International Marketing Report Harvard Case Solution & Analysis

ECONOMIC ENVIRONMENT:

The economic condition of the country is not very good currently as the GDP in the past   few years has been lower and weaker than expected by the experts. One of the reasons of this weak economic environment of the country is the extra added taxes and the economic reforms that have been introduced by the government and this has a negative effect on the purchasing power of the customers of the country.

The furniture retail industry of the country has also suffered as the revenues and margins of the industry have also declined in the period due to this economic environment. The customers are pinned down under the extra added taxes and their basic needs that they have to cut short of home appliances to an extent. There are also certain trade restrictions on certain woods that are thought to be endangered in the Mexican markets, which are imposed by the government and all these things contribute to a negative economic environment of the country(International, 2015).

The weak GDP of the country has also had an impact on the local currency and this should also be analyzed properly as the margins of profits that the company would reap out from the market would also be lower in the currency of the country where the company is based. This will also affect the pricing strategy of the company as the price of goods for the Mexican customers will be relatively higher when converted into the local currency and it will make it almost impossible for the company to compete with the local competitors as low pricing strategy is very critical when operating in a country where the purchasing power of customers is weak(Fund, n.d).

If the management of the company decides to launch its stores in the market, then the value of franchising the brand in the local market of Mexico will be higher and if the company licenses it to a lower price to the franchise, then its value in the home currency of the company will be lower then expected. However, the currency and the economy of the countryare expected to improve as per the economic analyst due to the decline in prices of oil. Due to this decrease in the prices of oil, the growth and economic condition of the country are bound to improve as the prices of the basic needs of the population are bound to decrease and subsequently this will increase and motivate the purchasing power of the society(Export.gov, n.d).

POLITICAL ENVIRONMENT:

There are several political risks in doing business in Mexico that an overseas company must consider. The most critical factor among all these is the lack of public support for the government of the country as any instability in the power structure is likely to harm the business. There are also some short term risks involved in the political environment of the country like the ever increasing security situation and lawlessness in the country due to crimes and the corruption in the country is also high.
The government of the country has also introduced new regulations that also need to be considered and the specifics related to the working structure of the company are trading across borders and enforcing contracts. The trading across border score as per the analysis is roughly 60 and it is satisfactory to say the least however,the enforcing contracts score of the country are below average(Lamerica, n.d).

The bribery and corruption in the country is also high as the country ranks just above hundred in the corruption perception index and anti-corruption laws of the country are also weak as the control procedures of the government for controlling corruption are below the average................................

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