Everyone wants to be an entrepreneur in Mexico

I thought I would save this title for my experience with Silicon Valley. But I think Mexico deserves this more.

By Emma Zhu

This is the third and final week of our IBD project. The focus of this week is to prioritze Prospera‘s strategic initiatives and create a marketing strategy for the young organization.

We started today’s work with interviewing Juan Rafael Mejorada Flores, a young entrepreneur at Guadalajara. He currently runs a 100-year-old family business in the furniture industry. It was a very enjoyable conversation. As a leader in the young entrepreneur community of Jalisco, Juan Rafael is a driven and passionate entrepreneur. He studied part-time at London Business School and shared his viewpoints of combining MBA knowledge with the business practice.

In the past two weeks, we have observed a strong culture in entrepreneurship at Guadalajara. In the Prospera workshops, we have met a lot of micro-entrepreneurs, mostly in the food industry. Some of them have been running a small-scale business, such as in salsa and jam. They came to the workshop to ask us for advice on specific questions such as “how shall I improve my packaging” or “would American consumers like the flavor of my jam”. Some others have just started their businesses and came to seek micro-financing. For instance, a young women just quit her job as a marketing assistant and became a full-time mom. She’s expecting a second child while tutoring English part-time. She wants to start a bakery business because she can stay at home with her children at the same time. She brought some tasting samples to the workshop and discussed the idea with us.

At Prospera, the micro-entrepreneur group is quite diverse. You may think that they must be struggling to make a living and have very limited education and resources. That’s indeed true in many cases. But at the same time, there are some people with fairly good education, usually college-level, and they understand the business concepts very well. Beside of the young woman mentioned above who can speak fluent English and have already known marketing very well, we have met someone who just wants to transition from his corporate engineering job to owning a salsa brand.

Outside of work, we have also learnt that it’s a trend for college students to start their businesses instead of applying for a job at a big company. We talked to a few senior college students and every one of them had some ideas about their own businesses. More interestingly, even for those who decide to start their career with big companies, a good number of them see their long-term future being their own bosses. They join the big firms just to learn things and then quit for their own things.

One explanation we received for the universal entrepreneur dream is the lack of employment opportunities at Guadalajara. Most of the big global companies locate their Mexican or Latin American headquarter at Mexico City. There is not that strong outside investment to support local human resources. The disadvantage in turn fosters the culture of entrepreneurship.

That may be true. Another reason I find more valid is that Mexico has an easy business environment to start a business. A recent article on Mexico’s entrepreneurship says:

“The World Bank ranks Mexico 44 in the world in terms of ease of doing business, putting it in the top third. Matt Harrup, founder of Mexico City-based information portal Mexperience.com, says that the Mexican economy offers good prospects for foreign firms that can find a niche. The market is especially favorable for companies that can provide “First World know-how,” especially as it relates to energy, food production, technology and banking. Not to mention, Mexico has had minimal inflation and lays claim to one of the highest per capita incomes in Latin America, even though it’s only about $12,500. And of course, Mexico’s link to the United States was strengthened in 1994 with the establishment of the North American Free Trade Agreement.”

There are two points worth repeating.

First, as all know, Mexico has a strategic location in the whole American continents. It connects the Latin American countries with two developed countries in the North America.

Second, Mexican people don’t like to save money. In another word, they like to spend money. Looking at the graph below, the adjusted net savings in Mexico in 2000 was merely 8%, even 1% lower than USA which was considered by many as leading the super consumption culture. Another comparison was China with the same figure as high as 27%. (China has been known for high savings propensity, which is an area the government is trying to address to stimulate the domestic market. )

As a result, with over 107 million population growing at 1% annual rate (2009 World Bank data), Mexico is definitely a lucrative market for global businesses and local entrepreneurs alike.

However, being an entrepreneur isn’t an easy task. It may be easier to get a business started in Mexico than some other places, but much more difficult to grow the business into the large- or global-scale.

There are a few road blocks I have observed.

1. Inefficiency of public services. A couple of examples. One, it takes long days to process transactions across banks. Two, no one uses the national post office because it’s slow and unreliable. I have been wanting to send a postcard to China but couldn’t find a place to buy stamps or deliver the card. My Mexican friends suggest me send the postcard when I get back to US… Another quote from the same article:
“Be prepared to work around inevitable delays. Mexicans tend to follow a more languid time standard, so beyond bringing something to read when waiting for an appointment, expect a lack of urgency when it comes to finalizing a contract.”

2. Informal, or in another word “relationship-oriented” business culture. One thing we have repeatedly learnt from our interviews is that relationship is the first priority of doing business in Mexico: relationship with government, relationship with commercial partners, relationship with everyone. Many businesses are still done in the old-fashioned way. People value personal connections more than the actual quality or even cost. Connecting with the right people and making referrals is the most effective way to get the deal inked.

3. Lack of innovation. This is the problem we are trying to address at Prospera. This is a reality with not only Mexico but also many other developing countries. People tend to make what they know rather than think creatively about differentiation. China has been battling the problem of piracy and copycats for a long time but is still in the same dilemma. Here in Mexico, when talking about being an entrepreneur, many people think of tacos, salsa, restaurants, etc. regardless of the homogeneous competition. In some cases, people seem to be satisfied with small successes and do not necessarily seek to be different or innovative. Perhaps that’s another consequence of the relationship-based business culture, which doesn’t reward innovation as much as VIP human capital.

I want to end the blog with another interesting observation from the article. I do believe that there are many opportunities in Mexico, given the growing consumer base and strong entrepreneurship culture. I’m particularly interesting in learning more about the high tech and clean tech sectors in this country. Meanwhile, for those who want to do business in or with Mexico, it’s essential to understanding and appreciating the local business culture.

“Regardless of whether you’re wearing trousers or a dress, it’s crucial to understand who wears the pants in the Mexican company you’re dealing with. “Always start at the top,” says Robbins, who flew down to Mexico to meet with a vice president of Bimbo–a multibillion-dollar Mexican brand and the world’s third largest bakery corporation, which also happens to have a cheeky, salable name to emblazon on T-shirts–who then secured her a meeting with the president of Bimbo. Harrup adds that Mexican companies will expect a deal to be finalized in person by the two parties’ owners, not by surrogates.

When meeting with your Mexican partner–often over breakfast or lunch–don’t rush to get down to business. Mexicans place a lot of importance on family, so asking about the kids and showing true interest will go a long way in forging business ties. With the small talk finished, Harrup advises tossing out your step-by-step agenda because Mexicans prefer less-structured meetings that can seem haphazard by American standards. ”

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