Mazda and other carmakers use Mexico as a production country. Summa-rise the advantages that accrued for the Mexican automotive industry through the country’s access to the NAFTA. Except the evasion of market barriers, which benefits are there in the context of producing vehicles in Mexico?

In the December of 2004, Mazda established Mazda Motor de Mexico. This was followed by the market entry of Mazda in 2005 and ever since then, the organization could manufacture and sell 180,000 vehicles in Mexico and almost 33,000 units in 2013. Actually, the company had faced various obstacles in its home country and in order overcome these obstacles, Mexico had chosen to establish its hub in Mexico. There was a hurdle that the firm faced in terms of supply chain along with the disaster in Fukushima. Furthermore, it was the global crisis that caused the company to reflect on the very possibility of relocating its production. Additionally, the expansion and development of Yen made the company fell a threat to its success. The company also faced a major decline in its profits and in order to counter all these difficulties, Mazda chose to develop vehicles in Mexico.

One of the most important advantages that Mazda got by establishing plants of production in Mexico is the countless free agreements of trade. In the automotive sector, substantial FTA are the AAE, ACE-55, MEFTA, and NAFTA. FTAs are capable of eliminating barriers life quotas and tariffs while permitting a trade that is duty-free in the member states that can lead to the side-effects of demand. Requirements of local content in this context often constitute most of the significant conditions. Within NAFTA, actually a local content of 62.5 percent is needed to be covered form the exception of custom duties. For an export that is duty-free, a share of local content of sixty-five percent is postulated. NAFTA doesn’t restrict its member nations regarding the negotiation of FTAs with other nations. None of the member states need permission in NAFTA for concluding a new bilateral free agreement of trade.

 Compare the possibility of relocating a production facility to Mexico with the advantages and disadvantages an automotive manufacturer could have shifting its production to the ASEAN region.

 NAFTA or North American Free Trade Agreement is signed by Mexico, Canada, and North America on the 1^st of January 1994. It came into an effect, creating one of the largest free zone of trade in the whole world while laying the foundations for a powerful economic growth and increasing the prosperity for Mexico, United States, and Canada. Ever since then, NAFTA has actually demonstrated how a free trade raises competitiveness and wealth, delivering actual advantages to consumers, manufacturers, workers, farmers, and employees. Meanwhile, ASEAN or the Treaty of Amity and Cooperation in the Southeast Asia treaty was formulated on the 8^th of August in 1967. This treaty involves Thailand, Singapore, Philippines, Malaysia, and Indonesia. This treaty promotes the right of every nation or state for leading to a national existence that is free from an external interference.

For achieving the goals of the Structural Reform strategy, Mazda actually follows the approach of manufacturing in foreign nations to the circumvent barriers of a market like regulations of custom. Other than Mexico, the organization also developed a plant of production in Thailand which is a member state of ASEAN. Within ASEAN, organizations that fulfill the 40 percent requirement in terms of local content are eligible to benefit from the 0-5 percent rate of preferential rate. Similar to operating in Mexico, the company is able to get the advantage of free trade. There is another benefit that the company is able to enjoy is the independent working without the intrusion of any other state. There are no such regulations that can harm the company are present in the trade. However, there is a possibility that an individual state might impose additional tariffs on the company but the benefits that Mazda gets in return are able to outshine the disadvantage.

Define different types of market barriers and show their effect on the market entry mode. Explain different strategies a company can use to deal with entry barriers in the context of the internationalisation of its business. Give some examples.

Tariffs means taxes on the goods which are traded globally have normally been utilized for protecting the domestic industries by increasing the import prices. Considering the fact that liberalization of trade has significantly progressed over the time, governments are using the barriers of non-tariff for protecting some of industries of their countries. Barriers of non-tariff can take 3 basic forms: quantitative restrictions which seem to impose a limitation on the quantity of a product or good, policies that impede the global trade, and campaigns of “buy local.”

Besides the establishment of actual obstacles to the trade, foreign investments can be deterred by a government. FDI or foreign direct investment takes place when an organization invests in an international joint or subsidiary venture with a partner organization in a foreign nation. These are some of the most significant barriers that limit the entry of an organization in a foreign country. In order to minimize the tariffs, for instance, a company just like Mazda has done, can choose a zone where there are no limitations on the trade and there are various routes of trade to other sectors in the region or a certain trade. Establishment in the countries where there are less limitations on import and export can facilitate the entrance of company in a foreign nation.