In this week's final paper, the five members that comprise Learning Team A decided to consider expanding its manufacturing operations in Mexico. When making a direct foreign investment decision, numerous variables have to be taken into account and several analyses have to be conducted as well. Learning Team A will present their recommendation to their company's Chief Executive Officer. The recommendation will include Mexico's foreign exchange rate data, capital sources, sensitivity analysis based on several "what if" scenarios, how the value of an organization can be determined from several perspectives such as the economic decision to change location, and finally a contingency plan based on our sensitivity analysis and changing global risk factors.
Variables used in our recommendations:
Before we arrived at our recommendation, Learning Team A has considered the following variables:
Proposed country for expansion and why.
Learning Team A chose Mexico over Canada because of its strategic location as well as its growing economy.
Mexico has a free market economy that "just now entered the trillion dollar class" (cited in Search on Mexico's economy). Mexico is one of the fastest growing markets for the United States. Mexico serves as a gateway to Latin American markets for many U.S. companies. Dating back to the late 1980s, Mexico has by far reaches for stabilization and structural reform efforts.
With the implementation of the North American Free Trade Agreement (NAFTA) in 1994, Mexico's trade with the U.S. and Canada has tripled. This alone impacted our final investment decision to pursue our company's manufacturing expansion in Mexico.
Mexico's foreign exchange data:
From 1994, Mexico has seen its exchange rate fluctuates a great deal. Every year the exchange rate continues to increase. Base on the data, the country exchange rate has steadily climbed over the years. In 1998, the exchange rate rose...