Upjobn Mexico: In Response to Changing Macroeconomic and Managerial Environments

Abstract

Expanding business operations to a foreign market requires much more than merely "setting up shop" in a host nation. A firm must first come to grips with the social, cultural, and economic policy environment which surrounds it. Needless to say, undertaking such a maneuver is scarcely an easy task. Alan Riding describes the current relationship between the United States and Mexico in his cross-cultural perspective Distant Neighbors as follows: "Perhaps nowhere in the world do two neighbors understand each other so little. More than levels of development, the two countries are separated by language, religion, race, philosophy, and history" (90. Foreword xi). Cultural traditions, extending to all sectors of society, social and economic, public as well as private, have been entrenched throughout Mexico's thousands of years of history. As such, they are difficult, but not impossible to change. An example is Mexico's historically fatalistic outlook on planning. Traditionally, Mexicans have spurned such a concept. But now, in a macroeconomic planning context~ the renegotiation of Mexico's $102.7 billion foreign debt, the reduction of inflation from 159 percent in 1988 to 19.7 percent in 1989, and the commercial "apertura" (opening) have resulted in a turnaround from years of stagflation and economic despair. All of these factors have impacted Upjohn Mexico (UM). Operating in an inflationary market is unquestionably difficult, but with assistance and the effective management of the situation by the Mexican government, UM has demonstrated its feasibility. The subsidiary has directly benefited from the relaxation of import tariffs, free importation of pharmaceutical compounds, and efforts to equate Mexican patent laws with those internationally. Upjohn Mexico must continually make adjustments while operating within the ever-new framework. Approvals for price increments to avoid declining profit margins as costs increase must constantly be sought on the basis of UM's commitment to Mexico. UM recently reinvested $2.4 million back into its fermentation plant, and hundreds of thousands more in capital equipment at its main manufacturing facility. Perhaps the greatest changes impacting UM have occurred within its own organization. With the arrival of the current general manager, the subsidiary has made a turnaround to progress, profits, and an excellent working environment for all personnel. Mexico has grown to become Upjohn's ninth largest market, gripping a 2.64 percent market share. A brief analysis of UM's financial statements reveals that changes to effective management have resulted in an increase of ethical pharmaceutical sales from $19 million in 1987 to $27.3 million in 1989, a jump of 30 percent in just two short years. Focusing on the education, training, and care of its employees, UM has developed its source of productivity for the future.