Group 2LIBA

THE LUKSIC GROUP

• Founded by “Andronico Luksic Sr.” in the city of Antofagasta in Northern Chile.1950

• Expanded to Metal processing, electric power distribution, general manufacturing, shipping, agriculture etc.

1960 • Private sector in Chile was restricted.

Expanded into Argentina, Colombia and Brazil

1970-73 • Restrictions were eased in Chile.

Diversified to telecommunications, banking, food & beverages , hotels and railways

1974

• Became one of the world’s largest copper mines.2003

QUINENCO

• Originally engaged in logging and supplying wood to Chilean coal mining industry

1957 • Andronico acquired a majority of the

company.1960 • Luksic ownership structure was

reorganized. Owned 82.4 % shares of Quinenco.

1996 –• – Succeeded in raising US$280 mn on

NYSE. 1997

LUCCHETTI PERU1996

• March - Final decision to go ahead with the construction of plant • July - Certificate of Compatibility from both Municipality of

Chorillos and city of Lima

1997

• May- Press reports claim that LP causing pollution as a result City of Lima revokes the permit

• Oct- Restarted construction of plant after court approval• Price wars started. LP’s COGS/ton is 107 % of sales

1998

• Jan - City of Lima again declares permit void• Nov – After court approval plant construction accelerated due to increase import

tariffs• Dec- Production started

1999

• Not many problems sales grew to $36 million• Gross margins became positive

2000 -

2001

• Political upheaval• Drop in sales due to negative image

2002 -

2003

• LP given final orders to shut down plant

DEVELOPMENT OF GLOBAL CORPORATION Export- Import Technology Transfer Direct FDI

Lucchetti first adopted the import-export initially.And as volumes of sales increased they moved on to Direct FDI. Investing in FDI was then attractive as tax rates and repatriation policies where favourable then.

Competitive pricing by other players and high import costs accelerated their plan for setting up the plant.

Was it a mistake??

STRATEGIC ORIENTATION OF A GLOBAL FIRM

Ethnocentric Polycentric Geocentric Regio-centric

Lucchetti followed a ethno-centric approach. It started Lucchetti Peru SA as a subsidiary of Lucchetti Chile.

EXTERNAL ENVIRONMENT

Location purchased – near Pantanos de Villa wetlands

Political climate – intertwining of business and politics

Competitor movements

LucchettiEFE Matrix

Opportunities Weight Rating WScore

High consumption rates of pasta in Peru

0.1 3 0.3

Lower quality of pasta sold in Peru markets currently

0.05 2 0.1

Growing Peruvian economy 0.1 3 0.3

Willingness of customer to purchase higher quality, higher priced pasta

0.1 3 0.3

Tax and repatriation benefits 0.05 2 0.1

ThreatsPolitical Climate 0.15 3 0.45

Fluctuating government policies 0.15 2 0.3

Competitors 0.1 1 0.1

Price wars 0.10 2 0.2

No local connections 0.1 3 0.3

LucchettiIFE Matrix

Strengths Weight Rating Wscore

Quality product 0.2 3 0.6

Distribution and service network 0.2 3 0.6

Have diversified holdings 0.05 1 0.05

Strong balance sheet 0.1 2 0,2

Higher market share 0.05 1 0.05

WeaknessWeak strategy formulation team 0.1 3 0.3

No political connections 0.1 2 0.2

Ethnocentric approach 0.2 3 0.6

CPM MATRIX

    Alicorp LP

Critical Success Factors Weight Rating Wt. Score Rating Wt. Score

Political connections 0.25 3 0.75 1 0.25

Product quality 0.2 2 0.4 4 0.8

Market share 0.1 2 0.2 3 0.3

Home turf advantage 0.1 3 0.3 2 0.2

Distribution & network 0.1 2 0.2 3 0.3

Price 0.1 2 0.2 2 0.2

Production facilities 0.15 3 0.45 1 0.15

TOTAL 1   2.5   2.2

WHAT COULD HAVE BEEN DONE?

Better analysis of external environment Lost opportunities – lower bid amount

and forgoing purchase of local unit They could have done a better analysis

of which products and markets to chose from a BCG matrix

Better analysis about competitor – Alicorp was increasing their capacity during 1996-97

OPTIONS

Divestiture Write off loss and leave the market Continue to invest in Peru Keep pasta as loss leader; Introduce

other products Come back when political conditions

are better