Home > Articles > Business & Management > Global Business

  • Print
  • + Share This
This chapter is from the book

Strategies for Latin Markets

The framework so far has described the dynamics of drivers and adjustment of the region's economies to external shocks and internal market conditions. We also explained the increasing link of the region with the global economy through trade, investment, and connectivity flows. The region's competitiveness, although lagging, is improving in certain sectors and making it possible for Brazil and Mexico to be part of the global supply chain in important sectors such as the automobile industry. In earlier chapters we reviewed the industry transformation in consumer markets, banking, infrastructure, and health. In those chapters we observed the massive transfer of government-owned assets to private ownership. In other sectors, such as consumer goods, the transformation has been characterized by industry consolidation and integration through mergers and acquisitions. The strategy of global players in the retail industry shows their intent to build regional strategies. In Chapter 1 we identified the two broad global strategies of shapers and adapters. Shapers, in turn, were said to be either specialists or integrators. Latin American-owned companies were identified as regionals. In Chapter 4 we refined this framework in terms of the degree of business integration and market aggregation. Based on these two dimensions, we identified the subcategories of strategy as broad regional integrators, narrow regional integrators, broad regional specialists, and narrow regional specialists.

The analysis has identified that a few Latin American firms have become formidable national champions. These strong national firms could emerge as regional integrators or as global specialists. The next generation of Latin stars will follow the examples of Cemex or Embraer at the global level or Bimbo and Gruma at the regional level. In Chapters 4 and 5 we analyzed the performance of strategies in the infrastructure and consumer markets and retail sectors. Our analysis of the infrastructure sector found that specialists tend to have high returns on sales (ROS) and net worth (RONW); integrators had low returns. In terms of assets, by their nature of business, specialists have small asset and revenue bases, whereas integrators have large asset size and revenues. National champions in infrastructure were mostly state-owned utilities with poor returns and medium-sized assets and revenues. The largest national champion, Telmex, is the largest Latin American firm in terms of revenues, market capitalization, and revenues and also delivered the best returns of all firms in the infrastructure sector. In the consumer sector, we found similar results. Specialists achieved better returns than integrators and national champions. In this case, however, broad regional specialists were as large in size as integrators. National champions in consumer goods were also large in size, but their returns on sales and net worth were average. We did not identify any shapers in the consumer goods sector. In the banking industry (see Chapter 6) we found that the top 50 Latin American banks had large asset bases. Most of the banks follow a broad regional integration strategy, and very few, such as Santander, are able to act as shapers. Given that the nature of the banking business is different from the two other sectors, it is difficult to compare the performance results of banks and that of the other sectors we analyzed. The strategies of pharmaceuticals companies reviewed in Chapter 7 revealed that the dominant players are dominant global integrators that have built their presence in Latin American through acquisitions. One or two national champions claim some market share in their local markets, notably Aché in Brazil and Roemmers in Argentina, but have very weak prospects to expand regionally due to weak innovation and poor patent protection.

TABLE 8.1 Performance of Alternative Strategies in Latin Markets1

Strategy Number of Firms Total Assets ($ millions) Employment Market Capitalization, 12/31/00 ($ millions) Net Worth ($ millions) Revenues ($ millions) Revenue Change 2000/ 1999 (%) Net Profit ($ millions) Net Profit/ Revenue (%) Net Profit/ Net Worth (%)

Broad regional integrator(BRI)











Broad regional specialist (BRS)











Narrow regional integrator (NRI)











Narrow regional specialist (NRS)











National champion (NC)











State-owned enterprises (SOE)











All firms











Our analysis of the regional strategies in the infrastructure and consumer goods sectors provides a broader perspective of strategy in Latin America. The strategy profile of 113 firms is shown in Table 8.1. The results in this table reveal that 44 firms used a broad regional integration strategy and 24 firms used a narrow regional integration strategy. Among the specialists, seven were broad regional specialists, and only one firm was a narrow regional specialist. Among the national firms, 26 were privately owned national champions and 11 were state-owned enterprises. In terms of size, broad regional specialists are very large in terms of employment, market capitalization, and revenues. These specialists were found mostly in distribution-intensive mass consumption businesses, such as the beverage sector. Broad regional integrators are asset intensive, as indicated by their large average asset value. These broad regional integrators are mostly in infrastructure business. In terms of revenues, broad regional specialists and national champions have experienced the largest increases in revenues in 2000. Firms using the latter two strategies also report the largest average profit of all firms in our analysis. The worst performers in terms of change of revenues were state-owned enterprises. In terms of returns, the best performer is the single national specialist, with returns on sales of 11.6% and a 26.3% return on net worth. The next-best performer strategy is the narrow regional integrator, with an average return on sales of 5.8%, almost twice the average return for all firms, and a 9.2% return on net worth.

We did not find shaper strategies in infrastructure and consumer goods. In Chapter 1 we pointed out that Mexico's Cemex and Spain's BBVA were examples of shaper strategies. These two companies were not included in our database, because of the limitation on the comparability of firms in the banking business with the other sectors in our analysis. In the case of Cemex, our focus on the infrastructure sectors was on the operations and not on the companies providing inputs to the sector. As mentioned in Chapter 1, Cemex can be described as a shaper in the construction industry. Cemex is also a global player, one of the top three largest firms in the cement industry. Cemex's intensive use of informational technology has helped this firm to become the top performer in the building-materials industry in 2001. Cemex's profit margin of 15.6% was much better than that of its two largest global competitors, Lafarge and Holderbank, and five times the industry average of 2.8%.

ABLE 8.2 Performance of Firms of Different Revenue Size in Latin Markets2

Revenue Cluster Number of Firms Average Revenue ($ billions) Average Total Assets ($ billions) Average Number of Employees Average Market Capitalization ($ billions) Average Net Worth ($ billions) Average Change in Revenue (%) Average Profits ($ millions) Average Return on Revenues (%) Average Return on Net Worth (RONW) (%) Best in Revenue Group (Strategy)a
Greater than $10 billion 1 10.7 16.4 74,911 40 5.1 19.5 2,756 26 53 Telmex (NC)
Between $5 and $10 billion 7 7.4 9.7 18,495 7.0 6.4 67.6 443 6.8 8.6 Sanborns– Mexico RNW = 12.2 Wal-Mart Mexico (BRI) RONW = 12.2
Between $3 and $5 billion 15 3.7 7.4 25,845 4.0 2.8 12.9 217 3.8 5.8 FEMSA– Mexico (BRS) RONW = 14.5
Between $1 and $3 billion 55 1.8 2.8 12,159 3.7 1.3 12.9 53 3.1 10.1 Nestlé-Brazil (BRI) RONW = 23.3
Less than $1 billion 35 0.6 1.9 2,590 1.3 0.9 12.6 23 1.8 2.8 Alestra– Mexico (NRI) RONW = 27.7

A strategic control map provides a visualization of our analysis of types of strategy and performance. The examination of several combinations of performance (return on sales and return on net worth) and size (value of total assets, employment, market capitalization, and revenues) was consistent in providing the same conclusion: that specialists are positioned in the upper-left quadrant and integrators are clearly positioned in the lower-right-hand quadrant. For illustration purposes, we include the chart that shows the relation of total revenues and return on net worth (see Figure 8.5 and the supporting information in Table 8.2). Figure 8.5 suggests that in between these two extremes, one finds a spread of firms with a combination of broad regional specialists, national champions, narrow regional integrators, and state-owned enterprises. Shapers could be identified in the upper-right-hand quadrant of large size and high performance. Besides the examples of Cemex and BBVA in banking, the only other firm that falls in such a quadrant is Telmex. In a strict sense, Telmex is not a shaper since this company has not altered the industry strategy in the same way as Cemex and BBVA have, with their emphasis on technology. Telmex is a very large incumbent in the telecommunications sector that up until now has enjoyed market protection. In the future, as competition intensifies in this sector and Telmex expands regionally, the company's position in the chart will move closer to that of the broad regional integrators.

The strategic map in Figure 8.5 clearly shows the pull of the two possible extremes of strategy in Latin America: integration and specialization. In our snapshot of strategy in 2000, the majority of companies are clustered in the lower-left-hand quadrant. The position of firms as small or average-size companies with average to low returns is not sustainable in the future. In contrast, a handful of firms have achieved large size and generate greater returns than those of their smaller rivals. A handful of small firms have pulled out of the pack and have been able to deliver superior returns. These small champions are a mix of specialists, narrow regional integrators, and broad regional integrators. The majority of firms in Latin markets have to decide whether they want to become specialists or integrators. The threshold for such a decision is indicated in Figure 8.5 as the ditch, the change in slope between the small exemplars and the large integrators. The threshold for the ditch appears to be at annual revenues between $3 to $5 billion and $7.4 billion in total assets.

Figure 8.5Figure 8.5 Latin American Strategic Control Map

A shift to specialization may require shedding assets and concentrating on core businesses where above-average returns can be generated. A shift to an integrator position is more troublesome. Firms in this group do not seem to have any incremental advantage over smaller competitors, as indicated by similar average increases in revenues and returns on sales with the disadvantage of a larger employment base. As firms succeed in crossing the threshold size, the average increase in revenues is multiplied by a factor of 5 and returns increase by a factor of 1.5 or more. As not all firms will succeed in crossing the ditch, many will become casualties of increased competition from larger competitors or will pursue consolidation with other firms facing the same dilemma.

A shift toward increased size and integration may lead the industry to consolidate. The effort here is to increase the scale and size of business. To do so, firms may increase their size through acquisitions. For foreign multinationals, this approach may be the only way to continue delivering profits and revenue growth in stagnant markets. For Latin American multinationals, increasing scale through acquisitions or organic growth will be extremely difficult, given the high costs in international capital markets for Latin American investments. In either case we anticipate substantial industry consolidation as firms in the lower quadrant are either integrated into other consolidators or exit the market. Narrow regional integrators seem to have broken out of the pack of vulnerable firms as they have achieved a relatively large size and are delivering good returns. Broad regional integrators of relatively smaller size have achieved scale in other ways, through asset size. As physical assets are local by nature, improvement in long-term returns may rest on the ability to connect dispersed assets to provide regional services in new sectors, such as the Internet and data transmission.

  • + Share This
  • 🔖 Save To Your Account

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information

To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.


Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.


If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information

Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.


This site is not directed to children under the age of 13.


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information

If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information

Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents

California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure

Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact

Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice

We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020