By Pedro Castillo
We are starting 2023 walking on a scenario that projects interesting movements in the economic and sociopolitical framework, it could be considered as we are entering a year of high-impact industrial transition.
Everything is positive and promising growth in the markets, but we must understand the difference between the growth of an industry, or market, and the value of it.
In Mexico there is a bonanza of contradictions in the industry, a dichotomy showing that while in some markets the demand for products and services continues to exceed the not-so-fast growing supply, in other markets exist bottlenecks keeping the growth desired by the majority strangled.
Companies participating in multiple markets keep working on reinventing their strategies to increase their capacity in some, while becoming extremely creative in others.
On the other hand, the announcement of new investments landing in the country is news bringing hope to companies in the industries but, unfortunately, the benefits will end up being tangible only for those who have been working to develop products and services with the highest quality, to those who have been investing in growing their operations and areas of expertise in anticipation of offering the markets greater bandwidth, a vertically integrated experience, and high reliability.
When investments are announced, it is already late, as there is a lot of work done prior to the announcement by previously positioned players. Some companies will desperately seek to grow their operations with panic actions such as hiring people with a theoretical resume, trying to develop purchased experience, etc., all this neglecting the due time that should naturally be taken, will be trying to sell a better image, but inevitably creating solutions of low reliability that will end up falling short in results in the medium term.
It is a domino effect where most companies will seek to transition to new customers by shedding existing customers, while the fittest companies will be able to receive new customers without neglecting service to their current customers. The supplier recycling cycle is generated.
It is a time of prosperity in which small companies take everything that the big ones cannot (or put aside), while some have been working hard to polish their processes, the vast majority arrive projecting a worrying lack of care in detailing consistency between their sales pitch and its final product, showing its little understanding of the market, since we are in the era of high demand and low supply where any product is better than having no product.
The times of the most bitter crises in Mexico of the last century, sowed the seeds of survival that, today, keep operational leaders confused, assuring that competitiveness is offering low prices, to operate while to sell at any cost, seeking to give more for less (or from the perspective of customers looking to receive something cheap and fixing it on the run).
In major league markets, and in the middle of the 21st century, market value is dictated by industry comparison within a framework of various factors that accompany price, such as internal standards, experience in complex solutions, technology, proprietary engineering , post-sale service, quality of components, annual maintenance cost of its products, among others.
Competitiveness defined as the lowest price is today as industries in crisis, and in third world economies, is pursued, a philosophy leaving an industry with no opportunity to increase its market value by promoting a competition strangled by its own participants.
Due to the latter, there is a phenomenon in which there are many companies living on borrowed money, which sustain themselves by paying past debts with cash advances received for future sales, factors weakening the industry’s reliability in the country. In the United States, markets have begun to take their toll on companies that have been operating this way.
In the same way, this competitiveness misconception is the reason industries in Mexico have been affected, by allowing to create a low standard when the path for the development of the entire industry as a solid whole is, precisely, by allowing to achieve and maintain an international market value.
The low-price war only brings about the destruction of the corresponding market, where its quality and image deteriorate to a level where it can’t be economically sustainable, scaring away innovation to other countries from where, soon, new competitors will arrive with innovations redefining the domestic markets. This is a scenario observed in México repeatedly.
This 2023 represents an opportunity for companies, entrepreneurs, and executives to take their operations to the next level, to take a step on the path towards the eternal ascending destination of success, but it also represents the third call for others who must straighten the path before bumping into a wall of unavoidable reality.
Being a leader in an industry does not mean being in charge or selling more but taking care of everything related to it, looking for the market to prevail and allow growth while avoiding quality devaluation and image deterioration.
Increasing the value of any industry is a joint task of all the players in it, although each company must look after its own survival interests, it must also look after the interest of the environment in which it operates to guarantee its own continuity. Reinvestment in innovation is essential, the industries in which innovation stops are those that customers tend to push prices. What innovation plans do you have for this 2023?
I wish you all the best of success in your purposes, goals and objectives.
Pedro Castillo currently works at TTX as Managing Director for México and Latin America, is a Founding Partner at INQ Strategic Partners LLC, and has more than 25 years of experience in various industries. Pedro holds a Mechanical Engineer degree from ITESM Monterrey Tech, and holds a master’s degree in Manufacturing Systems from ITESM Monterrey Tech. Pedro is founder and active collaborator of altruistic and commercial initiatives, as well as member in Boards of Directors of companies and associations in Mexico and the United States.