International business relationship and entry modes : A case of Swedish automotive industry Scania and Volvo in Mexico

Purpose – The purpose of this paper is to identify the critical events of the establishment processes of two Swedish companies in the context of cross‐culture and cross‐border investment and to discuss how and to what extent the networks have changed and how the change has affected the Swedish firms' establishments and positions in the market. Design/methodology/approach – The paper presents an exploratory study to develop a conceptual framework. A descriptive case study approach is also employed to document the nature of the automotive industry in Mexico and the establishment processes of two Swedish manufacturer companies. Data are collected by means of a number of semi‐structured interviews with some key figures of Scania and Volvo in both Mexico and Sweden. Findings – Management of firms that operate or intend to operate in the Mexican market and especially in the Trucks segment, have to consider and take appropriate measures in order to bridge the cultural gap that can be created by the old cabs concept; otherwise their investments are risky and they can easily be swallowed by other suppliers. Not only satisfying customers' needs but also dealing with the various government authorities adequately is also one of the preconditions for success in the Mexican market. It is recommended here that firms should comply and lobby in accordance with the environmental regulations. Practical implications – The result can be used by the automotive industry to re‐engineer and redesign their international business establishment processes and the future direction of their more effective and competitive international investment strategies. Originality/value – In contrast with earlier findings, pricing in the Mexican industrial market is found to be one of the major competitive tools for developing and sustaining a strong market position. Developing strong relationships with the various governmental authorities can help industrial firms to get a certain Act adopted and implemented that can enable them to create a competitive edge that also weakens the position of their rivals in the market. Instead of competing with all firms operating in the market, a firm co‐operates with some of them and competes with the rest (co‐opetition).