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Grupo Bimbo Case - International Expansion Plans

Case done for TiasNimbas Parttime MBA - Module International Business Management - Group D PTMBA 2010 - Alternate Resolution to expand to China and/or the US
by

Cara Mascini

on 18 November 2012

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Transcript of Grupo Bimbo Case - International Expansion Plans

Grupo Bimbo
International Expansion Plans Mexican company Vision:
Make Grupo Bimbo the world leader in the Baking Industry - 70 % of sales in Mexico
- Diet trends
- Higher ingredient costs
- Industry conditions per country varied - Leading in eliminating fats
- Leading in use of whole grains
- 17 countries, 100 brands, 5000 products
- Financially healthy - expansion fueled with free cash flow
- Expertise in efficient operation of plants CAGE Cultural Administrative Geographic Economic Cultural Distance China not that large
- Hofstede dimensions
- Taste difference - realistic adressing
- Language distance - local operation Panrico Administrative distance
- potentially large but known
- regulatory, political Adding Value scorecard Industry level
Enormous potential volumes --> now 40 mln, potential many multiples
Large market of 7.5 billion US$ total
Similar industry structure , mom&pop stores, fragmented distribution
Attractive industry structure, further efficiency improvements possible Clear cut case for expansion
- Large, fast growing market
- Similar and attractive structure
- First entrants take largest share GDP per capita low at 7.5K (vs Mexico at 14k) but growing fast with 10+ % (vs Mexico 5.5%) Should we focus our international expansion plans on China and the US? 5-forces quite similar How?
Current operation made profitable through increased efficiency's
+ learning step by step
seeing what is successfull
then expand like originally in Mexico
productwise - introduce other products slowly
and geographically - broaden cirlces around Bejing
- go to other cities, Shanghai, Shzenzhen, Guongzhou etc Expand in China, it is a clear cut case CAGE Cultural Administrative Geographic Economic Case for expansion
- Large market potential
- Distance is small
- Build a favourable solution for distribution Large market potential: ADDING value framework
(industry level) 5-forces:
bargaining power critical Marketshare for grasp Two market-leaders (and large competitors) in trouble:
- George Weston: decline of market share of 15% from 2003 to 2004
- Interstate Bakeries Corp: facing bankruptcy Increasing bargaining power versus Teamster to reduce cost of distribution

Currently Teamster bargaining power results in:
large wage increases
high health and workmen compensation insurance costs
block of Independant Operatiors conversion Breaking the bargaining power of Teamsters is key for expansion of Grupo Bimbo in the US How?
Current operation is profitable
Cash is available, lending possible
- acquire competitors - increase economies of scale
- increase bargaining power distribution Teamster outsmarted - possible strategies:
- Outsourcing of distribution (outsourcing party has more possibilities to recruit IO)
- Partner with other industries for distribution (e.g. Fedex; increase bargaining power vs. Teamster)
- Move distribution centers to “Teamster-free” states
- Acquisition of competitors with high IO network
- Reduce financial risk of IO conversion for operators Expand in US, the largest bread market in the world - Previously family-owned listed company in Industrial Baking
- Bread and Sweet goods
- Revenues US$ 5.24 billion
- Net profit 271 million
- Workforce 84.000 people
- 72 plants and 9000 distr. centres
- 17 countries Geografically close
Bread culture similar
- Packaged bread, sugar confectionery
Large group of Hispanics - potential goldmine:
- 43 Million - 1 out of 7 people - fast growing
- Childhood memories of Bimbo Prerequisite Case Brazil - negative
- Market size industrial bread is decreasing
- Market structure different and difficult
- Culturally not as similar as thought Conclusions 1. Due to the potential for growth and favourable market structure Grupo Bimbo should expand in China 2. Due to the size of the market and its economies of scale opportunities Grupo Bimbo should expand in the US - on the condition they focus on solving the distributor issues 3. Brazil will always remain a marginal market due to the structure and decline in size - do not expand further, consider retreat Largest industrial bread market in the world (17x Brazil, 4x China) Industry leader in 'healthy' bread Why is marketshare / volume so important?
Economies of scale are key to decreasing costs; spreading the high fixed costs of large plants Market for 'healthy' food is fast growing
Oroweat brand is highly profitable 2004: Market for non-artisanal bread in US $12,2 billon Distance is small:
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