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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.
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The Food Industry Case
Nuno Tiago Pimenta Ferreira
The Latin American International Management Strategy
Prof. António Vieira da Silva
Student
Supervisor
CONTENTS
Literature Review1
2
3
4
5
The Emerging Economies and the increasing importance of Latin America in World GDP
Methodology
Case Studies
Results
6 Conclusions
Literature Review
The first relevant international management strategies theory date from1986 (Porter)
Bartlett & Ghoshall (1989)
Global Transnational
International Multidomestic
Need for local responsiveness / Differentiation
Ne
ed
for
glo
bal
inte
grat
ion
/ C
oo
rdin
atio
n
ResponsivenessBranded packagedproducts
EfficiencyConsumerelectronics
Transfer ofknowledgeTelecommunicationsswitching
MultinationalResponsiveness
GlobalEfficiency
InternationalTransfer ofknowledge
andcompetencies
Literature Review
The ability to navigate turbulentwaters
Servitje Sendra (1998)Kosacoff (2002)
• The human resources cannot be used only for the companies’ ends;
• The importance of reinvesting 80% of its profits;
• Incorporation and generation of technological capabilities;
• The successful adaptation to a new business environment and the rules of the game.
Literature Review1
2
3
4
5
The Emerging Economies and the increasing importance of Latin America in World GDP
Methodology
Case Studies
Results
6 Conclusions
CONTENTS
The Emerging Economies and the increasing importance of Latin
America in World GDP
World’s GDP growth (2013-2015) and share by region (2014)
Sources: International Monetary Fund (IMF) – October 2013, ES Research.
GDP growth
8%
8%
2%
World
2%
4%
GDP share
Canada and the USA
Latin America
European Union
North Africa and Middle East
Sub Saharan Africa
Commonwealth of Independent States
Developing Asia
Japan
Australia
25%
23%
4%
18%
7%
2.52.8 3.0
2013 2014 2015
3.03.7 3.9
2013 2014 2015
1.92.7 2.9
2013 2014 2015 2.4 3.34.8
2013 2014 2015
2.12.6
3.1
2013 2014 2015
6.5
6.76.8
2013 2014 2015
1.7 1.71.0
2013 2014 2015
5.1
6.1 5.8
2013 2014 2015
2.6 3.0 3.3
2013 2014 2015
0.0
1.3 1.6
2013 2014 2015
Literature Review1
2
3
4
5
The Emerging Economies and the increasing importance of Latin America in World GDP
Methodology
Case Studies
Results
6 Conclusions
CONTENTS
Methodology
Which strategy the Latin American companies
have been following to become global,according to the Bartlett & Ghoshal matrix?
There is no identified strategies
about the Latin American
international management
how they set up and
manage their portfolio of
subsidiaries and activities
abroad?
which are the
internationalization
processes more used when
they go abroad?
Rank
2013Company Country Industry
Sales 2012 (million
USD)
Number of
countries
% Foreign Sales
2012
% Human Resources
abroad 2012
1 CEMEX MX cement 15.196,6 50 77 69
2 JBS BR food 34.856,9 15 84 56
3 BRIGHTSTARUSA/
BOtelecom 4.448,6 46 55 67
4 TENARIS AR steel 10.834,0 11 86 74
5 MX multisector 13.053,1 17 60 28
6 LATAM CL/BR airlines 13.379,6 16 57 25
7 IMPSA AR energy 1.442,8 30 67 50
8 TELMEX MX telecom 10.109,2 8 96 91
8 AJEGROUP PE beverage 1.666,7 16 80 78
10 TERNIUM AR steel 8.734,7 10 74 70
11 ODEBRECHT BR construction 49.892,9 35 42 31
12 BIMBO MX food 13.353,4 19 46 40
… … … … … … … …
20 BR food 11.227,9 21 35 42
30 GRUMA MX food 4.960,5 18 66 63
34 NUTRESA CO food 2.950,6 15 23 23
43 CMI GT food 2.247,2 12 75 77
50 ARCOR AR food 3.500,0 16 15 35
Ranking Multilatinas 2013
Methodology
Literature Review1
2
3
4
5
The Emerging Economies and the increasing importance of Latin America in World GDP
Methodology
Case Studies
Results
6 Conclusions
CONTENTS
90
420
1070 1003
745 801947
1301
1541
1879
22722167
2600
29233074
0
500
1000
1500
2000
2500
3000
3500
1950 1960 1990 2000 2001 2002 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sales
Arcor: the ability to grow during economic crisis
Latin American countries borrow huge sums of money from international creditors for industrialization
After a second bout of hyperinflation, Argentina adopts the crawling peg. Brazil devaluates its currency.
Argentinean default
End of fixed exchange rate
Rising industrial demand causes
a short-lived energy crisis
Subprime crisis
European sovereign debt crisis
The US supreme court decides to suspend the Argentinean bonds’ payments. This decision led to a new default in 2014.
Arcor is born in an inland
province
A multiproduct company with a national coverage. Exports begun.
Danone and Arcor’sjoint-venture to create
Bagley Latam
Acquisition of La
Campagnola
Manufacture of products together with Bimbo
Co-branding agreement with The Coca-Cola Company
Changes in Consolidated sales 1950-2012 (Millions USD)
Source: Kosacoff (2002)
Arcor is the one which uses all kinds of internationalization processes
Bimbo and Gruma: the NAFTA connection
Bread (2014) $1.667.000
Acquisitions1977: Mission Foods1996: Albuquerque Tortilla$8.800.000Casa de Oro Foods$20.000.000
Joint VentureArcher Daniels Midland
Acquisitions1986: Wonder Bread1992: Orbit Finer Foods1993: La Fronteriza, FabilaFoods, Bimar Foods1995: C&C, La Tapatia, Tia Rosa Texas1992: Orbit Finer Foods
1996: Pacif Pride Bakery1998: Molino Cereal FoodsMrs. Baird’s Bakeries1999: Four S2002: Oroweat – Webber’sGeorge Weston$610.000.000 2009: Weston Foods
$2.380.000.000 2011: Sara Lee Fresh Bakery$959.000.0002013: Beefsteak $31.900.000
Joint VentureMrs. Baird’sWrigley
Global leader in the baking industry;
Brand recognition with over 100 prestigious brands;
Diversified portfolio diversified by regions and brands;
One of the world’s largest and most complex distribution
networks, with over 52.000 routes;
Solid cash flow generation and market shares: conservative
financial approach;
Talented management team: an employee champion.
Gruma was founded after the discovery of arustic machine for grinding dry-cooked corn to bemade into tortillas on a business trip;
Mexican cuisine Intangible
Cultural Heritage by Unesco in
2010
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
21313340
6203
9616
15875
21014
16516
18750
0
5000
10000
15000
20000
25000
2000 2006 2007 2008 2009 2010 2011 2012 2013
Sales
JBS and Marfrig: the Brazilian National Champions
Source: Marfrig(2013)
Changes in Consolidated sales (Marfrig) 2000-2013 (Millions USD)
Marfrigis born
IPO islaunched
Acquisition ofMoy ParkAcquisition
of Quickfood
Acquisitionof Seara
Acquisition ofKeystone Foods
Creation of MarfrigBeef to unite
bovine industries inSouth America
Newacquisitions
in Brazil
JBS acquiresUSD 1,8 billion in
debt fromMarfrig to own Seara
BNDES injects
30 M BRL in JBS
JBS receivesthe money for
new acquisitionsand gives a
shareholder positionof 22% to BNDES
Nutresa and Pollo Campero: Rising stars
Colombian’s illustrious unknown
• Nutresa started as a chocolate factory but became a food company;
• Joint-ventures:Bimbo Colombia: 40% shareholderposition;DKM: JV with Mitsubishi in order to distribute coffe amongst Asia;
• 70% of total sales still coming fromColombia;
• Nutresa never changes the original structure of an acquired company.
Guatemala’s Answer to Kentucky Fried Chicken
• The firm was born after a 2.000 chicken farm given to cover a debt
• The implementation of an HumanResources management abroad is vital;
• Franchising as a FOM: the way to expand globally;
• The importance of a win-winrelationship in a strategic Alliance: Walmart allowed the US expansion, Telepizza’s agreement didn’t work out;
• China’s internationalization failed dueto the misunderstanding of the Guanxi.
Literature Review1
2
3
4
5
The Emerging Economies and the increasing importance of Latin America in World GDP
Methodology
Case Studies
Results
6 Conclusions
CONTENTS
Results
Organizational reasons for expatriation
Multidivisional Structure
Global activities controland coordination
Development of a transnational mentality
Transmit national imageand representation for the subsidiaries
Transfer know-how andskills
Lack of local talent
Need for local responsiveness / Differentiation
Ne
ed
for
glo
bal
inte
grat
ion
/ C
oo
rdin
atio
n
Competitive Form Internal Network
Cooperative Form
Integration between divisions
Op
era
tio
ns
de
cen
tral
izat
ion
Results
0
5
10
15
20
25
30
35
19701980
19902000
2010
02
2
1
0
0 1
17
35
41
1 25
500
0
13
6
15
2
00 1
7
4Nu
mb
er
of
Acq
uis
itio
ns
Year
Arcor Bimbo Gruma JBS Marfrig Nutresa
Acquisitions over the years (1970-2010)
Governmental support
Lesssupported
More Supported
Results
International Strategies
Global Transnational
International Multidomestic
Need for local responsiveness / Differentiation
Ne
ed
for
glo
bal
inte
grat
ion
/ C
oo
rdin
atio
n
Literature Review1
2
3
4
5
The Emerging Economies and the increasing importance of Latin America in World GDP
Methodology
Case Studies
Results
6 Conclusions
CONTENTS
Conclusions
The 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;
Conclusions
All 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.
THE END
Thank you very much for your attention