To complete the market strategy, we will then elaborate a non-market strategy to create an integrated strategy (Burton). CAGE distance analysis – Mexico /US Cultural Distance: Mexico and the United States share a common border on the northern side. Despite their close physical proximity and mexican adaptations to western styles, lots of dissimilarities are observed in the culture, beliefs, traditions and norms of social conduct of the people in these two countries. A vast majority of Mexican people use Spanish language. In fact, Mexico is the country which has the largest Spanish speaking population in the whole world.
On the other hand, English is the most popular language among the Americans. However, the Spanish language is the second most common language in the United States after English. Mexican foods are famous all over the world. They are very appetizing because of their flavors as well as the use of colors and decorations. Americans have a large variety of styles of cooking. Most of their traditional cuisines have undergone a sea change over a period of time, due to the influence of various immigrant communities. Administrative Distance: The politics of Mexico are somewhat similar to those of the United States.
The United Mexican States are a federation whose government is representative, democratic and republican based on a presidential system according to the 1917 Constitution Geographical Distance: The geographical distance between the Panera Bread in the US and Mexico is not significant. Both of these countries are part of the North American continent and are surrounded by the Pacific Ocean and the Atlantic Ocean. Economy Distance: The economy distance between the US and Mexico is not large. However, US economy has a large impact on the Mexican economy.
The economy of Mexico is the 11th largest in the world. Mexico came to an agreement with the government of the US and Canada and it joined the North American Free Trade Agreement (NAFTA) in 1994. As a result of this agreement, the massive US market is easily accessible in Mexico. CAGE Distance for food industry Bakery is a FMCG ( Fast moving Consumer Goods ) Highly perishable Non Market strategy to support the switch from artisanal bread and industry baked bread : •Nutrition and health program •Education (to target young and future customer) Alliance with other big company to change the consumption habits Bimbo’s globalization challenges : Industry competition: highly fragmented and competitive industry structure, with different players in different countries Demand patterns: Consumption habits heavily influenced by cultural legacy, demographics, tastes, fashion (e. g. low-carb diets in the US) and price sensitivity Distribution Networks: retailers bargaining power and location, country geography, transportation infrastructure, as well as labor relations affect distribution chain and costs.
Administration: regulatory frameworks wary widely among countries for labor relations, new business registration, bankruptcy filing Brazil failure : CAGE ANALYSIS BIMBO in US Culture: Consumption patterns are strongly related to Diet •Low carb movement •Well being ? healthy lifestyle are general trends influencing may other industries as well as competitors (Nestle’s new goal: health & foods) •Bimbo focuses on Hispanic immigrants segment (emotional ties) Administrative: Distribution = biggest challenge Bargaining power of large retailers: •Pricing dictated lower prices Supply patterns: full shelves requirements even if not in line with consumption.
Diaz, Head of Grupo Bimbo , Central and South America Division)Taste for sweet goods differs from Mexico: Brazilians prefer pound cakes, cereal bars and products with milk cream, whereas Mexicans like strawberry jelly fillingIntense competition and relatively low demand push prices down: industrial bread can be sold at only $ 1. 50 per Kg in Brazil v. $1. 90 in Mexico Unsuitable distribution strategy, targeting small shops, whereas 70% of sales happens in hypermarkets.
Mexican brand names are not meaningful to Brazilians; subtle language barriers exist among Latin American countries. •4. « If youwant to be in South America, you have to be in Brazil »(A. Diaz, Head of GrupoBimbo , Central and South America Division)Although hardly profitable, Brazil is a « must » market for a group that wants to have a presence in South America. •5. …. and ways to recover.
Control costs with a new distribution strategy adapted to the local market structure (as already initiated, deal directly with large retailers and use independent operators to supply small retailers)Improve revenue by offering new, different products, better suited to local taste, particularly in the promising confectionary sector, a growing market although still representing only 65% of Mexican sales in 2006 (based on data in Exhibit 5))Make Brazil a knowledge and innovation « lab » for the group. Use sound market research, instead of blind guessin
Strategic importance of local environmentIn The U. S. Market, Bimbo’s strategy is resulting in a “Contributor” position, because of the strong importance of the local environment, specifically in terms of pricing for their product as well as their lack of bargaining power on the distribution side. Their competence in terms of operations is affected by the unionized truckers on which they have too limited power. Competence of local organization analysisCulture: consumption patterns are strongly related to Diet trends“Low Carb” ovementwell being / healthy lifestyle are general trends influencing many other industries as well as competitors (Nestle’s new goal: health & foods)
Bimbo focuses on Hispanic immigrants segment (emotional ties)Administrative: Distribution = biggest challenge: Bargaining power of large retailers: Pricing dictated lower pricesSupply patterns: Full shelves requirements even if not in line with consumption Buy back agreementsTiming deliverySupply management:Conflicting goals of unionized truckers and large retailers (Wall Mart)Geographic position of the U.S. is an advantage in proximityas well as market demand similaritiesEconomy:Price premium not applicable in the USLabor costs: Insurance Unionized labor •8. Rationalize product portfolio to better meet customer demandsBetter targeted products: Taste/ needs: well being productsStrategic decision response to the “Low-Carb” and Diet trends: “pull” marketing strategy in terms of product specification needs form the market, the Health trend is undeniableTechnological improvement may allow freshness and new dietary requirements.