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Bimbo Case Analyisis



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    Summary This paper examines the case study on Grupo Bimbo (GRUPO BIMBO). Established in year 1918 in Mexicao, Grupo Bimbo has come a long way to becoming one of the largest baking company in the world. After entering USA and South American market GRUPO BIMBO faced a lot of hardship initially in terms of operating losses and only recently it has seen marginal operating profits in USA and Brazil.

    GRUPO BIMBO’s strategy is growth by acquisition and through this strategy GRUPO BIMBO has successfully acquired 100 well-known brands and 5000 products which include bread, pastries, cookies, processed foods, chocolates, tortillas, and pastas, sweet and salted snacks. Recently GRUPO BIMBO is looking into the growth opportunity in China after acquiring Panrico. At this point of time GRUPO BIMBO need a strategic direction to control its vast empire that spreads across Mexico, USA, South America and China. Analysis General Environment Mexico

    Favourable In Mexico, the company is clearly the market leader with almost 90% of the market share. Has greater reputation within Mexico and has a very loyal and talented human force. Unfavourable There is now limited growth within Mexico. USA Favourable Rising Latin American population within USA. Unfavourable Highly competitive and heavily fragmented industry. 2 The benefit for the truck drivers is more being an IO than being in a union. The consumer taste in USA is changing and it is moving towards the trend of organic foods that is declining the overall demand in the market.

    Increasing hypermarkets which Grupo Bimbo The trend in market is changing in USA from is in position to serve as it is in a good financial mom and pops store to hypermarkets giving position. Two of its major competitors are in bad shape. more power to the buyers and suppliers. The increasing power of unionized workers are increasing the cost and decreasing the quality of work needed to serve the hyper markets. South America Favourable Unfavourable Brazil has started operating profitably The consumption pattern of the products varies from country and regions. The demand for the industrial bread is low.

    The management of the distribution of the products varies from country to country. China Favourable Unfavourable The acquired company (Panrico) which is well established in the Beijing area. The old Chinese company has 38% of market share in the Beijing market. The acquisition experience was easier than expected Entered into a new market and new customer segment. Prior ownership did not managed the pricing/segmentation of products well The market is heavily fragmented and competitive. From the general environment it is clear that the GRUPO BIMBO’s strategy is lobal expansion through acquisitions. Having performing exceptionally well in Mexico for nearly six decades now GRUPO BIMBO is looking forward to be global leader in its industry. After expanding in 3 USA and South America, GRUPO BIMBO is looking forward to enter China market, but the operations outside Mexico has not shown favourable results so far. Keys to Success Key to success in this industry, being a food business, lies on these four factors: ? ? ? ? ? Quality of product, Lower cost of manufacturing, Innovation, Efficient operations and Marketing.

    GRUPO BIMBO must continue its operations in all the geographical areas they have expanded so far and come up with operational profits to improve their business. Quality of the product Being in the food industry it is essential from GRUPO BIMBO to have a greater portfolio of product and brand under them. The portfolio of product and brand will be essential in targeting different customer group across the globe. Lower Cost of Manufacturing Being in the low cost, high volume and low profit margin industry it is essential that GRUPO BIMBO maintain its manufacturing cost as less and possible. Innovation: Innovation plays a very crucial role in the industry as the market is changing rapidly and varies from one place to another. Proper innovation of products will help GRUPO BIMBO to meet the customers’ requirements Efficient Operations: Being in a highly competitive and heavily fragmented industry it is essential for GRUPO BIMBO to maintain proper operations to meet the markets demand. It must satisfy the needs of the hypermarkets and at the same time maintain its cost of operations lowest possible level.

    Marketing Marketing plays a very important role in improving the brand image and customer loyalty. As it is heavily fragmented industry good brand recognition plays a very important role in maintaining profitability. Level of Competition In terms of the competition GRUPO BIMBO faces various competitions in various geographical areas. In Mexico GRUPO BIMBO is a clear market leader. Within USA GRUPO BIMBO is one of the top 5 market leaders. In South America GRUPO BIMBO is facing competitions mainly from artisan and private labels and in China it has a huge competition from a large number of competitors.

    USA In USA Grupo Bimbo was facing a heavy competition from major companies like IBC, Sara Lee, George Weston, Flower Foods and Panrico S. A. 5 Of these 5 companies 2 companies (IBC and Panrico S. A) were in red as they were nearing bankruptcy or realigning their internal structure. Both companies had a big decrease in the net income and profitability. On the other hand George Weston, Sara Lee and Flower Foods were doing better business. Especially Flower Food as it was gaining market popularity and share rapidly.

    Both George Weston and Flower foods were innovating in low grains wheat bread , that was the demand of the health conscious market, and it added pressure on Grupo Bimbo as such innovations in the product were their strategy to increase the market share in the united states. Profitability Flower Food George Weston Bimbo Sara Lee IBC Brand Recognition Panrico S. A South America In South America, substitutes were a major issue rather than competitors. In general average per capita consumption of bread in South America was very low when compared to that of Mexico and USA.

    Moreover in places where the bread consumption was marginally high there was demand of industrial bread was low and competitive. The major competition was from artisanal and private label breads. 6 China Overall in China the market was highly fragmented with no company holding more than 2% of the market share. But in China most of the players, sharing the market share form 1% to 2 % were multinational firms who entered China through acquisition. Larger share of competition was also from local players who had an advantage of knowing the market better.

    Strengths of major competitors USA In USA GRUPO BIMBO was in neck to neck competition with Flower Foods INC, while Sara Lee and George Weston were much ahead in terms of market share. The other two companies were in red and so not much competition was expected from them. George Weston’s strength was its presence in the American market since 1882 and its human resource with 66 baking facility and 150,000 employees. Flowers Food’s biggest strength was its brand recognition and its efficient operations that has got them greater increase in net income.

    Sara Lee’s major competitive advantage was its non-unionized work force which can be flexible and efficient enough to serve the hyper markets. South America Major competition in South Americas was mainly from substitutes rather than direct competition. The low per capita consumption of bread products at South America was the major competitive advantage for the substitute products. 7 China Larger share of competition was also from local players who had an advantage of knowing the market better. Effectiveness of current strategy GRUPO BIMBO’s current strategy is global growth through acquisition.

    There are both benefits and disadvantage from this strategy. Through this strategy GRUPO BIMBO is getting an easier entry into a foreign soil. By acquiring a well-established brand inside another country GRUPO BIMBO is lowering its barrier of entry and also acquiring the employees, distribution network and brand loyalty. Following the best practices which they can duplicate from their Mexico operations they can bring down the cost and improve the profit margins. However, the major issue with this strategy is with each acquisition GRUPO BIMBO enters into a huge pile of management complications and this increased their costs.

    For example, handling the unionized work force was not one of their expertise but now that seems to be a bigger issue within USA. Being in a food industry it is clear than the consumer pattern will vary from one geographical location to another and thus with each global acquisition they have to formulate a new product portfolio, distribution system and marketing that suits the local taste. Also their entry into South American market seems to be unplanned. From the current issue that they are facing in South American market it is clear that they hurried entering into that market without doing proper due diligence.

    Their assumption that Mexico is similar to the other South American markets was a big mistake. Considering that they occupy more than 90% of the Mexican market to see further growth they have to expand in a new market. Current strategy of inorganic growth makes much sense for faster growth but GRUPO BIMBO must really invest more time in analyzing the acquisition first than they generally do. 8 Competitive Advantage: In order to drive the competitive advantage of GRUPO BIMBO we have to first understand the industry. Barriers of Entry: Overall Low to Medium USA: In USA its high considering the market is dominated by hyper markets.

    South America: Low to medium considering that most of the competition is from artisanal and private labels and very few countries have hyper markets. China: Low as market is too fragmented and small business has benefits of knowing local market. Threat of Substitution: High In USA consumers are demanding healthier product like low carbohydrate and fruits. In South America the consumption per capita is low for bread products so the substitution is high. Power of Supplier: Medium to Low USA: Power of supplier is high because of unionized workers and high cost of raw materials.

    South America and China: Low as there is lower cost of raw materials and non-unionized work force. Power of Buyer: High Big buyers like supermarkets (Wal-Mart, McDonald’s) have higher power as they have low switching cost and high substitutes. In case of end users (customers who buys bread) it is high considering that have low switching cost. Impact from competition: High The industry is very competitive. In all the areas where they have their international business the market is very competitive and fragmented. 9 Overall the industry is high volume, low profit margin and heavily competitive.

    To succeed in this market GRUPO BIMBO has following competitive advantages: 1. The best practices that is followed in Mexico, if replicated elsewhere internationally they can achieve a low cost production line and that will improve their margin. 2. Their brand reputation, especially among the Latin American group, is an asset and a clear competitive advantage considering Latin American group is the fastest growing group in USA. SWOT Analysis: Strength ? ? ? ? ? ? ? ? ? Brand reputation among the Latin Americans. The portfolio of products and brands.

    Market leader in Mexico. Human capital in Mexico. Focus towards R&D. Panirco acquisition in China has given them a good position in Beijing. Strong financial position. The operating efficiency and expertise in Mexico. The US operating and Brazil operation has almost break even. Weakness ? ? ? ? ? Lack of experience in dealing with the unionized workers. Their entry into the South American market without much due diligence. Their reliability on the performance of the acquired brand. Some of the product (fast food) in the portfolio is underperforming in USA.

    Their lack of experience in China. 10 Opportunities: ? ? ? ? ? Growing Latin American population in USA. Growth in hypermarkets South and Central America. The acquired company in China (panrico) has 38% of market share in Beijing area. The benefits to the truck drivers being IOs are more than being in a union. The non-unionized work force in China and South America. Threats: ? ? ? ? ? ? Increasing competition in USA, South America and China. Change in consumer pattern towards low carbohydrate and healthier diet. USA market dominated by super markets.

    Teamsters, the local union who presents the danger of strike. Unionized work force within USA. The lower cost per capita consumption of bread in South America. Identifications Where are the problems/issues? With the focus on being a global leader in terms size and quality GRUPO BIMBO has aggressively expanded in international markets outside Mexico. This has led to a situation for GRUPO BIMBO where that have a more stuff on their plate than they can adjust. Now GRUPO BIMBO is facing a operational challenge in almost all of its market outside Mexico.

    Internally, the main issue is the lack of planning during and after acquisition of foreign market. The success in Mexico is taken for granted and GRUPO BIMBO is trying to follow a similar strategy globally. This has resulted in huge operational losses and loss of brand loyalty and employee miss-management in some places. 11 Moreover externally, the market is changing in USA and market trend and consumption in South America is varying from places and regions. The Chinese market is new and unexplored by GRUPO BIMBO. What weakness will get GRUPO BIMBO in trouble?

    Lack of experience in dealing with the unionized workers will be a big problem for the GRUPO BIMBO, as the increase in demand from the unionized workers will reduce both the productivity and profit margin of GRUPO BIMBO. Their lack of performing a due diligence in South American market has already led GRUPO BIMBO to a position where they are facing huge operational losses. By continuing with their current strategy they will continue to incur more losses and that will indeed affect the overall profitability. What are the major threats and opportunities?

    The shift of power towards Teamsters, the union work force is a major threat in USA for GRUPO BIMBO. By losing the power to union workforce GRUPO BIMBO will eventually lose the flexibility required to support the hyper markets. The low per capita consumption of bread products in South American market is another major threat as if it continues to be the same or decreases further GRUPO BIMBO cannot operate profitably. As far as the opportunities are concerned the biggest opportunity for GRUPO BIMBO is the increasing Latin American population in USA which can be capitalized considering its brand value among the Native Americans.

    Also the acquired company in China (Panrico) has 38% market share in Beijing which is a huge market in China. 12 What competitive advantage will help GRUPO BIMBO? The best practices that GRUPO BIMBO follows in Mexico can be replicated in all other regions where they have business. By streamlining the process from Mexico to other areas internationally they will achieve a system through which they can reduce the cost of manufacturing. The brand reputation GRUPO BIMBO enjoys, especially within Mexican and Latin Americans.

    This will be very useful in their future strategic growth inside the Central and South America. Recommendations Currently GRUPO BIMBO has a strategy is to become a world leader in baking industry by the year 2010. In order to operate profitably outside Mexico and sustain the profitability GRUPO BIMBO has to postpone its target from 2010 to 2015 and try to achieve a sustainable profitable operating margin by the year 2010 in each country and region it is operating. For now GRUPO BIMBO must stop entering into new markets up until 2010 and concentrate on improving its business in South America USA and China.

    For USA, GRUPO BIMBO must first get a proper solution to their issue with unionized workers. It must hire a consultant who have greater experience in dealing with unionized work force and try to come up with a solution where there is no (or) limited power to the unions and more number of truck drivers are either IOs or work in union without compromising on the flexibility required to serve the hypermarket. At the same time GRUPO BIMBO must come up with the innovative product to meet the demand of the new customers who are looking for low grains, less carbohydrate products which are healthier. 3 For South America, GRUPO BIMBO must look into each and every market to understand the exact demand of the customers in those countries and regions. Moreover, GRUPO BIMBO must come up with a separate distribution and marketing strategy for each and every location they have their business. For China, GRUPO BIMBO must establish a firm position in the Beijing area. GRUPO BIMBO must continue to sell the products that panrico was selling before acquisition and then streamline the operation in that plant by introducing the best practices from Mexico.

    GRUPO BIMBO must then introduce new products in China based on their research of market study in China. In Mexico, GRUPO BIMBO must continue to maintain the profitable business and maintain or improve its market share. Does it solve the problem GRUPO BIMBO is currently facing? The biggest problem that GRUPO BIMBO is currently facing is the operation loss in the USA and South American market. GRUPO BIMBO must also consider its lack of experience in the Chinese market. GRUPO BIMBO has expanded aggressively and it has more issue to control now before entering into any new market.

    Through this recommendation GRUPO BIMBO will be able to solidify its position in all the three regions outside Mexico and at the same time achieve its goal to be a global leader in baking industry. 14 Does this recommendation consider the SWOT? Considering the competitive advantage of the GRUPO BIMBO this is the best recommendations. The best practices that GRUPO BIMBO follows in Mexico will be used to streamline the plants across the globe to reduce the cost and increase the margin.

    These recommendations will also help GRUPO BIMBO focus in its weakness in terms of lack of experience in handling unions, lack of its experience in China and its aggressive entry into South American market. The growth in Latin American population in USA and demand of Mexican snacks in China will be capitalized by this recommendation and the threat of shifting power towards union in USA and diminishing market in USA and South America will be counteracted. Does the recommendation add value to the shareholders?

    Yes, for Daniel Servijite and other higher management of the Groupo Bimbo group will attain the position of global leader in the baking industry by 2015. It will also help them operate profitably everywhere. GRUPO BIMBO employees in USA will get opportunity to earn more and have better growth as IOs. Does the recommendation add value to customers? Supermarkets and other large scale consumers (like McDonalds and fast food restaurants) will get their demand met in terms of flexibility and on time delivery and the end user will get the demanded product based on their region and also in terms of taste and health. 5 Implementation For the time being GRUPO BIMBO must implement strategies to improve its position in local market within the USA, South America and China and sustain its position in Mexico. GRUPO BIMBO must cut the cost down to increase the profit margin. So in conclusion GRUPO BIMBO must adopt all the three form of implementation strategies which are: ? Implementing best practices: by duplicating the practices of Mexico into other plants in USA, South America and China GRUPO BIMBO can bring the cost down. ? Solidifying its position in the market: By matching the competitors’ product qulaity.

    Gaining control in supply and distribution of services to clients and becoming more cost efficient. In order to increase the profit margin GRUPO BIMBO has to increase revenues and decrease the cost. In order to cut down the cost GRUPO BIMBO has to downsize its portfolio of products in each market based on the demand of the products in those markets. Financial Perspective The most important objective for the GRUPO BIMBO is to maintain its profit margins in the Mexico and increase the profits from the foreign sales.

    The profit margin of GRUPO BIMBO inside Mexico is 9. 5% and in South America is just 1. 5% currently. Moreover GRUPO BIMBO has just attained operating profits in USA and Brazil while in China its operating loss is marginally below $1 million. Under these conditions it is essential that GRUPO BIMBO has to bring up its operating profits outside Mexico and reach a target of attaining at least 5% of operating profits in USA, South America and China. 16 GRUPO BIMBO also has to bring down the cost of the goods sold by: 1.

    Improving the production facility elsewhere by transferring the best practices that replicates Mexican plants. 2. In USA GRUPO BIMBO has to negotiate with the truckers and convert them into IOs to decrease the operational cost. 3. In China and South America decrease the cost of production and segment the pricing of the products. GRUPO BIMBO must target to decrease the cost of operations by 3% everywhere and increase its revenue by 2% in USA, China and South America. Overall the target of GRUPO BIMBO must be to reach the operating profit margin of 5% outside Mexico before 2010.

    GRUPO BIMBO must measure its advances by calculating the decrease in cogs and increase in the revenues on quarterly basis on each and every region it is operating. Customer Perspective The objective of the GRUPO BIMBO is to segment the product portfolio based on the geographical preference of the consumers. For each region that GRUPO BIMBO is located it must do the following: ? ? ? Categorize their customers based on profitability Increase number of customers Get more revenues from the existing customers 17 Categorize the customers GRUPO BIMBO must categorise the customers based on their profitability.

    For example in USA the Mexican Americans and Latin Americans are clearly the most profitable customers. GRUPO BIMBO must do similar separation in each country they are located. Increase the number of customers GRUPO BIMBO must increase its number of customers by partnering with fast food and restaurant chains. It can also do so by improving its relations with the supermarket chains. Get more customers from existing clients GRUPO BIMBO must come with innovative products that can complement other products in its portfolio of product.

    On the other hand, GRUPO BIMBO can partner with the companies that offer compliment products (like milk, butter, jam, etc. ) and offer GRUPO BIMBO’s product as a sample with their products. GRUPO BIMBO must ensure that it is advancing in its targets by measuring the increase (decrease) in sales and percentage of leads converted. Operations Supply GRUPO BIMBO’s main objective must be to reduce the cost of the development of the product while maintain the quality of the product. GRUPO BIMBO must transfer the knowledge of the best practices that it has in Mexican plant in all the other locations.

    GRUPO BIMBO must develop a high-quality supplier chain and ensure that the suppliers are in best capacity to meet the aggressive demand of the hypermarket in USA, China and South America. GRUPO BIMBO 18 must attain the supplier partnership to decrease the cost of the suppliers. GRUPO BIMBO must also regularly inspect the incoming supplies of the raw materials to ensure the quality. To measure the quality of the products it releases GRUPO BIMBO must inspect the quality of its product regularly and check the cost of development at each quarter.

    For the suppliers GRUPO BIMBO must see the number of suppliers providing services directly to customers, time from completion of product from raw materials until ready for use by customer and % of on-time delivery by the suppliers. Production GRUPO BIMBO must lower the cost of producing products by continuously improving the process of development. It must track the best practices all over the world and ensure to duplicate it elsewhere. GRUPO BIMBO can measure the cost per unit of output (for organizations producing homogeneous outputs) and calculate the distribution in terms of transport expenses as % of total costs.

    Distribution GRUPO BIMBO must deliver responsively to the customers based on the customer’s demand. For the regions where the market is still dealing with the mom and pop stores GRUPO BIMBO must establish the sales force to directly deal with those stores. In China GRUPO BIMBO must provide services like repairing the cycles and trucks as the distribution there is mainly through these two means. 19 For regions where hypermarket is dominating GRUPO BIMBO must come up with state of the art distribution system which provides the flexibility and quality the super powers like Wal-Mart requires.

    GRUPO BIMBO can measures its advances through the lead times from order to delivery and % deliveries that did not met the customer’s demand. Risk Management In USA, there is higher risk of strike because of the unions. GRUPO BIMBO must consult a firm which has vast experience in dealing with unionized worker to avoid any such risk of strike in future. GRUPO BIMBO must also manage its financial risk by maintain high credit quality and operating profits. It must manage all the operational risks in each county it is operating by have required backups in time of emergency like power cut, etc.

    It must consistently check its machineries to ensure that its operating efficiency is not compromised. GRUPO BIMBO can measure is advancements by measuring its operating profits each years and by tracking percentage of capacity from existing & backlogged orders. Customers Management Target Groups GRUPO BIMBO’s main objective should be to understand the customer segment in each country/region they are in. In USA GRUPO BIMBO’s target group is the Latin American and Mexican customers who are the fastest growing minorities in the country.

    Also its target customer must be those customers who are looking for healthier products. 20 In South America, GRUPO BIMBO must target all the supermarkets and fast food chain restaurants. GRUPO BIMBO must capitalize on its brand to establish a long term contracts with the supermarket and fast food restaurant chains. GRUPO BIMBO must also target on those customers who has higher consumption of the bread products. Measures: profit contribution by segments and market share by targeted segments How to attract? In order to attract the right customers GRUPO BIMBO must maintain its brand position in the market.

    It must always maintain the reputation it has within the Mexican customers and try to get more recognition from the Latin American market. It must also come up with the social responsible causes encouraging better health and lifestyle to position itself within the American market which is demanding for the healthier products. In order to maintain its relationship with the customers GRUPO BIMBO must carry out customer survey on brand awareness and customer preferences on a regular basis. GRUPO BIMBO must also be effective in communicating the value proposition of its brand.

    GRUPO BIMBO must try to acquire new customers by introducing products that are appealing those who are not the current customers of theirs (i. e. Mexicans or Latin Americans). And it must also establish dealer/distribution relationships in every country/region they are in. In order to measure its success GRUPO BIMBO must use standard industrial practices like customer surveys on brand awareness and calculate cost/customer converted. To sustain the relationship with dealer/distributor GRUPO BIMBO must use dealer scorecard. 21 How to keep and retain customers?

    GRUPO BIMBO must create highly loyal customers groups within USA among the Latin American consumers. It must also ensure the quality of the product remains fresh and good and improve its packaging to preserve the freshness of its products. GRUPO BIMBO can also provide premium services to the customers like offering them discounts for repeat purchase or mass purchase. GRUPO BIMBO must try to get as many contract with the with fast food chain and restaurants in all the country/regions they operate to ensure the demand of the product is always there.

    GRUPO BIMBO can measure its success ratio be number of suggestions for product and service enhancements it gets from customers and also the ratings it gets from customers in terms of quality when compared to its competitors. Innovation Future Products/Service In order to increase its market share and retain it in future growth GRUPO BIMBO must have a team of marketing researchers to anticipate the demand of the future products in USA, South American and Chinese market.

    In all the country/regions that GRUPO BIMBO is present it must carry out sample surveys on the markets to get the response of new products and then release new products based on the research. At the same time GRUPO BIMBO must measure the performance of the given products in the market to ensure that none of the product in the market is underperforming. If there is a decline of demand of any existing product in the market then GRUPO BIMBO must either enhance the product to counter the declining demand or reduce the cost based to retain the profits. 22

    In order to measure its profitability GRUPO BIMBO must track the number (or %) of new projects launched based on client input and sales ratio of each and every product they are selling in the market. R&D GRUPO BIMBO must actively manage the product portfolio based on the demand of the market and market research done on the market. At the same time GRUPO BIMBO must maintain the superiority of its product by carrying out better innovation. In order to measure its R&D initiatives GRUPO BIMBO must carry out actual versus desired mix of projects every year to see if there is any gap.

    GRUPO BIMBO should also carry out net present value of products in pipeline before releasing them to avoid greater losses. Test Markets: GRUPO BIMBO in medium term (between 2008 and 2010) must test the markets in Europe and Australia in order to enter those markets in the long term. In China GRUPO BIMBO must focus on being a market leader in the Beijing area and test the Beijing market to introduce the Mexican products that are not present in the Chinese markets. Product Rollout GRUPO BIMBO must introduce/enhance the product in its portfolio based on the market to retain the market share and stay in touch with the consumer demand.

    In China, GRUPO BIMBO must continue to sell the product that its acquired Chinese firm (panrico) was selling. Once the process in that plant is streamlined and controlled based on the 23 best practices in Mexico, GRUPO BIMBO must introduce the 5 most promising products that were tested in Mexico during the past 2 years. Social Regulatory Increase environmental incentives Being in food industry it will only help GRUPO BIMBO to improve its brand if it takes social responsibility to improve conditions of living.

    As the USA market is becoming more and more health conscious by taking social incentives committed with health and environment GRUPO BIMBO will position itself as a responsible company dedicated on the health of its customers. GRUPO BIMBO can also take up incentives to improve the conditions of its employees in developing South American countries by providing them health insurance and other such benefits. Human Capital As GRUPO BIMBO is located in different geographic location its employee must be from the country/region the plant is located at.

    Most of the higher management within its international division should be the one who with vast experience in the food market of that country/region. For example for China plant the COO of the plant in China must be an employee who has vast experience in dealing with the Chinese food market. Similarly those employees in Chinese plant will get training in the Mexican plant to get the best practices in Mexico plant adapted in China. GRUPO BIMBO must adopt this strategy in each country/region it is in. For GRUPO BIMBO it is essential to have highly skilled labour force.

    Hiring employees with the proper skills and training them to attain the best products following the best skills should be the primary task for GRUPO BIMBO. As GRUPO BIMBO will be dealing with the hypermarket in USA, 24 China and some countries in South America it must divide its task force based on the products demands on that market to meet the demand of the hypermarket. IT As USA, some areas in South America and China are dominated by hypermarkets GRUPO BIMBO must capitalize on the information technology to meet the demands of the supermarkets and fast food restaurant chains.

    GRUPO BIMBO must come up with a system to provide just in time inventory to the supermarkets and fast food restaurant chains. GRUPO BIMBO must also track the cost involved in the manufacturing units to measure the costs, in case if the cost of operations goes up in some plant GRUPO BIMBO must look into the root cause of that to bring back the cost to acceptable level. Structural Perspective GRUPO BIMBO has to retain its global headquarters in Mexico. In Mexico all the important strategic decision of acquisition must take place.

    Also GRUPO BIMBO must have various geographical division Directors in Mexico who will work at Mexico, but travel along their respective geographical division more frequently to get the update on the business. The main responsibility of the directors will be to properly transfer the knowledge of best practices from Mexico to other locations. These directors will also provide support to their division in terms of finance, human resource, etc. On the geographical location the whole division will be led by a COO (or a team) who have vast experience in working at the local region/country.

    This director will either be the employee of the acquired firm or a new employee with vast experience in food industry. Further each 25 geographical location will have two sub divisions Marketing and Operations. Marketing division will carry out research on the product portfolio, brand management, relationship with supermarkets and fast food restaurant chains etc. Operations division will take care of cost management, distribution, relationship with suppliers, etc. Within Mexico (Headquarters) Please Note: The South American division will be divided into the different countries that they are present.

    For example Argentina will have a separate Director Argentina, COO Argentina, VP Operations and Marketing Argentina. Further GRUPO BIMBO must focus on these three values: ? Leadership – GRUPO BIMBO must build a cadre of leaders at different locations at all levels required to mobilize the organization towards its goal of lower cost high quality product. 26 ? Culture – Develop the awareness within the organization at each location prioritize “Quality First”. GRUPO BIMBO must also adapt the culture/tradition of the country or region they are in. ? Teamwork – GRUPO BIMBO must promote teamwork within their organization globally.

    Being in a high volume industry the best practices in team work will increase the efficiency. Change Resistance Plan In USA, as GRUPO BIMBO will have to negotiate with the truck drivers to become IOs we can expect unions to threat for a strike. In order to reduce the possibility of strike GRUPO BIMBO must outsource human resource consultants who have vast experience in dealing with the unionized workers. GRUPO BIMBO must also consult a reputed law firm to get assistance for the legal issue that might arise while dealing with the unionized workers.

    In China GRUPO BIMBO must also change the operations to match up to the standards of the Mexican plant. GRUPO BIMBO must make some of its Mexican employee go to Chinese plant to train the employees the best practice of ask the mangers from the Chinese plant to work in Mexico and learn the best practice to follow it in Chinese plant. In South America it is clear that the culture varies from country to country. So to make an easier transition on South American plants GRUPO BIMBO must get some of the managers from those plants to work on Mexican plant for few weeks for the transition of the best practices.

    Then the managers’ responsibility is to implement those practices in their plant keeping the local work 27 culture in prospect. By doing so GRUPO BIMBO can address both the culture differences that might add to resistance and also transferring of the knowledge from one firm to another. Overall GRUPO BIMBO must give the independence to the COO of plants in a particular country or region to take the decisions to counter the change in resistance as long as it does not effects the operational profitability of the company. Competitor Reaction Plan

    USA In United States the two major competitions (IBC and Panrico) are in red and they are doing a complete restructure internally so we cannot expect any action from these two companies. On the other hand George Weston and Flower Foods are coming up with their version of low grain white bread that will increase competition in USA as the consumer demand is more towards organic and healthier bread. Flower Foods are improving their brand image and will continue to improve it as they go along. While George Weston, Flower Foods and Sara Lee will try to get to supermarkets to increase the sales.

    In response GRUPO BIMBO must keep its loyal customers i. e. Mexicans and Latin Americans in America. GRUPO BIMBO must also continue its innovation on the field of the organic breads and improve relationships with the super markets and restaurant chains. 28 Major Competitors Flower Foods, George Weston and Sara Lee Action Innovate and bring new products in low grain and white bread. Response by GRUPO BIMBO Continue innovating in the same category and come up with an equal or better product(s). Flower Foods Improve Brand Image

    GRUPO BIMBO must capitalize on the Mexican American and Latin American group and also promote the organic bread to native Americans. Flower Food and Sara Lee Try to improve relations with the supermarkets and fast food restaurants. GRUPO BIMBO must improve its supply chain by dealing with unionized workers and then offer a flexible on time delivery system for the supermarkets and fast food chains. South America: In South America there is more completion from substitute products. The demand for the bread consumption is low when compared to USA or Mexico.

    So in terms of competitor action GRUPO BIMBO cannot expect any drastic measure from artisanal or local brand. Also GRUPO 29 BIMBO must be carefully evaluating its growth if any other international baking company enters South American Market. China In Beijing, GRUPO BIMBO can expect a greater competition from local competitors and other firms like Kraft Group, Artal Group and Ting Hsin International. The fact that GRUPO BIMBO has lack of experience in the Chinese market will get most of the competitors look at the Beijing area as a potential to increase market share.

    GRUPO BIMBO must be careful regarding this action of the competitors and to avoid losing market share GRUPO BIMBO must for a joint venture with local company inside Beijing area and capitalize on the expertise of the employees who have been in Beijing area from a long time. Timeline America (Short Term) In short term GRUPO BIMBO must get consultants to deal with unionized workers and streamline the products based on their profitability. 30 South America (Short Term) Start to do the research to find the consumption pattern and marketing trends based on regions and countries.

    Streamline the development process to reduce the cost. China (short Term) Streamline the development process, segment the products and introduce the tested products. 31 Medium Term (USA, South America and China) Achieve the profit margin of 5% outside Mexico and retain it. Test markets in Australia and Europe. Long Term (Continue global expansion: Enter Australia and Europe) Enter new markets and try to get profitable business. 32 Appendix Appendix Porter’s 5 forces Threat of new entrants Moderate to Low Power of buyer High Rivalry among existing competitors High

    Power of supplier Low to Medium Substitutes High 33 Strategy Mapping Financial Perspective Objectives Increase overall profit margin Increase revenue from “Latin American clients” Increase revenue from Local Market in Beijing Reduce costs of operation and development Improve productivity and market reach Targets Decrease the cogs by 3% by 2008. Increase revenues by 4% by 2008. Increase profit margin by 2008. Measures Measure the revenue vs. cost/ product line Segmented revenue stream for different products in the portfolio Calculate profit Margins

    Customer Perspective Objectives Separate the customers’ profile based on their profitability. Provide value added products/services Targets To be recognized as the top 3 brand. Measures Client satisfaction surveys Operations: Supply, Production Distribution and Risk Management Objectives Target Measures Develop high-quality supplier Decrease overall cost by Margins per plant capability 3% by 2008 December Inspect the incoming supplies Get contracts from at least Operating expenses as a % of of the raw materials 3 most popular sales supermarkets by end of 2007.

    Decrease the cost of Quality audits development and operation Continuously improve Number of suppliers processes Increase flexibility to meet the % of on-time delivery demand of the hypermarket Get out of union in USA %yields 34 Customer Management Objectives Segment the profitable customers Target high value customers like fast food chains and restaurants. Increase the brand reputation Acquire new customers Target Get clear picture of customer profiles in USA, South America and China.

    Get at least 5 contracts for the big fast food restaurants like McDonalds and Dagwoods. To be one of the top 3 brands in baking industry, Measures Profit contributed by each segment of customers Number of contracts each year Survey % of leads converted (new retailers) Innovation Objectives Forestall future customer demands Targets Have a 2 years plan of product to be introduced in market. Measures Actual versus desired mix of projects (advanced development, platform, derivative, and outsourced) Net present value of products in

    Bimbo Case Analyisis. (2016, Oct 29). Retrieved from

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