Pasha M.

Grupo Bimbo: Executive Brief

Changes to Global Strategy Grupo Bimbo should overcome the cultural and administrative distances and better respond to its consumers needs around the world. The management should develop, produce and deliver the products that meet the consumers current needs and preferences for every type of consumption occasion. This can be reached by constant innovation and a commitment to quality as the company broadens its reach around the world. In order to maintain its leading position in this highly fragmented and competative industry and successfully expand into new territories, Grupo Bimbo needs to have a strong presence in Brazil, overcome its administrative and cultural challenges in the US, and gain a strong position in China. Changes to the US Market In the US, the baking industry has been hurt by the advent of the low-carb movement which decreased the consumer demand for bread products. (Per capita bread consumption in the US decreased by 2 Kg between 1998 and 2006). The company is also under pressure from strong retail stores and supermarkets to keep prices low while the wages keep increasing due to unionization of its workers and truckers. To overcome the administrative and cultural distance in the US, Grupo Bimbo should produce healthier choices and earn a price premium by improving quality. Since it is difficult to bust the union, the company should create an incentive program to get drivers and employees to improve their efficiency. Improve Profitability in Brazil In order to dominate South America, Grupo Bimbo has to dominate Brazil. What they didnt account for however, was cultural distance. The company tried to replicate its success in Brazil by following the exact same strategy and operation as Mexico. It turns out that the sweet and industrial bread consumption in Brazil is much lower than Mexico and that Artisenal bread is king. Additionally, hypermarkets large bargaining power as well as tough competition keep the prices low. To be profitable, Grupo Bimbo has to improve its relationship with the large retailers and offer product that are better suited to Brazilian taste. An emphasis should be put on sweets and confectionary since its proving to be profitable. Long Term Profitability in China The expansion into China will prove to be the most difficult as the company faces cultural, administrative, geographic and economic distances. Grupo Bimbo has already invested in R&D in China and should continue this strategy to better meet local needs. The experience that the company has gained in other expansions will prove to be invaluable in China. A strong promotional campaign is necessary to introduce the brand and familiarize the Chinese consumers with the different product that matches their local recipes. There is curiosity toward western food in China and many consumers will be interested to try the Bimbo products if they are priced correctly. Government cooperation is key and the company has to make sure it develops a healthy relationship with local officials. Grupo Bimbo will benefit from acquisition of a large local business, as local experts are needed to help make this operation profitable.