1. 1) Market Drivers (High pressure for local responsiveness) -There are differences in demand pattern across different countries. Consumption habits are heavily influenced by culture, tastes, demographics etc. For example, In US, diets trend made people avoid both trans-fats and carbohydrates. (High Pressure for responsiveness) -Per Capita Consumption of products varies among different countries (Pressures for responsiveness) -There are differences in dominating distribution channel (i. e. mom & pop stores, hyper market) across different countries (High Pressures for responsiveness) -There are few global customers. Advertising and promotion should be different among countries. 2) Competitive Drivers (Medium-High pressure for local responsiveness) -There are differences in industry concentration across countries. For example, in Mexico, baking industry is highly concentrated whereas US market is fragmented and very competitive. -The level of globalization of competitors is low. Every country and market has different players. (Pressure for responsiveness, low pressure for integration) 3) Cost Drivers (Low-Middle pressure for global integration) – Potential for economies of scale is not huge Low-middle pressure for global integration) -Baking industry is not R&D intensive products (Low-middle integration pressure) -Labor cost varies among countries. 4) Government Drivers (Medium high Pressure for responsiveness) -Regulatory frameworks vary among countries for labor relations. =>Overall: High pressure for local responsiveness and low pressure for global integration 2. (a) Bimbo’s international strategy is based on Multi-domestic strategy (high responsiveness and low integration). In the baking industry, a high level of local responsiveness is required to deal with different customer’s emand. When Bimbo moved into international market, it preferred to continue developing the local brands acquired due to well known brand names. Also, Bimbo changed its products mix, sales force, and distribution channel to meet cultural and market difference. Integration less matters in Bimbo’s strategy because baking market is usually heavily fragmented and each market is very different. Therefore, customizing everything to market difference is more important than integration. (b) Strength 1) Quick responding to local market conditions
Bimbo quickly responds to the local market in terms of products (mix), distribution channel, and sales force to meet the cultural and market differences. 2) Acquisition of local brand Bimbo preferred to acquire local brand and develop it to get easy access to local customers and also distribution channel. In terms of local responsiveness, it is very effective strategy. 3) Bimbo has best practices in baking. Bimbo can compare everywhere and can detect a good number of opportunities to raise productivity. (Optimizing its production process and thus increasing productivity)
Weakness 1) Even though Bimbo has been invest in many markets and has an important presence in the US and Latin America, these investments have not been profitable. Its profitability still mostly came from Mexican market. 2) Selecting China for new market would not suit CAGE framework. U. S. and South America mostly fit all framework factors (Cultural: language, religion/ Administrative: trade areas/ Geographic: North & South America/ Economic: trade areas). However, China does not fit Framework factors except economics (Both are developing countries).
Even though Bimbo have internal experts of China, it would have been better to choose more close (in terms of CAGE) market. 3. 1) Being consistent with multi-domestic strategy, Bimbo should develop their organization as Area Structure. To keep quick respond to local market, operational authority should be decentralized. 2) Even though operational authority becomes decentralized, reporting system to headquarter should be well reorganized. 3) Considering many acquired company and brands in Grupo Bimbo, incentive system and career management system would be needed for employee from acquired company to motivate them. Mutual interest) 4. (a) Challenges -The basked goods sector remains extremely fragmented. Low entry barriers and relatively weak brand awareness are two main reasons. Also the relatively short shelf life of many products is another reason. Local firm benefited from their long experience in understanding the local consumer’s needs. -Unpackaged/artisanal bread remained competitive. Chinese consumers perceived unpackaged/artisanal bread as being tasty whereas packaged/industrial bread is perceived as less fresh. Prior ownership had not managed the pricing or segmentation well. The prior Spanish management had increased the prices radically, leading to a severe drop in volumes. Opportunities -Due to the relatively longer shelf life and well distribution channels, packaged/industrial bread is getting more available in China and especially popular in rural areas and cities where unpackaged/artisanal bread had little presence. -Packaged/industrial bread with health-related benefits is much popular than the other types. The company Bimbo acquired could serve large proximate market, has well expanding distribution network, and has potential for Bimbo to optimize its production process and thus increase product shelf life. -Bimbo could apply what it had learned from other markets about how to customize service for large hypermarket chains which is getting popular in China. (b) 1> Capitalize on making new products for local tastes and also capitalize on acquired company’s local products. 2> develop new products with healthy ingredients and also implement promotion increasing consumers health awareness. >invest more on R&D to increase shelf life of products and target rural areas consumers who are favored to packaged/ industrial bread. 5. (a) Modes of entry When Bimbo moved into US market, it started from exporting (low control and low commitment) and then moved to acquisition mode (high control and high commitment). However, when Bimbo moved into South America and China market, it directly started from acquisition which is high control and high commitment. (b) Sequence of countries: Bimbo Started from Mexico and move out to US (developed) and South America (developing) and China (developing).
It does not suit with PLC theory insisting moving from most developed country to least developed country. Bimbo’s sequence of countries is consistent with CAGE distance (US and South America) except China. (C) Pace of expansion: When Bimbo moved into US market, it started from exporting then moved to acquisition mode. It starts with a low commitment entry mode and buildup to higher commitment modes which matches learning theory. However, when Bimbo moved into South America and China market, it directly started from acquisition.
It is different from what leaning theory argues but in terms of experiential learning, it is possible to say that Bimbo got learning from US experience and applied the learning to South America and China market expansion case. (d) Based on The learning theory, the mode of entry would be low commitment. Therefore, licensing/contracting or exporting might be a good option. In addition, depending on Bimbo’s result in China market (Bimbo got into China market skipping low commitment pace), it would be possible to take into account JV or acquisition option because Bimbo has many learning from previous new marke