Local Expertise Drives Nearshoring Success

While nearshoring to Mexico offers a significant competitive edge for those companies seeking to be closer to their market destinations, especially the United States, setting up a factory is no easy task. Companies must navigate a host of challenges, including cultural barriers, unique local business dynamics, and a different pace of infrastructure and business development. Overcoming these hurdles is where local experience transforms from a helpful asset into a critical necessity for success.

The first and often most underestimated of these hurdles lies in navigating the significant differences in culture and day-to-day business practices. While many companies view these differences as obstacles, the most sophisticated firms adopt a strategic framework drawn from a Harvard Business Review (HBR) case study, to use the local culture as a source of competitive advantage.

This approach involves leveraging certain cultural traits. For example, the cultural value placed on personal trust can extend initial negotiation timelines. Some companies invest this time to build relationships with suppliers, unions, and officials, which can in turn foster operational loyalty and resilience. Similarly, by aligning with the local sense of community and family, a company can create a work environment that improves employee retention and positions the firm as an integrated member of the community.

This strategy also reframes perceived challenges into strategic advantages. A firm that masters local compliance, rather than viewing bureaucracy as an obstacle, can build a reputation for stability that attracts partners and talent. Likewise, adapting operational rhythms to local cultural norms, instead of imposing deadlines that may create friction, can reduce employee burnout and create a competitive edge in the labor market, notes the HBR article.

It is important to note that this cultural analysis is not one-size-fits-all. A successful approach must consider the specific region a company plans to engage with and its own corporate cultural background. The challenges and opportunities for a US-based firm in Monterrey will differ significantly from those of a Chinese company in the Bajio region. Nevertheless, some cultural characteristics are prevalent throughout the country's business environment. A foundational aspect is building trust-based personal relationships, which is often a prerequisite for business dealings. Another is a general respect for workplace hierarchy, where decision-making can be more centralized than in flatter corporate structures. Finally, foreign companies may also encounter a more indirect communication style, which is often used to maintain group harmony.

Beyond the initial strategic decisions, the success of a nearshoring venture hinges on a deep, practical understanding of the local operating environment. This requires adapting corporate processes to align with Mexico's cultural and regulatory frameworks. Local expertise is fundamental for navigating the country's legal, fiscal, and labor laws, ensuring full compliance from day one to avoid potential challenges. This extends directly into human resources (HR), where HR strategies must be tailored to the cultural expectations and communication styles of the local workforce to ensure smooth operations.

Success also depends on building strong partnerships with local suppliers and service providers. A key part of this is actively networking with industry clusters, government bodies, and academic institutions. These relationships offer invaluable support for market integration and provide insights that are not available through formal channels alone, as suggested by American Industries. 

HBR’s case study also calls to empower local leadership. By placing Mexican talent in key management and directive positions, a company gains an innate understanding of the business environment. These leaders can effectively navigate labor relations, leverage personal networks to build supply chains, and adapt global strategies for successful on-the-ground execution.

Core Operational Pillars for Success

Location, supply chain, and workforce are interconnected pillars that define the operational viability and long-term success of a new venture in Mexico. A company's choice of location, for instance, is heavily influenced by the presence of established industrial clusters where supplier networks and a skilled workforce are already concentrated.

Location and Infrastructure

Distinct industrial clusters with established supplier networks are concentrated in specific regions across Mexico. The northern states are prominent hubs for manufacturing and export. Baja California contains clusters for the electronics, aerospace, and medical device industries, with activity centered in Tijuana and Mexicali. Nuevo Leon, with Monterrey as its industrial core, is a primary center for automotive manufacturing, home appliances, and steel production. The state of Chihuahua is also a key area for automotive components and advanced manufacturing, particularly in Ciudad Juarez.

The Bajio region in central Mexico has become another major corridor, especially for the automotive sector. States like Guanajuato, Queretaro, and San Luis Potosi host large concentrations of vehicle assembly plants and an extensive network of Tier 1 and Tier 2 automotive suppliers. Queretaro is also a significant and growing hub for the aerospace industry, as noted by Boston Consulting Group (BCG).

Emerging trends show the continued expansion of these clusters. For example, medical technology manufacturing is growing beyond its traditional base in Baja California to locations like Monterrey, while new investments in electronics and automotive sectors are also being directed toward states in the southeast, such as Yucatan, which is developing new industrial parks to attract nearshoring investment.

While Mexico's primary logistical advantage is its extensive border with the United States, allowing goods to reach US markets in one to two days, the country's infrastructure is under significant strain. Transportation networks face challenges, including long wait times at border crossings and security concerns such as cargo theft. In the real estate sector, industrial land is becoming scarce and more expensive, with vacancy rates in the key northern manufacturing hubs frequently falling below 2%.

Furthermore, the nation's utilities are stressed. Electricity costs for industrial users are considerably higher than in the US. Water scarcity, particularly in the arid northern and central states that host major industrial clusters, is another critical challenge for manufacturing operations, with planned infrastructure projects progressing slowly. 

The Labor Equation 

According to Salomón Robles, CEO, Intermex Servicios de Administración, Mexico's labor advantage for nearshoring is a combination of a demographic bonus and a competitive workforce skilled by decades of exposure to world-class manufacturing. He explains that while this qualified labor is becoming scarce in high-demand northern states, this dynamic creates new employment opportunities and fosters in-country migration from southern regions, allowing Mexico to maintain its manufacturing cost competitiveness against its Asian peers. 

BCG notes that despite Mexico still enjoying a big labor cost advantage over the United States and China, it has been losing cost-competitiveness against Southeast Asian nations that compete for manufacturing work in industries like electronics and medical technology products. “For founders entering Latin America, the imperative is clear: Be bold in your vision, but deeply local in your execution. Adopt a regional mindset from the first day, build systems for flexibility, and treat complexity as a springboard, not a stumbling block. The rewards, both financial and strategic, await those willing to do the work,” said  Larry Gil, Founder and CEO, Loads.

Follow our MBS 2025 tag and do not miss our coverage leading to Mexico Business Summit 2025 on October 28–29, 2025. On Thursday, August 28, 2025, we will delve into how leading companies are getting the right talent amid a competitive labor market. 

Interested in staying ahead in the nearshoring landscape? Mexico Business Summit 2025 offers exclusive insights from leading industry experts and government officials on the key trends, risks, and opportunities fueling Mexico’s emergence as a global nearshoring powerhouse. Discover how supply chain innovations, workforce development, and sustainability strategies can strengthen your competitive edge.

Register now to secure your place and position your business at the forefront of this dynamic market: https://mexicobusiness.events/MBS/2025