MAGNA Int. and NAFTA

Presented by:• Mariana Garcia V

• Leanne Hoffart• Chris McEwen

• Faisal Niazi

Who we are?

• Founded by Frank Stronach (1954)

• Now:68 plants15,000

employeesSales of C$

2.4 billion

19921992

• Fast growth of the Automotive Industry

• Penetration of North American Market by Japanese producers (+300 plants)

• NAFTA is signed (Canada-USA-Mexico)• MAGNA is looking for a long-term

growth opportunity

19921992

MAGNA’s Competitive Strategy

• Full line supplier• Target OEMs• Employee

empowerment• Decentralized

Structure• Innovation=Competit

ive differentiation• Knowledge of the

business

COSMA’s Automotive Group

• Metal stamping, rust proofing and sunroofs

• Ability to design and construct its own die-making tools

• Capital intensive-complex+expensive tool

• Require automotive grade steel

• Opened MAGNA’s first Mexican division servicing VW

The big ??MAGNA is looking for a long-

term growth. MAGNA is already expanded all over Canada and USA. MAGNA wants to expand to new

markets… Is MEXICO the best option?

Mexican Economy, Culture and Workforce (1992)

• Solid Economy• Expected growth in automotive industry• Predicted rise in standard of living• OEMs in Mexico• Large market• Low wages• Large labor force (26.2 M)• Personal Relationships important• Government promoting foreign investment• Lax enforcement of labor + environmental

standard

Problems Entering Mexican Market

• High cost of entering• High training costs• Necessity to find

steel supplier in Mexico

• Relocation of engineers to Mexico

• Increased Transportation costs

Porter Analysis

Threat of Substitute

LOW

Threat of New Entrants

LOW

Internal Rivalry

HIGH

Bargaining Power of Suppliers

HIGH

Bargaining Power of Buyers

LOW

Effects of NAFTA

• Tariffs• Trade Balancing• Local Content• Equity Restriction

Projected Porter Analysis

Threat of Substitute

LOW

Threat of New Entrants

MODERATE

Internal Rivalry

HIGH

Bargaining Power of Suppliers

HIGH

Bargaining Power of Buyers

LOW

Alternatives

• Remain in Canada and US markets• Expand into Mexico• Expand into a different country• Merge of partnership with another

company

Recommendation

• Expand COSMA

• Upgrade the “Puebla” facility

Investment Strategy

• Capital intensive industry

• Must be aggressive• Can’t go

incrementally in need to make it full Market penetration to capitalize

QUESTIONSQUESTIONS

??