Performance, Strategy and Governance Cases from Mexico

INTRODUCTION Now the general who wins a battle makes many calculations in his temple ere the battle is fought. The general who loses a battle makes but few calculations beforehand. Thus do many calculations lead to victory, and few calculations to defeat: how much more no calculation at all! It is by attention to this point that I can foresee who is likely to win or lose. Sun Tzu. Over the past two decades, Mexico has joined the globalization process having signed several trade agreements and confronting free market competition, at the same time Mexican authorities have improved regulation and expanded transparency requirements of the financial market and banking sectors in accordance with the trend toward globalization and in line with its continental counterparts, the United States and Canada. Mexican companies have advance in three major areas in order to compete efficiently against multinational companies offering new imported products: improving corporate governance practices, increasing transparency, and complying with new financial information standards. This new business milieu raises the questions as to whether or not globalization and the North American Free Trade Agreement (NAFTA) have affected the financial performance of the Mexican corporate firm or its capital structure requirements. Has it impacted Mexico's commercial environment in a positive or negative way? Local companies have responded to this new environment by adopting new ways of approaching their customers, developing new strategies of competing against their challengers, and spurring the creation of new products. Foreign Direct Investment (FDI) from USA and Canada into Mexican economy has completely transformed its commercial landscape and greatly influenced the way the local companies introduces new products, new services, sought out new markets and/or explored associations with its new competitors. But, not all strategies worked as successfully as expected. We sought answers to the question: which strategies adopted by Mexican publicly traded companies were linked to financial success and which strategies unsuccessful? In exploring this question, we took into account that any new strategy had to have required the accommodation of the company's actual resources (i.e. their change in assets and liabilities), sought to understand whether any strategy impacted the company either positively or negatively, and analyzed the financial performance of a company over several fiscal periods. This permitted us to deduce how and what strategies were successful and identify how and where those resources were utilized by the company's management. Under the emerging market context, we asked what kinds of strategies were successful and did the type of capital structure utilized by the company relate to their success or failure. Overall, the purpose of this paper is to explore the Mexican public company at two levels, first explored whether there was any financial improvement before and after the NAFTA and the globalization process at Mexican Stock Exchange (MSE), overall system analysis. The second level is at company or case level, we investigated several firms with either outstanding financial success or poor financial performance looking into whether there were associations between financial performance and the implementation of a descriptive strategy used by the various firms during the relevant time frame. Then, at the MSE level we examined whether the developments of NAFTA and increased globalization affected specific industrial sectors o firm performance, and whether it has impacted the capital structure of various Mexican industrial sectors and the Mexican firm. We selected various types of companies looking for a relationship between financial performance and strategy. What kinds of strategies were adopted by different firms? Is there any relationship between management strategy, capital structure or ownership structure? …