The 2020 Mid-Year Economic Update_long

Mexico is Land of Opportunity for Distributors

Companies looking south of the border must be strategic about expansion.

With a population of 122.3 million and GDP of $1.3 trillion – the 15th highest in the world – as well as its proximity to the U.S., steady economic trajectories, surging aerospace and electronic manufacturing, and clear industry verticals, Mexico is a compelling target for any company looking to grow its footprint abroad.

But distributors contemplating a Mexico entrance must complete extensive due diligence on a number of issues. They need “Mexican professionals, Mexican workforce and an understanding of the Mexican business model,” says Barry Lawrence, director of the industrial distribution program at Texas A&M University, in Destination: Mexico.

Distributors looking to tap into Mexico's manufacturing boom and set up shop south of the border should align themselves with like-minded partners who are already there, advises Matt Petersen, director, retail and distribution, US Dynamics Industry, Microsoft.

“I would look to partner with my customers who maybe are a step ahead of me – they just opened up their international branches and they’re realizing the challenges,” he says. “Like any business, if you’re guaranteed a customer or two, you take a lot of the risk off the table.”

Expanding to Mexico does contain plenty of risk, of course. Safety issues, a still-developing appreciation of the distribution model, an overemphasis on pricing and a slower sales cycle are all entry barriers. But the nation's numbers point to plenty of rewards that should have distributors giving it a hard look.

Industrial distributor Hisco is a prime example of a U.S. company that flourished in Mexico by doing it the right way – through “long-term commitment and involvement, and deep understanding of how to conduct business in Mexico and across the border,” says the company's director of market, Andy Behr. “It takes a long time to develop that competence and expertise. It’s not for the faint of heart.”

Read more about the benefits – and pitfalls – of international expansion in Destination: Mexico.

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