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Rohan Kamath's picture
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CEIBS Presentation Script

Hello. My name is Asier and I am going to tell you about the methodology we followed to identify the three best countries for this project. First, we have listed all the risks that might have a potential impact in the project and given a weight according to the importance to each one of them. Let’s see the example the Mexico. From the Risk Room we have taken the values according to each current relevance and trends during the last seven years. With that we have calculated the score, which in the case of Mexico is 44.7.

We have calculated the scores for each of the potential markets and found out the Mexico, Brazil and Uruguay are the best countries for the project because they show a lower risk. We have also calculated the scores for the existing markets in Europe, as well as the total average in Western Europe and Eastern Europe. Here you can see a more visual comparison of the risks in the potential markets against those in the existing markets. Now Rohan is going to walk you through the key risks.

Thanks Asier. We will now move on to identifying the key risks involved in these three markets based on our model. Looking across all the risks across the three markets, four risks clearly stand out to us. They are burden of government regulation, extent of taxation, extent of market dominance and lastly risk of state failure. The last one, mainly risk of state failure, we believe, falls outside the purview of business and thus we will mainly focus our following analysis and suggestions on the three risks. Eduardo will now take you though our views on mitigating each of these risks separately. Thank you.

Thank you, Rohan. Moving on we will look at recommendations that will help us mitigate each one of the key risks. The first two risks we look into are managing government regulations and taxation, which in our opinion are very symmetrical. Our first step would be to partner up with local industry associations as well as chambers of commerce. Both can provide valuable guidance into how to adapt the global strategy to local business practices and rules. Our second step would be to rely on talent coming from each one of the countries to further gain in profit from local knowledge.

Our third key risk, overcoming market dominance has to be addressed in a different way for each one of the target markets as they are on different development stages. For Uruguay, a growing market, we would suggest organic investments and direct operations of the stores. In a mature market such as Brazil, we would also recommend organic investment but focusing on tier 2 and tier 3 cities, especially on the highly attractive northern region. For a market with high barriers of entry such as Mexico, we would advocate for acquisitions, a possible target would be the market number two – Soriana. Now I will give the word to my colleague Carlos. 

Thank you Eduardo. Ok, so besides the risks that we have seen previously, we also thought of three other risks Bicker AG should take into consideration when entering these three new markets. The first one is the informal economy. Why? Because small scale independent supermarkets and traditional stores account for about 40% of the market share. These are businesses that have been able to hold the ground despite significant inroads made by large supermarkets. They not only form an integral part of Latin American culture, but they also know well the local needs and tailor their offerings to suit them best. Also by relying on informal and illegal trading practices, they are able to provide lower prices to the emerging consumers.

The next risk we identified is the real estate prices. Big urban cities in the three countries have rising high real estate prices particularly in Mexico and Brazil. Real estate prices are one of the biggest investments when entering a new market and prices can determine whether the investment will be profitable or not. Location and size are also important to target customers and obtain scalability, which can produce more sales.

Last but not least the regional differences that exist within big countries such as Brazil and Mexico can also be a risk. Companies must be able to offer different value propositions, modify their distribution and marketing strategies to address different consumer preferences and behaviors. They must also be able to generate strategic partnerships with local companies and governments, and adjust their competition strategies as well.

Thank you.