mexico and Supply Chain

Sustaining Supply Chain Management Acme MexicoCity Case Study Acme Home Improvements, Inc. was founded in 1982 in Raleigh, North Carolina, and has 125 stores, about 100,000 square feet each, along the U.S. East Coast from Florida to Maine. The stores major competitors include big box home improvement retailers such as Ace, Home Depot, Lowe's, and TruValue, all of which are already in Mexico. The company has decided that it is in their strategic best interest, for a variety of reasons, to establish itself in the Mexican market.

The market entry mode will be through a joint-venture with local leadership present who can hopefully help the company converse the local environment and business culture. Though the company is a relatively late entrant in its relative to the other firms who have already establish Mexico. There are five major product groups within each Acme store: plumbing and electrical supplies, building materials, hardware and tools, seasonal and garden/yard items, and paint, flooring and wall coverings.

Furthermore, human resources will consist of a variety of professional positions within the store that will be filled by either local individuals or expats from the parent company depending on the position. Using this strategy, the company will leverage knowledge of the local market as well as knowledge about company operations from experienced members. This analysis will provide a brief introduction to what type of strategy might be best fit for the company's international expansion as well as some mention of challenges they might find within their supply chain.

Supply Chain Management Many developing countries have worked assiduously to acquire the resources needed to be competitive in today's international market. Mexico, for example, ranks as one of the top destinations for doing business according to the "Doing Business Report" produced by the World Bank (Martinez, 2013). Not only are Mexico's capabilities growing quickly, but also trade agreements are also a factor in creating a pro-business environment for foreign capital.

Furthermore, the country also shares more cultural similarities to the United States when compared to other developing countries such as China and India. The tendency for U.S. firms to enter the Mexican market for manufacturing or production processes has been ongoing for many years now and this trend has been referred to as "near-sourcing." Furthermore, near sourcing is often considered a feasible alternative to global expansion because the location and proximity to the U.S.

creates supply chain (SC) efficiencies when compared to more distant locations, yet the dynamics of this relationship are still being researched (Cagliano, Marco, & Rafele, 2013). It is reasonable to suspect that many of Acme's supply chain operations in Mexico will be able to be performed more inexpensively than in the domestic market and it would be entirely possible for the company to reorganize its supply chains along these lines.

However, the Mexican market is not just attractive to supply chain management because of the availability in low cost labor, many companies have also tapped this market for retail operations. For example, the world's largest retailer, Wal-Mart, operates over 2,200 stores in Mexico, and this accounts for over a third of its international store fleet (Trefis Team, 2015). Furthermore, given the success of the giant retailer in the Mexican market, the company is also planning to double its retail business in this market over the next ten years.

Yet, at the same time, Mexican retailers operating over 40,000 stores saw their comparable store sales rise just 0.9%, in 2009 which was much less that the estimates of 1.7% growth that were predicted; domestic consumption remained weak primarily due to a tax increase which discouraged consumer spending, and competition remained intense (Trefis Team, 2015). However, even in the current economy of Mexico, there have been some retail formats that have shown significant promise.

For example, Walmart has experienced a lot of success in Mexico with their self-service business (such as Sams Club) and their small format network, known as Bodega Aurrera Express (Trefis Team, 2015). The success of large scale retail in Mexico has also change the market conditions in other ways as well.

For example, Amazon.com has recently launched its physical goods store on Amazon.com.mx, a Spanish-language website with millions of unique items available for customers in Mexico and one that offers more categories than any other international Amazon website has featured at launch (Amazon.com Inc., 2015). Conclusions and Recommendations Acme will have many advantages to being a late entrant in the Mexican market. For example, they can learn from many of the mistakes that other major retailers have made when entering this market.

Furthermore, Acme will likely find many efficiencies in migrating many of their supply chain operations to the southern near-sourcing locations as well as have their market entry facilitated by their local partnerships. However, at the same time, some of the challenges they will face will be a highly competitive market with many established businesses as well as the threat.