Understanding the businesses’ profile in Queretaro

Published on Plaza de Armas, newspaper from Queretaro, February 21st 2011. (www.plazadearmas.com.mx)

During the last year and the beginning of this, we’ve heard a lot about the arrival of new investments to Queretaro from big companies, mainly focused in the aerospace industry: Bombardier with a factory for planes, Safran with 2 factories for plane’s components, DHL with its new hub at Intercontinental Airport, General Electric’s Engineering Center inaugurated last week, and plans for installing the first biotechnology cluster as well as talks with Sikorsky United Technologies to install a plant for helicopters, just to mention a few.

Definitely, these are good news, and the results are that Queretaro practically recovered from the 2009 fall, according to preliminary figures.

But let’s make a detailed analysis of the different characteristics of the businesses present in the State, and what opportunities they create. The most recent figures are from 2009 Economic Census, and it establishes the presence of more than 56,300 economic units from the private sector and government’s partially-owned companies, that bought 232 billion pesos in goods and services during 2008 (an economic unit is an organization dedicated mainly to one kind of activity on permanent facilities).

Half of that purchases concentrates on almost 250 organizations that belong to 2 big sectors: the manufacturing sector (mainly those companies with more than 100 people in the  transportation equipment building industry, food industry and chemistry industry), and in the wholesale commerce sector, with a big concentration in the raw materials industry for agricultural, forestry and industry. In other words, only 0.4% of the economic units represent 50% of the consumption of goods and services in the State!

This high level of concentration makes these organizations very attractive due to the high volumes of goods and services they buy; but these are also organizations with strong negotiation leverage, and lots of suppliers at their doors, that generates a very competitive dynamic for which you must have a clear differentiation strategy.

But, let’s not forget about the rest of businesses that still have the need of 100 billion pesos in goods and services that someone must deliver. It is definitely a complicated segment due to its pulverization and, very probably, low institutionalization levels (86% of the economic units in the State have 5 people or less), but you can establish niche strategies to facilitate the delivery and you can have a better negotiation position.

You must work to have a clear understanding and evaluation of your potential markets, with the purpose to identify the opportunities and how to seize them. This will allow you to be effective in your commercial efforts and to develop the right strategies.

If you are selling to businesses, do you know the potential size of your market?

In September, INEGI published the final results for 2009 Economic Census. This shows us the total number and characteristics of the economic units in the country (organizations, businesses or entities with one kind of permanent activity, with profit or non-profit purposes).

The following analysis considers the economic units (EU) that:

·         Had activity the whole 2008.

·         Were considered for the census by direct counting (in rural zones, EU were considered by sampling).

·         Belong to private sector and “paraestatales” (those that offer public services but are not part of public administration).

The total of EU of with this profile is 3,724,019. These EU bought almost $6 trillion pesos in services and products for the development of their activities.

Now that we know the size of the market, let’s understand how it is distributed. We will analyze it by three perspectives: location, economic activity, and size.

Considering location, the six first places are:

·         Distrito Federal (Mexico City), which concentrates the 17% of the total consumption of goods and services for EU.

·         Nuevo León, with 9.4%

·         Estado de México, with 9%

·         Veracruz, with 5.7%

·         Jalisco, 5.4%

·         Coahuila, 5.1%

These 6 states concentrate half of the total purchases made by EU for their activities.

Now, if we analyze from the economic activity perspective, the most dominant sector is manufacturing, with 57% of the total consumption of goods and services. Within this sector, the main economic branches are transportation equipment, chemical industry, and production of oil and carbon products, representing almost the half of the sector.

Now, considering the last perspective, the size of the EU, 95% of them have less than 10 people! On the other hand, only 0.2% has more than 250 people, but they represent 66% of the total consumption of goods and services.

Undoubtedly, if you can assess the size of the total “business cake” that you have for an activity or a region, as well as understand the characteristics of the businesses or organizations and their level of concentration, you will be able to make more efficient decisions to exploit your current competitive position and to discover new horizons and opportunities. So… of this “cake” of $6 trillion pesos, ¿how big can your chunk be?