History and expansion of Coca Cola FEMSA in Latin America
FEMSA, is a leading company in Latin America, which operates under two unalterable and mutually complementary principles: generate financial and social value. His corporate philosophy is driven with the main desire to attract and meet consumers’ demands, generate income for their shareholders and expand social development (FEMSA, 2019). In each different historical step, business has been built on a fundamental principle: respect for human dignity beyond any monetary consideration. FEMSA has been present in world markets for more than 128 years through different ways and strategies:
- Creating Coca-Cola FEMSA, the largest public bottling of Coca-Cola products in the world. It has operations in 10 countries, including Mexico, Brazil, Argentina, Colombia, Central America, Uruguay and Venezuela (FEMSA, 2019).
- Become the second largest shareholder in Heineken, a leading beer company in the world that sells in more than 70 countries, with 14.8% economic interest in the Heineken Group (FEMSA, 2019).
- Developing FEMSA Commerce, including a proximity division that Opera Oxxo operates, a small format store chain, a health division, which includes all pharmacies and related operations, and a fuel division, which operates the chain of retail service stationsOXXO GAS (FEMSA, 2019).
- Establishing FEMSA strategic businesses, a group of companies to boost the impulse of our different business units, providing logistics solutions, point of sale and plastic solutions to the business units of FEMSA and to third parties (FEMSA, 2019).
FEMSA currently operates in Argentina, Brazil, Chile, Colombia, Costa Rica, Guatemala, Mexico, Nicaragua, Panama, Peru, Uruguay and Venezuela, marketing recognized brands of soft drinks, juices, bottled water and energy drinks, such as Coca-Cola, Sprite,Ciel, Ades, Powerade and Andatti, which serve more than 290 million consumers (see the “Support Document 1”) (FEMSA, 2019). Through this document, Coca-Cola FEMSA will be analyzed in depth, since it represents one of the most important parts of the company.
Discovery and analysis
History and expansion
FEMSA is a company with a long history, with firm bases and clear ideas about what they have done and what they want to do in the future. Since its foundation, in 1890, it was decidedof its workforce, as well as the communities where it operates (FEMSA, 2019a).
To begin, from the beginning between 1890-1899, the story of FEMSA has shown the impulse of confidence in its abilities and teamwork. During that period the first barrel beer was launched under the Cuauhtémoc brand, and it was so successful that its manufacture was permanent. In addition, Carta Blanca won the Gold Medal Award in Chicago. This was the first recognition of a Mexican beer. However, it was not until 1940 and 1949 that there was significant growth for the company, where new companies were born. For example, warehouses and silos were created, a company dedicated to grain storage and other raw materials used by Cuauhtémoc Cervecería. In addition, due to the impediments to import steel sheet to manufacture metal bottles, they founded the tin and lamina steelThe quality of its technological products and developments (FEMSA, 2019a).
Between 1950-1959, FEMSA expanded operations to other Mexican regions. After 1960-1969 there was innovation, it was practically a decade of changes in beer containers, which defined them as a truly concerned company for its consumers. As a result of a historic decision, FEMSA merged with Moctezuma brewery. This added to its portfolio the renowned XX Lager, Superior, Sun and Good Night brands, in addition to generating synergies that led them to leadership in the national market and reinforced their competitiveness abroad. In the 90’s, the company began dominating beer markets beyond North America and joined The Coca-Cola Cola. That is, they adjusted their graphic identity that represents the Aztec ruling emperors whose names they took for the fusion of breweries and called it ‘Cuauhtémoc Moctezuma Brewery’. In addition, they began their conquest of the European market with the Sol brand, and positioned their products in more than 55 countries, some of them with a long beer tradition, such as England and Germany (FEMSA, 2019a).
Finally, an association with The Coca Cola Co was sought. To accelerate the growth of your company Coca-Cola FEMSA. First, The Coca Cola Co. He bought 30 percent of Coca-Cola FEMSA’s shares, and then placed 19 percent of the shares in the Mexican Stock Exchange, BMV, and in the New York Stock Exchange, Nyse. Definitely, the rapid growth of their businesses positioned them as a company of world class consumer goods. Therefore, it was decided to change his name from Visa to FEMSA through the exchange of actions. In May 1998, the actions were quoted as FEMSA in the New York Stock Exchange, Nyse (FEMSA, 2019a). All this originated what we now know as FEMSA, a monster in business.
Coca Cola FEMSA
In 1979, a FEMSA subsidiary acquired several beverage bottling companies. At that time there were 13 distribution centers and with a production capacity of 83 million unit boxes per year. This initial operation became, 40 years later, the largest bottling of Coca-Cola products in the franchise in the world, through which they serve 290 million consumers, marketing 3.3 billion unit boxes per year through the 2 million points of sale (see the “Support Document 2”). FEMSA works in close collaboration with The Coca-Cola Company to design and manage an attractive portfolio of brands and sizes that respond to the particular dynamics of their markets and encourage demand in a growing number of customers and consumers. Therefore, your customers have the opportunity to buy any of the 131 brands of drinks and other non -carbonated drinks that are sold. Operations cover franchise territories in Mexico, Guatemala, Colombia, Brazil and Argentina, and throughout the country in Nicaragua, Costa Rica, Panama, Uruguay and Venezuela (FEMSA, 2019b).
- Analysis of the five forces of Coca Cola FEMSA: Porter Anlysis
Through this analysis model, valuable information is provided to support strategic management, especially when addressing relevant problems in the company’s external environment. In this case its penetration to the Taiwanese market, which is the most current.
- Supplier’s negotiation power:
The supplier in the Taiwanese market of Coca Cola FEMSA has a reduced negotiation power despite the fact that the industry has the domain of 3 players, including Powerchip, Nanya and Promos. Coca Cola FEMSA manufacturers are simple original tools manufacturers in critical alliances with foreign players for modern technology. The second factor for a reduced negotiation power is the reality that there is an excess supply of Coca Cola FEMSA units due to large -scale manufacturing of these dominant market players that has actually reduced the cost per unit and also improvedThe Buyer’s negotiation power (Casteam, 2019).
- Threat of substitutes and degree of rivalry:
The danger of substitutes in the market is high, given the reality that Taiwanese manufacturers are shown in the market to players around the world such as Intel, Motorola, IBM, Hitachi, Nec, Toshiba, Samsung and also Fujitsu. This indicates that the market has a high degree of competition where manufacturers who have design and development skills, in addition to producing experience, can have the ability to have a greater negotiation power in the market. The market is dominated by players such as Micron, Elpida, Samsung and Hynix, which further reduce the purchasing powers of the Taiwanese OEM. The reality that these calculated players do not allow the Taiwanese OEMs to have accessibility to innovation indicates that they have a greater power of negotiation (Casésteam, 2019).
- Input threat:
Access risks in the Coca Cola FEMSA production industry are reduced due to the truth that building wafering factories and buying equipment is very expensive. For only 30,000 units per month, financing needs can vary from $ 500 million to $ 2.5 billion depending on the size of the units. The manufacture required to be in the most recent innovation, as well as for new players, could not be completed with the main OEM of Coca Cola FEMSA (original device manufacturers) in Taiwan who could appreciate economic climates of rank. In addition to this, the existing market had a discrepancy between demand and supply, so the surplus currently made it difficult for new players to enjoy the high margins (Casésteam, 2019).
- Firm strategy:
The production companies of the area have had a mass production approach to reduce costs through economic climates. Since the production of Coca Cola FEMSA uses common processes, as well as the typical and specialized Coca Cola FEMSA are the only two categories of Coca Cola Femsa that are manufactured, the processes can easily use automation. The sector has dominant producers who have actually formed associations in exchange for technology of Korean and Japanese companies. While this has led to the availability of technology and scale, in reality there has been an imbalance in the Coca Cola FEMSA sector (Casésteam, 2019).
- Threats and opportunities in the external environment
According to interior and exterior audits, TMC can take advantage of opportunities such as strategic alliances with technological partners or development through mergers / acquisitions. Along with this, a step towards mobile memory is also a possibility for TMC, especially because this is a market niche. The risks can be seen in the form of excessive dependence on foreign players for technology, as well as the competitors of the United States and also of Japanese suppliers of Coca Cola FEMSA (Casésteam, 2019).
Conclusions
It is evident that FEMSA is one of the most important Mexican companies not only nationwide, but also internationally. However, the challenges for the company, specifically in the Coca-Cola branch are very present. Different cultures make the company’s structure modify to be the most efficient possible to meet the required demand in that market. Through the five Porter forces, you can see how the Taiwanese market is more complex than previous markets where FEMSA currently operates. The two forces with more barriers to penetrate the market are the negotiation power of the supplier (bass) and threats and opportunities in the external environment (bass). Despite being only two of five, they should not underestimate that an error can cost FEMSA’s permanence, or any company, in that country. Finally, it will be necessary to take the expansion to the Asian country with their respective precautions since the distribution of income is not very high compared to the North American market
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