As the business world shifts and evolves, smart executives and founders are thinking of ways to both drive up profits and minimize expenses. International expansion has been a gateway to both. Entering new markets allows you to use a different labor market to your benefit, while also expanding your product or service to a new audience. Mexico, in particular, has become a new hub in terms of North American business. However, it’s important to understand the pros and cons, as well as the recent USMCA (United States – Mexico – Canada Agreement), to take advantage of these opportunities.

Pros and Cons Of Opening A Business In Mexico

As a start, if you’re interested in self-mastering a business strategy in Mexico, you want to build around the major benefits. They run as follows:
Geolocation: Mexico is located in proximity to both the United States/Canada as well as Central America. As a result, it’s easy to reach both of these markets with Mexico as a central hub. Of course, if you have ambitions to work in other areas besides, this may be more of a con.
Labor Market: Labor is inherently cheaper in Mexico than in other countries, and this is one of it’s largest draws as a market. In addition, as the currency and economic conditions improve, things will only get better.
Social Development: This government branch is specifically designed to help build up impoverished and rural areas of Mexico, creating a possible opportunity.
However, like any country, there are particular cons you need to consider if you want to start a business in Mexico. Here are some of the major hurdles:
Creating a Legal Entity: Compliance is essential when it comes to hiring international employees. Many companies try to make this easier by establishing a legal entity in Mexico. However, one needs to follow Mexico’s specific rules and understand that this can be a time-consuming process.
Bureaucracy: Complicating this is navigating another country’s bureaucratic processes. Various regulations and delays may cause you to miss your window of opportunity to expand.
Uncertainty: One of Mexico’s largest trade partners, the US, is in a period of uncertainty in terms of relations. However, as we will explain in a moment, the trade environment may become clearer soon.

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Understanding a USMCA Comparison

One major factor that everyone needs to consider when it comes to doing business in Mexico is the USMCA. Known as T-MEC in Mexico, this is a free trade agreement designed to supersede NAFTA and is signed, but not ratified, at the time of this writing. However, many political figures are confident that this will reach a positive conclusion, so adapting to USMCA may be more of a when, as opposed to an if.

The goal of the current administration is to try and modernize NAFTA with this new agreement, and there are indeed some opportunities for people looking to do business in Mexico. Here are some of the key elements to consider.

Digital Products: New provisions of the agreement allow data to be transferred cross-border, and cutting down limits on where data can be stored and processed. The terms of copyright have also been extended from 50 to 70 years.
Import/Export: Automobiles must have up to 75% manufactured in either the US, Mexico, or Canada to avoid tariffs. This may impact what type of industries want to do business in Mexico, based on what they specialize in. Thus, the agreement will help small businesses access the markets of potential trading partners, creating a stakeholder platform that provides entrepreneurs the chance to offer regular feedback on improving USMCA and market access for small firms. Along with this, USMCA eliminates a “local presence” requirement for cross-border service providers. This creates a massive lowering of costs. With this rule in place, small businesses no longer need a foreign office to do business.
Employment: 40% to 45% of all automobile parts need to be made by workers who earn at least $16 an hour by 2023. Mexico recently passed tougher labor laws to protect workers. While you can still reap the benefits of cheaper labor in Mexico, this makes compliance more important. The agreement, if enforced, would strengthen labor standards and rights, especially those related to collective bargaining in Mexico. This will help support better wages and labor conditions across the board.

Improving Your Organization Via Global PEO Best Practices

As alluded to before, even with USMCA potentially opening up a sea of business opportunities, the conventional methods of opening up a business in Mexico are far from flawed. Hiring on your own staff to lead these new teams requires lots of bureaucratic red tape to navigate, which could throw off your planned expansion timeline. The same applies to opening your own entity to engage more control. With this said, there is a way to go about opening your own business in Mexico without a legal entity.

This is using solutions like Acumen International’s Global PEO system. Our team will handle complex aspects like onboarding and payroll, whereas you still remain in control of your employees, all while not having to worry about compliance issues. If you want to promote your brand without needing a local presence, we can help make that happen. If you do want to fully set up in Mexico, our solutions allow you to take advantage of workplace diversity and be able to recruit the top talent.

It’s important to remember that a total of 80% of business respondents believe that their talent acquisition is more about total value creation for the company than achieving cost savings. This means that it’s essential that you think of the top quality options when it comes to starting a business in Mexico without incorporation. The USMCA differences that we have profiled, show new opportunities in this area, but also new regulations you need to remain compliant too.

At Acumen International, our services, like Global PEO, designed to help you navigate this balance. Foreigners can open a business in Mexico, building up their team the way they want while being confident that they are in compliance with all regulations. On top of this, it’s done at a fraction of the speed of foreign incorporation. There is barely a better way to enhance value creation for your company than that.

Reach out to us today for more information.

Employment without borders is rather a necessity than a preconditioned option. In terms of economic relationship, “global mobility” appears as a dawn of the upcoming technological revolution.

In the days of post-industrialization, companies of all sizes and niches are seeing the benefits of expanding internationally. The global transformation of the world economy is inevitable, ergo, multinational corporations are the major consumers of these changes. Mainly driven by the cross-border movement of goods, services, and labor, “global mobility” arises as the looming globalization force.

Starting from the late 1970s, international labor pool constantly evolving to interconnected workforce network, changing the way modern employment is perceived. In this light, the Social Security administration becomes crucial for proper relationship development between business representatives, trade unions, and governments.

People matters much like business

It comes without saying that consolidation of global networking requires a proper regulation, mainly provided by centralized legal authority. One of the organizations, responsible for adherence to social obligations is the International Labor Organization (ILO). In many cases, ILO appears as a pledge and a final resort for labor rights. Human trafficking and modern slavery, same as child labor become an issue in developing countries, that is why international corporations endorse ILO as a global workforce regulator.

Perhaps, one of the most high-profile labor related cases is a case against multinational corporation Coca Cola, initiated by the International Labor Rights Fund and the International Steel Union on behalf of a Colombian trade union in the beginning of 2000s. The authorities sued the beverage manufacturer for murder, torture and kidnap of Colombian trade union members, who tried to protect the civil rights of the bottle plant staff, opposing subcontracting of thousands of workers apparently engaged by Coca Cola in order to reduce labor costs.

As we see from the above example, not just understanding of international core labor standards but compliance and implementation of Social Security Standards are crucial for establishing an effective, standardized, and ethic driven networking.

Hiring employees in foreign countries is exercised under common standards and regulations

From New York to Tokyo, from London to Johannesburg, multinational corporations around the globe continuously exercise the immense amount of business operations. Taking into account the fact that all of these transactions require appropriate regulation and maintenance, millions of participants all over the world take care of global network functionality. Every day, new contenders become a part of this web.

Regardless of the country or region of the designated market, the primary responsibility is always related to ethical and compliant performance. Putting a strategy into action requires professional assistance, including the incorporation of a talented workforce; therefore, businesses need to understand the ongoing procedures that include:

• Legal fees and government registration fees payout;
• Establishing inhouse bank accounts (must be completed in person);
• Preservation accounting records locally in the market;
• Designating a country manager, paid in the country;
• Breaking down entity/terminate the operations under corporate law;
• Sourcing and continuously managing multiple vendors for booking and HR operations.

In addition, companies establishing their presence abroad should adhere to a certain ethical context:

• Freedom of association;
• Right to organize/collective bargaining;
• Restrictions on child labor;
• Restrictions on forced labor;
• Restrictions on discrimination;
• Equal remuneration.

Innovation-driven approach is a key to access

Considering the possible risks and hurdles related to hiring employees in foreign countries, it is quite reasonable for companies to handover this due diligence to professional employment organizations (PEO). Global PEOs are advanced employers of record, who commit 100% compliant ethical, financial, and operational performance regardless of the destination point. Addressing a Global Employer of Record is a right way for multinationals to adhere to international labor standards, provide their services, sell goods, and keep the global networking system functioning smoothly and flawlessly.

Social Security Administration reflects the humane and mutually beneficial relationship despite the role of participants. Moreover, the relevant adherence to social standards leads to succession and appears as a leverage point of global integration. On the other hand, neglect of basic moral principles and core labor standards denotes failure to take advantage of that great opportunity.

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We live in a time where the world is more connected than ever in terms of business. International expansion is proving not just to be a potential option, but a key facet in businesses developing their audience, reach, and workforce.

However, there is a right and a wrong way to take advantage of this trend. Plotting to expand internationally without a true HR strategy is not only expensive, but opens up your company to legal risk due to non-compliance. So, with this in mind, here are some of the key elements of consideration for your international HR management strategy.

Why You Need A Global HR Strategy

Ultimately, when it comes to expansion, you have two main purposes in mind:

• Broadening the scope of business operations in terms of groups served
• Broadening the amount of services your company offers

Expanding internationally strikes both of these points. Not only are you opening your company up to a whole new audience, but you’re also needing to take the country’s needs into account. For example, a telecommunications company based in the United States, trying to branch into Nigeria, is going to need a very different approach due to the different infrastructures there. However, success here means they have two huge audiences to profit from.

However, international expansion is about staffing strategy as well as planning. For example, in order to facilitate that Nigerian expansion, the American company would want:

• Employees who are able to communicate in local languages to facilitate partnerships.
• Employees who are familiar with the local telecommunications structure.
• Employees who know the American strategy and work mode to ensure this new project maintains the original standards.

This often requires a combination of expat and international hiring to manage. Your HR management strategy for globalization can take three major forms, which are as follows.

Expansion Through Diversification: This basically entails when a business expands via changing what they offer. Using our telecommunications example, the American company that focuses on landlines may make a stronger push into mobile to appeal to the Nigerian market. By taking this step, they are better insulated against economic downturns.

Diversification can take two forms, concentric and conglomerate. Concentric is expanding into areas similar to or adjacent to the current area of business, while conglomerate is going into new areas.

Expansion Through Concentration: This covers when a business doubles down on some of their existing strategy, rather than implementing a new product or service. For example, bringing existing telecommunications services to a new country, in and of itself, fits this description. However, introducing a new product into your existing market fits as well. The benefit here is that there’s less of a learning curve, but shifts in your niche can affect your business more drastically.

International Marketing: When it comes to developing international marketing, you have a variety of different options you can go with. These range from direct/indirect exports to global web businesses to joint ventures with local companies in the field of choice. However, all of these share one major hurdle for your human resources team.

Refining Your International HR Strategy

Whether you want to build a global web empire or set up an office in a new country, each country you’re looking at has its own set of rules regarding hiring. These hurdles for hiring the team members you want can slow your international expansion plans. There is one way to compliantly tackle the issue, though: a Global Employer of Record (GEOR) solution.

Global Employer of Record programs as the heart of your expansion strategy offer two key benefits:

• The ability to hire qualified talent to help fit your new market, meaning you always have the best workforce behind your expansion.
• Ease of use when it comes to the hiring process, including risk mitigation and compliance with any local regulations.

But how do you make this work in your business?

Implementing a GEOR Solution For Your Global Human Resources Strategy

Creating an HR strategy for global expansion is important not just for compliance, but also for helping to expand the sales reach and overall effectiveness of your company. However, to increase the return on investment for your efforts, you need advanced HR strategy solutions, like a Global Employer of Record program.

If you find yourself in the market for these human resources services, Acumen International is a standout option. We offer an express advantage to all of your international hiring needs. Whether your plans include hiring only a few temporary employees or a large expat workforce, we make it easy to work inside the hiring laws where you live, facilitating smoother international expansion. We also provide speed, helping you to onboard employees within 72 hours.

Reach out to us today for more information.