acme mexico city case study

8/9/2019 ACME mexico city case study

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MEXICO CITY EXPANSION PROJECT PLAN 1

Acme Home Improvements Mexico City Expansion Project Plan

Group Four:Pavel Batkhan

Margerie EdwardsJustina Ilonoh

Brianna ShippAMBA 64028 October 2014


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Project Title: Acme Home Improvements Mexico City Expansion Project PlanStart date: October 27, 2014 Project Finish Date: October 9, 2015Project Manager: Andrea Vega, (52) (55) 93668590, [email protected] Sponsor: James Montgomery, COO & President, [email protected] Headquarters, NC

Executive Summary

Acme Home Improvement is a specialty retailer that specializes in providing products

and services for home improvement projects such as plumbing and electrical supplies, building

materials, seasonal and garden/yard items, paint, flooring and wall covering, hardware and tools.

Acme Home Improvements Inc, has about 125 retail stores in the United States and is now

looking to expand its operations internationally and increase its market share by opening up a

store in Mexico within a 12 month period. However, deciding to expand the company globally is

a decision that must be thoroughly examined and planned. Acme Home Improvements has

introduced a joint venture with local partners in Mexico City to construct Acme Home

Improvements de Mexico city. However, exploiting strategic alliances such as joint venture for

expansion has its challenges such as differences in national culture, language, business practices,

political and legal system and economic environment. These challenges can create

communication problems, inadequate cooperation, and lack of commitment (Ozorhon el al.

2008). In order to overcome these challenges, Acme has decided to create a Project Management

team with experienced individuals that will ensure the project is executed successfully. The team

will implement a complete plan focusing on the triple constraint of project management (scope,

time and cost). The plan will show the breakdown of the different stages involved in this project

such as the cost for acquiring the land, the primary creation of the facility and construction

design, anticipated cost for building materials, landscaping insurance, office space, taxes and


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safety equipment’s, labor and training, inspection and testing, operations and administrative

staff, travel and housing costs, inventory, and other various expenses.

Introduction

Acme Home Improvements Inc. was founded in 1982 in Raleigh, North Carolina.

Currently there are 125 locations in the United States. Acme Home Improvements is opening its

first store in Mexico City SA de CV and since this is Acme's first store opening outside United

States and venturing into global market it is crucial that the project team is staffed with

individuals who knows the business, language and the culture thereby making the project processsuch as obtaining permits go smoothly. Therefore majority of the project members are Spanish

speaking Mexicans: project sponsor is the Acme COO, James Montgomery, the project manager

is Andrea Vega, construction manager is Martin Ramos, Store manager Maria Rosario, Human

resource coordinator is Phillip Barros, operations manager is Marc Castillo, Mathew Flores is in

charge of the finance department and Juan Lopez is in charge of quality control. This project is

scheduled to begin October 27, 2014 and expect to be completed by October 9, 2015 with a

budget of $18.5 million. The Project manager Andrea Vega is in charge of supervising the new

Acme location in Mexico from planning to store opening, ensuring that all the tasks are started

and executed as scheduled and within budget. The Scope of this project is to expand Acme to

become a global company thereby increasing productivity and profit. The plan includes all the

necessary details and information needed for the structure to ensure a successful transition to the

global business world. The plan also includes the work breakdown structure (WBS), Gantt chart

with critical path shown, project team organization chart, budget of the project in detail, risk

management, human resources, stakeholder analysis, and communications sections.


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Project Objective

Expand ACME to becoming a global company by constructing and opening the doors for

business of a new ACME Home Improvement store in Mexico City, Mexico.

Deliverables

• A 100,000 square-foot, facility located on a lot with additional 10,000 square-feet of property

• A completed attached garage

• Store fully shelved and stocked with items• Hire and train staff, who are ready to assist customers

Milestones

1. Begin Store Construction—11/4/14

2. Store Complete—5/5/15

3. Garage Complete—10/9/15

4. Store Grand Opening—10/9/15

Technical Requirements

1. Store must meet local government requirements and building codes.

2. All shelves meet safety and height regulations

3. Employees providing customer support will speak Spanish

4. 15% of employees will be able to communicate in English.

5. Garage will have a secure gate for storage


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6. Structure will pass stability codes.

Limits and Exclusions

1. Store will be constructed per the designs and blueprints pre-approved by the customer

2. All project scope changes will go through formal Change Control process and must be

approved by Change Control Board (CCB)

3. Hired employees will be Mexican Citizens

4. Contractor my use subcontractors for portions of the project

5. Primary contractor I solely responsible for subcontractors.6. Project scheduled to begin October 27, 2014 and Complete by October 9, 2015

7. Regular work schedule will be Monday through Friday, 8:00 A.M. to 6:00 P.M. Mexican

Time (UTC-6)

Customer Review

James Montgomery


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Project Organization

Project Responsibilities

• Project Sponsor (James Montgomery) - James is the Chief Operations Officer (COO) of

Acme Home Improvements. According to Schwalbe, the project sponsors are responsible

for providing “some type of target goals for a project’s scope, time, and cost and define

other key constraints for a project (2012, p 7)”. The project sponsor and project manager

must be in constant communication to ensure the project stays on track.

• Project Manager (Andrea Vega) - The project manager is ultimately responsible for thesuccess or lack thereof of the project. The project management should create and

maintain a good working relationship with all the stakeholders in the project. This will

promote honest communication so the project manager always knows the status of the


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project (Schwalbe, 2012, p. 9) Andrea is local to the area so she will be able to

communicate effectively with are stakeholders.

• Construction Manager (Martin Ramos) – The construction manager is responsible for all

things building related. He is responsible for requesting the permits and documentation

needed to start construction of the store and garage. Martin is local to the area and his

team of workers will also consist of locals.

• Store Manager (Maria Rosario) – The store manager will be responsible for 4 areas

within the store, human resources, Operations, Finance, and Quality Control. It is

beneficial for the store manager to be local because they will be dealing with customers

on a daily basis.

• Operations (Marc Castillo) – The head of operations will be responsible for the

scheduling on cashiers and stockers, they will also be responsible for customer service.

Marc is a local of the area.

• Human Resources (Phillip Barros) – The head of human resources will be responsible for

all employee relations which includes, hiring/firing, promotions, employee benefits and

performance reviews. Phillip is a local to the area.

• Quality Control/assurance (Juan Lopez) – The head of quality control/assurance will

ensure the quality of the Acme product. He will test product and work to rectify any

customer complaints about quality. Juan is a local to the area.

•

Finance (Matthew Flores) – The head of finance is responsible for the Acme Mexico City

budget. He is also responsible to maintain any financial forms or documentation.


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Project Critical Path

The start of this project will be October 27, 2014 and we would like to see the project

complete within 12 months. It is important that the dates for the building of the garage stay on

track because if not it could move our store’s grand opening on October 9 th 2015. The employee

hiring process starts the same time the building of the garage starts but since the tasks will not

take as long it is not part of the critical path. There are 18 extra days in case a task runs over but

we would not like to use that time if possible.

Project Budget

ACME has an 18.5 million dollar budget to construct its store in Mexico City. The land

the store will be built has already been purchased thus the cost of land is not included in the

$18.5 budgeted amount. . ACME will also allocate a 15% contingency for unexpected expenses.

There are so many unknowns when embarking on a new business venture, therefore it is crucial

to have extra money on hand to cover those unknown expenses. Table 1 details the 12 month

construction, soft, overhead and labor costs.


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Accommodation & TravelUtilities & SuppliesInsurance for workersTrainers for newly hired employees

Total Anticipated Cost for Overhead 20% of $18.5 million=$ 3.7 million

3. Estimated Inventory and Labor Costs Estimated Costs

ProductsShipping costTruck rentalsDuties (customs & tax)

Total anticipated of labor & inventory cost 20% of $18.5 million=$ 3.7 million

Summary of Project Budget Estimated Costs

Total Anticipated Cost for Materials 45% of $18.5 million=$8.325 millionTotal Anticipated Cost for Overhead 20% of $18.5 million=$ 3.7 millionTotal anticipated of labor & inventory cost 20% of $18.5 million=$ 3.7 millionContingency in project 15% of $18.5 million=$ 2.775 million

Acme de Mexico Project Budget Construction Costs

FoundationClearing siteParking GarageFencing

DrywallFraming

Electrical workPlumbing RoofParking lot/paving

HVAC

$14,000,000 Store Completion Costs Interior decorationSecurity systemStock inventory

LandscapingPainting & Furnishings

$2,000,000

Taxes & Fees Architectural fees (ifapplicable)

$500,000 MiscellaneousTravelTraining

$2,000,000


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Legal feesPermitsTaxes

Inspection fees

Recruitment Advertising

TOTAL COSTS $18,500,000

The above mentioned anticipated costs are only estimations; however, there is a

possibility the costs for materials may differ depending on economic conditions and supply and

demand. The conversion rate of $1 equals to 13.24 Mexican Peso and the lower cost of living in

Mexico must also be considered. Therefore, the actual amounts may be lower after construction

is completed. Lastly, a 15% contingency of the total budget is set aside for any delays along the

critical pathways as well as delivery of required equipment for construction.

A Local Mexican construction contractor with a prestigious reputation will provide the

labor and skill set for the construction of the new store and parking garage. The budget could

have been lower if a less experienced contractor was selected but quality and on time completion

of the project is crucial thus a firm with a proven track record of success was chosen. As the

saying goes “you get what you pay for”.Obtaining licenses and permits will be the responsibility of the General Counsel of Acme

de Mexico and managed by AMCE Headquarters in the US. The inventory on hand will be made

up of items ideal for a store located in a southern climate such as construction tools and materials

associated with hot weather and arid climates. ACME management will evaluate the inventory in

the future to determine if any adjustments need to be made based on demand in the local market.

Travel expenses over the next 12 months definitely need to be accounted for due to numerous

trips that will need to be made between the US and Mexico site visits, recruitment and training.

Citibank will be the financial institution of choice for ACME. Citibank provides banking

solutions in North America as well as Mexico. ACME locations in the United States have an


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established history with Citibank in terms of securing large loan amounts. ACME has already

secured a loan for 18.5 million to construct and open the store in Mexico City. There is a

Citibank location in close proximity to the site of the new store. It is crucial that strong

relationships are formed between AMCE and the bank to ensure confidence for future banking

transactions.

Risk Management

Identifying potential risk is key to avoiding complications which may delay or cause the

project to go over budget. The project team must identify a set of risk and put into place a plan ofhow to prevent this risk from deterring the on schedule opening of the store. The project

management team will implement safe guards within the project plan to escape potential higher

cost, in terms of overtime payments and still make the 12 month completion date. The safe

guards will be put in place when the project team predicts the highest risk will occur.

The lack of experience doing business in Mexico is one of the major potential risk factors

of this project. Cultural differences will also play a considerable role in this business venture.

Cultural difference will exist between project team members, US vs Mexican legal systems and

language barriers. It is essential the project team work hand in hand with their Mexican

counterparts who will assist in interpreting and understanding Mexican culture and

rule/regulations.

Weather is also an unforeseen potential risk factor that needs to be accounted for. Weather

conditions play a huge role since AMCE must build a store a parking garage. Improper weather

conditions could negatively affect the plan, construction and rendering of the structures. In the

event of inclement weather the construction workers may not be able to work causing delays in


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the construction schedule. In that case a buffer plan should be outlined to compensate for days

not worked. The project team will outline an allotted amount of additional time to compensate

for missed construction days.

Supply Chain Management is yet another risk that must be factored into the project plan.

In the event materials such as electrical and plumbing components or store inventory products

are not received in a timely manner could be detrimental to the schedule planned opening. To

account for such mishaps, the project plan includes safe guarded additional time to allow for any

late deliveries. In the occurrence international rule/regulations cause delays in transporting

materials into the country, the project team will relay on its Mexican counterparts for theirguidance and expertise to allow the on time delivery of goods.

The last risk that has been identified is the exchange rate between Mexico and the United

States. To lessen this risk ACME will rely on local financial advisors/bankers to monitor

exchange rates. Forward Markets are over-the-counter marketplace that sets the price of a

financial instrument or asset for future delivery. Contracts entered into in the forward market are

binding on the parties involved. These markets are used for trading a range of instruments

including currencies and interest rates, as well as assets such as commodities and securities

(Dictionarist.com 2012). By utilizing forward markets the company will be able to lock in rates

thus having a better understanding of what the Mexican peso equates to in the US dollar.

Of course there will be risk that cannot be predicted for those risks the team can rely on

the 15% contingency budgeted amount. Should this amount be needed to cover expenses the

project sponsor James Montgomery will authorize the usage of the funds.


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Human Resources

Phillip Barros, the Human Resource Manager for ACME will be in charge of recruiting

and staffing of employees in Mexico City. He will also be responsible for ongoing HR services

when the store in Mexico City opens. Barros other responsibilities include being the main point

of contact for employee benefits information. The same HR policies will be followed in Mexico

City as in the USA with the exception of when Mexican rules and regulations defer from the

USA. Barros will report directly to the HR director, however Barros will provide the expertise

and advise for employees in terms of compensation, benefits, and training and employees

relations for Mexico City. ACME will adhere to all rules and regulations for operating a businessin Mexico.

According to Forbes only one foreign manager can operate a store. This fact is something

Barros must be aware of and implement in order to comply with local regulations. Andrea Vega

who is the project manager will be the one and only foreign manager. Mexican citizens must be

hired and trained for all remaining management roles (Forbes, 2012). Barros must make sure

ACME is in compliance with all laws for operating a business in Mexico.

The Humans resource manager must be knowable of the hiring protocol in Mexico. The

standard work week and minimum wage differ than those in the United States. For example,

Mexican workers are entitled to one day of rest with full wage for every 6 days of work (Penner

& Associates, 2012). Unskilled workers like cashiers, cleaning crews and floor employees

receive minimum wage earning (Forbes, 2012). General minimum wage also exist in Mexico as

well as various other minimum wages based on position type (Wage Indicator Network, 2012).

This greatly differs from the USA where there is only one minimum wage. For instance, the

minimum wage for a cashier is 80.58 pesos the equivalent of $6.03 (Wage Indicator, 2012).


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Compliance with all wage rates must be followed to avoid legal actions such as fines or even

imprisonment (Wage Indicator Network, 2012)

As in the USA the minimum wage is not applicable to skilled labor like people who have

experience or education that makes them more in demand or sought after in the work force

(Forbes, 2012). Skill workers’ salaries will be determined by taking a proportion of the general

minimum wage in the USA with the Mexican wage and use the calculated difference between

the two amounts to determine the wage for skilled workers (Forbes, 2012). For example, the

minimum wage for the USA is $7.25 (US Department of Labor, 2012). The general minimum

wage in Mexico City is 62.33 pesos which is equal to $4.67 (Wage Indicator Network, 2012).The rate of Mexican minimum wage to the US is approximately 64% (4.67 divided by 7.25). A

US store manager on average makes $45,000 salary per year (Glassdoor, 2012). Therefore a

store manage in Mexico City would make approximately 29,000 (multiply 64.4% by $45,000).

The employee turnover rate is yet another issue ACME must address. As in the US there

is a high turnover rate in the retail industry in Mexico as well (Forbes, 2012). Since the same

high turnover issues exists in the US the HR director will be an excellent resource for Barros to

consult on how to best combat the turnover rate. Employees tend to stay longer at lager

organizations vs smaller organization in the US (Hope & Mackin, 2007). This fact may prove

positive for AMCE in that many businesses in Mexico are small or “micro businesses” ( Forbes,

2012, p 11). Also it has been shown that offering benefits to employees gives them an incentive

to stay thus decreasing turn over by 26.2% (Hope & Mackin, 2007). Based on this information

AMCE should consider offering employees a competitive benefit package that other companies

cannot offer. Due to cost savings associated with lower wages paid in Mexico vs the USA


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AMCE may also want to consider paying its Mexican employees more than the minimum wage

to attract and retain loyal employees.

Phillip Barros will have his plate full in terms of the amount of information he must

handle and understand. Not only must he comply with Mexican labor laws and reduce the

employee turnover rate, Barros has to be extremely knowledge of mandatory labor reporting

practices. The mail system is not always reliable therefore important documents may not be

received in a timely manner or at all (Forbes, 2012). It is the responsibility of Barros to be aware

and on top of all due dates and reporting requirements.

Communication

It is the responsibility of the project manager Andrea Vega to make sure the AMCE

project team, the project sponsor and the US ACME headquarter communicate effectively.

Andrea Vega will be located in Mexico City the majority of the 12 month construction period to

monitor the process and make sure the completion timeline remains on schedule.

Constant communication should occur between the team based in Mexico City and the

US based team to keep informed of the status of the project. Methods such as teleconferences

and Skype can be used for regular communication between the US and Mexican team members.

MS Project will also be utilized by the project manager to track the status of the project. MS

Project will be a great tool because it will allow approved team members to electronically make

changes/ modifications to the plan and indicate who and when changes were made.

The project manager must implement communication guidelines for the future operations

in Mexico. It is important that managers be fluent in English and Spanish to foster open

communication and understanding. This will promote a stable transition of AMCE into the


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Southwest regions. As with most things in life communication is one of the keys to success and

in this case AMCE must not only know but understand its new customer base.

Advertising and Marketing

From a business perspective ACME North America wants the Mexico City flagship store

to be successful in hopes of expanding and opening more stores throughout Mexico. To obtain

this goal a marketing plan will need to be configured in order to brand the new store for success.

Marketing plans and strategies used in the US may not necessarily be effective in Mexico.

ACME must investigate and determine the wants and needs of its Mexican consumers. It would be advantageous if ACME was able to hire a Marketing Director who has experience working

for a company like Home Depot who has successfully already transitioned into the Mexican

market. Within the marketing plan it is imperative that goals are set in terms gaining certain

amounts of dominance in the home improvement industry. This will be the main factor to

determine if the ACME will expand in the future or even remain open in Mexico City. The Store

Manager and staff will also play a key role in terms of engaging with the customers and

providing knowledgeable insight in the Mexico City store. ACME will need to position itself as

something new and exciting than its competitors in the region cannot offer in order to be success

and profitable.

ACME’s two main customer bases will be Homeowners and Construction workers and/or

Contractors. Do it yourself projects are extremely popular for Homeowners looking to save some

money. Advertising weekly specials or offering classes are promotions that have helped promote

Home Depot’s loyal following. Gimmicks ACME my want to consider utilizing. Construction

workers and contractors are also major markets ACME should market and advertise to. Offering


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more personal than their US counterparts. They prefer face to face interactions and like to take

their time and get to know the other party during negotiations ( Unger & Frankel, 2002). The US

executives must be patient and embrace these cultural differences to be successful.

Legal Concerns

Having a Mexican Attorney who understands the Mexican legal system is paramount. In

the US the legal system is practiced under common law, however in Mexico the legal system is

run under civil law. Therefore hiring an American Attorney would be a complete disaster. It is

advised that all “legal advice in terms of drawing up contracts, especially regarding mutualexpectation and obligation and settlement of disputes” (Unger & Frankel,p 36). Only original

contracts are legally binding in Mexico.

Corruption will be an issue in doing business in Mexico as well. ACME may encounter

Corruption from both the local and state levels. Yet another reason why it is key to have a legal

team in place that is aware of how to avoid and deal with such issues. ACME may want to

consider taking a strong stance against corruption within the company to influence fair business

practices (Unger & Frankel,p 25).Over the years Mexico has been trying get rid of corruption,

however “old habits die hard” and this is still an issue ACME will encounter.

Conclusion

As the project comes to the conclusion, the Project team will focus its objective on

completing the project and reviewing the results with Project Sponsor and the stakeholders. To

measure quality and success the project team will return back to the scope of the project, Project

Charter and the Scope Statement documents. The documents will be reviewed in details and act


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as a baseline to be compared to the actual end result. This is done to ensure that the Acme

project team has delivered on every objective of the project and has done exactly what it set out

to do. During the closure phase, the project team will review all the risks, ones that occurred and

ones that did not, documenting them and their mitigating actions. One of the final items that are

completed on the project is a customer satisfaction survey (BC Open Text, n.d.). This is

provided Acme to obtain information from the Project Sponsor as well as key stakeholders on

what was done right and key areas where improvement may be necessary. This information

along with other project documents will be archived and stored for future records and to act as

lessons learned. This information is vital as it provides key insight in to future expansion ofAcme Home Improvement stores to other global markets.

In the final days, the project team will have a celebratory party as a reward for

completing such a vast project. The following day, the project team will be disassembled and

returned back to its functional areas in the organization. Some of the employees will be

reassigned to other projects in support of future and ongoing efforts. At this point the project

will be transitioned to the store manager for managing day to day operations. He will be

expected to take over the store operations with minimal involvement with the project team after

the project completion date. He will have available to him all the archived documents,

assumptions and details of the project which have been finalized by the project team at

completion.


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References

Dictionarist.com (2012, July 21). Acme . Retrieved from http://www.dictionarist.com/acme

Forbes, J. (2012, July). Questions and Answers about Acme de Mexico. Retrieved from

http://tychong.umuc.edu/tycho/AMBA/640/1206/9045/conference/

launchconferencing.tycho

Glassdoor. (2012). Store manager salaries. Retrieved from http://www.glassdoor.com/

Salaries/store-manager-salary-SRCH_KO0,13.htm

Hope, J. B and Mackin, P. C. (2007). The relationship between employee turnover and employee

compensation in small business. Small Business Resource Summary .308 .1-44.Retrieved from http://archive.sba.gov

Institute, Project Management. (2013). A guide to the project management body of knowledge

(pmbok guide), fifth edition. Available.

BC Open Tectbooks. (n.d). Retrieved from (http://opentextbc.ca/projectmanagement/chapter/chapter-

18-project-completion-project-management/)

Ozorhon, B., Arditi, D., Dikmen, I., & Birgonul, M. (2008). Implications of Culture in the

Performance of International Construction Joint Ventures. Journal Of Construction

Engineering & Management, 134(5), 361-370.

Penner & Associates. (2012). Labor relations in Mexico. Retrieved from

http://www.mexicolaw.com/LawInfo11.htm

Salary.com. (2012). Salary wizard. Retrieved from http://www1.salary.com

Schwalbe, K., (2012). An Introduction to Project Management. Retrieved

from http://www.intropm.com/4eintropm-chapter1-2012.pdf

Unger, F. & Frankel, R. (2002). Doing Business in Mexico: A Practical Guide on How to Break

into the Market. Retrieved from http://www.dfat.gov.


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United States Department of Labor. (2012). Wages. Retrieved from http://www.dol.gov on July

22, 2012

Wage Indicator Network. (2012). Minimum wages in Mexico. Retrieved from

http://www.wageindicator.org on July 22, 2012

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