The case of Bicker AG

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Chia Yun Wang's picture
Video submissions: 

Good afternoon, ladies and gentlemen. Now, we would like to invite you to listen to our presentation on Bicker AG.

Question 1: 

According to our analysis of international corporate strategy and empirical data presented in the Zurich risk room from the past 7 years, we can clearly see that three countries: Colombia, Mexico and Brazil, have lower political and economic risk levels in comparison with other Latin America countries. This is also supported by their higher credit ratings.

From a purely risk assessment perspective, we would have chosen Uruguay which has a lower risk levels than Brazil according to risk data. However, the population of this state is non-comparable with Brazil in terms of client base potential.

By comparing with Bicker AG current markets in Europe, we found out that Mexico, Brazil and Colombia have higher political risks than European countries. However, due to the current economic slowdown in Europe, our data analysis shows that, these three countries have lower economic risks than eastern European countries.

Question 2: 

Moving on to the next question on particularly high risks, by comparing with all the risks in Latin America countries, we have draw out some risks may seem high in Mexico, Brazil and Colombia.

Based on risk data analysis, some risks such as crime or income inequality tend to be more uncontrollable for organizations therefore we think these risks are beyond the control of the company and not easily mitigated.

However, some risks such as employment or market dominance could be possibly mitigated through well-designed strategies. Our detailed strategy will be introduced in the next slides.

Due to Bick AG’s current market bring only focused on European countries, when expanding into a completely different Latin America market, the company can chose to operate through a joint venture model. This entry mode has been successfully applied by many multinational supermarkets, such as Wal-Mart when it first entered the Mexican market.

In doing so, local partners can help the Bicker AG gain better knowledge about local culture, and connections with suppliers and local government in order to secure the supply chain in terms of social and ethical considerations.

In the meantime, Bicker AG can transfer its logistic and management knowledge to local retailers, which help them improve their local supply chain management.

This may effectively avoid or mitigate some of the risks mentioned above, such as burden of government regulations or custom procedures, in order to facilitate in negotiating with government about tax holidays and government investments in infrastructure.

Regarding the business level of strategy, the development of more differentiated strategies may be also beneficial for the company to gain market share and reduce the risk of market dominance.

By mitigation of risks through a joint venture and differentiated strategy, this enables Bicker AG to save time, money, resource, and gain market share.

Question 3: 

We identified four main areas of concerns, which are not covered in Zurich risk room.

First, cross-cultural consideration. There are two clear examples: the failure of Wal-Mart in Germany and the successful case of COSTCO in Australia. Both companies used a completely different approach.

It is better not to consider our chosen Latin American countries as one group. Each one of them offers a completely different approach in terms of culture.

Our second area of concern is related with the availability of human resources. This finding is crucial to take into account before entering into new market, in terms of required professional employees capabilities.

Our third area of concern is site acquisition (location). Such factors as proximity to customers, security and logistics cannot be undervalued in Latin America.

Finally, the fourth point is the foreign direct investments. For example, during the last 8 years there has been a considerable outward of foreign capital in Brazil, Colombia and Mexico, which may indicate some high risks existing in these countries. Therefore, this highlights the relevance to take into account when evaluating the risks.

Conclusion

To conclude, we identified three countries: Colombia, Brazil and Mexico. However, based on risks data, some risks may seem high in these three countries.

Therefore, we suggest that the use of joint venture as entry mode could effectively mitigate some risks.

We also highlighted that four areas of concerns such as culture, location, human resources and foreign direct investment.

Finally, as mentioned earlier, some risks in these countries may difficult for a company to control. We recommend additional research in other areas in order to balance the overall risks. It is necessary for the Bicker AG to consider other market expansion options, such as Asia market.

By comparing and analysing risks in some Asia countries, such as Singapore, Malaysia, China, and India, we found out these countries may have more growth prospects than Latin American countries, as they tend to have lower level of political and economic risk levels.

We really hope you enjoy our presentation. Thank you very much for your attention.

 

 

References: 

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