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Strategic Recommendation

NAFTA brought different effects to different parties. For US workers, there are smaller chances to get jobs because some American manufacturers are moving to Mexico to obtain the benefit of cheaper labor price. However, for companies, the agreement brought opportunities in the form of easiness to perform trade activities within the borders of NAFTA. Furthermore, all advantages of the North European market can be harvested without significant bureaucracy.

For instance, as a reaction toward the agreement, American manufacturers could choose to establish their factories in cheaper regions like Mexico (Lederman, 2005). In the case of HJ Heinz, as a corporation, the company could benefit considerably from NAFTA as well it could face significant challenges due to the agreement. For instance, the opportunity comes in the form of opening branches in the Mexican and Canadian region. This way, the company will be less affected by the labor concerns as mentioned above and also the transportation cost from having to move finished products into the Mexican markets.

By establishing a manufacturing facility in Canada or Mexico, Heinz will have also protected itself form foreign currency fluctuations. On the other hand, HJ Heinz could also face significant challenges due to the agreement. For example, competitions will certainly be much more intense as competitors are no longer restricted to trade barriers and have a lower cost structure to start with. Taking account of the three operational strategies of the company in 2007-2008, we can conclude that HJ Heinz is helped by the presence of NAFTA.

In its first strategy, which is reducing cost, the company could establish a manufacturing facility in Mexico, who has lower cost structures. The second strategy, which is to promote growth through innovation, has also been –coincidencely- supported by NAFTA. Heinz could market their products into Mexico and Canada with no significant barriers. However, Heinz must also face the challenge of innovating products which are acceptable within the new markets.

The third strategy is of course, supported by the presence of the first and second strategy. By reducing costs and increasing the customer base, Heinz could provide larger returns to investors and attract new investment.


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