Hello everyone, today my 2 team members and I will discuss Bicker’s expansion strategy into Latin America.
Todays’ agenda will include the best 3 options from the list provided including a current & 7 year data analysis as well as a comparison with Bicker’s markets. Additionally, risk mitigation and impact will be discussed along with areas of concern and due diligence. Lastly, a brief conclusion will be provided.
We recommend Brazil, Mexico & Colombia.
We identify 5 key drivers for our recommendation is Population, Urbanization, Real GDP, Credit Rating and Inflation. Population is significant as combined all three countries represent 39% of the Americas population. Over the past 7 years, all three countries decreased or stabilised crime and inflation, while increasing transportation infrastructure.
Furthermore, throughout the financial crisis the business cycle indicator remained stable. While Exchange rate fluctuations fared better for Brazil and Mexico than the Eurozone, apart from Colombia which displayed frequent instability.
Upon analysis, Bicker currently operates in a low to medium risk environment, by offsetting some areas of risk the 3 countries potential can be leveraged to decrease their risk and put them on par or better than Bicker’s Central European markets.
We will utilize a CAGE framework to highlight differences and identify patterns for Bicker to consider for their expansion strategy.
Culturally, Hofstede ascertains that indulgence is important in determining an individual’s capacity to reward themselves, as it reflects their consumer indulgence behaviour. All three countries in Latin America present similar or higher levels of indulgence in comparison to the Netherlands.
From an administrative viewpoint all three countries have a good or outstanding relationship with the Netherlands and they are all part of WTO and the EU-LAC Foundation.
However, their geographic distance from the Netherlands is over 9,000km apart while they have a 3-7 hour time-zone difference also. Furthermore, they differ in their climates, as the Netherlands are not recipients of tropical weather unlike Latin America.
The Netherlands GDP per capita outperforms all three countries combined; all three Latin countries suffer from income inequality discrepancies which creates an uneven distribution of wealth. Bicker can lessen their risk by segmenting the market and positioning themselves as a niche player operating within a high end customer base.
SO, how can Bicker mitigate these risks?
Based upon data analysis of the risk room the Business & Economic risks in all three countries can be reduced and leveraged in the areas of the burden of regulation and customs procedures, given that treaties and agreements are in place between them and the Netherlands. Also, governments are encouraging of FDI investment and offer incentives to foreign businesses.
Similar to Business & Economic risks, we have also identified political risk particularly Income Inequality which can be mitigated for all three countries by segmentation of the market, consequently a niche focus on the middle class and upwards consumer base may also provide favourable growth conditions.
The picture on the left is reflective of the three countries present risk position and may not be viewed as attractive markets to Bicker as they represent medium – high risk. However, by applying a realistic ‘what if’ scenario and reducing the mentioned risks they are considerably mitigated and all three countries move into the middle spectrum of more readily acceptable risk and now pose as a much more attractive entry market for Bicker.
Although the risk mitigation strategy provided may sound sophisticated, it is important to highlight some additional areas of concern going forward.
Porters Five Forces is presented as a corporate strategy tool to apply focus on concerns surrounding the industry’s attractiveness in the present moment. Overall, all three countries are relatively attractive for Bicker as they present moderate threat levels. Bicker possesses the necessary resources and competences to gain market entry as a specialised new player and compete with rival companies while utilizing their existing competitive pricing strategies to win over consumers, who readily display low loyalty levels to begin with, but also high levels of indulgence. The lack of monopoly suppliers may be viewed as a potential opportunity for Bicker especially as there is a gap for the provision of healthier high-end options. Additionally, customers are extremely price sensitive and display shop-around tactics due to the fact that they have options to choose from, this relates to a number of substitutes such as restaurants and fast food outlets.
All three countries maintain many similar characteristics, with the caveat that numerous differences are also present. Specifically, national and regional differences are significant, particularly for Brazil where income inequality is far prevalent in the North in comparison to the South. Although risk exists in all 3 countries, Bicker is able to mitigate it as much of it is superficial. Measures such as cross-country treaties and agreements are already in place, which potentially reduces market entry risks. Investment and improvement in infrastructure and the educational sector is reflective of progress and supports sustainable country development, combined with an increased opportunity for economic efficiencies in decreasing unemployment and promoting middle class growth. Thus, overall the risk is more readily acceptable now in comparison to the previous 7 years. Further due diligence in these individual areas is necessary to gain a deeper understanding of the risks. Overall, the opportunity outweighs the level of risk, and presents itself as an attractive opportunity for Bicker’s expansion strategy.
Google Country Flags. Retrieved from http:flags.nationmaster.com/[Accessed on 29.04.15]
Geert Hofstede. Retrieved from http://geert-hofstede.com/countries.html [Accessed on 29.04.15]
Ghemawat, P. Retrieved from (http:www.ghemawat.com [Accessed on 29.04.15]
Cavusgil, S.T., Ghaure, P.G., and Akcal, A. A. (2013) Doing Business in Emerging Markets. Sage, London.