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The Latin American International Management Strategy: The Food Industry Case

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This investigation intends to analyze this tendency, looking specifically to the companies’ path from Latin American, and to understand which strategy these companies have been following to become global. Based on existing international strategy models and perspectives, we set out the analysis of seven case studies about Latin American food industry companies which will allow us to recognize which is the international strategy followed by each firm, how they organize their operations abroad in terms of multidivisional structures, what is the role of people in their internationalization processes, and how their financial partners look to this new reality.

Text of The Latin American International Management Strategy: The Food Industry Case

  • 1. The Latin American InternationalManagement StrategyThe Food Industry CaseStudentNuno Tiago Pimenta FerreiraSupervisorProf. Antnio Vieira da Silva

2. CONTENTS1 Literature Review2345The Emerging Economies and the increasing importance ofLatin America in World GDPMethodologyCase StudiesResults6 Conclusions 3. Literature ReviewThe first relevant international management strategies theory date from1986 (Porter)Bartlett & Ghoshall (1989)Global TransnationalInternational MultidomesticNeed for local responsiveness / DifferentiationNeed for global integration / CoordinationResponsivenessBranded packagedproductsEfficiencyConsumerelectronicsTransfer ofknowledgeTelecommunicationsswitchingMultinationalResponsivenessGlobalEfficiencyInternationalTransfer ofknowledgeandcompetencies 4. Literature ReviewServitje Sendra (1998)Kosacoff (2002)The ability to navigate turbulentwaters The human resources cannot beused only for the companiesends; The importance of reinvesting80% of its profits; Incorporation and generation oftechnological capabilities; The successful adaptation to anew business environment andthe rules of the game. 5. 1 Literature Review2345The Emerging Economies and the increasing importance ofLatin America in World GDPMethodologyCase StudiesResults6 ConclusionsCONTENTS 6. The Emerging Economies and the increasing importance of LatinAmerica in World GDPWorlds GDP growth (2013-2015) and share by region (2014)Sources: International Monetary Fund (IMF) October 2013, ES Research.25%GDP growth8%8%2%World2%4%GDP shareCanada and the USALatin AmericaEuropean UnionNorth Africa and Middle EastSub Saharan AfricaCommonwealth of Independent StatesDeveloping AsiaJapanAustralia23%4%18%7%2.52.8 3.02013 2014 20153.03.7 3.92013 2014 20151.92.7 2.92013 2014 2015 2.4 3.34.82013 2014 20152.12.63.12013 2014 20156.56.76.82013 2014 20151.7 1.71.02013 2014 20155.16.1 5.82013 2014 20152.6 3.0 3.32013 2014 20150.01.3 1.62013 2014 2015 7. 1 Literature Review2345The Emerging Economies and the increasing importance ofLatin America in World GDPMethodologyCase StudiesResults6 ConclusionsCONTENTS 8. Methodologyhow they set up andmanage their portfolio ofsubsidiaries and activitiesWhich strategy the Latin American companieshave been following to become global,according to the Bartlett & Ghoshal matrix?There is no identified strategiesabout the Latin Americaninternational managementabroad?which are theinternationalizationprocesses more used whenthey go abroad? 9. Rank2013MethodologyRanking Multilatinas 2013Company Country IndustrySales 2012 (millionUSD)Number ofcountries% Foreign Sales2012% Human Resourcesabroad 20121 CEMEX MX cement 15.196,6 50 77 692 JBS BR food 34.856,9 15 84 563 BRIGHTSTARUSA/BOtelecom 4.448,6 46 55 674 TENARIS AR steel 10.834,0 11 86 745 MX multisector 13.053,1 17 60 286 LATAM CL/BR airlines 13.379,6 16 57 257 IMPSA AR energy 1.442,8 30 67 508 TELMEX MX telecom 10.109,2 8 96 918 AJEGROUP PE beverage 1.666,7 16 80 7810 TERNIUM AR steel 8.734,7 10 74 7011 ODEBRECHT BR construction 49.892,9 35 42 3112 BIMBO MX food 13.353,4 19 46 40 20 BR food 11.227,9 21 35 4230 GRUMA MX food 4.960,5 18 66 6334 NUTRESA CO food 2.950,6 15 23 2343 CMI GT food 2.247,2 12 75 7750 ARCOR AR food 3.500,0 16 15 35 10. 1 Literature Review2345The Emerging Economies and the increasing importance ofLatin America in World GDPMethodologyCase StudiesResults6 ConclusionsCONTENTS 11. Arcor: the ability to grow during economic crisis90420End of fixedexchange rate1070 1003745 8019471301154118792272216726002923307435003000250020001500100050001950 1960 1990 2000 2001 2002 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012SalesLatin Americancountriesborrow hugesums of moneyfrominternationalcreditors forindustrializationAfter a secondbout ofhyperinflation,Argentinaadopts thecrawling peg.Brazil devaluatesits currency.ArgentineandefaultRising industrialdemand causesa short-livedenergy crisisSubprime crisisEuropean sovereigndebt crisisThe US supreme courtdecides to suspend theArgentinean bondspayments. This decision ledto a new default in 2014.Arcor is bornin an inlandprovinceA multiproduct companywith a nationalcoverage. Exports begun.Danone and Arcorsjoint-venture to createBagley LatamAcquisitionof LaCampagnolaManufacture ofproducts togetherwith BimboCo-brandingagreement with TheCoca-Cola CompanyChanges in Consolidated sales 1950-2012 (Millions USD)Source:Kosacoff (2002)Arcor is the one which uses all kinds of internationalization processes 12. Bimbo and Gruma: the NAFTA connectionBread (2014) $1.667.000Acquisitions1977: Mission Foods1996: Albuquerque Tortilla$8.800.000Casa de Oro Foods$20.000.000Joint VentureArcher Daniels MidlandAcquisitions1986: Wonder Bread1992: Orbit Finer Foods1993: La Fronteriza, FabilaFoods, Bimar Foods1995: C&C, La Tapatia, TiaRosa Texas1992: Orbit Finer Foods1996: Pacif Pride Bakery1998: Molino Cereal FoodsMrs. Bairds Bakeries1999: Four S2002: Oroweat WebbersGeorge Weston$610.000.0002009: Weston Foods$2.380.000.0002011: Sara Lee Fresh Bakery$959.000.0002013: Beefsteak $31.900.000Joint VentureMrs. BairdsWrigleyGlobal leader in the baking industry;Brand recognition with over 100prestigious brands;Diversified portfolio diversifiedby regions and brands;One of the worlds largest andmost complex distributionnetworks, with over 52.000 routes;Solid cash flow generation andmarket shares: conservativefinancial approach;Talented management team:an employee champion.Mexican cuisineIntangibleCultural Heritageby Unesco in2010Gruma was founded after the discovery of arustic machine for grinding dry-cooked corn to bemade into tortillas on a business trip;It became the Tortilla King due to the acquisitions on border states andthe inexistance of recognized brands in the USA;Gruma is selling corn chips and ingredients to the Asian supermarkets,convenience stores, and fast-food chains, adapting it to local tastes;The Venezuelan experience ended dramatically in 2013 13. JBS and Marfrig: the Brazilian National Champions213133406203961615875Creation of Marfrig21014165161875025000200001500010000500002000 2006 2007 2008 2009 2010 2011 2012 2013SalesSource:Marfrig(2013)Changes in Consolidated sales (Marfrig) 2000-2013(Millions USD)Marfrigis bornIPO islaunchedAcquisition ofAcquisition Moy Parkof QuickfoodAcquisitionof SearaAcquisition ofKeystone FoodsBeef to unitebovine industries inSouth AmericaNewacquisitionsin BrazilJBS acquiresUSD 1,8billion indebt fromMarfrig toown SearaBNDESinjects30 M BRL in JBSJBS receivesthe money fornew acquisitionsand gives ashareholder positionof 22% to BNDES 14. Nutresa and Pollo Campero: Rising starsColombians illustrious unknown Nutresa started as a chocolatefactory but became a food company; Joint-ventures:Bimbo Colombia: 40% shareholderposition;DKM: JV with Mitsubishi in order todistribute coffe amongst Asia; 70% of total sales still coming fromColombia; Nutresa never changes the originalstructure of an acquired company.Guatemalas Answer to KentuckyFried Chicken The firm was born after a 2.000 chickenfarm given to cover a debt The implementation of an HumanResources management abroad is vital; Franchising as a FOM: the way toexpand globally; The importance of a win-winrelationship in a strategic Alliance:Walmart allowed the US expansion,Telepizzas agreement didnt work out; Chinas internationalization failed dueto the misunderstanding of the Guanxi. 15. 1 Literature Review2345The Emerging Economies and the increasing importance ofLatin America in World GDPMethodologyCase StudiesResults6 ConclusionsCONTENTS 16. ResultsOrganizational reasons forexpatriationMultidivisionalStructureGlobal activities controland coordinationDevelopment of atransnational mentalityTransmit national imageand representation forthe subsidiariesTransfer know-how andskillsLack of local talentNeed for local responsiveness / DifferentiationNeed for global integration / CoordinationCompetitive Form Internal NetworkCooperative FormIntegration between divisionsOperations decentralization 17. Results35252015105030Acquisitions over the years19701980(1970-2010)199020002010022100 11735411 250 50013615200 174Number of AcquisitionsYearArcor Bimbo Gruma JBS Marfrig NutresaGovernmental supportLessMoresupportedSupported 18. ResultsInternational StrategiesGlobal TransnationalInternational MultidomesticNeed for local responsiveness / DifferentiationNeed for global integration / Coordination 19. 1 Literature Review2345The Emerging Economies and the increasing importance ofLatin America in World GDPMethodologyCase StudiesResults6 ConclusionsCONTENTS 20. ConclusionsThe international strategy closer to the reality of the investigatedcompanies, according to the Bartlett and Ghoshal matrix is theInternational;The need for Responsiveness happens when the Latin Americanmultinationals begun to join the Asian markets;Brazil is the most projecting economy to expand their firms worlwidedue to the BNDES support;The Mexican firms are better prepared to internationalize in the USmarket due to the NAFTA connection;History shows that these firms began to internationalize in the Hispanicmarkets following their natural clients;Arcor and Bimbo became internationally competitive due to theirregional presence and niche specialization; 21. ConclusionsAll the investigated firms are joining the Chinese market, a platform tothe Middle East, India or Indonesia;China signifies the need for responsiveness but also fierce competition;A strategic alliance allows the expansion of a firm but should be used in awin-win relationship;The food industry is characterized by small profit margins. Theirinternationalization shall look to reach economies of scale;Despite being in the Stock Exchange, these companies remain generallyfamily-based;Although their internationalization may be interesting, these firms arestill an attractive target for acquisitions. 22. THE ENDThank you very much for your attention

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