LEARNING THE ENTRY MODE

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Entry mode

Foreign Direct investments is the best mode for GTA to enter into Mexican market because, according to Franklin R. Root when a company's product is a service whose production and marketing requires face to face relation between producers and customers such as GTA consulting services , the firm must find a way to create and deliver its services locally. Since the services cannot be manufactured and exported, exporting mode would be ruled out and consulting requires high knowledge, skills and strong control franchising and exporting would be irrelevant and unattractive, so direct investments is the only viable entry mode. (Franklin R. Root. 1994)

Franklin R. Root (1994), Entry Strategies For International Market, Lexington books an imprint of Macmillan Inc , New York, p.145.

Entering international market through ownership and control of assets in host country by investment in foreign market is known as foreign direct investment. By using the green field strategy, which is starting a new company operation from scratch by buying or leasing land, hiring and/or transferring in managers and employees and then launching the new product. GTA could lease an office space for its employees and start consulting for agricultural fields and industries based in Mexico. (Griffin and Pustay 2005)

Griffin Ricky W and Pustay Michael W (2005), International Business, fourth edition, Pearson Education Inc, USA, p.344.

The resources required for a new company to register in Mexico are:

Obtain authorization for using company name from Ministry of Foreign Affairs which would take 2 days.

Sign the deed of incorporation before a notary public and obtain tax registration number which would take 2 days.

Registering deed in public register of commerce which would take 3 days.

Register at Ministry of Finance and credit to obtain tax ID number which would take 2-7days

Register with the Mexican Social Security Institute which would take 2-5 days.

Register with the local tax administration for payroll tax which would take 1 day.

Notice of opening a mercantile establishment before local government which would take 1 day.

Register with the National Business Information registry which would take 1 day

Total number of day for a new company to register in Mexico would be 20 - 22 working days. (Doing business 2009)

Doing Business measuring business regulations, 12-09-2009, starting a business in Mexico, 12-09-2009, <http://www.doingbusiness.org/exploreTopics/StartingBusiness/ Details.aspx?economyid=127>.

Structure of GTA

The most common form of organization design adopted by MNCs is global product design. Assigning worldwide responsibility for specific products to separate operation within a firm is knows as global product design. This design works best when the company has diverse products or services like GTA Company, which consults for wind energy, solar energy, waste and water disposal solutions, agriculture related solutions and many more. The advantages of this structure is each division head gains expertise on a single product or service and gain expertise on that particular field, secondly it is more effective and decisions can be taken faster since the engineers or consultants have extensive product knowledge. Thirdly they are better enabled to compete globally and finally incorporating new and latest technology becomes easier because of the knowledge, also respond quickly and flexibly to technological changes. (Griffin and Pustay 2005)

Griffin Ricky W and Pustay Michael W (2005), International Business, fourth edition, Pearson Education Inc, USA, p.395.

GTA Company Structure


Control Measures

The management of any organisation must develop a control system tailored to its organization goals and resources. Some of the common control system characteristic are:

A focus on critical points: controls are applied where failure cannot be tolerated or costs cannot exceed a certain amount.

Integration into established process: controls must function smoothly within these processes and should not bottleneck operations.

Availability of resources when needed: setting and providing deadlines for projects, time needed to complete the projects, cost associated with the project and priority needs.

Economic feasibility: setting cost and taking up projects which are feasible for the company. Comparison of costs to benefits and ensuring that the benefits are higher than the cost for the company.

Accuracy: effective control system providing factual information that's useful, reliable, valid and consistent.

Comprehensibility: controls must be easy and simple to understand.(Cliffs notes 2009)

Cliffs notes, 12-09-2009, Effective organisational control system, 12-09-2009, <http://www.cliffsnotes.com/WileyCDA/CliffsReviewTopic/Effective-Organizational-Control-Systems.topicArticleId-8944,articleId-8927.html>

Appendix

Registration Requirements Summary:


Procedure

Time to complete:

Cost to complete

1. Obtain the authorization of using the company name from the Ministry of Foreign Affairs (Secretaría de Relaciones Exteriores)

2 days

MXN 705

2

2. Sign the deed of incorporation before a notary public and obtain tax registration number

2 days

MXN 10500

3. Register the deed in the Public Register of Commerce

3 days

MXN 1520

*4

4. Register at the Ministry of Finance and Credit,Secretaría de Hacienda y Crédito Público, to obtain the tax ID number : Registro Federal de Contribuyentes "RFC"

2-7 days

no charge

5

5. Register with the Mexican Social Security Institute (IMSS)

2-5 days

no charge

6

6. Register with the local tax administration (Secretaría de Finanzas del Gobierno del Distrito Federal) for payroll tax

1 day

no charge

7

7. Notice of opening a mercantile establishment before local government (Delegación)

1 day

no charge

8

8. Register with the National Business Information Registry (Sistema de Information Empresarial, SIEM)

1 day

The costs can vary from MXN $100 to MXN $670

(Doing Business 2009)

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