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Posts Tagged ‘Mexico’

The Maquiladora Option [Part I]

Our guest for Monday Morning is Ms. Jennifer Walton—President of uniform and apparel maker GOT Mfg. The current post highlights a recent interview on international labor courtesy of Skype; a future post consists of Ms. Walton’s responses to subsequent student questions during a business ethics course.

Monday Morning Business Ethicist [MMBE]: You operate Mexican maquiladora(s) for major U.S. sporting good brands. What are maquiladoras? Can you compare and contrast these factories with their Asian and South American counterparts.

Ms. Jennifer Walton [JW]: Mexican Maquiladoras are factories exclusively owned by foreign companies. Mexico does not own any part of these ‘shells’ or possess any fixed assets. While products technically could be sold in the host nation, everything produced at the plant naturally returns to the original country; otherwise duties and taxes are assessed. These arrangements are distinct from the partnerships and subcontractors one finds in the East and other manufacturing countries.

MMBE: How has the North American Free Trade Agreement [NAFTA] affected your business?

JW: NAFTA is beneficial for employees and our suppliers. Those against NAFTA do not (or refuse to) understand that many American companies compete in a low-margin market. Not only would we need to move our operations from Mexico to Asia, we would no longer be able to buy our American materials and pay the high union wages in the United States without NAFTA.

MMBE: How is international business done in Mexico?

JW: Foreign firms are highly regulated, constantly audited and fined, and are seen as cash cows for the government. Although Mexican companies are subject to the same laws, they emphasize ‘loyalty’ relationships and are less regulated with the Peso.

MMBE: Is the actual threat of drug cartel violence analogous to the stereotypical image of Californians always experiencing earthquakes and Midwesterners constantly dealing with tornadoes?

JW: The threat is definitely real. The violence heard on the news is usually a battle over territory between cartels. Kidnapping Mexican executives (as a business) is a billion dollar industry. Two years ago, I hired Israeli guards due to the cartel’s infiltration of the security industry. I still keep them currently on the payroll; the workers expect them around—whether in the Mexican factory or Maquiladora.

MMBE: Why choose Mexico (with the significant higher costs) over other places in the world?

JW: Maquiladora workers are backed by the Mexican government and embrace a family-oriented working environment. This stability brings efficiency and lower costs in the long run. Also, if something goes wrong, Mexico is a short drive and the country poses less of a communication barrier. You have more control.

MMBE: Is the disparity between laborer wages and the price of an NFL jersey justified?

JW: Everyone in the supply chain wants their piece of the profit pie. The negotiation process with big companies is brutal, and sometimes we sacrifice a run as a loss leader. Honestly, I would not tell the workers the price of an NFL jersey. Americans are willing to pay that price; it’s simple supply and demand.

MMBE: Any final reflections on business ethics?

JW: Reality doesn’t tend to be ethical and you need to hold your ground. If you belong to an unethical company, that black mark will follow you.