Grupo Bimbo continuous expansion with an ambition to become one of the five-largest bakers in the world, while the company’s performance in existing foreign markets should be improved so fore made profitable and keep company away from financial hazard due to acquiring losses and lack of substantial profit from foreign markets.
Almost 70% of Grupo Bimbo’s sales came from Mexico, where the company had built a 90% market share in the packaged bread segment, the business was very profitable and the company operated in growing market.
However, the investments in U.S. and Latin America, where markets were highly competitive, have not been profitable. According Grupo Bimbo’s global strategy – to become one of the five-largest bakers in the world – it had launched a series of strategic initiatives to make foreign operations successful. In March/April, it had purchased the Beijing Panrico Food Processing Center that had already established operations in China.
S., inexperienced independent operators in Brazil, modifying China’s distribution structure to rely on bicycles). Because of nature of the products (fresh bread), Grupo Bimbo must service stores directly, on a daily basis. This places tremendous demands on the distribution network to guarantee uninterrupted, fresh product deliveries. The wide geographical spread of the business created by Bimbo’s rapid international expansion called for complicated logistical planning to keep the business functioning efficiently.
While 80% of Mexico sales still were through ‘mom and pop’ stores, allowing to control where, when, how and for what price products were sold, 80% of the sales in U.S. and 70% in Latin America transpire through large supermarkets. The power of supermarkets as a main chain of the product distribution in domestic Mexica`s, as well as Brazil and Argentina markets increases their bargaining power was very high. The company should find the best practices how to customize the relationships with these large chains in newly established market in China.
“In Mexico, our company has been very successful, and success typically leads to rigidity and makes it difficult to see changes in the environment. We should reflect on our current situation while keeping everything open for change.”Three Dimensions of Distance:Three Dimensions of Distance according Bimbo’s operations in Chinese market:
If Grupo Bimbo would like to become a leader in Chinese market, the priority should be Cultural Distances. As the company acquired the plant in order to make the production process locally and already established changes in production process to make it more efficient- that’s mean The Grupo Bimbo goes for Multi-domestic strategy (low costs, high localization).
As we see from the Exhibit 7, the Panrico Group, bought by Grupo Bimbo, market share was only 0,1%. But in the same time the artisanal bread has 53,8% of market share. Such a high figure shows us that Chinese do not like the industrial- manufacturing bread. It is similar to people preference in South America.
To realize this strategy successfully, it has to set the priority for dealing with cultural differences due to it is most important as it served the bases for choosing the right products based on the Chinese consumer demands and tastes, as well as language barriers according local employees and suppliers.
Harward business school. by jordan siegel march 23 2007