beating the paradoxes of emerging markets - strategies for reaching the consumers at the bottom of...

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Beating the Paradoxes of EmergingMarkets: Strategies for Reachingthe Consumers at the Bottomof the Pyramid

Guillermo D’Andrea

‘What is good does not need to be more expensive’. This basic principleinspires the strategies of a number of firms which have successfully attemptedto reach the BOP, trying to prove wrong the myth that anything cheap willend up costing more. Here we present the conclusions of various studies onthe markets at the BOP, and of companies targeting them.

The picture of scarcity that characterizes the poorest segments of emerg-ing markets conveys the assumption of a series of simplistic myths aboutthese consumers’ reality, and the persistence of some misconceptions regard-ing the real possibilities for companies to effectively address their needs.The examples of a few firms are intended to illustrate how to overcomethose prejudices and reach the vast markets at the BOP. They also illustratethe magnitude of the challenge and the profound perspective required togenerate creative solutions, innovative in its own way.

15.1. A Complex Picture of Scarcity

In the complex world of the twenty-first century, a number of trends coexistbut not necessarily converge. Large corporations, a result of the concentrationof increasingly mature industries, coexist with and generate more businessthrough a myriad of small companies, which they need to carefully sustain inorder to keep the efficiency of their increasingly decentralized strategies. Thegrowing commoditization of products, such as home electronics, gives wayto an economy based more on relationships than on mere negotiating power

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Beating the Paradoxes of Emerging Markets

between manufacturers and their channels of distribution. Greed and the con-stant search for profitability combine with a growing sense of social responsi-bility among businesses. And in a world defined in more than one aspect bythe 80/20 relation—80 percent of the population have only 20 percent of thepurchasing power worldwide—strategies designed for mature markets need tobe adapted in order to address this 80 percent of the world population livingin emerging markets.1

The scarcity that typically characterizes emerging markets also prevents thesurge of world-class leaders. However, we will see how some companies areable to break this traditional pattern and address the needs of the marketsat the BOP, and by doing so achieve global leadership, joining world leaderswho, through a change of perspective, also access these vast markets.

15.1.1. Strategies Focussed on the Bottom of the Pyramid

The reality at the BOP is pretty different from the traditional myths. Theyare a very important market, with a significant economic value, and theyprefer well-known brands—many times more than buyers from segments ina better economic situation. In Argentina, 70 percent of these householdsrepresent 75 percent of the population and they account for 58 percent of thefood products market. Their access to communications is growing—35 percenthave a cell phone; 47 percent, cable TV; 65 percent, a fixed line telephone;16 percent possess a computer.2 And they prefer to buy in neighboring storesthat do not have any bargaining power with wholesalers or the leadingmanufacturers, but have the trust of their customers, who are also gratefulfor their recommendations.3

Some companies have understood this reality and developed business mod-els according to these segments’ needs, managing even to conquer leadingpositions in the more advanced markets. Corona Beer of Mexico enjoys aleading position among the imported beers in 122 countries; its sales in thehigh-price segment are mainly due to the fact that they link their image to thepleasure of vacations in Mexico.4 Arcor of Argentina is the top world candyproducer. It sells its many products in 110 countries based on a strong pres-ence at local fairs and chambers, supported by local executives and factoriesdistributed in several countries. Cemex is the third largest world manufacturerof cement, with presence in thirty countries, based on a system of just-in-time delivery that the competition finds hard to imitate. But these—and othercompanies that we will analyze—have a fundamental component of theirstrategies at the BOP.

Cemex’s5 strategy relies heavily on its just-in-time system of distributingconcrete, inspired on the method used by the 911 emergency number, whichallowed them to reduce delivery time from 3 hours to 20 minutes, of ahighly perishable product like concrete. A lower requirement of working

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capital together with a greater turnover resulted in increasing profits and anextraordinary source of financial resources. But not less important is its accessto the self-construction market at the BOP, by far the largest buyer in emergingcountries. The creation of the Construrama franchise to cater to this segmentprovided a better access, making it easier to grant credits to small suppliersof building materials (corralones) which also received advisory assistance toimprove their business. The profound understanding of this segment of buyersled to establishing ways to attract remittances from exiles in the UnitedStates for their relatives, ensuring that these funds arrive in the country andthat they are safely invested in building materials that help reduce the 5-year period it usually takes to build their simple dwellings. Brand advertisingvia popular soccer teams strengthened its relationship with this segment,6

where having their own house is priceless, not only for its material value butalso to the self-esteem of those who have built a home for their family atgreat effort.

Corona beer enjoys a premium price in international markets, partly due toa selective distribution and an image of attractive holidays. But in Mexico itsstrategy was based on extensive distribution, placing emphasis on a stronglycompetitive price for a product of good quality. Unlike its internationalpositioning, its focus in its home market is the mass market, and it hasnot hesitated to take part in price wars to defend its share among the lowersegments.

Arcor7 originally based its strategy in Argentina on the extensive distrib-ution of its products of competitive quality at lower prices, manufacturingunder a model of vertical integration that encompasses raw materials, produc-tion of energy, its own packaging and distributing through its own networkof wholesalers. Only in the 90s, they added a communications componentto reinforce its brand image and improve the quality perception, on top ofadding other brands through takeovers, but always being careful of not losingits presence in the popular BOP market segments.

Bimbo sells its bread and other quality bakery products like salted snacks,sweets, and chocolates, based on a large fleet of 22,000 trucks and 400 distribu-tion warehouses and over 600 distribution agencies that ensure the delivery offresh products to an extensive network of 450,000 retailers in Mexico. As breadlasts for 12 days, Bimbo recovers it from the shelves on the third day to ensureits maximum freshness at home, and redistributes it among a network ofstores as ‘Pan de Ayer’ (yesterday’s bread) at a price that is lower by 25 percent.Another alternative is to put together certain products in promotion packagesand sell them in ‘Cold Bread Routes’ on the cities’ outskirts, with an averagediscount of 35 percent. In 1984, the company started direct distribution inthe Unites States, and in 1990 they acquired a factory of bread and sweetrolls in Guatemala, which was the first step toward the expansion across LatinAmerica.

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Kola Real is the company founded by the Añaños brothers looking todiversify out of their agricultural business by manufacturing soft drinksin their city of Ayacucho in the south of Peru.8 Since the very begin-ning they offered a low-price product, which was distributed extensivelythrough an informal, unstructured, and growing network of carriers, sup-ported with local brand presence as they opened new markets. This presencewas aimed at the needs of their popular customers, such as the setting upof first-aid posts in poor areas, obtaining a high brand recognition witha significantly lower investment than any other manufacturer in the samecategory. Based on this focussed strategy they earned close to 20 percentof market share, before repeating the formula in Venezuela where theyachieved 14 percent and more recently 5 percent in Mexico but under theBig Cola brand. By these means, their revenues have mounted up to over$300 million.

Jabon La Corona commands 80 percent share of the Mexican soap marketwith its Zote brand, successfully competing with giants such as Procter &Gamble, Unilever, and Colgate.9 Fabric softeners, detergents, and olive oilhave been added to its product line, always answering to the principle ofoffering good quality products at low prices. The company does not investin advertising, relying on customers’ recommendation, nor in R&D, trustingproduct innovation to their own employees, who belong to the same socialclass as their target customers.

But not all the innovations aimed at the BOP were designed by companiesthat originated there. Some multinational companies have managed to over-come their own paradigms and develop successful solutions.

Coca-Cola Venezuela boosted the creation of 30,000 ‘productive homes’(hogares productivos), giving small refrigerators to housewives, thereforeimproving its distribution in remote neighborhoods and supporting the cre-ation of new microbusinesses.10 This followed a similar line to what it haddone in India in 2002, where it added to its formal traditional distributionsystem any available means—rickshaws and carriages—to supply to the smallrural towns that until then it had not been able to properly reach.11 Itdistributed more than 2 million fridges among rural retailers and created 200ml bottles which were sold at Rs 5, half the price of the previous 300 ml one.Furthermore, it adapted its image to local culture, employing a Bollywoodstar to communicate the price cut, in three advertisements especially madefor rural and semiurban populations.

Unilever’s approach to the BOP in Brazil caused a modification in the Omosoap, replacing the powder for soap bars in order to sell the product in theNortheastern markets.12 Women in that region, lacking washing machines,go to the river to wash the clothes, where they socialize with other womenwhile devoting themselves to their families’ care, which is shown in theirfamily members walking around in clean clothes.

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SC Johnson in Argentina examined the progress of its furniture polish Blemafter the 2001 economic crisis. A shift from the spray formula to the pasteallowed the company to diminish the cost of the container by 60 percent, soeven though it doubled its cost of direct labor it reduced the selling price by30 percent.

In Mexico, Procter & Gamble redefined the characteristics of its Alwayssanitary towels and launched Naturela to successfully compete in the B-brandmarket, based on a product that keeps its main characteristics. In a similarfashion, in Brazil it redefined the quality of disposable diapers to reach a12 percent share in the market’s lower segments.13

These last examples show that, in spite of their local origin and strong bondswith their markets, understanding the BOP is not an asset belonging only tolocal companies. Executives joining MNCs but coming from emerging mar-kets are also cracking the locks to access these markets, and local companieswill need to be aware of this growing competition in their own markets. AsMNCs also discover the value of the markets at the BOP, these could wellbecome the next competitive arena.

15.1.2. Aiming at the Middle

The cases analyzed show variations regarding the traditional strategicapproaches. In the first place, those strategies based on skimming the marketsby introducing the brands through the upper segments in order to generate an‘aspiration’ positioning, prove to have a limited effect when trying to reachfarther than the upper segments, to those with more or less limited possi-bilities of buying them. The inability to purchase them may turn aspirationinto frustration and even anger, as we have already seen, and consequentbrand rejection. Some companies have sensibly decided to aim at the mid-dle of the pyramid, placing their products within the reach of middle-classconsumers.

The case of Bodegas Lopez in Argentina illustrates this ‘aimed at the mid-dle’ strategy.14 Its Lopez brand is shown in the opening price level for finewines, and it offers three more brands—Rincon Famoso, Chateau Vieux, andMonchenot—with increasing levels of price and quality, and two others—Traful and Vasco Viejo—for lower price points. It is interesting to point outthat this winery’s brand is not at the top of the pyramid of prices andbrands, but in the middle, but outsells by far its competitors in the fine winesegment.

Likewise, Nazca Cosmeticos of Brazil decided to broaden its line of qualityhair care products at medium-to-high prices, targeting the population ofAfrican origin which has clearly different characteristics than those buyersof European origin.15 Research revealed not only these evident differences

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but a desire of recognition of their own specific characteristics instead ofhaving to adapt to using products designed for customers with different needs.Nazca decided to risk its brand prestige by aiming at this neglected segment,becoming the dominant player of this significant segment without losing salesamong their previous customers.

The strategies aimed at the middle of the pyramid have several aspects incommon: quality products, extensive distribution, and affordable price. Thereare three principles that appear to guide them: accessibility, affordability,and availability. They are based on attractive products that create buyingimpulse. Both design and size facilitate product access, and finally, extensivedistribution places products within easy reach of consumers.

15.1.3. Designing Strategies for the Bottom of the Pyramid

These examples show us that developing these strategies entails significantinnovation in more than one aspect, to modify the offer to cater to the needsof those consumers who are in greater need.

A deep understanding of their actual needs, purchasing, and consumptionhabits was applied in the first place, to be able to distinguish the varyingbehaviors of the segments comprised within this large group of consumers, asthe case of Jabon La Corona showed.

Secondly, innovation is often more related to the business process thanto the products themselves.16 Their needs are more associated with simpleaccess than to more advanced technological developments, which in manycases buyers cannot apply and do not require. Technological innovation ismore directed at modifying processes in aspects like production, logistics,marketing, and service. By these means access is facilitated not only in termsof the product’s cost but through other factors that relate to its availability,like in the case of Bimbo’s ‘yesterday’s bread’.

Finally, innovations come not only from analyzing their own sector, as inthe case of Cemex with the application of the 911 technology. It is necessaryto explore other regions and business sectors with an open mind in order tofind responses that can be adapted to one’s own business.

It is essential that these product innovations and service adaptationsintended to broaden the product offer show a solid respect for the dignity ofthe chosen segment and convey the necessary trust so as to build long-lastingrelationships—something that was properly interpreted at Kola Real.

To promote these innovations key process areas were identified—such aslogistics, marketing, or service—and then selected to carry out experiments.Some of these adaptive process variations generated enough differentialvalue and were therefore selected in order to disseminate them into theorganization, spreading the implementation. Essential to the success of these

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innovation processes was the dedication of cross-functional teams for thesearch for improvements throughout the whole business process. Theseteams also facilitate further implementation, since they knew each functionpeculiarities and how to respond to the different objections that would ariseto the suggested changes.

15.1.4. Changing the Vision Along the Value Chain

As the innovation process comprises logistics, service, and marketing aspects,it requires a broad business perspective, including the links in the industry’svalue chain. The examples of Cemex’ Construrama and Coca-Cola’s ‘hogaresproductivos’ show that to develop strategies based on business modelsthat create value for emerging consumers, it is necessary to ensure thesustainability of other participating businesses by aligning the strategies of allparties involved.

Value creation is at the top of the agenda when catering to emerging con-sumers, and value is not only created through innovation and individual costreduction, but also by improving efficiency along the supply chain. Consensusand coordinated actions along the supply chain are required if the costs toreach the market are to be improved. Suppliers, wholesalers, and retailers mustbuild a dialogue in order to boost the efficiency for reaching end-customers.Aspects such as the efficient use of logistics or presence in points of sale requirethis type of participation and coordination.

In some cases, the government and other incumbent institutions that affectthe consumption sector may have to participate in this forum. Aspects suchas tax evasion, very common in the entire region with the exception ofChile, affect every player’s performance in one way or another. However, thesolution to this problem that hinders the growth of the best players and affectssociety as a whole cannot be solved by some well-intentioned participants: itrequires an overall and coordinated approach.

But this will not happen as long as some of the major players believethat they can generate more by their own means, to the detriment of theircompetitors, than collaborating with other participants of the sector’s chainin a more transparent fashion. Working along sector chains requires settingaside the vision of sheer competition to an evolved concept of competitorsand collaborators. This approach allows formulating and implementing acommon agenda of feasible and controllable action plans.

These agreements are intended to increase the productivity and innovationof every member of the sector chain, promoting the sustainability of eachplayer’s business. The broad concept is to enlarge the pie rather than sustaina dispute to see who gets a bigger slice—of a total pie that keeps shrinkingwith each crisis! Opportunities need to be identified and seized, but under thecondition of sharing the benefits among the supply chain’s participants.

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The broadened focus is on understanding what boosts the industry’s devel-opment as a whole, how each player gains and loses competitiveness and howthey can develop together a greater capacity of innovation.

15.1.5. Managing Deceiving Perspectives about the Bottomof the Pyramid

These misconceptions hide rigidities and a lack of vision that work similarly asthe myths on emerging consumers, restraining the access to these segments.17

1. It is not our segment, they cannot afford the quality and level of inno-vation of our products: The statement hidden behind this statement isthat the cost structure is taken as a given, with little chances of beingreduced, and consequently costs are too high for these segments. Thecases of Blem and Omo’s product redefinition and Coca-Cola’s distribu-tion reconfiguration reveal that these companies not only revised theircosts but the entire product concept and manufacturing processes aswell in order to reach these customers.

2. They do not have use for advanced products: When redefining productsexecutives realized that the functionalities were different. The price ofa top brand training shoe is comparably much higher for an emergingconsumer than for a high-income buyer, but it is for this very samereason that the first one is likely to use it more carefully and not for thepurpose it was originally designed for.

3. Only consumers in more advanced markets appreciate and pay fortechnological innovation: Even though this may be true to some extent,it is also a fact that they do not require such an advanced technology,and consequently they do not consider that innovation worth the costof a higher price. Hutchinson Telecommunications Argentina set its PortHable communications network to address the poorest segments aroundBuenos Aires. They offer cellular telephones with a limited coverage ofa few blocks. In doing so, they provide means of communications toplaces out of the reach of ground network lines necessary to install fixedphones, and through a cell of limited scope the company offers serviceto the cellular telephones that are under their range of influence. In away, it is a wireless telephone with a greater coverage. The much lowercost of the required technology opens access to these areas that havebeen ignored by traditional communications companies that stick tothe model of fixed telephones served by wire lines.

4. Their total volume being low, they are not key to the company’s long-term success, for they do not generate enough profitability: As we haveseen in the first myth, a more detailed and deeper analysis shows this

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statement to be false, but sustaining it drives us to consider them asan eventual, sporadic opportunity, almost a distraction. Bimbo’s ‘yester-day’s bread’18 shows how they can be aggregated to the business ona permanent base, and not as an addition more connected to socialresponsibility issues but to the business itself.

5. The true intellectual challenge lies in developed markets: It is therewhere the most significant progress regarding innovation takes place.As a consequence of this, one cannot recruit or appoint the best exec-utives to work at the BOP, since it is not stimulating enough to lurethem. Companies, such as Fabrica de Jabon La Corona, prove that solv-ing the challenges to cater to the BOP requires sometimes a completeredefinition of the business processes, something that only the mostexperienced and flexible managers are able to do. If it is not taken as thereal challenge it represents but rather as a secondary objective, attractingthe best candidates to devote their time to this segment turns out to beextremely difficult.

15.2. The Mythology of Scarcity

The scarcity of low-income consumers reflects a number of variations. Notjust their income varies in terms of amount and frequency, but also theirlevel of equipment, from car availability to common home goods like refrig-erators, and in their access to energy, communications, and running water.Expensive and scarce capital availability has a negative impact in R&D privatebudgets, and also reflects in a weak technological platform, due to the lack ofworld-class universities that would provide well-trained scientists.

Scarcity goes along with dense populations with deeply rooted habits, suchas daily shopping and cooking. Families comprise three, four, or five personsper household, seasonal workers with variable and unpredictable incomesresulting from high unemployment rates. This combined with the lack ofappliances for keeping food fresh, among other things result in the need tocook daily. But income variations are also due to the peculiar characteristics ofself-employment in jobs such as plumbers, painters, electricians, taxi driversand the like. Therefore shopping is done daily and sometimes twice in thesame day, in low volume and with special emphasis on freshness since foodwill be consumed shortly after. To this the neighboring store becomes the bestoption, not only for convenience but also because it allows rounding downthe purchase if available cash is insufficient, acquiring only the strictly neces-sary amounts of products, getting the best affordable quality of freshness, andthe brands that best fit their particular needs. It is money that is lacking, nottime that can be used to optimize the value of their spending. In these cases,time-saving products are not economical, given their higher price.

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Out of a limited understanding of their reality, the picture of emergingconsumers at the BOP is filled with misconceptions. They would like to buyproducts but cannot afford them, their purchasing power is too low to becomea significant market, and their preferences go straight to the lower price, andso on. Myths like these condition the development of strategies that couldeffectively address their specific needs. The resulting paradox is a limitedaccess to products and services for an enormous group of consumers whorequire them to satisfy their very basic needs.

During 2003, a research project was ordered by The Coca-Cola RetailingResearch Council—Latin America, to better understand consumers’ prefer-ences in the region with regard to their purchasing habits. While setting theproject it became clear that it should focus on the vast majority of less favoredconsumers that make the biggest portion of the market: the emerging con-sumers. Our research covered six countries: Argentina, Brazil, Colombia, CostaRica, Chile, and Mexico. Four focus groups were conducted in each coun-try for a total of 208 participants. Target consumers were women from theemerging socioeconomic strata who (a) typically make the bulk of householdpurchases for food, beverage, personal care, and cleaning product categoriesand (b) shop regularly in at least one type of small-scale retail format. Amongthe secondary sources consulted were Socio-Economic Strata (SES) profilesfrom local marketing research associations and previously published, relevantconsumer studies from organizations such as Latin Panel, A. C. Nielsen, andlocal retail-oriented associations like Mexico’s ANTAD. Fieldwork carried outin each country included 217 store checks and 190 in-depth interviews withsmall retailers.

Its focus was to understand not only what and where these consumers buy,but why they make these choices. While there are many salient differencesbetween emerging consumers across the six countries in this study, severalcommon themes emerged that contradict the conventional wisdom aboutthese consumers. We will look at the ‘truth’ about emerging consumers,in relation to six common myths—or preconceptions—about lower-incomesegments.

15.2.1. The Myths on Emerging Consumers19

1. Emerging consumers have little money to spend: In spite of being perceivedas ‘poor,’ emerging consumers in fact have a considerable amount of money asa group to spend on consumer products. And, while incomes are indeed lowerand less stable, these consumers dedicate a larger portion of their income tohousehold purchases.

Consumer products are the number 1 consumption category across LatinAmerican countries, with housing/rent, transportation, and communication

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typically absorbing a large part of the remainder. However, while consumerproducts make up roughly 30–35 percent of consumption for the ‘averageconsumer’ in a given country, emerging segments spend a disproportionatelybigger share on these products—anywhere from 50–75 percent, with thelowest SES claiming to spend nearly all income on these purchases. Hence,while it is true that their incomes are lower and overall they buy less, thenet effect is that household purchases can still amount to substantial sumsover time, and therefore represent a significant share of the consumer goodsmarkets (see Figure 15.1). Two separate studies by A.C. Nielsen and ANTADsuggest that average tickets for emerging segments may reach up to 50 percentof what middle-class and higher-income consumers spend in supermarkets. Itshould be noted that the reported average ticket sizes by SES do not take intoaccount frequency of shopping and that emerging consumers shop much lessfrequently in large supermarkets.

Furthermore, the vast majority of lower-income consumers can hardlybe described as ‘destitute’. It is true that Latin America has its share ofpoverty, and that there are social classes who have the misfortune to earnthe descriptive label of ‘marginal’ or ‘indigent’. But many households todayhave running water, electricity, and basic appliances that have an impact onpurchasing behavior. Nearly all ‘C’ and ‘D’ households have a television, radio,and refrigerator (e.g. 90–100 percent household penetration)—and in coun-tries like Mexico and Costa Rica, penetration of washing machines, VCRs, andaccess to cars in urban areas is relatively high with the exception of Colombia,where penetration of TV, stoves, and radio lowers to 65–85 percent.20

Beyond the rather large fraction of the budget these purchases represent,household expenditures have a much greater meaning to emerging con-sumers. For the women that control the majority of these purchases, con-sumer products are a key mechanism by which they fulfill the overlappingroles of ‘wife’, ‘mother’, ‘economist’ and ‘self’. Focus groups revealed thatconsiderable self-esteem is derived from managing these expenses in the bestway possible to care for the family—a task that, as we next observe, can berather complex.

2. At the base of the pyramid the needs are simple, and the lowest priceprevails: Their lower and less stable incomes mean emerging consumers needsimple, affordable products, and low cost retail formats. Yet emerging con-sumer product and format needs are better described as ‘basic’ rather than‘simple’. These consumers overwhelmingly purchase more basic foodstuffsand perishables, but they are willing to pay for intermediate and leadingbrands in basic categories. And they also may shun low-cost retail formatssuch as hard discount stores.

Overall, very few of the focus group participants stated they shopped at harddiscount supermarkets (especially in Mexico and Colombia, where almost

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52.5%

28.9%

16%

2.6%

% population

B

C

D/E

A

% population

65.2%

22.4%

1.5%

10.9%B

C

D/E

A

A/B/C1,2

C3

D/E

~20%

~30%

~50%

% population

% population

52.9%

37.2%

2.2%

7.7%B

C

D/E

A

41.8%

49.9%

2.1%

6.2%

% population

B

C

D/E

A

% population

50.3%

36.2%

12%

1.6%

B

C

A

Brazil Mexico Argentina (1)

Colombia Chile Costa Rica

24.9%

34.4%

29.4%

11.3%

% buying power

~18%

~29%

~53%

% buying power

% buying power

33.0%

33.6%

24.0%

12.8%

42.8%

23.3%

21.1%

12.8%

% buying power % buying power

36.6%

34.5%

11.9%

17.0%

% buying power

19.6%

28.0%

33.8%

18.7%

% buying powerset aside forconsumerproducts

32%

31,4%

25.8%

11.3%

62.7%

25.8%

11.5%

% buying powerset aside for

consumerproducts

12.9%


25.3%

40.3%

25.3%

7.1%


consumerproducts (2)

31%

28.6%

19.8%

20.5%


consumerproducts

20.1%

38.1%

26.2%

14.8%

D/E21.1%

48.4%

17.6%


Figure 15.1. Understanding the true value of emerging consumers at the BOP


all participants claimed they ‘never shopped’ at discount supermarkets—inArgentina, shopping incidences were the highest observed for this format).It should be noted that sample size is not sufficient to make a quantitativeassessment and that many consumers interviewed may not happen to liveor work near these stores. That said, issues with this format were expressedin each country, indicating that there is some dissatisfaction with this storeformat for at least a subset of emerging consumers.

Certainly, there is a well-established link between affordability and categorypenetration of consumer products in low-income households. The shoppingbasket of these consumers is weighted toward staple products—some of whichare common across countries while others are not (see Table 15.1). Typically,the more expensive, higher value-added categories like frozen foods, ready-to-eat meals, yogurt or flavored milk drinks, and fabric softener have lowerpenetration in these households, driven in part by the low penetration ofhousehold appliances like freezers and microwaves. Undoubtedly, relativelylow penetration of freezers and microwave ovens in emerging segments par-tially explains the low penetration of ready-to-eat meals and frozen foods.But also many of the group participants expressed enjoying preparing mealsfrom ‘scratch’ as an extension of caring for the family and it is not clear thatthey would ‘panty load’ frozen meal components (e.g. chicken, meat, andvegetables) even if they owned freezers and enjoyed incomes that permittedstocking.

In looking at emerging consumer attitudes toward brands, there is tensionbetween brand preference and consumers’ economic reality. We found thatthese consumers have a strong preference for intermediate and leading brandsand not buying them can generate frustration. Overall, discussion groupparticipants stated that they regularly purchase intermediate and leadingbrands; we also noted an unwillingness to try new brands. In many categories,emerging consumers showed more loyalty to ‘brands’ in general than to asingle, preferred name. The consumer will have a relatively small set of brandsthat are considered acceptable substitutes, and switching does occur withinthis set. In many cases, this switching was driven by promotional prices.However, these attitudes toward brands are not a lemming-like response toadvertising campaigns or blindly ignoring economic constraints—consumersare keenly aware that leading brands carry a price premium. But perhapsmore importantly, brands embody backing, confidence, and quality for theseconsumers as a group.

It is worth noting that brand loyalty (for the purposes of this study, definedas purchasing a brand as opposed to just preference or purchase intent) differsby category. Interestingly enough, we found the highest loyalty to brandson staples like rice and cooking oil. Loyalty was also high for aspirationalcategories like soft drinks, or categories that impact self-esteem as a care-giver (e.g. laundry detergent), but economic reality overrode purchase intent

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Table 15.1. What do emerging consumers buy?

Staples Secondary Luxuries

Packagedfoods

Rice, beans, dry pasta, oil, saltsugar, tomato sauce, cookiesand snacks for kids (valuebrands)Br.: flours (wheat, manioc,corn), canned fish (Class C)Col.: lentils

Sweet and salty snacks,some canned foodMex: cereal, snacksArg.: salty snacks, sweets,candyCh.: dressings, mayonnaise

Canned foods, chocolatecandy, cookies (leadingbrands), cerealArg.: tuna, olives, ‘alfajores’Br.: condensed milk, cakemixCh.: heat of palmCol.: salty snacks (adults)

PerishableFoods

Fruits and vegetables , eggs,bread, margarine/butterArg.: jelly, cold cutsMex./Br.: class C: yogurt

Cold cuts, meatsArg/Ch.: sausagesBr.: yogurt, cheese, chickenMex.: ground hamburgermeatCh/Col.: margarine, chicken

Frozen foods, icecreamBr.: frozen lasagna, friedpotatoes, hamburger pattiesBr./Mex.: ready-to-eat pizzaMex./Col.: seafood

Beverages Coffee, Juice concentrateCol.: chocolate barsBr.: value brand sodasMex.: powdered drink mixAra/Ch.: tea

Value brand sodas (Arg, Col),Br.: powdered drink mixArg./Br.: beer

Coca-ColaArg/Col.: wineMex.: tequila, rumCR: gatorade sports drinksAr/CR: tang powdered drink

Cleaningproducts

Powdered laundry detergent,bleach, disinfectantBr./Col.: bar laundry soapMex.: softener, steelwoolArg.: floor cleaner

SoftenerArg.: multi purpose cleaners,air freshenerCol.: liquid dish detergent

Leading brands in detergentand softenerBr.: furniture polish

Personalcare

Toilet paper, soap, toothpaste,sanitary napkins, deodorant,family shampooMex.: diapersArg./CR: conditioner, cotton

Leading brand shampoo(Arg. Br.), conditioners

Leading brands, perfumeBr.: personal shampoo, faciallotionCh.: makeupMex.: body lotion

Source: IBOPE Solution, BAH analysis.

more often. Overall, less loyalty was observed in personal care and cleaningproducts, even though brand preference was still high (especially in personalcare categories that appeal to consumers’ sense of vanity). Hence, brand atti-tudes and purchasing patterns represent quite rational and savvy behavior onthe part of emerging consumers, who are fulfilling their need for performancein categories that make up the bulk of the daily diet or that showcase capa-bilities as a caregiver. Similarly, the risk aversion of these consumers in tryingnew brands makes sense given that there is less room to experiment or ‘fail’—selecting an underperforming product has greater financial implications whenincomes are lower. These observations are in line with existing theory, whichholds that a consumer’s ‘level of involvement’ with a category is positivelycorrelated with loyalty. In many categories, emerging consumers are moreloyal to ‘brands’ in general than to a single, preferred name. The consumer willhave a relatively small set of brands that are considered acceptable substitutes,and switching does occur within this set. In many cases, this switching isdriven by promotional price points.

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Acceptance of dramatically lower priced (and low cost) ‘value brands’ isgrowing in some countries; nevertheless, emerging consumers are still drawnto brands. In Brazil and Argentina, emerging consumers were more opento trying value brands, especially in cleaning products. Economic necessityclearly plays a role in increasing trial of these products, as do word of mouthtestimonials from friends and family about performance. However, interme-diate and leading brands still represent the largest share of purchases andemerging consumers hesitate to try value brands. Low-price points are attrac-tive but can also generate mistrust and skepticism about product quality—‘Lobarato sale caro’ (‘What is cheap ends up being expensive’) a frequently heardcomment.

Another way in which the ‘lowest cost’ myth does not play out relatesto package sizes. Subsets of emerging consumers have lower or less stableincomes, and they prefer to smooth consumption over time rather than gowithout products. Lower incomes mean that larger sizes represent a muchlarger portion of available income, so consumers knowingly incur higher perunit costs (e.g. price per gram) on smaller sizes to keep ticket sizes down andin line with cash on hand.

3. Emerging consumers are overwhelmingly attracted by lower prices:Emerging consumers are certainly ‘price sensitive’, as evidenced by the metic-ulous tracking of price benchmarks, the exercise of self-constraint while shop-ping, and aversion to debt and credit when purchasing consumables. Theirresponse to the recent deterioration in economic conditions shows that theydo scale back spending in response to decreased incomes or increasing prices(if incomes do not also rise). However, purchasing decisions are more drivenby a desire to minimize ‘total purchasing cost’—which is entirely differentfrom retail shelf price.

‘Total purchasing cost’ represents a fully loaded cost for a basket of goods,and retail shelf prices naturally make up an important part of the equation.However, we found that emerging consumers mentally factor in transporta-tion costs to arrive at a final price for the shopping basket—that is, the ‘totalpurchasing cost’. In addition, they have a strong awareness of ‘hassle factors’(such as finding child care or policing/coping with children’s demands whilein the store), logistical constraints for bringing purchases home, and timespent commuting or (to a lesser degree) standing in line. This makes theinterplay of physical proximity and pricing a top criterion for selecting a retailformat.

Format needs do differ for ‘daily’ and ‘large/stocking’ purchases, but phys-ical proximity is the first order determinant of store choice in both cases.Consumers do not like to travel very far and they consider the transportationcosts of even round trip bus fare or a short taxi ride to be significant. Most dis-cussion group participants did not consider public buses and subways to be a

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viable means of transportation for bringing purchases back home when heavyor numerous packages/bundles were involved; instead, consumers tended toreference the price of a pirate taxi ride, ‘collective’ or shared van/taxi servicewhen referring to the transport expenses they were factored into the ‘totalpurchasing cost’. When asked to explain the difference between a store thatis considered ‘close by’ versus ‘far away’, most consumers define both of theseextremes within a relatively small physical distance—‘one block’ versus ‘sevento ten blocks away’, or ‘within a 5 minutes walk’ versus ‘three or four busstops away’. Most emerging consumers in urban areas (by far the bulk of thepopulation in these segments) have numerous store formats nearby and thusneed travel only minutes to make daily or even stocking purchases. Usually,the nearby stores are small-scale retail formats such as traditional, over-the-counter shops, small independent supermarkets, or street/open air formats.

The smaller average ticket sizes resulting from both lower incomes overalland greater prevalence of ‘daily’ shopping behavior in emerging consumersegments have relevant implications. Proximity translates into significantlylower ‘total purchasing cost’ for emerging consumers if shopping at geograph-ically close-by, small retailers. An estimate of the ‘break even’ price discountrequired to recover just the cost of a bus trip to and from a store locatedfurther away throws more light over this point. Given the low ticket sizeassociated with a ‘daily needs’ shopping trip, the price discount would haveto reach from 25 to 55 percent only to justify the trip transportation costs.Not surprisingly, emerging consumers require significant discounts on a com-plete shopping basket to choose a store for a ‘stocking’ trip—not just one ortwo items.

4. Emerging consumers should prefer shopping at supermarkets: Followingthis ‘Modern Trade Myth’, emerging consumers are often looked at as juniorversions of their higher-income compatriots, who should naturally flock tothe modern infrastructure shopping experience, and the variety and valuethat large supermarkets provide. (This myth presupposes that there are specificbarriers to this happening, as we discuss in the next section.) Emerging con-sumers may not be all that distinct from higher-income segments in that allconsumers tend to look for ‘good’ prices at stores they consider to be within anacceptable distance. In many categories, emerging consumers are more loyalto ‘brands’ in general than to a single, preferred name. The consumer will havea relatively small set of brands that are considered acceptable substitutes, andswitching does occur within this set. In many cases, this switching is drivenby promotional price points. But the similarities probably stop there. Otherdistinct format characteristics beyond the proximity/price combination seemto distinguish emerging from higher-income consumers.

Product assortment is certainly a relevant store choice criterion for all con-sumers, but in the emerging segments, product variety can be a double-edged

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sword. Emerging consumers do not like to feel their choice is restricted andconsequently they value a wide assortment—although admittedly as a pointof interest or form of entertainment. As an example, many emerging con-sumers described how they like to browse the wide variety of personal careand general merchandise items found in larger stores—but that they did notnecessarily buy. Furthermore, the entertainment value of a wide assortmentwas clearly associated with ‘stocking’ trips—which occur much less frequentlyin these segments. In fact, a wide assortment sometimes has a negative effectbecause it is either too tempting or time consuming to shop, or because itreinforces feelings of restriction and having to do without. Thus, emergingconsumers value the ‘right’ product assortment—a mix that is carefully tai-lored to needs for performance brands, economy, and feelings of validation.This is a decidedly more abstract concept than simply filling a store withthousands of SKUs.

‘Operational Characteristics of Street Markets in Brazil’

In Brazil, metropolitan street markets or ‘feiras’ are quite common. They are licensed bythe city governments and operate from Tuesday to Sunday. For each day of the week,several different feiras occur in different locations. The items sold to consumers at the feiraare mostly fresh produce, beef, fish, and poultry. Within each category, it is common tofind many grades of product or hard to find ‘local specialties.’ There may also be a verylimited selection of grocery items, housewares, clothing, and shoes. In São Paulo, theyare responsible for 70 percent of the overall supply of fresh food for the city.

Feiras take place in predetermined streets, which are closed for traffic, and later cleanedby city employees. They consist of portable stalls or modified vehicles, from whichproducts are sold. Stalls are set up early in the morning—between 5:00 and 6:30 a.m.The public starts to arrive around 7:00 a.m., but customer movement peaks around10:00 a.m. and by 1:00 p.m., most of the crowd is gone. In the early hours of the feira,prices tend to be higher, and no discounts are offered. As the morning progresses, pricesare reduced and discounts are offered. Stall owners, or ‘feirantes’, seek to sell all theirmerchandice since in many cases product is fully ripe and highly perishable.

Note: paraphrased from ‘The Structure of Sao Paulo Street Markets: Evolving Patterns of RetailInstitutions’, Journal of Consumer Affairs, vol. 33(1).

For some product categories like fresh fruits, vegetables, meats, breads, andmilk, emerging consumers in fact do not prefer large chain supermarkets at all(see Figure 15.2). Instead, there is a strong association of fresh categories withstreet and open air formats where quality is perceived to be higher, prices aresubstantially lower, products may be sampled, and the customers can activelymanage the price/quality trade-off by choosing the time of day at which theybuy. It is important to note that for these consumers, the definition of ‘quality’

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in fresh categories is not necessarily consistent with the uniformly shaped andcolored product typically offered for sale in large supermarkets.

Whereas there is a feeling that the stocking and ripening process employedat large supermarkets is unnatural and even worsens the taste, street andopen air formats are seen as wholesome and ‘farm fresh’. Incidentally, there isevidence that higher-income consumers have similar attitudes since althoughthey do purchase more ‘fresh’ categories in large supermarkets than lowerincome SES, overall penetration is relatively low compared to other categories.

As it turns out, ‘modern’ infrastructure is attractive to emerging consumersbut relatively unimportant as a store selection criterion when it comes tofresh produce. Aspects of store physical appearance are secondary, withinfrastructure and hygiene used as a screen rather than a driver of choice.Services associated with the shopping experience at large chain supermarkets(e.g. promotional flyers, delivery with minimum purchase, loyalty cards, andextended operating hours) are similarly less important. A portion of emergingconsumers are attracted to large supermarkets, but by and large, these largechain formats lack a key element: the emotional proximity and feeling ofcommunity that comes as a result of personal relationships with shopkeep-ers or store personnel. Personal relationships are usually the top factor fordifferentiating between outlets with comparable prices and distance for thisgroup. And it almost always enters into store choice when making dailypurchases in small-scale retail stores. These relationships typically result froma history of positive interactions and experience—providing customers with asense of familiarity and belonging. Personal relationships—rather than formalprocesses—are the mechanism by which this group generally resolves issueslike exchanging a product, coming up short at the cash register, selecting aproduct during a stock-out, or feeling confident that produce and meats arefairly weighted. In comparison, emerging consumers report poor treatmentby staff while shopping at large chain stores. In large chain stores, treat-ment was usually described as ‘professional’ when seen in a positive light,but not ‘personal’ or ‘caring’—words that were used to positively describesmall-scale retailers. Sometimes this is the result of extra scrutiny from secu-rity personnel, or clerks who show visible frustration when economizingconsumers ask to weigh small purchases or inquire after promotions. The‘cold’ treatment is often said to come also from other customers in thestore.

5. ‘It’s only a matter of time and money’ for emerging consumers toflock into large supermarkets: Building on the previous discussion, this mythassumes that emerging consumers cannot act on their natural preference forlarger supermarkets for a number of reasons—for example, they have lowerincomes, they do not own cars, or they may need the credit that is offered bysmall retailers.

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19

24

31

21

12

67

76

76

64

33

37

44

37

16

88

88

80

72

48

54

60

59

41

87

89

93

80

0 20 40 60 80 100

Fresh fruits/veg.

Fresh meats

Eggs

Milk

Soft drinks

Packaged foods

Personal care

Detergents/cleaning

Bazaar/home items

D Class C Class A/B Class

% consumers that purchase category

Cat

egor

y

Figure 15.2. Consumer purchasing behavior in Mexican supermarkets (percent con-sumers’ purchasing category, by SES).Source: ANTAD.

Today, emerging consumers infrequently shop—if at all—at large supermar-kets or hypermarkets. We observed extremely low penetration with these con-sumers in Colombia, Mexico, and Argentina (a more recent phenomenon). InBrazil, a moderate number of consumers shopped at supermarkets but thesetended to be small independents or local chains with no more than four orfive stores. Penetration was higher in Chile and Costa Rica, where consumersnoted that large supermarkets happen to be located close by.

Other strong factors deter emerging consumers from switching away fromsmall-scale stores—but the need for credit is not typically one of them.Some do take advantage of credit out of necessity on occasion, and con-sumers who rely on ‘fiado’ credit do have strong barriers to switchingstores. Yet, generally speaking, lower-income segments are averse to spendingbeyond their means and they prefer to pay cash as a means of control-ling expenditures. Credit is viewed as more appropriate for major purchases

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(e.g. appliances, back-to-school supplies, and uniforms) rather than for fund-ing day-to-day consumables.

That said, emerging consumers commonly ‘come up short’ on small pur-chases and rely on their ‘virtual wallet’ at small-scale retailers who essentiallyoffer a type of informal credit by allowing regular customers to make up thesesmall differences on their next shopping trip—usually the next day or shortlythereafter.

‘Special Forms of Consumer Credit in Latin America’

One type of credit that is available in Latin America is commonly known as ‘fiado’. Whena consumer purchases ‘fiado’, no cash is exchanged at the time of sale and the ownernotes the amount of purchase in a record or notebook under the customer’s name. Thecustomer returns on a later date (e.g. on payday) to pay down the balance due or retirethe debt entirely. ‘Fiado’ is not available at chain retail supermarkets.

Typically, no interest charges are levied. But customers who take too long to pay orrenege on debts are likely to have their names and how much they owe posted on asign for all in the neighborhood to see. There are strong social incentives for customersto make good on balances to retailers, but there is still considerable risk. Small-scaleretailers typically offer this type of credit only to a subset of their customers.

Other types of credit used by emerging consumers vary by country. For example inBrazil, checks are more commonly used than in other countries to make purchases,and some emerging consumers do have accounts. Chain retailers and some small inde-pendent supermarkets will allow customers to postdate checks, thereby granting short-term credit. The consumers who participated in our focus groups very rarely used creditcards.

This is a critical service for this group, since having to remove purchases atthe time of payment is considered extremely embarrassing and to be avoidedat all costs. Furthermore, it allows parents to send their children to make dailypurchases with the least amount of money possible—considered a valuablemeans to control impulse spending on candy and snacks. Technically speak-ing, this is a form of short-term credit. But it is more like an extension of thepersonal relationship between the consumer and the shopkeeper, rather thana transaction or service. Also, since the amounts in question are extremelysmall, the benefit of this ‘virtual wallet’ to consumers is one of financialflexibility, rather than needing the credit per se.

We have seen that credit is not a driving force behind this behavior. Fur-thermore, given emerging consumers’ distinct values and needs, it is not clearthat increased incomes and access to transportation would cause them to‘graduate’ to different retail formats at all. The lack of personal relationships,a modern but ‘out of element’ shopping experience, and negative perceptionsabout some categories (like fresh goods) would more than likely keep them

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Intangible

Primaryneeds

Secondaryneeds

Product assortment

Affordability

Ubiquity/ physical proximity

Personal relationshipwith retailer

‘handshake’

Cleanliness

Services—delivery, hours, promotional

literature, etc. Entertainment

Shopping experience

Tangible

The ‘right’product mix

Credit and‘virtual wallet’

Pleasing appearance

Professionalism‘arm’s length’

Figure 15.3. Emerging consumer values.

away. Figure 15.3, emerging consumers values, summarizes their needs andpreferences with regard to retail selection.

6. ‘The popular class’—Emerging consumers may be addressed as a sin-gle group: In mature markets, numerous terms have entered the commonvocabulary to describe the unique characteristics and behavior of the mid-dle and upper income classes—yuppies, buppies, DINKs, BOBOs, and more.Typically, lower-income consumers are unceremoniously lumped into the‘blue collar’ or ‘working class’, as if no notable differences existed amongthese consumers. Similarly, Latin America’s lower-income consumers are oftencollectively referred to as the ‘popular class’.

The qualitative research for the referred study, however, indicates that thereare probably many meaningful differences between emerging consumers—abasis for further study and segmentation. Clearly, demographic variables suchas size and stability of income matter: some subsegments have incomes thatafford ‘stocking’ occasions, greater experimentation, and breadth of purchaseswhile other consumers are more focussed on daily needs and tend to avoidchanging brands or stores. Emerging class consumers, even though they mayshare a relatively homogenous profile in demographic/socioeconomic vari-ables, could be differentiated by psychographic variables. Specifically, thereappears to be a range of lifestyle and shopping attitudes along a continuum ofpracticality/control/traditionalism and emotion/impulse/innovation. Thesedifferences in lifestyle and attitudes have an impact on shopping behavior,manifested in characteristics such as brand loyalty, store loyalty, willingnessto innovate, price sensitivity and responsiveness to promotions, and breadthof categories purchased. Economic crisis also shows its impact, as newlyconstrained consumers seem to act differently from structurally low-income

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groups—many of the ‘newly poor’ are struggling with the ordeal of definingwhat they can do without.

In summary, research across six Latin American countries breaks six com-mon myths about emerging consumers. Although ‘poor’ relative to upper theSES, these consumers spend a great deal of money on consumer productsand constitute a significant portion of these markets. When shopping, theyfollow a quite rational and sophisticated behavior as they seek to reconcilepreferences with their economic reality. They have a distinct set of productand format needs—which does not necessarily include whatever is lowestcost, credit, or responding to shelf prices. The personal relationships andsense of community they seek is a strong incentive to shop in small-scaleretail formats. Furthermore, differences within emerging consumers implythat retailers need a differentiated proposition to address the needs of thisgroup.

Research conducted in Argentina by Grupo CCR in 200421 also shows arich complexity that demands a more careful treatment of these groups. Theimpact of the economic crisis in 2001 showed different impacts depending onthe extent of the economic deterioration experienced at each household. Twogroups could be observed at first sight: those who had been able to adapt toit—eventually their economic misadventures had started before—and thosewho still long for their previous status and were living in aguish. Among thefirst, chances to recover their projects were observed, while the melancholicor anguished showed differing attitudes, ranging from staying alert to keepfrom further deterioration, to the anger of who cannot fit to the new reality.

These differing attitudes are less associated with the actual economic level,and more to the size of the deterioration, or the extent of the downfall.A greater degree of affinity was observed among consumers that had expe-rienced a larger variation in their status, than with those living at—andsharing—the same economic level.

15.2.2. Solving the Paradoxes

Cemex, Arcor, Corona Beer, Jabon La Corona, Kola Real, Nazca Cosmeticos,and many other companies, some cited here and others that are not, havefound ways to successfully deal with the Bottom of the Pyramid. Some proudlyrank among the global players, while others limit themselves to their localmarkets. Nevertheless, they all share a strong bond with the Latin Americanconsumer, through their understanding and respect of their needs, and theintelligent adaptation of their business models in order to access the vastmarkets at the Bottom of the Pyramid. Their management has been ableto look past the typical misconceptions regarding the poor, and revise theirbusiness processes under a fresh perspective. And they are not tied to businessmodels and strategies that have originally proved their success in developed

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markets, but whose adaptation to emerging environments requires changesthat challenge that original success formula. All of these are reasons for bettingthat they will be around for quite a while, in spite of the general trend towardthe globalization of markets.

Notes

1. Charles Handy, Understanding the Shifts, CIES, Rome, 2004.2. CCR Report, Comprendiendo la Base de la Piramide, Buenos Aires, 2004.3. Creating Value in Retailing, The Coca-Cola Retailing Research Council, 2003.4. Rohit Deshpande, Corona Beer, Harvard Business School case 9-502-0223.5. Innovating Around Obstacles, Donald Sull, Alejandro Ruelas-Grossi and Martin

Escobar, Strategy & Innovation, Nov.–Dec. 2003.6. Why Mexicans mix cement with football, Financial Times, July 8, 2004.7. G. D’Andrea, Arcor International Expansion, IAE case, 1995.8. Miguel Ferre, Kola Real case, PAD, Lima. 2000.9. Fabrica de Jabon La Corona, Working Paper, IPADE, 2003.

10. John Ireland, Como han ganado las multinacionales en los mercados populares deVenezuela, Debates IESA, Vol. VIII, N. 3, 2003.

11. K. Subhadra and S. Dutta, Coca-Cola India’s Thirst for the Rural Market. ICFAICenter for Management Research, 2004.

12. P. Pacheco Guimaraes and P. Chandon, Unilever in Brazil: Marketing Strategies forLow-Income Consumers. Insead, 2004.

13. Thomas Weinrich and Renata Ribeiro, Negocios de primera con marcas de segunda,Harvard Business Review, May 2004.

14. Fernando Robles, Francoise Simon, and Jerry Haar, Winning Strategies for the NewLatin Markets, Financial Times–Prentice Hall, 2003. Chapter 5, p 175: An EmergingApproach: Convergence to the Center.

15. Nazca Cosmeticos. Working Paper, IAE, Division of Research, 2001.16. Alejandro Ruelas-Grossi, innovar en mercados emergentes: El paradigma de la T

grande. Harvard Business Review América Latina, February 2004.17. Adapted from C. K. Prahalad and Stuart Hart, The Fortune at the Bottom of the

Pyramid, Strategy + Business, Issue 26, 2002.18. Grupo Bimbo, Working Paper, IPADE, 2003.19. The Myths on Emerging Consumers is taken from the study by The Coca-Cola

Retailing Research Council: Creating Value in Retailing for Emerging Consumers.2003.

20. According to researcher Napoleon Franco & Cia., Bogotá, Colombia.21. Los sectores de menores recursos, un gran mercado de consumo. Research presented

at 3rd. Conference on Consumer Products, December 2004, IAE, Buenos Aires.

References

Chattopadhyay, A. and Dawar, N. (2000). Rethinking Marketing Programs for EmergingMarkets. Working Paper. Insead.

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D’Andrea, G., Stengel, A. y Goebel-Krstelj. Nov. (2003). Creating Value for EmergingConsumers. Harvard Business Review.

Gomez Samper, H. and Marquez, P. Business Challenge: Encouraging the market of themasses. Discussions IESA, Vol. VIII, N. 3

Hart, S. and Christensen, C. (Fall 2002). ‘The Great Leap. Driving Innovation from theBase of the Pyramid’. MIT Sloan Management Review.

Ireland, J. How the Multinationals Have Penetrated into the Popular Markets ofVenezuela. Discussions IESA, Vol. VIII, N. 3.

——Marketing in Venezuela Today: Searching for the Majorities. Discussions IESA, Vol.VIII, N. 3.

Malave, J. The Popular Consumer: A Vast and (almost) Unknown Market. DiscussionsIESA, Vol. VIII, N. 3.

Prahalad, C. K. and Hammond, A. (Septermber 2002). Serving the World’s Poor Prof-itability. Harvard Business Review.

Other Case Studies

Bodegas López. Guillermo D’Andrea, IAE, 2003Carrefour Chevere! Iana Torres and Ashok Som. Essec, 2004Carrefour in Malaysia’s Retailing Industry. M. Sadiq Sohail. King Fahd University, 2004L’Oreal Thailand. Dominique Turpin IMD, 2003Tupperware in India. Swapna Kingi. ICFAI, 2004LG: Rural Marketing in India. Dakshi Mohanty. ICFAI, 2004

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16

Conclusions: So . . . Can Latin AmericanFirms Compete?

Luiz F. Mesquita

Can Latin American firms compete? This is the question that drove not onlyour debate throughout this book, but also during the conference we organizedto discuss the competitiveness of Latin American firms. At the end of thisconference, the authors had enthusiastically concluded that the answer tosuch a question was a qualified ‘yes’. In their research, the authors unearthedabundant evidence demonstrating that a number of successful private andpublic enterprises from Latin America have developed unique strategies tocope not only with the broad scope and quickness of economic and politicalchange in the region but also with the challenges of going global from LatinAmerica. On the other hand, the answer above also indicates that much workremains to be done in regard to broadening this competitiveness to otherfirms and sectors. As pointed by Robert Grosse in Chapter 1, Latin Americanfirms still have little representation in the list of the largest, most aggressive,and most competitive multinationals from emerging economies. It is with theintent of helping broaden this competitiveness that we put together this book.As such, my goal in this last chapter is to weave common threads across thevarious studies included here, with the intent of distilling common strategicfactors and decisions used by these successful Latin American firms.

Latin America as a region stretches from the Southern tip of South Americain Tierra del Fuego all the way up to Mexico, where it borders the United States.The languages spoken there are various, including not only the obvious Span-ish and Portuguese, but also French, Dutch, English, and many other nativetongues. Culturally, although most people tend to see Latin Americans instereotypical frames, the region encompasses immense differences in heritageand managerial habits (see recent study by Friedrich, Mesquita, and Hatum2006, for a thorough review). Given this diversity, one could question ourattempt to speak of a Latin American Firm. However, as Frachia and Mesquita

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Conclusions: So . . . Can Latin American Firms Compete?

(Chapter 9) pointed out, the region has shared some common economic andpolitical elements in the past 100 years which enable one to find patterns thathelp explain common strategies and decisions that link the various successfulfirms portrayed throughout this book. Such events include, but are not limitedto roller-coaster bouts of economic development boom and bust; massivepresence of the state in the economy, inducing power relations and bureau-cratic controls; failing markets for labor, capital, and many other intermediateproduction goods; underdeveloped and unstable institutional environments,especially in the financial and judicial areas; as well as radical changes inforeign trade conditions, especially during the 1990s, as many governmentspursued the precepts of the Washington Consensus. All in all, the resultingenvironment became one characterized by higher levels of uncertainty andrisk for investments, property rights, competition, resource acquisition, andstrategic decision-making.

Throughout our book, the authors have looked at specific pieces and levelsof these Latin American challenges and sought to understand their nature, aswell as how firms have geared up to cope with and overcome them, as thesefirms strive to compete not only locally (with local and foreign opponents) butalso globally. The evidence we have about the formal strategies and activitiesdeveloped by these firms seems at first to be composed mostly of context-specific activities, where particular firms perform particular strategies. Theacademic challenge that results from this chapter involves weaving commonthreads that contain these idiosyncrasies, while still providing general princi-ples for understanding Latin American firm strategies. As such, my goal in thischapter is to unify such important idiosyncrasies in simple, yet understand-able principles, to help understand the uniqueness of Latin American firms.To weave these threads, I examine the various studies presented throughoutthis book under the lenses of three leading theoretical perspectives in man-agement research—institutional theory, transaction cost economics, and theresource-based view of the firm, within the context of Latin America. Below Ifirst introduce these concepts, and later discuss Latin American firm strategycommonalities within these theoretical frameworks. This discussion is parallelto, but offers a differentiated view from, the analysis in Chapter 1 of this book.

16.1. Institutional Theory, Transaction Cost Economics, and theResource-Based View

Institutional theory summarizes the influences of systems surrounding peo-ple and organizations that influence their behavior (Shapiro 1987; Zucker1986). In a way, organizations (i.e. mostly the people within them) operateaccording to expectations that are based on guarantees, safety nets, or simply

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safeguarding structures they observe within the environment they operatein. As such, institutional settings have an impact on behavior as membersof a system act according to the expected, where such expectations havesymbolic representations that everything is ‘customary’ (Baier 1986: 25), ‘nor-mal’ (Garfinkel 1963: 188) and ‘seems in proper order’ (Lewis and Weigert1985: 974). Institutional theory is useful for examining phenomena in LatinAmerica, as it permits one to understand firm behavior and strategy underinstitutional constraints. For example, North (1990) explains that institutionsprovide the rules that structure people interactions in societies and that orga-nizations react to such formal and informal rules. As such, institutions enablethe reduction of both transaction and information costs as they reduce theuncertainties surrounding behavior of partners, and facilitate interactions.

Transaction cost theory helps examine the boundaries of the firm (i.e. whatthe firm internalizes vs. what it outsources) through an analysis of trade-offs between the internal costs of bureaucracy versus the external costs oftransaction (Williamson 1985; Masten 1996). Under exchange hazards, suchas increasing uncertainty and asset-specific investments, at the margin, suchtrade-offs are likely to favor vertical integration. Transaction cost economicsis useful for examining phenomena in Latin America, as it permits one tounderstand why firms integrate businesses and supplies which in a developedcontext would simply be procured in the market. In a way, where marketsare efficient in ways to offer competitive prices for the goods procured, thetrade-offs mentioned above favor outsourcing, whereas where markets fail(due to high uncertainties, and small numbers bargaining), these trade-offsfavor vertical integration.

The RBV of the firm is often seen as a more recent development vis-à-vis theabove-mentioned two. It purports to explain why firms are different and howthey achieve and sustain competitive advantages (Wernerfelt 1984; Barney1986, 1991; Dierickx and Cool 1989; Peteraf 1993). This stream of literatureis specifically concerned with how firms acquire capabilities, as well as howthese capabilities are associated or not with competitive advantages. For exam-ple, Barney (1986) explained that key resources differ in their ‘tradability’ andthat managers can identify these resources and their prices through factormarkets. Dierickx and Cool (1989) supplemented these views by indicatingthat some special resources do not find themselves easily in such markets;firms must instead painstakingly develop them internally through path-dependent investments. Later, Barney (1991) and Peteraf (1993) indicated thatresources may lead to competitive advantages when they are valuable, rare,and costly to imitate.

The RBV of the firm is a particularly useful theory perspective for under-standing resource acquisition difficulties and their association with com-petitive advantage within the context of Latin America. Particularly, factormarkets in Latin America are known to be deficient, whereas the concept of

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path dependence explains the difficulties Latin American firms have in estab-lishing coherent path-dependent, resource-developing investments. Thus, thedevelopment or acquisition of resources which would otherwise be easy toobtain in developed economies becomes a severe constraint for these firms.

16.1.1. Weaving Common Threads of Strategic Decision-Making by LatinAmerican Firms with Institutional Theory

As discussed above, institutions represent rules and signals that provide aframework within which members of a society interact. As such, actions offirms and people within them are oriented based on anticipation that otherswill behave as expected. Otherwise, firms cannot coordinate actions (North1990). In Latin America, such rules and signals (or the lack of them) operateat several levels such as cultural, judicial, as well as financial, labor, andcapital markets. It is interesting to notice how successful Latin American firmshave operated under the premises of the above theoretical perspective. MarciaTavares (Chapter 3), for example, highlights that FDI by Latin American firmshas been more likely to earn them advantages in international markets wherefirms are able to transfer their experience to handle business dealings to othercontexts of similar cultural and linguistic settings. By operating in marketsoffering similar cultural institutions, Tavares argues, these Latin Americanmultinationals accrue similar advantages to those acquired in the domesticmarkets, in regard to serving particular patterns of customer demand forquality and technology. Where foreign markets differ significantly in regard tosuch cultural and linguistic heritages, Tavares argues that such Latin Americanfirm advantages are not necessarily sustainable.

The institutional environment is also relevant to explain the patterns ofinvestments in locally developed technologies. In this regard, Jorge Katz(Chapter 4) looks at the government policy environment surrounding LatinAmerican firms. Unlike what was observed across Asian emerging economies,he explains, the dramatic changes in overall country developmental policiesimplemented across the region have exacerbated uncertainties and risks, asopposed to creating more assuring environments for firm investments inresearch and development for new technologies. His recommendations forrectifying such institutional surroundings include government investments inoverall infrastructure, such as information and telecommunications systemsas well as the development of more transparent regulations and longer-terminvestments in technology incubators and subsidy programs for small andmedium enterprises. In the same line, Wood and Caldas (Chapter 10) andJohn Edmunds (Chapter 15) explore the difficulties imposed by the uncertaininstitutional environment. Wood and Caldas, in particular, highlight the eco-nomic turmoil Brazilian companies faced through the past few decades, with asequence of inadequate inflation-stabilizing plans that resulted in one of the

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most volatile economic environments in Latin American history. Similarly,Edmunds demonstrates how the financial institutions of a country can fos-ter investments. Particularly, he explores how weaknesses in the financialinstitutional environment (e.g. financial markets are small, often illiquid, toofocussed on financing the expansion of traditional commodity productionand exports, as opposed to financing innovation and new technologies) haveoften held Latin American firms short of becoming internationally compet-itive. The underlying message here is that where the institutional settingsprovide incentives for private initiative, innovation is fostered (see Jeffersonand Rawski, 1995).

The liberalizing reforms that swept Latin American markets during the1990s aimed at, among other things, creating free market institutions thatwould help create just the sort of stable institutional context to support greaterlevels of development and competitiveness. However, the extent to whichsuch institutions change across various economic sectors differs, and suchdifference is likely to affect firms differently across these economic sectors.In that respect, Eduardo Frachia and Luiz Mesquita’s (Chapter 9) debate onhow such changes developed more rapidly in some sectors vis-à-vis othersand how this variance helps explain the competitiveness of Argentinian firmsin foreign markets is very illustrative. Their study highlights that where eco-nomic reform had a faster impact on curbing failures in labor, capital, andsupply markets; firms were more likely to focus on their product corporatestrategy and become more aggressive in their international expansion.

In contrast to the studies that highlight how firms passively adapt totheir institutional surroundings, many scholars debate that enterprises canreact more dynamically and play a more active role within such an insti-tutional environment if they have adaptive abilities that allow them tomaneuver beyond institutional constraints (Oliver 1991). Here, Hatum andPettigrew’s (Chapter 12) study illustrates how organizational flexibility indeedsupports such maneuvering abilities, enabling firms to more successfully nav-igate through the maze of institutional uncertainties observed in Argentina,throughout the past twenty years. I will return and discuss such organizationalflexibility in depth further in the section on the resource-based view, butthe lesson that this study brings to our understanding of strategy-makingunder diverse institutional settings is one of firms actively overcoming theirsurrounding limitations.

Another example of such active approach to dealing with institutionalshortcomings is the process of helping create one’s own institutions to governthe expectations of investors. Firms that can help create rules that fosterstrong institutions, help form expectations, and therefore help foster invest-ments by the larger industrial community with positive externalities for allinvolved. One fine example of such a process is offered in the study by McDer-mott (Chapter 5). Here, the author contrasts the creation of government

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institutions across the wine-producing regions of Mendoza and San Juan inArgentina. As richly illustrated in this chapter in the province of Mendoza,producers were able to establish a strong collaboration with the provincialgovernment, and create a more innovation inductive environment by explor-ing the privatization of a previously government-owned winery and trans-forming it into a regional federation of cooperatives that provided moderntechnical training, credit and many other services to the winery entrepre-neurial community at large. As such, McDermott links the internationallysuccessful presence of Mendoza wineries (in contrast to the less successfulSan Juan ones) to the development of these institutional factors. To helpfurther contrast what can happen when firms lack the ability to work togetherand help form institutions, one can turn to Michael Penfold’s (Chapter 7)account of the shrimp cluster in Venezuela. This country is known to have suf-fered through disastrous changes in private investment institutional settingsrecently, where the federal government has geared toward a communist formof socialism, taking direct control of any economic sector it deems strategic(The Economist 2007). As firms in this sector lack appropriate government-supported market institutions as well as abilities to create a cooperation-inducing environment, they are eventually unable to overcome commonproblems such as the Taura virus that threatened the entire industry.

All in all, the underlying lesson arising from the debate of our chapters,in regard to institutional settings is that yes, governments do have an impor-tant role in shaping appropriate innovation-inducive institutional settings.However, as it became clear across the various chapters, firms can and musthelp shape their institutional environments by developing strategic responsesinstead of adapting passively. Additionally, firms can also actively developresources to cope with weak institutional environments. Firms can developgrowth-oriented responses from an active strategic choice perspective insteadof just constrained strategic choices. The studies included here demonstratehow relevant it is to see competitive advantage from a firm and entrepreneur-ial perspective as opposed to a ‘waiting for the government to do something’perspective. Even with regard to investing in foreign markets, where LatinAmerican firms find themselves to be new players in an inhospitable market,firms are still able to choose institutional settings that are more similar tothose they are accustomed to in their domestic markets.

16.1.2. Transaction Cost Economics

Transaction cost economics, as traditionally applied, often takes the insti-tutional environment for granted. As such, this theoretical perspectivehas mostly been applied to developed market contexts, characterized bystrong legal regimes, and binding social norms. Less is known about gov-ernance structures for transactions in emerging economies (Hoskisson et al.

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2000: 254). Latin American institutional settings, as explored above, bearsome important characteristics which affect how firms are organized as wellas how they transact with each other. Particularly, measurements of outcomesfrom agreements as well as judicial enforcement of contracts are importantfactors that hinder efficient transactions among business and economic actorsin Latin America (Carrera et al. 2003). Additionally, in a country where theinstitution of transparent market pricing does not often accurately providesignals for efficient resource allocation, measurement costs are known to bequite high. Here, resource markets are affected, and consequently the easewith which firms obtain competitive inputs is strongly affected. (See mymore extended debate on resources in the section that follows.) Similarly, incountries where official discretion rather than the rule of law seems to defineproperty rights, enforcement costs are high (la Porta at al. 1997). As such,transaction cost economics often suggests that firms develop a preference forhierarchical governance over the private market.

What this means for Latin American firms is that the most successfulenterprises are often those diversifying into new product markets to greaterextent vis-à-vis successful firms operating in more developed markets. In away, transaction cost economics explains the incidence of unrelated diversifi-cation. Khanna and Palepu (1997) argue that unrelated diversification by largebusiness groups is efficient in emerging economies because of their under-developed capital and labor markets. This argument connects closely withWilliamson’s arguments (1985) that market failure leads to diversified hierar-chical firm development. To exemplify how successful firms have manipulatedthese forces, authors of several chapters in our book explore the strategiesemployed by diversified organizations, the so-called business groups.

Grosse (Chapter 2), for instance, highlights how close-knit groups of stake-holders (e.g. families or groups of families) have held tight ownership controlof organizations, even where these organizations have outstanding sharestraded in domestic or foreign exchanges. By vertically integrating, and form-ing larger capital and labor pools, Grosse explains, these firms form advan-tages that confer them an edge over other domestic and foreign competitorsin this Latin American environment, which is characterized by failing marketsfor these very resources.

Another good example of successful unrelated diversification, which followsthe transaction cost economics rationale, is Héctor Ochoa’s study of theColombian GEA (Chapter 6), as well as Grosse and Thomas’ study of fifteenof the largest Mexican economic groups (Chapter 11). These organizationsare known to have pursued very high levels of business diversification. Inthe particular case of GEA, its activities ranged from a chocolate, cookies,and crackers company, going through cement all the way through financeand insurance. Ochoa’s debate of GEA’s internal organization demonstratesthat firms can not only take advantage of scale and scope economies in

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related business activities (as explored by Grosse in Chapter 2) but also accrueadvantages of risk diversification and resource pooling in unrelated businessactivities. As an example of the advantages of related activities in the foodsdivision, GEA consolidated thirty-three food companies, giving this divisionscale and consumer identity power to dominate the local market vis-à-vis localand foreign competitors. On the other hand, an example of the advantagesit gains from unrelated diversification include market power and a largercapital pool that enable it, for example, to develop its powerful distributionchannels—which as Ochoa highlights, lies at the heart of GEA’s competitiveadvantage—in the local market as well as abroad. The same type of rationaleapplies to Grosse and Thomas’s Mexican business groups. By amassing largerpools of resources, these firms develop sprawling distribution channels whichlie at the center of these Mexican success stories. Such advantages also playeda central role in helping these firms expand abroad; such an expansion fur-ther solidified these firms’ resistance to economic volatility in their domesticmarket, such as that observed in the Tequila Crisis of 1994 and 1995.

Although it may sound as if larger degrees of diversification into unrelatedbusinesses may seem the pattern in Latin America, Frachia and Mesquita(Chapter 9) explain that this is not always the case. Business groups in factmay take very diverse forms; some of them pursuing only limited levels ofdiversification. At first, Frachia and Mesquita’s study of Argentinian businessgroups may sound as if practice defies theory, that is, that the preceptsof transaction costs discussed above are not always correct. However, asFrachia and Mesquita explained, the concepts apply equally here. The catchis that, the competitive landscapes across various economic sectors, as wellas capital and labor markets, developed differently over time, following theimplementation of market-liberalizing reforms in those countries (as it wasthe case in Argentina and several other Latin American countries throughoutthe 1990s). Particularly, despite expectations that market-liberalizing reformsguided by the so-called Washington Consensus would turn failing capital andlabor markets into more fluid environments, and as a result, according tothe transaction cost perspective, fewer firms would pursue larger degrees ofdiversification, the fact is that several of these spot markets take longer todevelop. As a consequence, one is likely to observe a mix of business groupspursuing different strategies. According to Frachia and Mesquita’s analysis,business groups operating mostly in business segments least affected by theliberalizing reforms were likely to continue pursuing larger degrees of diversi-fication (so as to defend themselves from higher transaction costs); on theother hand, business groups operating mostly in business segments mostaffected by the liberalizing reforms were more likely to decrease their degreesof diversification, now that risks of transaction costs were lower.

As one can see, by carefully analyzing how likely particular markets areto fail, firms can devise different organizational forms so as to cope with

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the home environment. The examples and analyses included in our bookindicate that by carefully crafting their corporate strategies (i.e. levels of diver-sification) according to the concepts discussed here they are more likely tosucceed vis-à-vis local and foreign competitors unaccustomed to such marketcircumstances.

16.1.3. The Resource-Based View of the Firm

The main precept of the RBV, as summarized in our early discussion above,is that where firms are able to amass valuable, rare, and costly to imitateresources they are to earn a competitive advantage. The studies we includedhere that highlight the value of particular types of resources for compet-itive advantage of Latin American firms differ from other traditional RBVstudies in at least two very important ways. First, the value of resources isintrinsically based on a particular context. Depending on the characteristicsof such context, a focus on certain resources is actually known to createstrategic inflexibility and core rigidities for the firm, leading to negativereturns (Leonard-Barton 1992). Second, the ease with which resources canbe acquired, an issue first discussed in Barney’s debate of factor markets(1986), is often taken for granted in several RBV studies, particularly thoseinvolving developed markets. Indeed, the very fact that factor markets oftenfail in emerging economies, and in particular in Latin America, indicates thatresource acquisition may be one of the most difficult tasks for top managersof Latin American firms to handle. In sum, in the context of Latin Americanfirms competing at home or abroad, any discussion of resources as sources ofadvantage have to be combined with a characterization of the institutionalenvironment and market failing characteristics surrounding the firm. Firmstherefore have to manage the social and market context of their resources andcapabilities in order to generate rents.

To this point, little research using an RBV framework has examined strategydifferences in the social context of emerging economies (Hoskisson et al.2000: 256). Like most resources that create competitive advantage in emerg-ing economies, on the whole they are intangible. However, they are notnecessarily product market resources, as suggested by the knowledge-basedview of the firm (e.g. technologies or patents). Some resources are especiallymore valuable in the context of emerging economies. Thus, firms in emergingeconomies are often known to reap the benefits of first-mover advantagesthat include being the first participants in new product markets, reputationeffects, and economic advantage of sales volume, and dominance of sprawlingdistribution channels.

One of the best examples of the intricacies involved in resource develop-ment and deployment in Latin America is presented in the study of AndresHatum and Andrew Pettigrew (Chapter 12). Through an ethnographic-like

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study of two Argentinian champions respectively leading the pharmaceuticaland food industries, Sidus and AGD, Hatum and Pettigrew explore the valueof organizational flexibility as an intangible resource in helping firms to copewith the constantly changing environmental conditions that characterizeArgentina’s (and most of Latin America’s) economy. Their study highlights theimportant match that exists between environmental conditions (i.e. unstablecontext) and the value of resources and capabilities (i.e. organizationalflexibility). This study is particularly rich in detailing the types of capabilitiesthat allowed these firms to have organizational flexibility, and therefore,differentiate themselves from local and foreign competitors. Such capabilitiesincluded know-how on acquisition processes as well as an uncanny drive tolearn from experiences of successful firms in other industries.

The match between context and resource value also seems to drive newresource investments, as firms recognize the nature of their surrounding insti-tutional environments. In fact, in emerging economies, such as those in LatinAmerica, local competitors may develop capabilities for relationship-basedmanagement in their environment that substitute for the lack of institutionalinfrastructure. These assets may be used domestically or in transferring abroadto other emerging economies where such assets would also be useful. Suchis the case of Tavares’s study (Chapter 2) of foreign direct investments andcompetitiveness of Latin American firms. In a way, her analysis confirmsthat as firms develop resources and capabilities to operate within a certaincultural and political context, as they expand geographically, the most likelyforeign markets they are bound to succeed in are those of similar institutionalsurroundings. In a similar vein, Goldstein and Toulan’s analyses of BrazilianEmbraer and Argentinian Techint highlight that global competitiveness ofLatin American firms rely not only on the unique technologies and product-related capabilities (i.e. aircraft manufacturing and industrial steel products,respectively) that these firms developed but also on organizational capabili-ties. Such organizational capabilities, similar to those described by Tavares inChapter 2, relate to these firms’ abilities in maneuvering through the mazeof bureaucratic and political environments of an emerging economy. This isobviously not to say that these firms’ product technologies are not valuableoutside their home institutional context. In fact, these authors highlight thatboth Embraer and Techint seem to demonstrate that Latin American firms,though not always known for their technical capabilities, are indeed able tocompete globally, with a competitive edge, based on their having developedsuperior product technologies and know-how.

As far as competing in the local markets against multinationals is con-cerned, it seems that successful firms have not only relied on their superiorflexibility and technological know-how, but also on first-mover advantagesin the possession and dominance of strategic resources. For example, Grosse(Chapter 1), Ochoa (Chapter 8), Frachia and Mesquita (Chapter 9), Grosse and

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Thomas (Chapter 11), and D’Andrea (Chapter 16) all highlight the importanceof dominating distribution networks in the local markets. Here, brand nameand familiarity with the local consumer give these local firms a significantedge over foreign firms which are often unfamiliar with not only habits oflocal consumers but also with how to operate within this particular culturalinstitutional setting. All in all, it seems early relationships with distributionchannel gatekeepers, governmental agency officers, as well as opinion-leadercustomers seem to be a valuable intangible resource for local firms. In fact,early relationships, an intangible asset, can be said to give tangible benefits,such as access to the limited number of government licenses, as well as limiteddistribution channel shelf-space.

Still in the matter of contexts that enhance the value of resources, severalsuccessful Latin American firms have pursued niche strategies. The underlyinglogic is that of seeking positions that have not yet been subjected to thehighly rivalrous context of globalization, therefore helping dodge the land-slide of aggressiveness often seen coming from multinational corporationsentering emerging markets. In this regard, D’Andrea (Chapter 16) gives usa very rich description of retailing successes to the consumers known to beat the ‘bottom of the pyramid’—BOP (i.e. very low-income consumers)—as opposed to those at the ‘top of the pyramid’—TOP (i.e. higher incomeconsumers). Because BOP shoppers make up the overwhelming majority ofconsumers in Latin America, and also because these consumers are oftenforgotten by large foreign multinationals who are often only able to targetwealthier Latin American consumers who are more similar in profile to thosefound in their home markets, several key abilities seem to give local firms astrong advantage in the competitive landscape. D’Andrea lists several of these,including relationships with small local mom-&-pop retail outlets, packagingthat is more suitable for very low-income consumers (e.g. selling cigarettesin smaller quantities than the traditional 20-cigarette pack), as well as devel-oping abilities to produce at low cost, but still maintaining a strong brandimage. By managing these capabilities, indigenous firms, unknown to theglobalized world, have taken on multinational giants. Just to cite two classicexamples from D’Andrea’s research, Peruvian Kola Real maintains a significantedge over colossal competitors Coke and Pepsi in the low income marketsegment. Likewise, through such key capabilities in retailing Jabon La Coronahas beaten Proctor & Gamble, Colgate, and Unilever in the Mexican soapmarket.

In regard to resource acquisition, my discussion above on transactioncost economics highlighted the difficulties one may suffer when handlingresource-bundling activities in contexts characterized by failing capital, labor,and inputs markets. Other than vertically integrating, firms have several otheroptions to ensure their ready access to key competitive resources. For example,

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many competitive advantages in Latin America seem to be based on networkrelationships and close business–government ties, such that firms becomeeffective monopolies in their home markets. The research by McDermott(Chapter 5) and Penfold (Chapter 7) seem to take us in that direction.

A valuable example of successful resource acquisition and development isoffered in the study by Dong-Sung Cho and Keum-Young Chang (Chapter 14).Using experience from company strategy in Korea, they bridge the path toour context with resource-development lessons that can be useful to LatinAmerican firms. Their examination of the Yuhan–Kimberly joint venturedemonstrates how local firms must face foreigners not only as competitorsbut also as potential partners, from whom they can amass lacking resourcesand capabilities, and learn how to become more competitive. Among theintangible resources this joint venture has created, one can appreciate thevalue of reputation for fair people management and ethical behavior and thefostering of innovative management techniques. Lastly, the theoretical modeloffered here (the SER-M model) enables one to link leadership, environment,resources and mechanisms through which these factors interact to help thejoint venture sustain its advantage vis-à-vis its competitors.

In a similar vein to that of Cho and Chang, Wood and Caldas also carefullylay out a conceptual model (SCAR, for sustainability, cost, attractiveness, andreturn) that help firms identify one’s particular strengths and weakness versusforeign firms, especially in regard to resources and capabilities. As they high-light, the most challenging difficulties Brazilian firms face relate to amassingcapabilities that help domestic firms overcome failing institutional settingsand market contexts, much in the same way Hatum and Pettigrew discussedthe value and importance of organizational flexibility.

In essence, the research presented here demonstrates that a firm mustunderstand the relationship between its company assets and capabilities, andthe quickly changing nature of the institutional infrastructure as well as thecharacteristics of its industry. In so doing, the emerging economy firm may beable to become an aggressive contender domestically or globally by using itsresources as sources of competitive advantage. As the markets are liberalizedand globalized further, managerial expertise derived from experience withclosed economies seems unlikely to provide a resource in emerging economyenvironments, as such large conglomerates are likely to have to change theirapproach to diversification and resource acquisition.

As a concluding remark, in this book we aimed at studying not only theunparalleled circumstances Latin American firms face in regard to their sur-vival and competitiveness but also the unique challenges they go throughto develop strategic decisions that enable them to overcome such distinctivedifficulties and attain an advantage vis-à-vis local and foreign competitors.We obviously do not offer answers to all problems, but it has been our

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hope that our small effort will help light new avenues for further acad-emic and professional inquiry into the competitiveness of Latin Americanfirms.

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377

Index

aboriginal communities 78Abramovitz, M. 68ACAC (AVIC Commercial Aircraft Co.) 280,

281, 282, 283acceptance 173access to markets 51, 52, 111, 144

permissions 205preferential 327privileged 280

accountability 298Acevedo 204acquisitions 19, 38, 47, 53, 74, 75, 186, 254,

260, 275bargain 223benefits reaped from 55consolidation frenzy (1990s) 232cost of 59downstream assets 56followed by expansion within or outside 125global 48growth through 276innovative ways of paying for 336multiple 58profitable opportunities 219rationale for 278restrictions on growth of companies

through 55strong sense of opportunity when dealing

with 221technology, overly ambitious 93underpriced opportunities 34see also M&A

action plans 346active waiting concept 243adaptation 59, 60, 170, 174

assessing 173fast 179firm-level 169hindered or promoted 244understanding of 173upgrading through 104

adaptive process variations 345adaptiveness 172, 174added value 47, 77, 134, 138, 330

foreign activities 50high(er) 87, 132, 145, 154, 235, 285, 352producers trying to increase 160services aiming at improving 217

ADRs (American Depositary Receipts) 260, 277,321

adversity 297advertising 126, 135, 138, 342

adequate budget for 136Aerolineas Argentinas 206affiliates 32, 41, 255, 328affordability 138, 141, 345, 352Africa 58, 276

Portuguese-speaking countries 57after-sales servicing 283AGD 18–19, 175–94, 373aggregation 95aggressive tactics 297Agip 277agribusiness 78, 96, 259agriculture 203, 250

contract 72–3agro-industry 150, 158agronomists 90, 106, 107AIG 282Air Canada 272Air China 283Air-Liquid 278Air Traffic Management Bureau (China) 283air travel 48aircraft manufacture 19–20, 67

see also Bombardier; EmbraerAlbaine, Luis 285Albert, S. 189Algoma Tubes 276Alianza 130alliances 98, 105, 125, 130, 255, 277

learning new business practices through 216severed 260see also strategic alliances

Almacenes Exito 126Alpargatas 224aluminum-based products 38Alvarez Morales, Víctor 128

378

Index

AmBev 55, 243, 307América Economía magazine 30, 309América Móvil 12, 38, 47, 252, 253, 255Amgen 186Amore Pacific 297Amsterdam 313, 330analytical chronologies 178Añaños brothers 343Andean Pact rules 143Andean Region countries 125, 133animal health sciences 77ANOVA statistical analysis 213Anshan 286ANTAD 349, 350antagonisms 94Antarctica brewery 243anticompetitive practices 279antidumping rules 278Antioquia Union, see GEAanti-pest prevention systems 106antitrust authorities 55Antofagasta 35Anzoátegui 157, 158AOL Latin 37appreciation 154aquaculture 78Aracruz 17, 239Araya 158Arcelor 55, 287Arcor 186, 341, 342, 361Ardila Lulle, Carlos 37Ardila Lulle Group 37–8, 126Argentina 19, 45, 51, 361, 371

automated and capital-intensive plants 73business groups 16, 201–31changing business and economic

conditions 18collapse of convertibility plan 320companies facing turmoil 17company survival 169–98emerging consumers 349, 354emerging consumers 358famous fixed exchange rate 320financial crisis (2002) 227food products market 341GMOs 67, 70, 72–3growth of local stock markets 41investing in downstream segments 56labor productivity 67leading banks with major local operations

in 22leading industrial group in 275low-income consumers 22manufacturing production 70market reforms totally reversed 153monetary discipline 320national financial system 336

oil privatization 40outward investment from 47pro-market reforms 87regional free market trade agreement 206,

219response to Asian crisis and Russian

default 320response to financial contagion 319SMEs closed down 67strategy based on extensive distribution 342structural transformation 70wine industry 16, 23, 81–122see also AGD; Arcor; Bodegas Lopez; ExportAr;

Hutchinson; Impsa; Loma Negra; Mendoza;Pérez Companc; San Juan; Sidus; Techint;Telefónica de Argentina

Argos, see Cementos ArgosArizu 93Arsa 275Asian Aerospace Conference (2002) 280Asian Crisis (1997) 315, 319, 322

financial aftermath 320reaction to 334triggering event for 328

Asian Tigers 46, 309, 315, 316, 328average savings rate 333effect of crises on large companies 321financial systems 318highest rates of economic growth 332marginal capital/output ratio 335national financial systems 333

Asian Wall Street Journal, The 294aspiration 344, 352assembly 20, 34, 281assertiveness 303asset-seeking investments 47asset swaps 55assets 58, 219

bank 314, 315, 316complementary 50considered to be in ‘strategic’ sectors 221divested 55downstream 56fixed 330foreign 47, 314geographical location/distribution of 52,

53intangible 144loans secured by circulating 329overseas 330return on 256, 257, 262strategic 144tangible 144technological 56

associationalism 93–4inherited 99

Astley, G. W. 169

379

Index

audit 98, 180independent 204

austerity 335Austin, J. E. 233, 234Australia 29, 48, 108authority 302

multiple layers of 245strong 298

auto industry 34, 277auto parts 18, 38, 48, 54, 61, 244–5

heavy toll on 259high-quality production of 255

automation 236autonomy 21, 108, 132, 302

building a corporate culture that pursues 298corporate culture that encourages 294decision-making 182high degrees of 182operational, boosting 183

Avianca 125Avrichir, I. 246Ayacucho 343

B-brand market 344backward integration 275backwardness 81–2, 103, 104, 105, 107Bagó 12, 186Bahia 325Bahrami, H. 171–2Baier, A. 366Bain, Joe 7, 8bakery 38balance of power 107balkanized society 85Banamex 258Banca Serfin 260Banco Azteca 254, 261Banco de Chile 36Banco de la Nación 40Banco de Santiago 36Banco Itaú 243Banco Santander 22, 36Bancolombia 126, 128Bangalore 34bank deposits 315banking laws 34bankruptcy 244, 260, 300banks 30, 76, 163, 213

alliances with 98family-owned 243foreign 334government-owned institutions 125large 243largest providers of capital 315leading 22private 318productivity 236

provincial 101retail 236shares sold to 258state-owned 243Swiss 314see also central banks; commercial banks

Bantel, K. A. 179Baotou 286bargaining power 98, 341

strong 270Barham, J. 145Barney, Jay 8, 296, 366, 372Barranquilla 137barriers 95, 137, 269, 355

capital 235collaboration 109cultural 12–13, 59entry 10, 33government 235institutional 50internal 246investment 3, 289language 59nontariff 47outward investment 57substantial efforts in overcoming 60sustainability 110switching stores 358tariff 47, 134trade 3, 53, 232

Basualdo 204Bavaria 125BBVA 22beer 36, 37, 260, 261

imported 341Beijing 19, 279, 280, 285Beijing-Brasil churrascaria 56Belgium 55benchmarking 19, 51, 90, 103, 108, 185–6, 191

aggressive 220competitiveness, analyzing 159constant 189distinct parts of value chain 106price 354

Best Corporate Image Award for EthicalManagement 294

Best Employers in Asia 294best practices 56

databases on 104diffusion and application of 93improvements in 156

Bestfood 186beverages business 38, 47, 307Big Cola 343bills of lading 329Bimbo Group 10–11, 12, 48, 342, 345, 348biochemistry 180

380

Index

biosafety 164biotechnology 3, 77, 186, 188birth rates 304Blanco 258Blem furniture polisher 344, 347blue collar class 360BNDES (National Bank for Economic and Social

Development) 274bodegas 23, 41Bodegas de Argentina 94, 105Bodegas Lopez 23, 344Bogota 137Bohai Bay 286Bohai Sea 287bold management innovation model 301–3Bolivia 56, 67, 130Bollywood 343bolsa blanca 73Bolsa de Brazil 323Bolsa de Comercio 107Bombardier 20, 274, 275, 282Bonarda 90bonds 22, 314, 315, 316, 329

corporate 330, 334international 330railroad 330

Bonferroni adjustment 215book printing 126booms 13

commodities 313financial 329infrastructure 243outward investment flows 48stock market 321

BOP (bottom of the pyramid) 22, 23, 340–63,374

Bordon, Jose Octavio 97, 99Borg-Warner Automotive Inc. 259Botelho, Mauricio 273, 282, 283bottle & cap production 38bottling 93‘bottom up’ view 84Bourgeois, L. J. 214, 215Brahma 243brand names:

ability to compete comes from 255need to create 145strong 217, 219

brand recognition 142, 343brands:

acceptable substitutes 355active 136added value to 138adding through takeovers 342advertising via popular soccer teams 342attitudes toward 352, 353avoidance of changing 360

best fit for particular needs 348development of 162emerging consumers still drawn to 354exclusive 134, 135, 144global 145introducing through upper segments 344investments in 187leading 129, 132, 352local presence 343loyalty to 352, 353, 355, 360managed 161new, unwillingness to try 352, 353own 134prestige, risking 345recognized 137, 138, 142, 145regional 137rejection of 344responsibility for promoting 135strong positioning of 137switching 352, 353, 355top 347value 354well-known 137, 341

Brasilia turboprop 280brass 38Brazil 39, 40, 45, 51, 57–8, 78, 318, 375

African origin population 344approach to BOP 343commercial banks lending to

government 327companies facing turmoil 17competitive shocks 201consumer market 54courted assiduously by Chinese 270customs union 206emerging consumers 349, 354, 358equity market development 323firms and challenge of

competitiveness 232–49firms that have subsidiaries abroad 60foreign debt 334frequent bouts of illiquidity 22industrial development 325–6low-income consumers 22manufacturing production 70monetary discipline 320new possibilities for firms 324official Chinese goodwill visit to 283recycling processes 307regional free market trade agreement 216,

219relative uncompetitiveness 17response to Asian crisis and Russian

default 320response to financial contagion 319risk aversion 325savings rates 331

381

Index

Brazil (cont.)shrimp production 151, 159SMEs export to 52street markets 356sudden weakening of currency 320sugar pricing 138technology-intensive manufacturing

industries 67vehicle industry 72see also Aracruz; Banco Itau; Camargo Correa;

CVRD; Embraer; Gerdau; Natura; NazcaCosmeticos; Novo Mercado; Odebrecht;Petrobras; Promon; Sabó; Sadia;Votorantim; Weg

Brazil-China Expo (2004) 281bread business 10–11, 342, 345brewers 55, 125bridges and tunnels 39Bruton, H. J. 204, 205, 227BSF (Bechtel, Sinopec and Foster Wheeler) 285budget control 184Buenos Aires 275, 347Bufalo 260Bulgheroni 224Bunge 185Burger King 37buses 259, 260Business and Company Resource Center 259business associations 111business climate 152, 153–5

adverse and volatile 165business culture 244business dispersion 16business groups 29

corporate strategies in the wake ofcompetitive shocks 201–31

prevalence as leading firms 32business management 142business models 242, 346

bullet-proof 244good 246

business opportunities 243buying power 55BVQI (Bureau Veritas Quality) 307

CAAC (Civil Aviation Administration ofChina) 279

cabernet 89cable and wire products 38Caldas, Miguel 17–18, 246, 367, 375Cali 37, 137Camargo Correa 48, 244Cambio Rural 104Campbell, A. 189Canada 48, 55, 274, 275, 276, 314

financial systems 314high-income consumers 132

SMEs export to 52candy 137–8

impulse spending on 359top world producer 341

capabilities 9, 22, 84, 251, 279administrative 152caregiver 353competitive 11distribution 18dynamic 171executive decision-making 204export 66–80internal 8linguistic 61managerial 171marketing 12new 86opportunities to develop 302organizational 171, 220organizational learning 271path dependency of 209signal transmission 255social 68stand-alone independent 303upgrading 109world-class R&D 305see also production capabilities; resources and

capabilities; technologicalcapabilities

capacity 259excess 335

capacity for action 173capillary system 134, 137, 138, 144capital 139, 223

access to 163, 326allocation of 312, 315, 316, 333, 335availability of 244, 246, 348, 335banks still largest providers of 315barriers posed by 235denied 330difficulties of obtaining 33equity 310, 315, 323, 324expensive 333, 348foreign 205, 314, 333gathering 315, 316government borrowing of 327inactive 244political leverage to obtain 318private sources of 333raising 310, 315, 330scarcity of 239, 312, 333, 348seed 275shortage of 330steady infusions of 310stock market insignificant as a source of

321working, bias against lending for 329

382

Index

see also human capital; investment capital;political capital; also under followingheadings prefixed ‘capital’

capital costs 53, 244, 246high 239influence on 52reducing 53

capital flight 258, 259, 312careful attempts to measure 31

capital goods 69sponsoring imports of through exchange rate

manipulations 203capital-intensive industries 66, 73, 233, 335capital markets 158, 204, 315

allocation of credit 330European, bonds floated in 329functioning of 76imperfect 34, 52international, access to 59issuing government bonds in 329lower-cost, borrowing in 9more vibrant, development of 78national 22, 336raising financing funds in 145reform of 334size of 315small 22, 316weak 33

capitalism 79Caracas 37Cardoso, Fernando Henrique 280Caribbean 3, 32, 133, 144, 333

intermediate stage 145main financial centers 46main investors from 48shrimp farming 15, 157see also CARICOM; ECLAC

CARICOM (Central America, Caribbean, andMexico) 134, 135

Carrefour 254Carrera, A. 202, 204, 206, 207, 210, 225carriers 343Carso Group 3, 11, 29, 38, 252–3, 255, 256Cartellone 224Carvajal S.A. 126CASC (China Aviation Supplies Import and

Export Corp.) 280cash 273 274, 331, 354

abundant access to 205insufficient 348preference to pay 359rate of internal generation 317

cash flow 54, 322more stable 204

cash flow management 138, 140Casino 126catalytic processes 73

catchup process 67Catena 93cattle farming 158caudillos 324Caves, R. E. 226Cavic 96, 97CCM (Controladora Comercial Mexicana) 258CCU 36cellular phone services 252, 253, 255, 347

deregulation in industry 261lowest charges in Mexico 254

cement 14, 48, 54, 144, 145, 239demand for 255, 259largest companies in world 255, 306, 341major expenditure in the industry 259see also Cementos Argos; Cemex

Cementos Argos 14, 126, 129Cemex 11, 12, 23, 29, 47, 48, 54, 255, 306,

309, 335–6, 341, 346, 361application of 911 technology 345challenge for 56foreign operations 259internationalization 53

CEMPRE (Compromisso Empresarial paraReciclagem) 307

Cencosud 336Central America 130, 144, 163, 270

free-market opportunities 134intermediate stage 145OFDI from 46sales volumes located in Andean

Community 133see also CARICOM; Costa Rica; Dominican

Republic; Guatemala; Mexico; PanamaCentral Bank of Chile 319central banks 329

newly independent 205central planning 316centralization 83, 172, 178, 191

developmental efforts 203high level of 191low 174, 179, 182–4

CEPAL 127ceramic tiles 38cero tillage 72certification 75, 160, 161, 272, 280Cerveceria Regional 37Cervecerias Cuauhtémoc y Moctezuma 260chaebols 29

expanded too rapidly 318financial distress 319

Chakravarthy, B. 170challenges 21, 46, 232–49, 298

corporate culture that encourages 294future 152, 153, 156overcome 297solving 348

383

Index

challenges (cont.)strategic 99, 101systemic, structural and business factors 246threatening 250

Chandon 93Chang, Keum-Young 20–1, 375Chang, S. J. 225change 173, 179, 273

ability to react to 244alertness to 243anticipated 187–8, 191environmental 170, 171external 169hindered or promoted 244institutional 85, 110, 151interaction of continuity and 85legal 188market 187mechanisms for inducing and sustaining 85perceived not to be a favorable process 222policy 107political 153, 154rapid 191reacting quickly to 243regulatory 188required 302resistance to 190strategic 188, 202, 207structural 68–72, 73, 183technical 271unexpected 244

Chapman 313chardonnay 89Chateau Vieux 344Chávez, Hugo 15, 40, 151, 153checks and balances 329chemicals sector 259

heavy 299Chengdu 280, 283Chevron 277Chicago 135Chile 37, 40, 45, 51, 78, 108, 346

banks 22, 36burst of initial public offerings 321competitive shocks 201dumping ground for Asian manufactured

goods 319emerging consumers 349, 358famous retirement system 319labor productivity 67low-income consumers 22manufacturing production 70mining 70national financial system 336new industry inceptions 70private pension fund schemes 312pulp and paper industry 70

regulated inflows of foreign portfolioinvestment 319

response to Asian crisis and Russiandefault 320

response to financial contagion 319salmon farming 15, 16, 67, 70, 73–5SMEs closed down 67structural transformation 72telecom sector 70wine production 67, 70, 89see also Cencosud; Conama; Corfo; ENAP;

ENDESA; Enersis; Floraverde; FundacionChile; Luksic; SAG; Sernapesca

Chilean Construction Chamber 130China 19–20, 34, 56, 303, 318

high-income consumers 132investments in 47multilatinas go to 269–92shrimp production 151, 159

China Aircraft Supply Corporation 282China Aviation Supplies Import and Export

Corporation 20China Eastern Airlines Wuhan Ltd 281China Southern Airlines 280, 281Chinese Iron and Steel Association 287Cho, Dong-Sung 20–1, 296, 375chocolate 14, 15, 128, 131, 132, 133, 141

candy category 137–8exclusive brands 134group leader 137

Choi, U. 225Chongqing-Chengdu route 283Chudnovsky, D. 144CIARA 186Cigatam 38CILFA 186Cisneros Group 3, 29, 37, 253Citibank 22, 250civic associations 97civic mindedness 84CJ 297Clarin 213, 226Clark Chapman 278cleaning products 354CLEIF (association for enologists) 94climatic conditions 91, 95climatic zones 93clothing 34, 38, 250clusters 81, 207, 213, 215, 223, 224

biotechnological 73development of 16, 78differences across 214independent suppliers 75sector-specific 74shrimp 150–68strategic responses to competitive

shock 217–22

384

Index

CNOOC (Chinese National Offshore OilCorporation) 285

coalitions:broad 108cross-sectoral and cross-regional 103dominant 174, 178, 179–82

Coca-Cola 37, 255, 260, 261, 300, 343,374

distribution reconfiguration 347hogares productivos 343, 346

Coca-Cola Retailing Research Council-LatinAmerica, The 349

Coche Island 158Codelco 36coercion 331, 332coffee 131, 133, 141

gourmet 132, 135ground 137growing activities 127high quality 132reliance as main source of foreign

exchange 326soluble 137

cognitive diversity 19, 191Cohen, J. and Rogers, J. 95coins 324cola 23, 37Colcafé‘Cold Bread Routes’ 342cold storage facilities 137Colgate 23, 343, 374collaboration 84, 105, 176, 303

barriers to 109benefits of 86decentralized, voluntaristic attempts at 109gradual 94little 162nascent 93producers and provincial government 14satellite and space research,

Sino-Brazilian 281collateral 145, 329

tangible 330collective action 75, 78, 83

complex 107concerted 94improving 106–8

collective problem-solving 83, 85, 86, 87, 103,104

focus on 110institutionalization of 106

collectivist cultural traits 245Colombia 40, 321

competitive shocks 201emerging consumers 349, 358fresh flowers 67, 70, 75household appliances 350

leading banks with major local operationsin 22

low-income consumers 22manufacturing production 70retail conglomerates expanded into 336shrimp production 151, 159structural transformation 70vehicle industry 72see also Ardila Lulle; GEA

Colombian National Federation of CoffeeGrowers 132

Colombina 126colonial period 58, 313Coltejer 38Comerci, see CCMcommerce 324commercial airlines 125commercial banks 34, 38, 78

capital allocated 333dominance in capital allocation process 316family-controlled, national financial systems

dominated by 328lending to national governments 326, 327–8rich families often in control of 330short-term loans 33successful competition with stock

market 323commercial financing 38commercial law 92commercial paper 330commercialization 162, 163commodities 34, 160

export of 311, 313commoditization 340commodity prices 326

abrupt changes 244high 334

commodity segments 278communications 175, 342, 347

access to 341facilitating 184internal 302

Compañía Suramericana de Seguros 130comparative advantages 76, 165comparative costs 88competition 75, 105, 150–68

brutal 297foreign 56, 66, 244, 245level indicated by general level of FDI 175political 95regional 139stressed 299US-based and European multinationals 15

competition policy 51adequate 77growth beyond the limits of 55–6strengthening of 46

385

Index

competitive advantages 1, 18, 23, 52, 55, 57,58, 155, 247, 250, 296

based on SER-M 21brand recognition and 142business groups said to have 204common sources among economic

groups 39–40core competences 140, 141depended on external conditions 164finding the source which generates excess

profit 295global 59international firms gain 9key 35lack of knowledge of 162–3major 37Porter’s theory of 8resources that could be leveraged as sources

of 222shared by many large and successful firms 24shift in 253significant 60source of 288stronger 16sustainable 13, 20understanding 8

competitive edge 3, 373global 305

competitive strategy 136–9perspectives on 7–9

competitive strengths 11, 39–40and weaknesses 19

competitive threats 3, 9competitiveness 11–19

accumulation of 301country-level 234–5dependent on inherited factors 152differentiated product 301, 304–5difficult times for companies in terms of 184emerging market firms 34factor to help firms sustain and improve 156FDI and 45–65firm-level 236–9flexible 220global 3, 234–5, 307; see also international

competitivenessgreater in emerging markets 255higher levels of 128holistic approach to analysis of 295–7how each player gains and loses 347increasing the levels of 170industry-level 235–6innovative initiatives for increasing 152institutional barriers to 50internal 239–41lack of 10limited 153

long-term 139minimum scale to ensure 54negatively affected 154overseas 255–6; see also international

competitivenesssizable gaps in conditions for 246sources of 250–66sustainable 8

complementarities 158, 270components 33

aerospace 273buying at lower cost 260household appliances 48

compressors 54CompUSA 252, 253computer sciences 77computers 3, 105

chips 34Conama 74concentration 53, 75

geographic 152nascent 152overseas market 257

concrete:just-in-time system of distributing 341world’s largest producer 47

Concrete Express 126Condumex 38Confab 276confectionery 125–6, 128, 129, 131, 132, 133,

138, 141exclusive brands 134introduction of products from abroad 136most easily recalled brands 137specially aimed at children and youths 134,

136conflicts of interest 138, 328conglomerates 14, 30, 34, 38, 131, 141,

294classic 36exclusive brands 135extremely successful 244financial, consolidation of companies

into 142huge investments made by 135inherent high level of risk favors presence

of 244large 70largely integrated 206largest sales volumes 133nationally owned, property of 67net worth 132portfolio of popular consumer goods 134prominent 297retail 336

connectedness 184, 185, 186, 191consensus-building 273

386

Index

construction industry 18, 38–9, 52, 277heavy 244

Construrama 342, 346consultants 20, 93

shared cost of 94teams of 104

consumer goods 131–2, 141mass 135, 136, 137, 143popular 134protecting nascent industry from foreign

competition 203consumer markets:

major 47rapidly growing 216

consumers 38, 138benefits perceived by 139bottom of the pyramid 340–63high(er)-income 23, 132, 137, 357low(er)-income 22, 254, 348, 350, 360mass-market 254middle-class 344middle-income 137newly constrained 360–1prices competitive and appealing to 141products made attractive to 142products placed within easy reach of 345see also emerging consumers

consumption 350, 354water 76

contagion 318, 319, 334, 335containers 126context factors 234Continental Express 272contracts 93

consulting 104favored schema 204government supply 204R&D 104

control systems 60convertibility 320

incentive to restrict 324cookies 14, 125–6, 128, 129, 131, 132, 133, 141

distribution using capillary system 137exclusive brands 134introduction of products from abroad 136leading manufacturer 134most easily recalled brands of 137

Cool, K. 366‘cooperadoras’ 101Cooperala 186cooperation 16, 164

agreements 271close ties 245inter-departmental 302lack of 153, 156lacking in tools for 152potential benefits of 156

promoting 155scarce 162support institutions that promote 156

cooperatives 14, 86, 94, 98, 105federation of 97prominent 91small 98

coordination 77, 81, 92, 93, 346challenge of 95complex 94decentralized, voluntaristic attempts at 109policy 94poor histories of 111private sector 161public sector 78, 161

copper 36, 38, 253Cordialsas (Corporación Distribuidora de

Alimentos S.A.) 15, 135, 141, 145core competence 8, 23, 139–42, 273

historical commitment to developmentof 220

path dependency of 223core values 190Corfo 74corner stores 145Corona Beer 341, 361Corona (sanitary porcelain) 126corporate control 34–5corporate culture 21, 294, 301

building 298corporate governance 145

bylaws 130characteristics of 11defects in 323scandal 322standards of 323

Corporate Longevity Forum 293, 306corporate strategies 201–31corralones 342corrective mechanism 335corruption 11, 153, 154

pervasive 270Corus Steel 48COSL (China National Offshore Oil Co.

Services Ltd) 286cosmetics 17, 239cosmopolitanism 171–2cost disadvantage 239cost-efficiencies 184Costa Rica 34, 78, 134

emerging consumers 349, 358household appliances 350low-income consumers 22production facilities 144

COSTIND (Chinese Commission of Science,Technology, and Industry for NationalDefence) 280

387

Index

country characteristics 22country-specific advantages 59Coutinho 233, 234, 246Coviar 111COVIAR (Corporacion Vitivinicola

Argentina) 108crackers 14, 15, 131, 132, 133, 136

diet and wholegrain 134introduction of products from abroad 136whole-grain 136

CREA (learning groups) 94, 95, 104creation and destruction cycles 13, 66–80creativity 21, 184

corporate culture that encourages 294encouraging from private sector 299expression of 298

credibility 305credit 330, 342, 358

access to 59allocation practices 309–39appropriate for major purchases 359aversion to, when purchasing

consumables 354business 253–4contraction of 328, 344developing services 236improvement of ratings 59offered to purchasers of home appliances 254out of necessity 358short-term 359special forms of 359

creoles 313crew system 304cronyism 328crop protection systems 106cross-functional teams 346cross-route subsidization 279Cruz, C. H. B. 235CSN (Companhia Siderúrgica Nacional) 48, 55CTA (Centro Técnico Aeroespacial) 273Culpepper, P. D. 86cultural differences 59, 60culture 57, 59

see also business culture; organizationalculture

currency:anchored at par to US dollar 205crisis 258devalued 300, 320, 334fixed parity 320foreign 314, 320, 325local 324, 331, 332national 324–5overvalued 87stable 332weakened 319, 320

customer satisfaction 273, 301

customer segments 277customer service 21customs duties 143CVRD (Companhia Vale do Rio Doce) 12, 47,

48, 53, 270, 306–7cycle of dependency 335cyclic crises 239Cyert, R. M. 179, 295

dairy products 141Dalmine 38, 276, 278Damanpour, F. 182Dana Corp. 259D’Andrea, Guillermo 22–3, 374Danone 15, 126, 134Da Rocha, A. 60Darwinian hypothesis 58days-off 304dead-ends 93debt 93, 258, 316, 317, 320

aversion to using 317aversion to, when purchasing

consumables 354capacity to service 335dollar-denominated 258financial costs of raising 272foreign 334, 335large interest payments on 260little new capacity to service 314not enough revenue to pay 316service ratios 333very expensive or very risky 317

decentralization 78, 90, 101, 183economic benefit derived from 270–1flexible structure requires 171geographical 325

decision-making 16, 214, 217–19, 226, 295agile 189, 190centralization of 172, 174, 178, 179, 182–4,

191decentralized 107–8, 171executive capabilities 204family-based 17, 209, 220–1, 221–2fast 189, 190firm-specific 209formalization of 172, 174, 178, 179, 182–4,

191participation of organizational members

in 183paternalistic style of 222, 223strategic 182, 183, 209, 224, 367–9

deferred payment provisions 273delegated authorities 298deliberation 86, 87

iterative 110structured 107

deliberative forums 106, 107

388

Index

delicatessen 131demand:

cement 255, 259dropped drastically 304insufficient growth of 239pent-up, realization of 271real growth 240sudden variation in 244travel 279

demergers 130demographic analysis 178, 180demographic variables 360department store chains 252depoliticization approach 83, 86, 87, 96, 109,

110depressions 314deregulation 46, 59, 66, 70, 176, 205, 222, 223,

256, 262impact of 261, 263

Dersa 176, 191Desc 255, 256, 258–9Descartes, René 295design:

as a limiting factor 328–31networked 243structural, flexible 171

detergents 343Detroit’s Big Three 259devaluation 258, 259, 261, 300, 320

citizens seeking to protect savings from331

massive 324prior warning of 332too severe and too frequent to ignore 328triggering event for Asian crisis (1997) 328

developing countries 46debt service payments 333defining characteristics of markets 54federalism and party systems in 110investment by companies based in 52major investments made by multinationals

from 143ownership advantages of transnational firms

from 57possible competitive conditions for

enterprises in 234size of MNCs 246successful 235transnational firms from 47UNCTAD ranking of transnational

companies 233development competences 247diapers 294, 297, 298, 301, 304

disposable 344Diego Cisneros, see CisnerosDierickx, I. 366differentiation 189, 190

digital production organizationtechnologies 78

Di Maggio, P. J. 173Dina 259–60Dinero magazine 137DirecTV Latin 37disclosure 204discontinuities 186discount 342, 355discourse analysis 178dispossession 331disruptive activities 186distribution 90, 160

capillary strategy 134, 137, 138, 144direct 136, 342exclusive agreement 37extensive 342, 343, 345international 15, 135, 141local formats 23selective 342superior 18, 38

distribution channels 341ability to build 255access to 141, 144creation of 162early relationships with gatekeepers 374efficient 141intermediaries usually control 161limited shelf-space 374more extensive 35powerful 371products that use the same 128, 140proprietary 252redundant processes related to products that

use same 128sprawling 371, 372support to traders in 135

distribution networks 129–30, 132, 138dominating 374efficient 134enhancing 136extensive 141integrated 144major strength in 137mastering 58regional 144relationships with 57superior 251

diversification 16, 176, 202, 205allowing companies to move forward 182average levels of 215–16conglomerate 30, 261–2export 333firms above a high threshold of 202general principle of 257geographical 53, 214, 217, 225, 226, 276greater levels of 201, 202

389

Index

diversification (cont.)increasing levels 223international 18, 223, 256, 257low versus high 256outlook appears unlikely 150overseas 18portfolio 53, 209, 217, 221product line, greater or lesser 17product market 214, 215, 225, 226related businesses 214risk 51, 52, 53–4, 150, 216riskier than expanding production of export

commodity 330sectoral 256, 257, 263strategy similar to other major groups 253unrelated businesses 30, 214, 253

diversity of backgrounds 172dividends 322division of labor 69domestic content industries 79domestic environment 234dominant coalition 174, 178, 179–82Dominican Republic 129Doña Maria 260Doner, R. F. 110Dongfang Boiler Works 285downturns 242, 256

business vulnerable to 317cyclical 314, 317

drag net fishing 157drawback 154Duesenberry, J. 331Dunning, J. H. 9, 47, 50, 51, 52, 59, 143–4duties 244, 245, 282

EAF 286E&P (exploration and production) activities 53,

277, 286early movers 186earnings per share 324EASA (European Aviation Safety Agency) 272East Asia 46, 67

dynamic economies 79Eastern Europe 315

difficult transition 316emerging markets 13, 24, 30, 40

ECLAC (UN Economic Commission for Latinand the Caribbean) 45, 47, 51, 53, 57, 59,61

eclectic paradigm 143–4Economia magazine 233economic crisis 360–1economic cycles 221economic development 81, 110, 145

community cooperation generatedtoward 14

failed 81

post-World War II efforts to spur 312rapid, cycles which lead to 13relation of economic groups to 40–1success case of 299understanding of 68

economic groups:disaggregation of 17large 18, 250–66role of 29–44

economic growth 54–6, 307, 335enviable 328export-led strategies 46high(est) 316, 332lack of 151, 163low 150, 153need to adopt reforms to promote 205phenomenal 299rapid 287slow 331stimulating 319structural change as a source of 68–72volatile 87, 328

economic incentives 83, 84, 110arm’s length 87, 96, 109

economic indicators 40economic openness 41, 45, 234economic opening policy 16, 22, 138, 143,

150, 252, 263generalized 18performance before and during 256

economies of scale 17, 50, 51commitment to grow and gain 220improving 152, 156major 219regional 255relatively large 284search for greater 224significant 158

economies of scope 141Economist, The 235, 228Ecuador 39, 130, 143

disease imported from 153labor productivity 67shrimp production 151, 159Taura virus first identified in 163

edible oils 18, 170, 175–6, 185–8Edmunds, John 21–2, 367, 368educational needs 79EEAs (Estaciones Experimentales) 104, 108efficacy 76efficiency 50, 160, 189, 281

improving 21, 76, 142, 278, 346increasingly decentralized strategies 340‘paragons’ of 224supply 302, 346see also scale efficiencies

efficiency-seeking operations 47

390

Index

Efromovich, G. 125Egypt 54Eisenhardt, K. M. 207, 213, 214electric power 29

outages 154electronics 34, 253, 274

home 340Elektra 253, 254, 261elites 82, 94, 95, 104, 105, 313

concentrating profits in the hands of 325privileged 87ruling, historical rivalry between 324well trained and connected 93

embeddedness 18, 170, 173, 269macroculture 178, 179, 184–7, 191

Embraer 3, 12, 17, 19, 21, 23, 29, 48, 58, 242–3,247, 269, 271–5, 279–84, 287, 288, 289,373

orders dropped abruptly 244successes of 20, 246

emerging consumers 347myths on 349–61value for 346

emerging markets 13, 19–23, 24, 30, 40adaptation process of companies in 170beating the paradoxes of 340–63cement demand growing faster in 255challenges that threaten continued existence

of 250competitiveness greater in 255cost and availability of capital 244income per capita 3leaders in 29major part of 1measured innovation in 3overcoming specific difficulties 202prevalence of Grupos in 33sources of competitiveness 34transferable 12

employee satisfaction 21employment 75empowerment 83, 298ENAP 56encaje 319ENDESA Chile 321–3energy 40, 277, 278

integrated systems 54production of 342

Enersis scandal 322engineering 48, 52, 54, 69, 76, 78, 277, 286

strong core competence-system 271sectors 70, 72

enologists 90association for 94licensed 93

enology 88degree programs 106

Ensenada 275enseres and muebles 329entertainment 48, 305entrepreneurs/entrepreneurship 7, 33, 37, 369

keen sense of 219new vintage of 74opportunities 205skills 61, 299truly exceptional 336

entry 144, 217direct 205integrated 216speed and breadth of 224

environment 21, 297, 299–300focusing on 21rapidly changing 298

environment-friendly products 239environmental costs 157environmental factors 234environmental limitations 247Environmental Management System 307environmental pressure 171, 173

ability of firms to adapt quickly under 179firms must try to avoid 186

environmental protection 306economically viable and compatible

measures 307sound principles 76technologies 75

environmental scanning 174, 178, 179, 187–8refined sense of 221

enzymes 90Equinoccial 130equity 41, 66, 78, 272

income distribution 67offerings 321–4

Ericsson 274Escobari, M. E. 236, 239, 240, 241ESOP (Employee Stock Ownership Plans) 300Esparta 157, 158, 163ethical behavior 21ethics management 294, 301, 305ethnic factors 57, 58, 142EU (European Union) 108

exports to 88, 151European Commission 55evaluation committees 94, 103EVICO (wine evaluation event) 94, 95exchange controls 155, 204exchange rate 52, 53

fixed 320nominal 155real 154sponsoring imports of capital goods through

manipulations 203volatility 244

exclusionary principles 83

391

Index

executives 60, 61exotic species farming 157expansion 35, 129, 299, 336

acquisitions followed by 125beyond limits of home country markets 54first step across Latin America 342global 280ICT infrastructure 79internal financing for 33international 60, 73, 132, 133–6, 216, 219,

223, 226, 275, 330knowledge-intensive production 69laying plans for 321monopoly may favor 35national 132overseas 255related businesses and products 220retail industry 70sales and revenues 51scaled back plans 258sectoral 76

expatriates 271, 281, 285expectations 216

positive 131experimentation 79expert appointments 236expertise 288

acquired 58international 158local 205, 286, 289managerial 171, 205technical 39, 222

ExportAr 104exports 9, 13, 51, 52, 87–8, 109, 151, 259, 320

ban on 283–4bias against exporters 153–5cheaper 260commodity 232, 311, 313, 325, 328complemented with investments abroad 54development of 312development of new capabilities 66–80doubled 259financing 310fine wine 91finished goods for 329firm strategy 61good performance in 235government, funds budgeted for 272international markets 157much more competitive internationally 263promotional programs 111relatively small 3sales 157subsidy-free 205

external conditions:competitive advantages depended on 164ideal 240

poor 240external factors 234externalities 69

common 84financial booms and collapses have 329knowledge-sharing 152major 73network 76, 78positive 156significant 85

ExxonMobil 277

F-tests 213FAA (US Federal Aviation Administration) 272Facultad de Enologia Don Bosco 93, 94failures 156

economies characterized by 204multiple 93serial 242

Fairchild Dornier 279Falcón 157, 158, 163family-based/family-owned groups 29, 32, 36,

41, 317decision-making 17, 209, 221–2large indigenous 175–6leading owners 17national financial systems dominated by 328small- and medium-sized 91traditional and third-generation 245typically established 128widely diversified in business activities 30

family feuds 225Far East 276farming cycles 159, 160Farnborough Air Show (1996) 272FDI (foreign direct investment) 9, 12, 74, 201,

367attracted 150, 153, 300inward, liberal approach toward 288level of competition indicated by general

level of 175opening up toward 170strong presence 232sudden increase in 87third largest recipient in world 270see also OFDI

Fecovita 14, 97, 98, 99, 105, 108federalist systems 110Federation of Korean Industries 294feedback 103FEMSA (Fomento Economico Mexicano,

S.A.) 47, 253, 255, 260–1Ferraz 233, 234, 246Ferrocarriles Nacionales 252Ferrosur 38fertilizers 90FETs (Functional Excellence Teams) 302

392

Index

FIESP 235finance/financing 60

access to 59, 128attempts to channel loans to sectors or strata

not obtaining enough 329commercial 38debt 316, 317equity 41, 330foreign 334long-term project 140raising funds in capital markets 145see also national financial systems

financial crises 125, 316frequent 317response to 319, 320weathered 319

financial institutions 17, 36, 312, 323direct lending to members by 34discouraging small merchants and

manufacturers from relying on 328foreign 314international 163lingering distrust of 328local, money into 335major 14money deposited in 331overhauling of 334

financial instruments 244financial markets 19

inefficiency 240information improved 205key features of 22liberalization of 201, 205net supplier of capital to 333overreacting 318rational response to unstable conditions

in 325traditionally not willing or able to lend

long-term 34world 318, 333

financial protection 244financial resources 34, 132, 134, 138

ability to channel own 145ability to use quickly 12availability of 142, 244extraordinary source of 342facilitating access to 142inadequate 22learning how to allocate 239

financial services 14, 75, 253, 254, 282financial slack 217, 219, 220Financial Times 233Financiero Inbursa 38fine wines 88, 98

development of grapes for 96economically priced 91exports 109

opening price level for 344FINEP (Financiadora de Estudos e Projetos) 274firm-specific factors 59, 234first adopters 186first-aid posts 343first-mover advantage 284fishing companies/methods 16, 157fixed-price situation 138flexibility 18, 58, 221

determinants of 169–98financial 359labor 11leveraged 217structural 243

Floraverde 75Florida 272Fondo Vitivinicola 101, 103, 105, 107, 108food business 37, 48, 170, 175, 186

fresh categories 356–7frozen 352key clients in 38manufacturing 126–7processed 236special emphasis on freshness 348see also INCH

food safety 105, 106forced-savings schemes 331Ford 274foreign exchange:

attempts to control allocation of 329biased business decisions against projects

that would take large amounts of 333controls 150, 153incentive to restrict convertibility into 324main source of 326noncash, heavy losses in 258–9policies 154reserves of 324, 334struggle to stem outflows of 320

foreign investors 48, 81, 91, 158investors attracted 205companies purchased after modernization

125groups acquired by 29large extensions of land acquired to start

shrimp farms 158strategic alliances with 126

foreign markets 12, 50, 105, 213access to 51average number per business group 215–16companies that have succeeded at exporting

to 144competition through direct investment 9greater ability to enter 20ignoring opportunities 202information on 59lack of knowledge of 250

393

Index

foreign markets (cont.)necessary strengths to venture into 144need to look for 144products and services positioned in 128

foreign trade:distortions related to 205freer 205

foreigners 205, 222, 227entry by 209, 216hurdles 271

forestry 38, 78, 239, 305formalization 172, 174, 178, 179, 182–4,

191high level of 191

Fortune (Global 500) 32forward integration 162Fracchia, Eduardo 16–17, 368, 371, 374France 29, 93, 126

aerospace companies 272bonds 330leading cookie manufacturer 134

Fredrickson, J. 182, 191free-market opportunities 134free-trade agreements 47, 150, 216freezing methods 160fresh flowers 67, 70, 75Friedrich, P. M. 364Frisco 38frustration 344, 357FTC (Fondo para la Transformación y el

crecimiento) 101, 105Fundacion Chile 74

Galicia 213, 224game theory 7–8Ganitsky, Joseph 16Garfinkel, H. 366Garrido, C. 142–3Garrovaglio and Zorraquin 224gas 47, 48, 286, 309

end of monopoly 56pipeline construction 39

Gavião Peixoto 272, 284GDP (gross domestic product) 32, 41, 46, 67,

150, 151, 157, 274, 314, 315, 316, 323,333

aggregate, relative impact upon 78business groups represent a large portion

of 202per capita 153, 154relative stagnation of 144research and development expenditures as

percentage of 235thirteenth economy in world 232

GE (General Electric) 282, 300GEA (Antioquia Entrepreneur Group) 3, 14, 23,

253, 370–1

strategies for facing internationalcompetitors 125–49

see also INCHGECAS 282General Motors 274generic drugs 19Genetech 186genetics 74, 77

see also GMOsgeographical denominations 75geographical location 165, 274geographical markets 52, 55, 206

resources deemed to be transferableacross 219

Gerdau 11, 12, 47, 55first acquisition abroad 56

Gerdau Ameristeel 48Germany 29, 130Ghemawat, P. 201, 206, 207Gigante 258Giol winery 14, 97–8Giraldo, Carlos Mario 132glass bottle fabrication 37global markets 139, 140, 236, 246, 284

leadership in 58opportunity to experience as global

leader 303global outreach 48globalization 66, 67, 139–42

group moving in the right directiontoward 146

threats associated with hostileenvironment 145

GMOs (genetically modified organisms) 67, 70,72–3, 161

Goldstein, Andrea 19–20, 373good manufacturing practices 75gourmet products 132, 135government intervention 10–11, 85

loosening of 271reduced 299strong 23

government sell-outs 216, 222, 223government support 58, 59graduate degrees 278Granovetter, M. S. 225grape producers associations 108

diversity of 98leading 111small 96–7

grapes 82clones of 90detailed mappings of microclimates for 104natural sweetener from 107potentially high value, eradication of 87quality of 88, 91, 95small suppliers 91

394

Index

volatility of prices 93, 97, 101water reduction growing methods 93

greed 341green revolution (1960s) 73greenfield investments 48Greenwood, R. 173, 179grievances 103, 107grocery products 260Grosse, Robert 11–12, 33, 145, 364, 370, 371,

374Guan Dongyuan 280Guangzhou 281Guangzhou Zhujiang Iron & Steel 286Guatemala 342Guillen, M. F. 33, 43, 204, 225GWDS (Great Western Development

Strategy) 279

habits 22, 348hacendados 324HAIC (Hafei Aviation Industry Company) 281,

283Hainan Airlines Co. 283, 284hair care products 344Haiti 129Hamel, Gary 8, 139Harberger, A. 69Harbin 281, 283, 284hard currency 52, 54Harding 313hardship 334, 335harmony 298Harris, D. J. 209Hart-Landsberg, Martin 318‘hassle factors’ 354Hatum, Andres 18–19, 364, 368, 372–3, 375hazard insurance 107HEAI (Harbin Embraer Aircraft Industry)

Company Limited 281, 282, 283, 284health companies 180, 186, 188health products 297health services/needs 77, 79Heilongjiang 281herbicides 75Herdez 260heritage 209, 222

cultural 305Hermo 133–4Herring 313heterogeneity 171, 172

dominant coalition 174, 178, 179–8Hewitt Associates 294Hewlett-Packard 300Hicks, Muse, Tate & Furst 37highway construction 259‘high-flex’ firms 171high-tech industries 48

global market for products 239Hinings, C. R. 173, 179Hispanic market 142, 255holding companies 15, 37, 253

insurance 130holidays 304Holsum 10, 11home-country advantages 251Homecenter stores 126homogenization/homogeneity 173, 190–1Hong Kong 303Hong Kong Express Airways 272Hormel Foods Corp. 260Hoshi, T. 225Hoskisson, R. E. 372hot chocolate 137household goods/appliances 293–4, 297, 350

components for 48credit offered to purchasers of 254furniture 253low penetration of 352

household purchases 349, 350housing facilities 77housing sector 259HPWS (high performance work system) 21, 302HTA (High Technology Aeronautics)

consortium 274hub-and-spoke routes 281Huberman, A. M. 207Huggies 298Hughes Electronics 37human capital 76

destroying 84qualified, scarcity of 60upgrading programs 78

human resources 76, 93, 222ability to pool across countries 255exchange between subsidiaries 303flexible practices 220heavy investments in 279institutions to improve capacity and strategic

use of 108internationally functional 60learning how to allocate 239most talented 134policies 61qualified, slack of 219redistribution of 302talent 132

human sciences 77Hutchinson Telecommunications

Argentina 347hybrid seeds 75hydrofluoric acid 38hygiene 297, 357Hylsamex 48, 277, 278Hymer, Stephen 9, 52

395

Index

hyperinflation 87, 316hypermarkets 358Hyun, J. 143Hyundai Motors Co. 293

Ibero-American Media Partners 37ICTs (information and communication

technologies)diffusion of 76expansion of infrastructure 79

identity:cultural 59less flexible firms 191organizational, strong 19, 174, 178, 179,

188–90weak 191

idiosyncrasies 60IDIT (public-private institution) 107IDR (Instituto Desarrollo Rural) 98, 101, 103,

104, 105, 107universities’ joint research projects with 106

IFC (International Finance Corporation) 163IGBC index 133ILFC 282illiquidity 22image 305, 342

adapted to local culture 343brand 342

IMF (International Monetary Fund) 300, 315,326, 327

Global Financial Stability Report (2005) 314imitation 93, 156

environmental conditions 160immunology 77import substitution 54, 57, 127, 136, 203, 204,

271investment rates and growth 205policies 13, 205, 327

imports 275financing 310lowered duties 245massive inflow of 206repealed tariffs on 319sponsoring through exchange rate

manipulations 203unsupervised 164

Impsa 54–5IMTs (innovative management techniques) 21,

301, 307Inapesca 157, 162, 163, 164Inbursa 253, 258incentives 86, 93, 108, 150, 206, 303, 319

export 154financial 77, 110optimal 85political 95, 110tax 96, 97, 111, 321

see also economic incentivesINCH (Inversiones Nacional de Chocolates) 14,

15, 128, 129, 131–3, 145competitive strategies 136–9globalization approach 139–42

inclusionary principles 109income 67, 316, 317

generating more 145low(er) 19, 22, 23, 134, 349, 350, 353, 354,

358, 361mid-low 136, 137national 41net 258oil, long-term decline in 154per capita 3, 144poorer segments 23size and stability of 360

incubators 13, 78state-supported 59

independence 313, 324, 329India 29, 48, 318, 343

global software development 34indices:

business environment 235global competitiveness 234–5innovation capacity 235productivity 235, 236national competitiveness 235

Indonesia 13, 29, 54aviation 279financial systems crashed 318

industrial environment 234industrial organization theory 295industrial policy 85industrialization 48

attempted 157centrally directed style of 326emphasizedencouraged 203extended period of 318government-sponsored policy 326handmaidens of 318import substitution 54, 57, 203

inefficiencies 42financial market 240

inertia 169, 173, 179, 190, 209ability to quickly react and overcome 244

inflation 155, 205citizens seeking to protect savings from

331comprehensive plan for reduction 232currency regime predisposed to 325drastically reduced 244high 313, 324low 87too severe and too frequent to ignore 328

informal sector 66

396

Index

information:financial market 205foreign market 59limited 9macroeconomic 187, 188privileged 224real-time sharing 303sectoral 188superior 204

informational asymmetries 85, 86infrastructure 11, 13, 277, 357

ICT 79institutional 288investments 221legal 74major projects 244public 154weak 23, 288

Ingenio del Cauca 37inheritance customs 227initial public offerings 321‘initiation’ stage 144inmuebles and inmobiliaria 329innovation 13, 21, 40, 57, 67, 176, 273, 301

administrative 172agreements intended to increase 346broad-based 85companywide management 302consistent advancements in 88continuous 306corporate culture that encourages 294developing a greater capacity of 347dynamic comparative advantages based

on 76enhancing the rate of 79, 77export platform required to boost

productivity through 152implementation constrained 182improvement 155increasing levels of 152institutional 82, 110key 103permanent product 142processes vital for sustainable base of 95promotion of 246scale that would allow for necessary

investments in 54sine qua non condition for 76technological 3, 163, 172, 345, 347trusting to own employees 343vision for 298weakness in 3, 40, 239see also innovative capacities; innovativeness

innovative capacities 81, 111attempts to create new 82incentives to invest in 110new 86

innovativeness 171, 174, 179, 192boosting 184determinants of 172–3process view of 172

insolvency 244instability:

bank-centered financial system 328economic 240inherent 151macroeconomic 239magnified 333organizations must be able to cope with 187tax law 154

institution-building 83, 84, 85, 99institutional environment 153institutional investors 323institutional model 82institutional pressures 173, 187institutional theory 171, 174, 179, 184, 186,

365–6, 367–9new approach in 173

insurance 38, 75, 130INTA (Instituto Nacional de Tecnología

Agropecuaria) 98, 101, 103, 104–5, 107,111

universities’ joint research projects with 106integration 16, 131, 186–7

backward 275complex stage 144economic 261financial 126foreign personnel in domestic operations 61forward 162incipient agreements between

governments 143lack of 162local suppliers 286systems 273upstream 38see also vertical integration

Intel 34intellectual property rights 73

protection of 287, 289strengthening 77

interactions 70, 78, 297dynamic 296limited 94positive 357repeated 84social 69

Interbrew 55interest groups 107, 108interest rates 235

high 240, 258, 259liberalization of 205real, raising 319

interfirm networks 81

397

Index

intermediaries 161absence of 204financial 73, 78market 222, 223, 224weak 204

international competition 10, 23strategies for facing 125–49

international competitiveness 8, 22, 66, 68, 72,81, 160

expansion of 73improving through time 69policies for enhancement of 76–9policies which limit the capacity for 151relatively low 17sustained 108undermined 138

international markets 12, 51, 54, 125, 261ability to compete in 154access with greater ease to 162accumulated knowledge of 61aggressive response to changes and

challenges in 293capital obtained from 336difficulties in forming team capable of

functioning in 60environmental and sanitary demands 163exports to 157focusing on the growth of 151increasing the number operated in 206lack of knowledge of 162low diversification into 256major economies of scale in 219most production oriented toward 165new and highly competitive industry in 70premium price in 342quality standards of 56selling shares publicly in 129significant advantages for competing in 141success in 140, 278sustained growth in 155target, successful penetration in 134very small group of firms entered 150

international relations 10, 234international trade 203internationalization 17, 50–1, 58, 130, 143,

176, 262advanced 145, 232, 233average levels of 215–16chiefly commercial 233common goals 127consolidation of 165cultural difficulties in 61factors that allow 165greater, effect of 257increased levels of 202, 206, 207, 216,

222initial stage 144

language and cultural barriers in 59major benefits of 52, 56major motivation for 51mature stage 144more intensive 56obstacles to 59outbound 232positive results of 51rapid process of 74regional, preliminary stages to 146rewards from 263risk management as a benefit of 51successful path toward 145superior performance and 263

internationalization strategies 126, 128, 139changed 261innovative 127major motivation behind 53positive expectations resulting from 131success of 134

internet 3, 79Interoceánica 130interorganizational networks 84interpersonal contacts 184Interprovincial Consultative Council 107intertwined relationships 128INV (Instituto Nacional de Vitivinicola) 105,

107, 108INVERSURA 130investment capital 204

squeezing away from agriculture 203investment opportunities 34invisible hand 206Ireland 79iron alloys 306iron ore 48, 53Irsa Group 259Isaura 216ISCAMEN (Instituto de Sanidad y Calidad

Agropecuaria Mendoza) 105, 106isomorphism 173, 191Israel 79IT (information technology) 170, 184

expansion of 77Itaipu hydroelectric plant 270Italian city-states 329Italy 38, 275, 276, 277

merchant banking 329private health care institutions 278SMEs export to 52

ITU (public-private university) 107Iusacell 261

Jabon La Corona 23, 343, 345, 348, 361, 374,361, 374

Japan 48, 126, 135, 255, 276, 285, 303, 327financial systems 314

398

Index

high-income consumers 132wine exports sold in 88

Jefferson, G. H. 368‘Jet’ chocolate bar 137Jiang Zemin 280Jiuquan 286job delegations 298Johanson, J. 59joint action 152joint-stock companies 330joint ventures 20–1, 37, 143, 253, 260, 270,

281, 285, 293, 297opportunities for 286programs that plagued 283

judicial insecurity 154judicial systems 204, 205just-in-time delivery 341

kaizen 273Kashyap, A. 225Katz, Jorge 13, 367Kazakhstan 286‘Keep Korea Green’ campaign 21, 301, 305Kennedy, R. E. 201, 206, 207Kerr-McGee 286Khanna, T. 33, 34, 201, 225, 370Khavisse 204Kim, B. 296Kimberly Clark 21

see also Yuhan-Kimberlykinship 84, 227Kmart Mexico, S.A. de C.V. 258know-how 60–1, 303

managerial 281tacit 287technological 220, 305

knowledge:access to 51, 111accumulated 303acquisition of 56attempt to transfer 157dynamic comparative advantages based

on 76industrial 285market 33, 34, 35, 60, 61, 144necessary 132necessity for a broad base 171shared 110, 152, 303specific 95tacit 86, 94

knowledge-based economy 78, 79knowledge creation 92knowledge diffusion 81, 85, 93, 94–5knowledge-generation activities 75, 76, 77

inducing more 79knowledge-transfer 219Kock, C. J. 204, 225

Kola Real 23, 343, 345, 361, 374Korea 13, 40, 205, 318, 375

aviation 279economic crisis (1997) 21, 300, 304, 320financial systems 318, 319manufactured goods dumped in Chile 319most-admired company in 21sustainable management of firms 293–308see also chaebols; Yuhan-Kimberly

Korea Electric Power 320Kraft 15, 134Krijnen, H. C. 171Kubitschek, Juscelino 326Kusnetz, S. 68

La Agricola 95labor:

cheaper 280entrepreneurs seek to overcome difficulties of

obtaining 33expulsion of 66forced 161training 69way in which it relates to corporations 11

labor costs 154, 344increase in 304low(er) 34, 259

labor markets 204labor productivity 235–6

average 67higher than average 67

labor-saving bias 67labor unions 56, 97laboratories 157, 158, 160, 163

specialized 164laissez-faire policy 319, 326, 329Lall, S. 57, 58, 143landing fees 283language 58, 364

common 59sharing 57target country, no knowledge of 60

Latin Panel 349Latino communities 133, 135Laurels Award 273Lau, Pierre 282laws 107, 135

banking 34national and regional 93

laxity in control 182lay-offs 304Lazzarini 374Le Bourget Air Show (2005) 274leadership 21, 295

chance to improve skills 303dominant 17fifth level of 300

399

Index

leadership (cont.)global 341hands-on 222paternalistic 221skills 138strong 152, 221, 22visionary 278, 279

learning:collective 83, 84, 94continuous 189feedback 273organizational 271see also lifelong learning

Ledesma 224Lee Kwan Yew 326–7Leff, Nathaniel 33, 225legal tender 324leisure activities 317lending 324–8Leonisa 126less developed countries 203, 245

production facilities in 46Lessard, D. R. 52, 314letters of credit 329, 330level playing fields 60leveraging 51, 217, 222, 282, 287, 293

political 318Levi’s 250Lewin, A. Y. 169Lewis, J. D. 366Ley Pevi 108LG Telecom 293liabilities 272Lian Yuan 286liberalization 59, 93, 288

foreign investment 205, 297interest rates 205internal and external policies 207investment 46price 87trade 46, 70, 87, 202, 205see also market liberalization

licenses 271assembly 281import 204

life cycle 157, 271see also product life cycle

lifelong learning 21, 301, 302, 304corporate culture that encourages 294

lifestyle differences 360Likert scale 210limiting factors 313–31lingerie 126linguistic differences 59, 60liquidity 273

crises of 310, 316–21Lisbon 313

litigation 322living conditions 61living standards 279, 318local government 23local markets 361

ability to navigate 41–2challenges for companies in maintaining

their positions in 46cost-effective solutions for 280cutback on 304difficulties with idiosyncrasies of 60entry of MNEs into 216expanding sales in 47exported surplus not sold on 61financial resources to take advantage of

opportunities in 12foreign firms allowed to increase direct

investments and to control resourcesin 206

importance of dominating distributionnetworks in 374

knowledge of 33, 34, 35, 60minimum scale to ensure competitiveness

on 54observatory of 56preferential access to 327reputation in 217understanding of 34

localization 285location advantages/disadvantages 246loc-balization 301, 303–4Locke, R. M. 95logistics 128, 138, 306, 345, 346

easing 274efficient use of 346managers with backgrounds in 180multiple 286

Loma Negra 48London 313, 314

money market 330López, A. 56, 143, 144, 233Lora, Eduardo 153Los Pelambres 36losses 244, 271

heavy 258–9LOT 272low-cost factors 33, 47, 57

customers 19, 22, 23production 12, 34products 40

low-income households 352low-technology sectors 335loyalty:

brand 352, 353, 355, 360customer 305perceived 245

Lucchetti 36

400

Index

Luksic, Andrónico 35, 36Luksic Group 3, 11, 35–7, 253

strategy 34see also Quiñenco

Lussieu da Silva, M. 232

M&A (mergers and acquisitions) 126major transformation in industrial structure

obtained through 74restrictions on 55technological and competitive regime more

demanding as a result of 75Maanshan 286McDermott, Gerry 13–14, 16, 22, 23, 368–9,

375McDonald’s 250McKinsey Institute 235macroculture 178, 179, 184–7, 191macroeconomic conditions 11, 76, 222

high risk, unstable environments 58information 187, 188major cycles 220prevalent 246

macro-to-micro interdependencies 68Madeco 36Madrid 313, 322main focus 243Malaysia 13, 318Malbec 87, 90malpractices 270management 179, 273

adapted to Third World conditions 58average age of 180change 302close process 219closely related 29cognitive limitations of 191cosmopolitan mindset among 172cutting-edge methods 300ethics 294, 301, 305excellent skills 278exposure to new practices 56foreign assignments 322heavy investments in 279homogeneous 190, 191indigenous styles 227innovative 21local practices 235mission and vision of 209modern approaches 236, 247new structures 285one-of-a-kind style of 303paternalistic styles of 224people-focused 294powerful 293professional 70reengineering process 125

resource 221skills 57still in its infancy 247strategic 295, 296sustainable 293–308technology 3vertical 303, 304

management models 243manganese 306Mansfield Plumbing 126manual transmission business 259manufacturing industries 54, 150

auto-parts 245investments for domestic markets 327jobs disappeared 319labor expulsion in 66natural-resource based 48shift away from higher value-added

production 87technology-intensive 67world-class 269

maquila production 34Maracaibo, Lake 15, 158, 163March, J. G. 169, 179, 295marginal capital/output ratio 335marginal utility 317marginalized groups 85market consolidation 284market coverage 136

extensive 141market failure 33

canonical examples of different forms of76

internalizing 34–5market forces 203, 209

greater importance to 217–19, 220–1local 227trade-open 205

market imperfections 9, 34, 52ability to take advantage of 43

market intelligence 273market leaders 21, 255, 297market liberalization 84, 201, 202, 205, 288

internal reforms 206market mechanisms 78market niches 137, 250, 251market power 221, 371

monopolistic 77market saturation 144, 216market-seeking operations 51, 53–4market segments 141, 142

broad 250leaders in 253, 288neglected 345niche 279poor 23popular BOP 342

401

Index

market segments (cont.)restraining access to 347upper 344

market share 134, 137, 138, 285, 294, 297, 298,343, 344

companies with highest risk of losing 126constantly increased worldwide 242large, in lower-income segments 254leading 23price wars to defend 342significant 23

market signals 273marketing 60, 76, 160, 271, 345, 346

access to, or capacity to develop 57aggressive benchmarking against

international competitors in 220client proximity required for 53international 73, 75, 105knowledge 15managers with backgrounds in 180redundant 128revamped 98strategy 135–6superior capabilities 12

markets 93, 170, 217, 219, 220, 221ability to compete with foreign firms in 10attacked by multinationals 217bond 333, 334contested 75debt 310deepwater products 278deregulated 66, 205, 222developing country 54downstream 55equity 321ethnic 58export 271external 69, 70factor 366highly competitive 88important hedge against 263institution-strong 9leading 29mass 342mature 341, 360multiple 201national 214need to balance out 54newly liberalizing 278organizations created to organize 9penalties to limit volatility in 107penetration of 134, 260prominent 287regional 137, 281regulatory demands of 161securitization of 107self-construction 342

sellers 284sophisticated, competitive 88Spanish-speaking 250, 251strategies based on skimming 344street 356superior knowledge of 38, 40, 41–2target 134, 144technology 76transparency in regulation 206turbulent 170unrelated 204, 219venture capital 78wholesale 107world’s fastest-growing 269–70see also access to markets; capital markets;

consumer markets; emerging markets;financial markets; foreign markets;geographical markets; global markets;international markets; local markets;product markets; stock markets

Martinez, I. 209Maverick 278Mavesa 15, 157–8Maxus 53MBV (mechanism-based view) 295, 296, 297MCII Holdings (United States) Inc. 260meat products 133, 137, 141, 260mechanical philosophy 295Medellin 37, 137Medellin Stock Exchange 14media sector 37, 250, 261Mendoza 13–14, 23, 82, 83, 86, 87, 92–113, 369

Ministry of Economy 107number of vineyards 90registered and active wineries 91Zona Este 91, 95Zona Primera 93, 94, 95, 104

Menem, Carlos 87, 210Mercosur 87, 108, 206, 219mergers 130, 132, 133, 138, 145

internal 128see also M&A

‘merit’ goods and services 77merlot 89Mesquita, Luiz 16–17, 364, 365, 368, 371, 374metal fabricating 36metalworking industries 70Mexicana de Aviacion 252Mexico 45, 51, 57, 175, 276, 277, 344, 364, 370

commercial bank lending to government 327competitive shocks 201debt crisis (1980s) 260emerging consumers 349, 358fear that companies are too averse to risk 270frequent bouts of illiquidity 22generalized economic opening (1990s) 18growth of local stock markets 41

402

Index

household appliances 350imported beers 341institutional conditions 10–11large groups 18, 250–66leading banks with major local operations

in 22low-income consumers 22manufacturing production 70maquila production 34oil 40privatized pension schemes 334shrimp exports to 157SMEs export to 52soap market share 23, 343, 374strategy based on extensive distribution 342tilapia 15vehicle industry 72see also América Móvil; ANTAD; Bimbo;

CARICOM; Carso; CCM; Corona; Femsa;Hylsamex; Jabon La Corona; Telmex;Tequila Crisis

Miami 331microbusinesses 343microclimates 90, 92

detailed mappings of 104diversity of 105

microeconomic behavior 76microeconomic conditions 222

changes in 223influence in shaping of corporate

strategies 225shifts in 201

micro-lending 312micro-level strategies 14–16Middle East 276, 332

savings rate 333middle-income classes 360Milan 275Miles, M. 207military dictatorship 318mimetic behavior 173, 179Minas Gerais 325Minetti 216minimal government 205mini-mill steel 48mining 35–9, 47, 48, 277, 309

gold 127largest companies in the world 53

minority shareholders 130, 322transparent relations with 138

mistakes 246mistrust 162Mitsubishi 126, 135Mittal 287MNCs (multinational corporations), see MNEsMNEs (multinational enterprises) 3, 11, 17, 20,

22, 23, 31, 40, 69, 111, 253, 321

ability to outperform 236advantages in comparison with 252attempts to enter Chinese market 19challengers successfully fended off from 254competing against 21, 35, 220discovery of value of BOP markets 344entry into local/domestic markets 216, 217,

219European 15foreign affiliates 32, 41forward integration 162global 145, 328globally integrated 309, 310, 318, 324important competitors 14investment in shrimp industry 151largest emerging market 12misled by apparently unlimited

opportunities 270nascent 327products branded by 250risk of losing ownership to 145sectors less attractive to 223significant difference between size of 246taking advantage of low local costs 34target of entry of 221US-based 15world-class 335

modernization 236, 247technological 125

molecular biology 77monarchy 313Monchenot 344monetary policy:

expansionary 324lax 204stable 205

money 319, 324, 349creation in excess of tax revenue 324deposited in financial institutions 331, 335lack of alternative uses for 334lacking 348

money supply 316Mongolia 303monitoring:

environmental 74, 242mutual 83, 104

monocropping 84monopoly 9, 35, 58, 77

imminent end of 56market 204state, privatizing and/or deregulating 206suppliers to government organizations 252

Monsanto 73Montenegro, Rodolfo 95, 105Moon, Kook-Hyun 294, 297–9, 303, 304, 305moral hazard 315, 328Morck, R. 32

403

Index

Moreno 185mortgage loans 259, 329mosto 107, 108MRO (maintenance, repair and overhaul)

firms 272–3multicultural exposure 61multilateral organizations 158–9multilateralism 300multilatinas 269–92multilevel analysis 170multinationals, see MNEs; multilatinasmultistage extension services 106Munich-Re 130municipalities 101mutual forbearance 206, 217mutual funds 323

Nabisco 134Nacobre 38NAFTA (North American Free Trade

Agreement) 259, 260, 261, 278Nakano, Y. 240Nanhai Project 285Narula, Rajneesh 59national champions 40, 58national financial systems 22, 309–39National Innovation Systems 13, 76, 77–8national sovereignty 204National Steel Industry Policy (China) 287nationalization 37

fear of 52Natura 17, 239natural resource-seeking operations 51, 52, 53natural resources 154, 233, 318

access to 51, 144companies invest abroad to acquire 51expansion of sales of access to 51exploitation of 48, 78extraction 48intensive use of 269investments 47production of 48price of 50rich 73, 78sectors related to 219support for discovering 305sustainable exploitation of 77

Naturela 344Navistar 260Nazca Cosmeticos 344–5, 361negotiation abilities 221neoclassical growth 69neo-institutional perspective 173, 179Nestlé 15, 134, 135, 137, 250network learning model 104new entrants:

brutal competition from 297

opportunities 205new industrial activities 72–6new products time-to-market for 305

vital ‘hits’ in development of 246new technologies 90

developing 142investments into 84training on 304upgrading focused on 98

New York 314railroad bonds 330stock market 129see also NYSE

New Zealand 79Neway 301–3newly industrializing countries 13, 333news media 213Newton, Isaac 295NGOs (nongovernmental organizations) 98,

101cooperating with 306

Nicholls, Juan Pablo 136, 138nickel 48Nielsen (A.C.) 349, 350NKK Tubes 276Noel 14, 125, 128, 132, 134, 137Nomura Securities 282nonmarket conditions 34noodles 141norms:

institutional 187prevailing 184social 84

North, D. C. 366Northeast Asia 301, 303Norway 74Novo Mercado 323NYSE (New York Stock Exchange) 260, 272,

277, 320, 321

Oceania 276Ochoa, Hector 14–15, 370–1, 374OCTG (Oil Country Tubular Goods)

market 276, 277, 286, 287Odebrecht 52OECD countries 278, 287, 288, 300OFDI (outward foreign direct investment):

and competitiveness of firms 45–65relatively small 3

offshore activities 286Ogma 272–3oil 53, 277, 309

economy dependent on 150end of monopoly on 56export sector concentrated in 154FDI attracted to 150long-term decline in fiscal revenues 153

404

Index

products designed specifically for use inextraction and production 287

oil companies 29, 31, 56exposure to 286list of largest 47–8national 40

oil pipelines 20, 39, 285oil prices 15, 154–5

high 151sales and earnings highly correlated with 277

oligopoly 75olive oil 343Oliver, C. 173, 179Olympic Games (2008) 279Omo 343, 347operational excellence 243, 247opportunism 9, 253

strategic 242–3Organización Techint, see Techintorganization models 70

networked 243organization theory 169organizational culture 128, 135

desirable, plans for creating 302efficient 302familiarity with 60sound 246

organized crime 154original equipment manufacturers 255Orr, G. 289orthogonal vine training systems 95, 105Ostrom, E. 86OTC (over-the-counter) market 186output quotas 87outsourcing 278, 366Overholt, M. H. 171overvaluation 87, 88

Pacific 319Padgett, J. 95paint 126Palepu, K. 33, 34, 201, 225, 370Pan de Ayer (‘yesterday’s bread’) 342, 345, 348Panama 129, 130Panizza, Ugo 153paper products 17, 21, 48, 70, 71, 213‘paragons’ 224, 225Paraguaná 158Paraguay 67, 206, 219Paraíba Valley 274parallel economy 331‘parasite’ behavior 224, 225parenting advantage 217Paris Bourse 313, 329, 330parrales 95participatory governance 103–6, 111

empowered 83

participatory restructuring approach 83, 86, 96,107, 110

particularistic interests 84partnerships 37, 56, 91, 176, 205

collaborative 171public 126strategic 275technological 278

party systems 110passivity 173pasta business 36, 131, 133Pastelería Frances 38patents 40

incipient generator of 235legal protection of 287

paternalism 221, 222, 223, 224cultural traits 245

path dependency 220, 225, 366–7capabilities 209core competencies 223

patronage 107pay-TV 37PDTI (Programa de Desenvolvimiento

Tecnológico Industrial) 274PDVSA (Venezuelan oil company) 37, 40, 47–8Pellas Group 130Pemex 277Penfold, Michael 15–16, 369, 375pension funds 213, 312pension schemes 334people-focused management 21Pepsi-Cola 23, 37, 374Peres, W. 142–3Pérez Companc 48, 217performance 76, 243, 258, 304

affected by tax evasion 346analysis of feedbacks 273comparing 261competitive 234decreases in 201exacting standards 271export 235extremely good 270financial 18, 236, 263, 294, 296, 317, 335gap among companies operating in same

industry 295growth 66hampered 315higher 202improved 273indicators of 184long-term 67outstanding 21, 259positive 262slightly worse 262strong 306sub par 245

405

Index

performance (cont.)superior 8, 233, 256, 262, 263sustainable 233, 263technological 79testimonials about 354see also HPWS

performance-related remuneration 273permeability of boundaries 171Peron, Juan 204Peronist party 95personal care categories 353, 356personal relationships 357, 359Peru 39, 40, 321

commercial bank lending to government 327competitive shocks 201poorer income segments 23privatized pension schemes 334retail conglomerates expanded into 336see also Kola Real; Positiva

pesticides 75Peteraf, M. A. 366Petrobras 12, 47, 48, 55, 277

intensified investments abroad 56international strategy 53offshore drilling technology 58–9

petrochemicals 154, 206, 277largest complex in China 285

Petroleum Intelligence Weekly 47–8Pettigrew, Andrew 18–19, 178, 180, 187, 368,

372–3, 375pharmaceuticals 18, 77, 170, 175–6, 180, 187

competitors’ moves in 188most important professional association

in 186Philippines 54Piedrahita, Carlos Enrique 131, 132, 134,

135–6, 137, 138, 139Pintuco 126pipelines 20, 39, 277, 285Plan de Convertibilidad (Argentina) 210Plano Real 232, 244Poland 272policy shifts 226

early 210external liberalization 206

policymaking 86, 99, 110centralized 83depoliticization approaches attempt to

insulate 87opening up the process 85strong, coherent apparatus 84

political capital 108political conditions 33political connections 204political-economic institutions 82political interference 246political parties 153

political ties 205popular class 360populist slogans 204Porcelanite 38Port Hable 347Porter, Michael 8, 9, 155, 233, 295portfolio investment 52Portia 278Portugal 57, 58, 272–3

colonial 313, 329POSCO 293positioning:

‘aspiration’ 344international 342strong 137

Positiva 130post-sales assistance 47Postobon 37poultry 56poverty 144, 205, 350

mass 203Powell, W. W. 173power distance 245power plants 39, 177, 277

electric 321managing 322

PowerPoint 299Prahalad, C. K. 8, 139prefabricated structures 236preferences 349

brand 353purchasing 22

President Lula in May (2004), 283préstamos vinculados 328price controls 87, 150–1, 153

elimination of 271Price Costco stores 258price sensitivity 354, 360price wars 342prices 93, 105, 316

affordable 138, 141, 345attempts to fix 329bargain 209, 219better 142competitive and appealing 141distorted 204electric energy 259export 89fair 136, 138international 138, 284liberalization of 87low(er) 126, 343, 344, 354–5, 356–7market 320premium 342, 352promotional 322, 352, 353, 355reduced 344relative 204

406

Index

retail, deflation of 220share 322strongly competitive 342volatility of 93, 97, 101world 75see also commodity prices; oil prices

private sector 13, 29, 154, 247accumulation of foreign assets by 314commitment to R&D and

knowledge-generation efforts 77coordination between public and 161large-scale projects conducted by 299were shifts in lending away from 327

privatization 14, 37, 46, 48, 59, 87, 125, 209,232, 253, 261, 271, 321

ability to negotiate to win projects 39bargain 220financial slack during 217multiple acquisitions often through 58oil 40poor 97promotion of 205successful 278taking advantage of 16, 217, 243

privileged groups 85Procter & Gamble 23, 297, 300, 343, 344, 374procurement 55, 244, 271product assortment 356product development 90, 136

client proximity required for 53product differentiation 145product life cycle 134, 138

short 170product lines 23, 343

diversification of 17product markets 55, 104, 214

more transparent 206resources deemed to be transferable

across 219strategies oriented to 206

product quality 12consistent advancements in 88important increases in 158mistrust and skepticism about 354superior 35, 252

product range 53production 163

abroad 51capital-intensive 66, 220commodity 311, 325computer-based 66concentration on 162consolidated 53decentralized 90downstream relationships in 57duplication of 140efficient 134, 138

environment-friendly 305foodstuff 70global 56inception of new activities 72internationalized 233jeopardized 163knowledge-intensive 69labor-intensive 67low-cost 12, 34maquila 34methods of 161program for improving efficiency in 21proper management of 138quality 138redundant 128relatively low-cost 255relocated 47risks associated to concentration of 53upstream relationships in 57

production capabilities 137, 139, 140, 145based on acquisition of manufacturing

facilities 142organization 68, 69

production capacity 129, 281cycles of creation and destruction of 66–80

production costs:capabilities which impact 209low 12lowering by moving abroad 9

production networks 134, 137integrated regional 144

production output 96productivity 159, 184, 235

agreements intended to increase 346enhancing 152, 156export platform required to boost 152high(er) levels of 156, 303high standards 236important increases in 158improvements in 151, 155, 156, 162, 163,

304increase in 259innovative initiatives for increasing 152international gap 77temporarily lowered 153

productivity growth 67, 69impact upon 78sine qua non condition for 76

professional associations 84, 185, 186, 191professionalism 189professionalization 219profit margins 151, 316profitability 129, 261–2, 347

constant search for 341nominal 133reduced 262sustained 21

407

Index

profits 35, 129, 244, 260, 342contribution to society 300dipped and increased 258excess 295net 259primary source of equity capital 310reinvesting 317risky ventures 330short-term 16skimming 325

project management 244ProMendoza 101, 103, 104, 105, 106, 107, 108,

111Promon 17–18, 243promotion 180

hierarchical 209promotional strategies 142

flyers 357packages 342responsiveness to 360

property rights 84, 93legal enforcement of 77protection of 78security in 205

Propulsora 275, 276protectionism 11, 35, 82, 151, 204proteins 161proximity 355, 356

client 54cultural 12–13, 58emotional 357interesting market because of 278physical 354

psychic distance 59psychographic variables 360public corporation structure 127public policy 78–9

improving 106–8public-private institutions 83, 95–108

dense network of 14facilitating or impeding construction of

82multiple 111program in support of SMEs 51promising area for action 78

public sector 77, 247coordination between private and 161institutions 274interventions 76large-scale investments in projects 299

publicly-traded corporations 128Puebla 37pulp and paper 48, 70, 71Punto Fijo 158purchase-supply agreements 98purchasing behavior 350, 353, 354purchasing power 341, 349

purchasing power parity 232push and pull factors 46

Qi Xiangdong 287quality 50, 57, 58, 151, 344

competitive 342discussion of 94environmental 307excellent 21, 141high 155, 255, 256innovating in 95perceived to be higher 356strong focus on manufacturing 287stronger competencies to manage 220superior 132upper-market pricing and 23well-known 136see also product quality

quality control:better 236modern systems 91state-of-the-art 90

quarantine 164quasi-government enterprises 318quasi-monopoly 220, 223Queretaro 259Quiñenco 37quotas 204

R&D (research & development) 98, 103, 301decentralizing the management of public

funds 78expenditures as percentage of GDP 235financing of 78genetic 75global-level 304–5huge investments in 305increased 235institutional resources for 111negative impact in private budgets 348programs to support 162promoting investment in 13public and university labs 76relatively high expenditures 54resources allocated to 77sophisticated 106spending by firms 40subsidies by small and medium-sized

firms 13world-class capabilities 305

radio broadcasting 37–8, 213railroads 33, 38, 39Rainbo 11Ramírez C. E. 143random selection 214rationalization 279raw materials 3, 342

408

Index

cheap, capitalizing on 259control over 37entrepreneurs seek to overcome difficulties of

obtaining 33guarantee of standard quality 137low-cost 144preserving 306reduced cost of 136top quality 138unbound appetite for 270upstream suppliers of 278

Rawski, T. G. 368RBV (resource-based view) 8, 295, 366–7, 372–5RCN 37–8real estate sector 259recession 260

severe 258, 259recombination process 86, 99–103

social and political resources 110recovery:

post-privatization 273slow and painful 318

recruitment 60recycling processes 307red tape 154reductionism 295refinancing 125refineries 277reforms 205, 206

institutional 153market-oriented 66, 67structural 66, 153

refried beans 260refrigeration 54, 90, 343regional advisory councils 101regional discrimination 94regional jets 21, 242, 243, 272, 279–81, 284

Chinese and Russian-built 283cost of operating 283globally competitive maker 247

regulation(s) 74, 162, 163, 319adequate policy 77changes in 51, 156code of the gentleman 329core, controversial issues 107disclosure 318efforts to find right mix of laissez-faire

and 329favorable measures 217food safety 105growth beyond the limits of 55–6increasingly sophisticated institutions 70level of competition indicated by degree

of 175national and regional laws 93pest prevention 105public sector agencies 76

quality of 154strict 161tax 154transparency in 206

relocation 204local personnel 61production 47

remittances 342rent-seeking behavior 205, 217

business associations 94firms may take advantage of new

opportunities 223instincts 86motives 219typical 224

Repsol 55, 277reputation 21, 300–1

firms soiling 106local market 217loss of 329positive 305respectable amount with local clients 221seeking of 216social 294spread overseas 294

reregulating 206reserves 53, 324, 334resilience 58resource-dependence growth strategies 219resources 9, 21, 77

ability to allocate 243access to 86collective 81competitive 8complementary 103constellations of 104contributions of 86critical strategic 144disproportionate distribution of 83easily transferable 219engineering 220information 104initial 103institutional 95, 111intangible 204, 209, 217, 219–20knowledge 93, 108limited 106main 222main factors that determine composition

of 297major and irreversible commitments 220material 108misuse of 205organizational 97pooled 98public 127rare 8

409

Index

resources (cont.)shared 110socioeconomic, legal and inherited 92structural transformation strongly biased in

favor of activities 70tangible 204, 219–20, 223technological 140, 220training 106upgrading 104valuable 8, 239vital 99VRIN-based 296wasting 106see also financial resources; human resources;

natural resources; resources andcapabilities

resources and capabilities 209, 214, 217,219–21, 222

common core 224path dependent 225

respect 301, 303, 305love and 300market-leading 21

responsibility 298delegation of 303strengthening 302see also social responsibility

restaurants 56, 131, 258restructuring 97, 99–101, 109, 145, 244–5, 260,

279aggressively pursued 300major 278post-privatization 57see also participatory restructuring approach

retail-oriented associations 349retail sector 38, 48, 188, 253, 254, 261

expansion of 70, 321innovator in 336see also small-scale retail stores

retention 169, 245retrenchments 243, 246revenues 40, 51, 104, 343

devalued 320dispersed 214fiscal 153not enough to pay debt 316tax 324

rickshaws and carriages 343rigidities 347Rincon Famoso 344Rinker 48Rio de Janeiro 325risk 316–17

credit 53downside 330exchange rate 53financial 304, 325

inflation devaluation 331inherent 165, 244market cycles 53opportunities and 239perception of 209rating 240significantly diluting 244well-known 324

risk aversion 52, 245, 270, 325, 353risk diversification 51, 52, 53–4, 216

incentives to 150risk management 51–4, 243

unusually high standard in 244risk reduction 50, 51, 52–3, 142, 257risk-sharing 73, 128, 140, 156

partners 273, 274RMC Group 47, 48, 53, 54Rocca, Agostino 38, 275, 276Rocca family 278Rodrik, D. 85Roemmers 186Roggio 224Roman 224Romania 276rotation 60rule of law 154rules of inclusion 87, 104, 110, 111Rumelt, R. P. 214Russian default (1998) 320

Sabel, C. 86SABMiller 125Sabó 18, 54, 244–5Sadia 56Safford, S. 95SAG 74St Martin 176, 191salaries 280sales 151, 252, 253, 260, 272, 277

dropped 258export 157foreign 256plummeted 259return on 256, 257, 262

Salinas, Ricardo 253Salinas Rocha, Hugo 253Salinas Group 253–4, 256, 261–3salmon 15, 16, 67, 70

major farming countries 73–4world prices for 75

salsas 260Samsung Electronics Co. 293San Juan 13, 14, 82, 83, 86, 87, 369

Mendoza vs. 92–101, 104, 109, 111number of vineyards 90registered and active wineries 91

Sanborns 38, 252

410

Index

Sancho, Eduardo 97Sancor 226sanctions threat 274sanitary activities 74

high restrictions 134sanitary goods 26, 293–4, 301, 304, 344sanitation services 77Santander cocoa 132Santiago Stock Exchange 320, 321Santiso, J. 270Santodomingo family 125São José dos Campos 274São Paulo 239, 325Saraiva de Magalhães, F. 60sardines 161‘satisficing’ behavior 317sauvignon blanc 89savings 331–6SC Johnson 344scale economies, see economies of scalescale efficiencies 202, 206–7, 223

increase in 216minimum 217need to expand 216

SCAR (sustainability cost, attractiveness, andreturn) model 17, 375

scarcity:capital 239, 312, 333complex picture of 340–8human capital 60mythology of 348–62

Scharfstein, D. 225Schneider, B. 95Schroeder, Gerhard 280scientific development 40Scotland 74Scott Paper 300scrip issues 324Sea Farms Venezuela 163Sears de Mexico 38seat dumping 279security:

political 95public 154

Seguros América 130seigniorage 324, 325selection 169, 236self-dealing 84, 85self-empowerment 303self-esteem 342, 350

categories that impact 352self-regulation 329self-service store chains 134September 11 (2001) attacks 244sequence 297, 307SER-M (Subject, Environment, Resources, and

Mechanism) model 21, 295–7, 307, 375

Sernapesca 74Serviacero 275service companies/industries 48, 53

high productivity 67high-quality 12stronger competencies to manage 220

SES (Socio-Economic Strata) profiles 349, 350,357, 361

Seville 330Shanghai 281

World Exposition (2010) 279Shanghai Baosteel 270Shell 56, 277, 285shift-working system 304shipping ventures 330shocks 101, 163

ability to respond to 243competitive 201–31major 13

shopping behavior 348, 355exercise of self-constraint 354frequency of 350incidences of 352lifestyle and attitudes impact on 360poor treatment by staff 357

short-term lenders 317shrimp industry 15, 150–68

virus that harmed 16Sichuan Airlines 280, 283Siderar 275–6, 277Siderca 275, 276, 285, 286Sidercolor 275Sidor 48, 277Sidus 18–19, 175–94, 373siembra directa 72Silva, Ozires 282Simon, H. A. 295Sindicato Antioqueño, see GEASingapore 13, 280, 326–7

commercial banks 326single-industry focus 11situational conditions 236size of firm:

attempt to compete by reducing 243average 75minimum 41small 145, 250, 313–16

slaughterhouses 137Slim, Carlos 38, 253small-scale retail stores 136, 349, 355, 357

informal credit by 359SMEs (small- and medium-sized

enterprises) 14, 52, 74, 75closed down 67computer software and engineering services

for 78devastated producers 101

411

Index

SMEs (cont.)family-owned 70, 91financing programs 104growth of 51potential for leveraging 51subsidies 13, 116

Smith, Darwin E. 300, 301snacks 136, 359soap 23, 343social and political polarization 153–4social capital 93, 109

destroying 84dysfunctional 82

social class 343, 350see also blue collar class; popular class;

working classsocial conditions 33social contracts 332social responsibility 294, 301, 305, 306,

348growing sense of 341

social security services 78socioeconomic environment 84–5socioeconomic groups 85, 95

antagonistic 86government incorporating a wide variety

of 87major 96networks 81see also SES

socioeconomic variables 360sociopolitical conflicts 84Sodimac 126SOEs (state-owned enterprises) 29, 31, 40, 252,

271privatized 41

soft drinks 37, 126, 260, 261, 343, 352software 78

global development 34sector-specific 76

soil qualities 91solvency 128SOMISA 275, 278South Asia 46Southdown Inc. 48Southeast Asia 46

emerging countries 333famously high savings rate 332

Southern Star Concrete 126Southwestern Bell 253soy beans 67, 70, 72, 73

exports 283–4Spain 55, 57, 58, 255

colonial 313, 329control of largest firms 29, 320Latino population living in 133

specialists 158

specialization 69new pattern of 269

speculative pressure 320SpencerStuart 285Spice Islands 330Spicer 259Ssangyong Group 297stability:

civic 14economic 184, 232financial 205income 360macroeconomic 69political 270rules of the game 60

stagnation 314, 334standardization 285, 302standards 165

DOC 108environmental 163excellence 239, 243improving 156increasingly complex 106international 74, 93, 105, 151, 155locally developed 105operational and product 98performance, exacting 271productivity 236quality 56, 137, 155social 163world 93

Standing Committee of the 10th NationalPeople’s Congress (China) 283

start-up companies 154state-of-the-art practices 70, 75, 76

quality control 90technology 136

steel 20, 38–9, 47, 53, 206, 275, 309largest companies 48, 270see also Arcelor; Corus; Mittal; Shanghai

Baosteel; Siderca; Techintstock exchanges 277

see also Bolsa de Brazil; Bolsa de Comercio;Medellin Stock Exchange; NYSE; ParisBourse; Santiago Stock Exchange

stock markets 128, 129, 133, 142, 333advanced development of 32boom in 321capitalization 321, 323commercial banks successful competition

with 323impressive upsurge in activity 324increase in demand for shares 131possibility to grow 41small and volatile 315strong, lack of 32tradability of shares 126, 142

412

Index

transactions to discourage potentialbuyers 127

stockbrokers 38store checks 349strategic action plans 303strategic alliances 15, 126, 128, 135, 243, 286

success of 134strategic initiatives 180, 182, 186, 191strategic management theory 295, 296strategic planning 53, 273Strauss, A. 207street markets 356structural factors 234

change 68–72, 73, 183complexity 270conditions 23, 236deterrence 270problems 151retrenchments 243unemployment 67

structural transformation 68, 70deep 73

subcontractors 69, 70large independent 73

subsidiaries 38, 60, 67, 260, 272, 281, 304aircraft leasing 282direct ownership of 269exchange of resources between 303guaranteeing debts of other subsidiaries 318stronger competencies to manage quality and

services across 220subsidies 78, 275

direct 203export 274small- and medium-sized firms to R&D 13zero-sum game over price supports and 94

success stories 156Sucre 163Sudamericana de Seguros 14Sudan 286sugar 126

high cost of 138sugar mills 37, 38sugar production 37Sull, D. N. 236, 239, 240, 241supermarkets 23, 37, 126, 187

discount 350–2emerging consumers shopping at 350,

355–60large 355, 356, 357, 358outstanding presence of brands 137small independent 355

suppliers 93, 96, 346aerospace component 273auto companies 255chemical 93dedicated 98

electricity and natural gas 278facilitating learning processes by 156foreign 138, 274government, key 217independent 75integration of 286intermediate input 74international equipment 93laws on protection of contracting rights

for 107medium-sized 97monopoly 252premier 259relationships with 57, 188small 91, 97sophisticated base of 275specialized 274upstream 278world-class 278

supply chain 245consensus and coordinated actions

along 346improving efficiency along 346

supply management 55support institutions 152

absence of 162lack of 156

support structure 303survival 18, 159, 160, 169–98, 245, 299

adaptation essential to 169critical factor of 144domestic market 51guaranteed 126internal configurations that assure 246scale to promote 54–5

survivorship bias 317suspicion 244sustainability:

barriers to 110long-term 165promoting 346

sustainable advantages 1, 15sustainable development 163Switzerland 316

banks 314, 327synergy 50, 51, 132, 217

companies enabled to take advantage of 127cross-border 276group more profitable from 138

systemic factors 234

3M 300table wine 98

cheap 88, 91tacit knowledge 86, 94tailor-made products 47Taiwan 13, 205, 270, 318

413

Index

takeovers 243adding other brands through 342hostile 127, 136, 145targets 3, 127threat of 127, 136, 216voluntary 145

Tamsa 276, 278Tanggu 286tariff barriers 47, 134tariffs 204

freedom to set at cost-recovery levels282

reducing some 206repealed 319

Tata Steel 48Taura virus 16, 153, 163–4Tavares, Márcia 12–13, 367, 373TAVSA 276tax 108, 240, 255, 283

adequate 282change in treatment 323

tax burden 235tax evasion 346Techint 3, 19, 23, 38–9, 48, 269, 271, 275–9,

284–7, 373benefits reaped from acquisitions 55public-private program in support of

SMEs 51successes of 20

technical assistance 93technical competence 209, 283technical support 303technological absorption 76, 77technological adjustments 156technological advantages 58technological capabilities 66

accumulation of 68being developed 269improvements in 108policies for enhancement of 76–9

technological development 13internal 40

technological progress 41, 77indicators of 40

technological superiority 255technology 33, 139, 235

access to 51, 57advanced 143, 347agricultural 73availability of 11best 134capacity to develop 57efficient and environmentally

sustainable 157human capital 269increasingly complex 106proprietary, utilizing 9

scale that would allow for necessaryinvestments in 54

sharing 280sound base 245state-of-the-art 136see also new technologies

technology parks 13, 78technology transfer 281, 287, 288

increased 280leakage to other producers 151

Teece, D. 171Telcel 255telecommunications 48, 67, 70, 250, 253, 254,

309FDI attracted to 150huge move into 253wireless 255

Telefonica 38, 255Telefónica de Argentina 320telephone companies/holdings 29, 38Televisa 254television 38, 126, 206, 213, 254, 261

satellite-based 37Telmex 38, 47, 252, 253, 309Tempranillo 90Tenaris 20, 276, 277, 278, 284–5, 286, 287tenure 180, 189Tequila Crisis (Mexico 1994–5) 18, 254, 261,

263, 321, 322defusing the impact of 257performance before and during 256recovery from 334

Ternium 20, 277, 284testimonials 354textile manufacturers 38Thailand 13, 151, 159

commercial bank lending 327–8financial systems crashed 318

theory building process 207–10Third World 58, 281

debt crisis (1982) 314Thomas, D. E. 262, 370, 371, 374Three Gorges Dam project (China) 270Thunderbird Business School 131Tiananmen Square protests (1989) 270Tianjin Free Trade Zone 287Tianjin Pipe Company 286Tierra del Fuego 364tilapia 15time-to-market 305timing 297, 307TITBCO (Techint Industrial Technologies

Beijing Co. Ltd) 286TMM 252Todito.com 261Tomlinson, R. C. 169‘top down’ view 84

414

Index

TOR (Transforming the Organization forResults) Program 273

Torrontes 90total purchasing cost 354, 355total quality management 273Toulan, Omar 19–20, 201, 202, 206, 209, 210,

225, 373tourism 96trade associations 96–7trade barriers 3, 53, 232trade delegations 106trade fairs 104trade liberalization 46, 70, 87, 202trade surplus 334trademarks 75trading posts 330trading volume 321Traful 344training 60, 61, 104, 106, 156, 302, 303

annual regular hours 304domestic labor and subcontractors 69high emphasis on 278innovative programs 21institutional resources for 111joint programs 103management 156network methods of 103professional 273regular 301revenue streams that could subsidize 104

transaction costs 8–9, 138, 165, 366, 369–72growing/rising 154, 155

transgenic crops 72transitional phases 270transnational firms 58, 59

developing country 54largest 53local providers to 51ownership advantages of 57presence in thorough internationalization

stage 233successful 47

transparency 60, 138, 206, 346transportation costs 50, 126

emerging consumers mentally factorin 354–5

saving 134Trapiche 93tree planting 21Triad countries 13, 255triage 236trial and error 74, 79trucks 259, 260, 342

medium- and heavy-duty 260trust 60, 305, 341tuna exports 157turbulence 257

environmental 239, 242, 244market 170negative impacts of 243

Turkey 29turmoil 173, 187, 191, 244

companies facing 17economic 170, 244environmental 171, 179, 192internal 190political 170social 170

turnarounds 58, 82major 278

turnover 273, 280, 342TV Azteca 254, 261

Uchire 158UNC (Universidad Nacional de Cuyo) 106uncertainty 85, 173

complex coordination under 94diversity combined with 93economic and business 205investment 204structural 270

UNCTAD (UN Conference on Trade andDevelopment) 47, 53, 143, 144, 145, 233

underperformance 311, 353underprivileged people 313Unefon 254, 261unfavorable conditions 236Unik auto parts division 259Unilever 23, 343, 374unincorporated business 127United Kingdom 32, 47, 48, 53United Nations Center on Latin America and

the Caribbean 12United States 32, 48, 53, 54, 126, 145, 252, 261

cement industry 129commercial banks 326competition 10, 255Cordialsas 135counterpart industries in 235dramatically built sales in 259excessive emphasis on opportunities in 270exports to 260FDIC-insured bank accounts 331free-trade agreement with 138GMOs 72high-income consumers 132Hispanic market in 255interesting market because of proximity 278labor productivity 67Latino population living in 133leading universities 278Mexican companies in 58Mexican food popular in 260MNEs based mostly in 31

415

Index

United States (cont.)narrow sectoral focus that typifies 253possible free-trade agreement with 128reducing dependence on 281remittances from exiles in 342restrictions imposed by competition

authorities 55risk of losing ownership to MNEs from 145shrimp exports to 151, 157wine exports sold in 88direct distribution in 342

Universidad de Oriente 158, 162Universidad Maza 106Universidad Nacional de Cuyo 98universities 77

leading 278world-class, lack of 348

unpredictability 171, 173unprofitable operations 58upgrading 78, 81–122upper-income classes 360Uruguay 56, 206, 219utilities 29, 125, 309, 320, 321, 322

vaccines 77Vahlne, J.-E. 59value chains 19, 107

benchmarking distinct parts of 106changing the vision along 346–7internal capabilities relative to rivals at each

step of 8reformulated 236shrimp harvest 160transforming middle and upstream segments

of 90value creation 301, 346values 184, 298, 301

changes in 189–90emerging consumers 359, 360

Van de Ven, A. 169Van Hoesel, Roger 59vanity 353Vargas, Getulio 326varietals 89–90, 93

fine 95Vasco Viejo 344vegetable oil 67, 70, 72, 73vehicle industry 72Venevision 37, 133, 143Venezuela 278, 343, 369

attacks on private sector firms 40cement industry 129largest business group in 37oil revenues to finance public-sector

build-up 40production facilities 144shrimp industry 15, 150–68

SMEs export to 52see also Cisneros; Mavesa; PDVSA; Sidor;

TAVSAventure capital 78, 205, 312Vernon, Raymond 9vertical integration 37, 91, 126, 137, 162, 330,

342few companies able to arrive at 162reduced levels of 202

Vietnam 151, 159vineyards 88, 91, 105

common problems of upgrading 94largest owners 90maintenance of 90, 93time-consuming experiments for

transforming 96vinification 90‘virtual wallet’ 359VISA 260vision 273

global 288lack of 347long-term 303

viticulture 104degree programs in 106

volatility:economic 87, 152, 153exchange rate 154, 244foreign exchange 154institutional 155market 107price 93, 97, 101

Volberda, H. W. 169, 171, 192Volkswagen 274volunteering spirit 300Votorantim 17, 54, 55, 239, 244vulnerabilities 153, 162

systemic 110

Wal-Mart 254Walters, A. 93, 94, 95, 98Ward, J. L. 209Washington Consensus 203, 205, 365, 371waste management technologies 76water services/supplies 76, 77, 154weakness 17, 165, 250

common 84competitive 19, 106innovation 3, 40institutional 151, 155macroeconomic 11support system 106technological 3, 40, 41

wealth concentration 205Webb, E. 189Weg 61Weigert, A. J. 366

416

Index

well-being 145Wells, L. T. 52, 57Wernerfelt, Birger 8, 295Whetten, D. A. 189Whitmore, K. 143wholesalers 135, 342, 346Wiersema, M. F. 179Williamson, J. 314Williamson, Oliver 8, 370wine industry 13–14, 16, 67, 70

institutional renovation and economicupgrading 81–122

two sets of product lines for 23Wine Spectator 87, 89Wines of Argentina 105wireless telephone services 38, 255, 347

leading providers 47Wolfenzon, D. 32women 349

overlapping roles 350Wonder bread 10Wood, Thomaz 17–18, 367, 375wood products 21work ethics 227

working class 360World Bank 154, 159world-class companies 245, 269World Economic Forum 154, 235WTO (World Trade Organization) 274, 275,

282, 287WTO launching of 300Wu Bangguo 283Wuhan 286Wuhan Airlines 280

xenophobia 59

Yafeh, Y. 225Yamazaki 48yeasts 90Yeung, B. 32Yin, R. C. 207YPF 40, 53, 55, 277Yu, Il Hwan 300, 301Yuhan-Kimberly 21, 293–308, 375

Zote brand 343Zulia 158, 163

417

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