Which Route to Mexico Manufacturing is Best for You?
When expanding production to Mexico, there are several operational models to consider. How will you get there?
The Standalone Model
Full Control & Full Responsibility
The Standalone Model is best suited for companies that require complete independence and control over all aspects of production and General & Administrative support. Under this model, you establish a wholly owned subsidiary in Mexico.
The Contract Manufacturing Model
A Hands-Off Approach
For small-to-midsize companies lacking the level of capital and risk tolerance of a large OEM, foreign expansion via the Standalone Model is a non-starter. Contract Manufacturing is a viable option if you are willing to outsource production and assembly to a third-party. Areas of risk include loss of production control and quality assurance.
The Campus Model
Minimize Risks; Increase Efficiencies; Maximize Growth.
For many Tier Two and Tier Three manufacturers, neither the Standalone nor Contract models meet requirements. On the one hand, these small-to-midsize companies lack the resources to expand their production to Mexico independently via the Standalone route. And on the other, they require more control than the Contract model offers. What these SMEs need is something in between – the Campus Model, like that provided by Entrada Group.
The Joint Venture
The Joint Venture entails two companies forming a cooperative business venture where resources, risks, rewards, and responsibilities are shared and assumed by the new, combined corporation. Best for companies not large enough to form their own standalone company in Mexico, or those lacking an aspect of business expertise required to succeed in Mexico; those seeking more control and protection than offered by the Contract model.
In this option, the international manufacturer shares the risk with a Mexico-based partner company. Through the relationship, the manufacturer gains to access new knowledge or information they previously lacked.
This relationship puts a lot of pressure on finding the right partner, creating extraordinary legal liability in Mexico without full control.
The Shelter Model
Small-to-midsize manufacturers may lack the resources to expand their production to Mexico via the Standalone route or may prefer to dedicate resources to other priorities. At the same time, they want more control and protection than the Contract or JV models offer. What most SME manufacturers need is something in between – the Shelter Model.
This model is unique to Mexico, where the government has created a special legal status for it, in order to promote economic development. With the Shelter Model, your company sets up operations within an established Mexico manufacturing community.