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Global corporations are rapidly discovering an emerging market of nearly 600 million Latin consumers in the United States and Latin America. In Winning Strategies for the New Latin Markets, three experts analyze the Latin market's unique dynamics and offer end-to-end strategies for success. They illuminate dramatic transformations in demographics, economics, local competition, regulation, technology, and culture. Then, through executive interviews and case studies, they offer insights into key strategies for every aspect of doing business: regional market expansion, market segmentation, branding, distribution, financing, and corporate structure.
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I. THE NEW ENVIRONMENT.1. Latin Business in the New Economy.
Macro Outlook: Economics of Uncertainty. Regional Integration Scenarios. Technology Trends. Company Strategies.2. The Latin Consumer Markets: Convergence or Fragmentation?
Size of the Latin Market. Drivers of Buying Power in Latin Markets. Latin Market Consumption Patterns. Segmenting the Latin Market. Connectivity in Latin America. Latin Markets in the Twenty-first Century.3. The Latin Market Competitive Landscape.
The Structure of Competition in Latin America. Multinational Firms and Corporate Strategies.
II. SECTOR-SPECIFIC STRATEGIES.4. Building the Infrastructure Network.
Massive Infrastructure Investment Needs. Infrastructure Reforms. Investors' Expectations for Reformed Infrastructure Markets. Regional Network Strategies in Reformed Latin American Infrastructure. Telecom Argentina: A Narrow Regional Integrator. Integrator or Specialist?5. Reaching the New Latin Consumers.
Consumer Value in Uncertain Times. Positioning to Meet Consumer Value in Latin Markets. Building Brands in Volatile and Uncertain Markets. Level of Market Aggregation. Unilever: Blending Global, Regional, and Local Strategies in Latin Consumer Food Markets. Retail Metamorphosis in Latin Markets. Integrators and Specialists in Consumer Markets.6. Funding the Latin Market Growth.
Trends in the Financial Services Sector. Strategic Responses of Financial Institutions. Financial Firm Strategies: From Diversified Competitors to Niche Players. Grouping Strategic Responses.7. Improving Health Services and Products.
Regional Health Profile. Health Reform. Pharmaceutical Markets: Scope and Growth. Conclusion.
III. CONCLUSION.8. Windows of Opportunity and Winning Strategies for Latin Markets.
The New Latin Market: Latin American or American Latin? Strategy in Uncertain and Volatile Markets. Drivers of Opportunities. Windows of Opportunities. Links to the Global Economy. Strategies for Latin Markets. Winning Strategies. Brand Relevance: Key to Implementing Winning Strategies. Conclusion.Endnotes.
Globalization is transforming profoundly the business landscape of the Latin world. Firms competing in this region are reacting not only to new trends in technology but also to the impact of fundamental changes that have transformed the economic landscape of the Americas. Several international financial crises have affected the fragile Latin American economies with devastating cycles of growth and contraction. This is the first book to analyze the dynamics of the Latin world and to define key success factors for Latin markets. Based on over 100 executive interviews and in-depth case studies, the book offers managers and analysts engaged in global business a fresh perspective on a dynamic but volatile market. It will be a trendsetter for future strategic studies of emerging markets.
Although Latin America is a challenging region in which to do business, it offers rich rewards. Whereas first-movers had time to adjust to the varying conditions and changing regulations, newcomers to the region do not have that luxury. Cycles of economic upturns and downturns have intensified. Multiple drivers affect Latin American markets in many different ways at different times. The essence of strategy in Latin America is to identify the windows of opportunity, timing of entry, resource commitments, and creative response necessary to succeed. Early-movers have built different business architectures based on their geographic and business scope. National champions have emerged to contest the challenge of integrators and specialists. In this struggle, success will be determined in the two largest markets, Brazil and Mexico. These two countries offer different platforms for success, and some firms may have to choose the focus of their Latin American success. For global firms, Brazil and Mexico are essential components of the global value chain. The future of the region may not be decided in the marketplace but in the political arena. The pressure to minimize the region's vulnerability to global shocks and market-driven economies is increasing. This certainly creates an additional source of uncertainty for investors. In the long term, the region's potential should offer many rewards.
Any strategy for Latin markets must recognize the importance of the U.S. Latin market. The 34 million people of Latin American descent in the United States represent the fourth largest Latin American nation and the third largest in buying power. The future of any large multinational firm in Latin America will be decided by its ability to command enough market power in the three largest markets of Brazil, Mexico, and the U.S. Latin market. A strategy that focuses on market dominance in only one or two of these three large Latin markets will not be enough to achieve regional market predominance.
In the first chapter we analyze the transformation of Latin American corporate strategy from the old and traditional brick and mortar model to one in which information technology and the Internet play an increasingly important role in planning, production, control, marketing and distribution, and customer service. In the first part of the chapter we provide an overview of the drivers and barriers to corporate development, growth, and expansion in the region. In the second part of the chapter we summarize the emergence of the "new economy," focusing on both business-to-consumer and business-to-business Internet firms, including hardware and software incumbents and startups, vis-a-vis Latin America. In the third part we examine some of the key ways in which Latin American corporations are beginning to integrate the Internet into their business strategies. In the last part of the chapter we present a framework to assess the transformation of multinational firms in Latin America within the larger context of globalization and Internet-driven pressures.
In a short period of time, the Latin American social fabric has changed. The region has transformed itself into a complex, fluid social structure of rich and poor, old and young, and cosmopolitan and nationalistic attitudes. If we add to these layers of complexity differences in race, ethnicity, language, and climate, the conclusion is that the Americas are a rich mosaic of diversity that produces a variety of consumption behaviors and different ways of adjusting to the vulnerabilities affecting the region.
The nuclear family remains the focus of consumption, but it is changing rapidly. Families are smaller, more urban, and multigenerational. Their members are working more and generating the same or less income. The population is aging rapidly, and by 2015, Latin markets will resemble those of the developed world. Inequality of income distribution remains unchanged; and the incipient middle class has been losing its share of total national income during the last decade. The fragmentation and varying dynamics of Latin markets present a challenge to all firms. The simpler approaches of the past, based on geography and socioeconomic class, no longer reflect the complexity of the region. Regional strategies based on the logic of convergence and similarities of consumer preferences do not work as well.
In Chapter 2, we provide a guide to navigation of the intricacies of Latin consumer markets. We analyze the size of the market and identify major drivers of buying power. We discuss changing consumption patterns and provide different ways to segment Latin American markets. The chapter is concluded with a discussion of implications and recommendations as to how to approach Latin consumer markets.
In Chapter 3, we discuss our view of the dynamics of competition in Latin America. The key players in the theaters of competition are the large American and European multinationals and strong traditional Latin American groups. We identify the various groups based on their origin, historical presence, and intent. Recognizably, the Latin American competitive landscape is not a level playing field. The presence of large national family-owned conglomerates has created high barriers of entry in many sectors. Many of these conglomerates are embracing the Internet revolution and extending their reach to electronic commerce. In this chapter we develop the conceptual framework to analyze how the various players stake their positions for dominance in the region.
Strategic investors new to the region need to understand a plethora of liberalization and privatization frameworks. Reforms and deregulation have been aimed at dismantling state monopolies, privatizing, and deregulating various components of the infrastructure value chain. This unbundling of state monopolies has taken many approaches in the region. Liberalization has also taken a variety of approaches. In some cases, parts of a sector have been opened for competition; in others, the state has retained ownership and monopoly status. As a result, the region is a mosaic of sector structures, regulatory frameworks, and ownership regimes. In some countries and sectors, the rules are transparent and the regulatory bodies well managed. In others countries and sectors, ambiguous rules and weak regulatory bodies are the rule.
In addition, technology is reshaping the nature of competition and providing new opportunities to all firms. Information technology, including the Internet, is revolutionizing the way that infrastructure services are produced, bought, and used. New technologies give rise to new skills and competencies in the once-stodgy infrastructure industry. New technologies, such as using liners in pipelines or remote metering, reduce the costs of transmission and repair of utility networks. Technology is also blurring the distinction between types of utilities. Network value chains can carry different types of services. Energy companies are finding that their pipelines can also carry telecommunication services.
In Chapter 4 we examine fundamental aspects of infrastructure network strategy and discuss a successful case of transforming a government-owned monopoly into a global-class competitive business.
A new Latin world has emerged as an attractive revenue frontier for multinationals. A powerful network linking the Americas, Spain, and Portugal is targeting a population of nearly 600 million Latins. In the United States alone, the Latin market of nearly 34 million is the largest ethnic group, with annual spending projected to reach $1 trillion by 2010. Like Mexico and Brazil, it has a young population, a rapid technology adoption rate, and an influential culture. Pioneering firms such as Spain's Banco Santander, Mexico's Cemex, AOL, and Unilever are targeting Latin markets with winning strategies in branding and manufacturing, supported by information technology.
To reach Latin American consumers in these difficult and pressing times, firms need to deliver the right market value. The challenge is to find a value proposition that fits the diversity of consumption strategies that one finds in Latin America. The best value/price ratio may depend on a firm's target segment. Clearly, the increasing importance of retail chains and discount stores is part of the value delivery strategy. Another strategic issue is the importance of the brand in meeting consumer value in uncertain times. Do Latin American consumers use familiar brands as indicators of superior and consistent value? Do global brands provide greater value than brands of local champions? Are integrator or specialist strategies better prepared to emerge as strong players out of a recessionary period? In Chapter 5, we address these questions.
No sector has been so affected by the sweeping economic, legal, and regulatory reforms of the 1990s as financial services. At the same time, no sector has affected as extensively the economic liberalization process that has been the hallmark of Latin American development from the late 1980s through the present. In Chapter 6 we highlight trends in the financial services sector, discuss the key drivers of change both globally and regionally, illustrate how three of those drivers--mergers and acquisitions, technology, and customer demand--are revolutionizing this sector, and review the organizational and strategic responses by financial firms to the increasingly competitive environment.
Addressing the health care and education needs in the Latin world is essential to the region's further development and global competitiveness. Education and health are the twin foundations of a workforce with world-class skills and are also important factors of economic and political stability. Although significant progress in this area has been made in major countries, challenges remain. In addition, broad discrepancies persist between the least and most developed countries within the region, and health systems are quite dissimilar.
The Latin American health care market is the fourth largest in the world and has a three-pronged appeal for multinationals in both services and manufacturing: (1) a large population with attractive demographics (a rapidly aging segment and a young group with a rising income as it enters the workforce), (2) a regional base of physicians and scientists on a par with those of OECD countries, and (3) a group of local producers and institutions eager to enter into research and marketing alliances. However, these positive market and private-sector forces are countered by political and macroeconomic problems. The most critical of these are still-inadequate patent protection and insufficient health care coverage as well as corruption and inefficiency at the local and federal levels in most markets. These will need to be addressed aggressively, possibly through public-private partnerships, in order for the region to regain its innovative capacity and competitiveness vis-a-vis other emerging markets, especially those in Southeast Asia. In Chapter 7 we review the health sector and reforms in the region and provide an assessment of the pharmaceutical markets in Mexico, Brazil, and Argentina. The chapter concludes with an analysis of company strategies and competitive positions in the Latin American pharmaceutical market.
The last decade of the twentieth century was a time of profound economic transformation in Latin America. We began this book with an identification of key drivers of such transformation: global financial systems, regulatory reforms, regional integration, market transformation, and the role of technology. With different levels of intensity and at different times, these drivers have, without exception, had a profound impact on Latin American countries. The impact has transformed industry and business strategy. In the first part of this book we analyzed the impact of these drivers on the infrastructure, consumer markets, banking, and health sectors. In Chapter 8, we revise our initial framework, assess the strategy of adapters and shapers introduced in Chapter 1, and provide recommendations as to how firms may continue to adapt to the Latin American market environment and new uncertainties in this region. Here we explore the impact of various political and economic scenarios, the sustainability of the emerging regional strategy, and the intensification of globalization forces in the region. The chapter ends with a summary of winning strategies.