Industrialization and Private Enterprises in Mexico: 7: Import Substitution Industrialization and the Development of Indigenous Enterprises

By Hoshino, Taeko | I.D.E. Occasional Papers Series, January 1, 2001 | Go to article overview

Industrialization and Private Enterprises in Mexico: 7: Import Substitution Industrialization and the Development of Indigenous Enterprises


Hoshino, Taeko, I.D.E. Occasional Papers Series


As Mexico's industrialization progressed, the leading industries changed from consumer goods to intermediate goods and then on to capital and durable consumer goods. The six cases of indigenous enterprises examined in this book have been the companies at the forefront of the leading industries at each stage. Following the time periods presented in the Introduction that mark the stages of Mexico's industrialization, the consumer goods industry played the leading role during the first period from 1890 to 1940, and the beer brewer Cuauhtémoc and the bread manufacturer Bimbo belong to the enterprises which arose in this period. The second period from 1940 to 1953 marked the shift to the intermediate goods industry, and Fundidora and Hylsa belong to the enterprises of this period. The third period from 1953 to 1962 saw a shift toward the production of capital goods as well, and Grupo Mexico in the nonferrous metal mining industry belongs to the enterprises of this period. The autoparts maker Spicer belongs to the fourth period from 1962 to 1982 during which the capital goods and durable consumer goods industries became the leading industrial sectors. All of these enterprises established their dominant positions in their respective industries during the period of import substitution industrialization, and with the exception of Fundidora, they still continue to dominate their industries, even as Mexico has progressed with market liberalization. Why were these enterprises able to enter the leading industries of each stage and grow into the dominant enterprises of their industries'? The analysis in this study indicates that the main factors making such entry and growth possible were the innovativeness of these enterprises along with the supportive policies pursued by the government.

Enterprise Innovativeness

In the Introduction, this author defined the innovativeness of enterprises as the ability of enterprises to correctly understand the requisites of growth, then to resolutely take up the challenge of new ventures in order to prepare the way for growth, then finally to realize growth; and this ability is embodied in the technological, productive, and marketing capabilities of an enterprise. For the enterprises in this study, the requisites of growth were very much determined by the characteristics of the industries they operated in and by the conditions of Mexico's industrial development. The beer brewing and bread manufacturing industries, for example, have common characteristics. The technology is standardized, companies have to build up extensive networks for procuring raw materials and selling products, and they can build up brand loyalty amongst customers through advertising and product promotion. Technologically the impediments to new entrants are low which means it is quite easy for indigenous enterprises to set up in these two industries, and these enterprises have the advantage over foreign companies when establishing networks with customers and raw material suppliers. The requisites for enterprise growth in industries which have these characteristics are: decreasing costs, increasing quality, diversifying products by introducing advanced technology, establishing wide-ranging networks to assure the stable procurement of raw materials and the sale of goods, and cultivating the loyalty of clients through vigorous advertising and product promotion activities. Cuauhtémoc and Bimbo both incorporated these requisites into their business strategies, and by doing so, both companies became "first movers" who quickly secured their dominant positions in their respective industries. At the same time, the ability of both companies to carry out their corporate strategies depended on the progress of Mexico's industrialization. The lack of development of the raw materials sector led Cuauhtémoc to internalize raw material production. Meanwhile the changes in people's life style, the growth of the country's road network, and the spread of mass media that came along with industrial development stimulated the expansion of the domestic market and prepared the way for expanding sales networks and undertaking mass advertising which were major factors for the growth of both companies. …

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Industrialization and Private Enterprises in Mexico: 7: Import Substitution Industrialization and the Development of Indigenous Enterprises
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