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Copy of Copy of Arcor : Global Strategy and Local Turbulence

GM 105 Group 7 Presentation
by

Amit Sharma

on 9 July 2013

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Transcript of Copy of Copy of Arcor : Global Strategy and Local Turbulence

Group 7
Sasha Tkacheff
Kelly Cover
Bettina Patino

Global Strategy and Local Turbulence
1891
2010
1950
Evolution of the Confectionary Industry
History of Arcor
Large volume purchase by Buyers
(Low Cost)
5 Forces and Business-Level Strategy applied to Nash Equillibrium
11
5+7=
(cc) image by anemoneprojectors on Flickr
Large volume purchase by Sellers
(Low Cost)
Higher Quality Demanded by Buyers
(Differentiation)
Higher Quality Demanded by Sellers
(Differentiation)
Buying Power of Buyers
Buying Power of Sellers
- B = low cost

- S = low cost
- B = high cost

- S = low cost
- B = high cost

- S = high cost
- B = high cost

- S = high cost
If Arcor is entering the U.S. Market as the seller, they may choose low-cost strategy first because it benefits all parties. As they gain market share and can charge more for their newly differentiated product, they can then move to charging buyers a higher price, resulting in increased revenue.
Result
Horizontal Strategic Alliances
5 Forces and Corporate-level Strategy applied to Nash Equillibrium
5+7=
(cc) image by anemoneprojectors on Flickr
Horizontal Mergers and Aquisitions
Threat of Substitute Products & Services
Threat of New Entrants
- SA = low cost

- SA = low cost
- MA = high cost

- SA = low cost
- SA = low cost

- MA = high cost
- MA = high cost

- MA = high cost
Horizontal Strategic Alliances
Horizontal Mergers and Aquisitions
mutual competitive advantage


Maipu 1210 2-3 Y
Piso 6
Buenos Aires, 1006
Argentina
Phone:
54 11 4310 9500
Fax:
54 11 4310 9501
www.arcor.com.ar
Arcor is classified under Sugar and Confectionary Products
Industry Group 2064 : Sugar and Confectionary Products
Arcor was founded on July 5, 1951 by Fulvio Pagani and his partners in Arroyito a small town in Argentina.

By 1958 Arcor produced over 130,000 ponds of candy a day.

Mid-1970s, Arcor captured 20% of the Argentine candy market and 8% of the chocolate market.

In 1976 Arcor began exporting products to Paraguay, in 1979 Uruguay, and by 1981 Brazil.

In December 1990, Fulvio Pagani died in a car accident.
Luis Pagani, the eldest son, took over as president and sales increased by 300% between 1991and 1999.

In 2000 Arcor became the leading exporter of hard candy in the world

When the case was written in 2003, Pagani hoped to take Arcor public by 2004 or 2005 and expand internationally
Effect of the financial crisis
1999, financial crisis hits Argentina
2001, Arcor suffered from the uncertainty around value of the peso – worried that this financial loss would result in lost customers
2000, Argentinians became price focused, Arcor had to change their packaging to reap consistent revenue
2001-2002, Arcor looked outside of the country to increase revenues
2002, Arcor post-devaluation level at 42%, other countries were averaging 177%
Problem Analysis and Discussion:
1891 during the industrial revolution Claus Doscher opens Doscher Brothers Confections, and a few years later after tasting taffy in France, the company introduces the famed French Chews.

First industrial operation!!
In 1900 Milton Hershey introduces a variation of what will eventually become the Hershey's Milk Chocolate Bar

Speed, economy, good price and size product
In 1904 Emil Brach starts Brach's Candy, his second attempt at the candy business. The first product was wrapped Caramels which sold for $.20 a pound.
Future Strategic alliance!
1930 M&M Mars introduces the Snickers Bar, named after the Mars family's beloved horse which is also one of the best-selling candy bars

Establishment of brand names, key foothold in domestic household
In 1950 Sam Altshuler creates the Annabelle Candy Company, named for his daughter, his first product was the Rocky Road Candy Bar.

1951 Arcor in business!!
In 1973 Hershey opens the first candy-related theme park known as Hershey's Chocolate World.

Industry moves into new markets - entertainment.
In 1976 Herman Goelitz Company introduces individually flavored jelly beans called Jelly Belly.
In 1990 Hershey sends 144,000 heat -resistant candy bars to soldiers in the gulf war
New technology in the industry.
Effect of the financial crisis
Problem Analysis and Discussion:
Products and Markets
Customer base suddenly less affluent
Had to change packaging to reflect new price points
Expansion into international market would bring up revenue
Production
changed quantity and mix of inputs
Production changes were costly
Effect of the financial crisis
Problem Analysis and Discussion:
Channels and Distribrution
djusting to daily distributor and retailer requestsA
Price forecasts fluctuate on a regular basis
Tighten restrictions for retailers around payment
Governmental Relationships
Required tax upon export
Self-financing required to pay up front
International Strategy and Competitive Advantage
Problem Analysis and Discussion:
Source: http://www.arcor.com.ar/nuestroManagement_popUpEN.htm
Corporate Structure
Arcor : Multidomestic International Strategy
Products and services tailored to local markets
SBUs are independent of one another
Strategy and Operating decisions are decentralized
International Strategy and Competitive Advantage
Problem Analysis and Discussion:
Latin America
Business-level strategy: low-cost leader
Corporate-level strategy: strategic alliances to enter local markets (Brazil), acquisitions domestically (Argentina)
Competitive advantage:
regional distributors have long-term relationships with Arcor
Aquired production facilities, Nechar, candy company
Mastered local candy and chocolate tastes
Mastered local market share, domestic revenues of candy sales were 27%, chocolate was 25%, other food was 23% in 2001
Key training for distributors

North America
Business-level strategy: low-cost leader
Corporate-level strategy: strategic alliance
Competitive advantage:
Minimizing costs, entered under a private label – U.S. = Wal-Mart stores, under “Whisper” and “Sweet Enticement”
Strategic alliance with Brachs
Manufacture with a private brand in Canada to enter market
International Strategy and Competitive Advantage
Problem Analysis and Discussion:

Europe
-Business-level strategy: low-cost leader
Corporate-level strategy: strategic alliance
Competitive advantage:
Research market before expanding

Asia
-Business-level strategy: low-cost leader
Corporate-level strategy: strategic alliance
Competitive advantage:
Manufacture willing product in bulk
Research market before expanding

International Strategy and Competitive Advantage
Problem Analysis and Discussion:
Porters Five Forces applied to Nash Equilibrium
Porters Five Forces applied to Nash Equilibrium
Strengths
Dominates domestic market share
Experienced corporate management
Can gain raw materials from factories they own or control
Diversified into other fields
Continual investment in equipment and technology
Large budget for distributor training
Hiring people who want to live in their target markets
Maintaining and gaining strategic alliances
Weaknesses
Resistance to buy advertising and marketing in larger markets
Lack of market research
SWOT Analysis of Arcor
Opportunities

Expand Arcor label products globally
Business to business website
Large untapped markets that are friendly to low-cost suppliers

Threats

Intense rivalry in the industry
Waning domestic demand
Regulatory barriers, tariffs and taxes
Global economic fluctuations
SWOT Analysis of Arcor
US and Canada
Continue providing product under local labels to large distributors and wholesalers
Do not engage in local manufacturing
Focus on popular products such as Bon O Bon and gum
If possible, outsource marketing when cost is attractive to move towards gaining market share

Other Regions
Gain entrance to India and Mexico and foster growth in Asia
Similar distribution layout to capitalize upon
Opportunities to engage in local manufacturing
Recommendations
North America
Further expansion completed
Focus on private labels, value added through licensing, Arcor brand products, manufacturing contracts for third parties
Brands: Arcor Value Line, Liberty Bell, Party Mix, Fruitfuls
Stores: CostCo, Sam’s, WalMart, Kmart, Dollar Tree, CVS, Walgreen’s
Latin America
Increase in Mexican sales by 69.3%
Merger with Danone to create healthier breakfast cereals
Still going strong in Brazil, sales increased by 19.2% in 2011
Pacific Asia
Commercial office established in Shanghai
Focus encompasses China, Korea, Taiwan, Hong Kong, Australia, and New Zeland
Europe
Launched advertising campaign to integrate several mainstream products – Bon o Bon
Year End
Extreme growth – December 2011
20,000 people employed
40 industrial plants
Export to 120 countries
Increase in sales of 3.8% worldwide
Recent developments 2011-2012
Thank You!!!
Have a Sweet day!
Class Questions:
1. Do you agree with our recommendations?
2. Would you want to sample some of Arcor's product?
Full transcript