EVREN KUCUKKAYA

2012

INTERCULTURAL

MANAGEMENT Mehdi Majidi, Ph.D.

Grupo Bimbo

I S G - I N T E R N A T I O N A L M B A

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INDEX EXECUTIVE SUMMARY ......................................................................................................................... 2

INTRODUCTION ................................................................................................................................... 3

1. GRUPO BIMBO ................................................................................................................................. 4

2. SITUATION ....................................................................................................................................... 7

a) Strategic Challenge in the U.S.: ............................................................................................... 7

b) Improvement in Central and South America:.............................................................................. 8

c) Opportunity in China: .................................................................................................................. 8

3. ANALYSES......................................................................................................................................... 9

4. CONCLUSION ................................................................................................................................. 10

5. RECOMMENDATION ...................................................................................................................... 11

REFERENCES ...................................................................................................................................... 12

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EXECUTIVE SUMMARY

The term "culture," which originally meant the cultivation of the soul or mind, acquires most

of its later modern meanings in the writings of the eighteenth-century German thinkers, who

on various levels developing Rousseau's criticism of modern liberalism and Enlightenment.

Thus a contrast between "culture" and "civilization" is usually implied in these authors, even

when not expressed as such. Two primary meanings of culture emerge from this period:

culture as the folk-spirit having a unique identity, and culture as cultivation of inwardness or

free individuality. The first meaning is predominant in our current use of the term "culture,"

although the second still plays a large role in what we think culture should achieve, namely

the full "expression" of the unique of "authentic" self. Term of culture described as above by

Velkley.1

The globalisation of the economy, with increased cross-border alliances, ventures and global

relocations, as well as the advent of e-commerce, has brought about major changes in the field

of international customer relations and intercultural diversity management. This has led to an

increased appreciation by companies that managing cultural differences properly can be a key

factor in getting things done effectively across borders. With increased contact of personnel

and customers from diverse cultural backgrounds, there is a growing demand for businesses to

understand and manage the diverse values, perceptions, business worldviews and behaviour of

corporations, staff, and its customers. Intercultural communication and management is an

1 Velkley, Richard (2002). "The Tension in the Beautiful: On Culture and Civilization in Rousseau and German

Philosophy". Being after Rousseau: Philosophy and Culture in Question. The University of Chicago Press. pp. 11–30

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interdisciplinary human resources field concerned with facilitating communication,

management and effective interaction of personnel and customers across borders.2

INTRODUCTION

This study will try to look inside the intercultural management challenges of the Grupo

Bimbo on China, United States, Central America and South America.

With the globalization of the world and economy, management in different countries and on

different cultures getting a rising trend of importance day by day. A successful management

strategy in different countries and on different cultures mostly depends on a successful

intercultural management strategy. With the technological and communication developments

all cultures become interacted and this situation makes harder to make analyses on a single

culture. All developing cultures are interacting with each other by communication techniques

such as internet or television and exchanging cultural habits between them. This situation

causing changes on cultures especially towards the developed western countries and makes

analysing the cultures harder. In addition all cultures have unique traditions which can be

totally different or opposite from another culture. Such as differences between body languages

and direct or indirect communication skills.

In an article (5 April 2001) in the Financial Times by Elisabeth Marx titled 'Shock of the alien

can sink a merger', for instance, it was said that "Research on cross-border acquisitions has

shown that differences in management style (particularly in attitudes towards risk) have a

negative effect on company performance. Sadly, very few companies consider the softer,

cultural factors of mergers, which may be a significant contributor to their subsequent

failures. Far too few companies even begin to consider the effects on staff or the human

2 http://www.synergy-associates.com/cultural/i_mgmt.htm

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implication of a merger." The article carries on to say that "it is easy to end up in a situation

where the whole is worth less than the sum of its two parts", the very opposite of the intention

behind the merger, and quotes the DaimlerChrysler merger as a case in point. The article

advises: "Managers' first task is to conduct more extensive business analysis before taking the

decision to merge. In addition to carrying out traditional financial and commercial due

diligence, they should complete a thorough examination of the cultural compatibility of the

parties involved."3

Grupo Bimbo is challenging to give the right decisions on a totally different culture then them

and trying to find the answer of a problem that is questioning them about national values of

the company.

1. GRUPO BIMBO

Grupo Bimbo is one of the global baking companies which are operating in several different

countries. The company is operating in 19 countries in America, Asia and Europe. They have

nearly 10.000 products and over 103 brands under the operations of company.4 The

company’s base is established in Mexico. Companies CEO is Daniel Servitje. The Servitje

family had a proud history in the bread business even before the founding of Grupo Bimbo.

Daniel Servitje’s grandfather Juan had invented Mexico’s first machine for mass-producing

bolillo breads in 1918. Grupo Bimbo, originally named Panificación Bimbo, in turn was

launched in 1945 by a group of siblings and close friends led by Daniel’s father, Lorenzo.

Daniel’s uncle Roberto, who at age 17 had been the sales manager at the time of the

company’s founding, had received his management education in Harvard Business School’s

3

http://books.google.fr/books?id=I14RCjT3XAgC&pg=PA114&lpg=PA114&dq=Elisabeth+Marx+financial+times&source=bl&ots=izY8WK7END&sig=gpBdp2J_s9ruZUbOqgx51g_k2fc&hl=tr&sa=X&ei=vzbOT8nxMoHO0QXNxOSTDA&redir_esc=y#v=onepage&q&f=false 4 http://www.grupobimbo.com/en/index.html

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Management Development Program (PMD), and still served as the chairman of the

company’s board some 62 years later.

Map 1: Operational countries of Grupo Bimbo

Some of the brands of the company are:

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When the company first opened out of its tiny factory in 1945, it quickly adopted the use of

the little male bear named Bimbo on its packaging and advertisements. The company used the

bear to market its initial product line of just four basic types of bread and toast.

The company used its’ first differentiation strategy in the first Mexico City plant. Grupo

Bimbo distinguished itself from its competitors by wrapping its bread and toasted products in

clear cellophane (instead of the conventional wax paper) so the product’s freshness and

quality would be maximally apparent. Competitors had used the wax paper to sell product that

was already stale, whereas Bimbo’s clear cellophane enabled its customers to both see and

feel the freshness of its product. Starting with one small production site in Mexico City, the

company employed 10 trucks to deliver its products to nearby stores. By 1955, the company

was ready to expand into sweet pastries and cakes. In subsequent decades, Bimbo expanded

by creating literally thousands of bread and sweet-goods products that it produced in factories

noted in the industry for their scale and flexibility. In the early 1970s the company entered the

snack market with its Palomitas (popcorn) product; it also diversified by manufacturing and

marketing its own chocolate and candy brands, and in 1980 it listed its shares on the Mexico

Stock Exchange. Between 1984 and 1997, under the leadership of Daniel’s uncle Roberto, the

company expanded across borders into the U.S. as well as Central and South America. Daniel

Servitje, a Stanford-educated MBA, took over as CEO in 1997. The company further

expanded its global footprint through a large Brazilian acquisition in 2001, the major U.S.

acquisitions of Mrs. Baird’s in 1997 and Weston’s western division in 2002, and the

company’s choice to become one of the first few Latin American consumer product

companies in China in 2006.

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2. SITUATION

a) Strategic Challenge in the U.S.:

The Company had grown to become one of the five-largest bakers in the world, although its

profitability still came largely from its Mexican operations. The Company began exporting

Mexican products to the US in the mid-1980s and start to expand their operations in US by

acquisitions. The Company’s acquisition was Pacific Pride Bakeries (in California) in the late

1980s. In the late 1990s and early 2000s, regional bakers west of Chicago, Mrs Baird’s in

Texas, Oroweat (the western division of Toronto-based George Weston), Entenmann’s and

Thomas’s English muffins in the western half of the U.S acquisitions followed.

The Company faced three situations in U.S. First of all unsold inventory was returned to the

bread producer, who suffered the cost. U.S. grocery store buyers demanded fully stocked

bread aisles even in the presence of recurring fad diets and supermarkets expected to see their

shelves filled. Second is the Hispanic population in U.S. 43 million Hispanics are living in

U.S. and Hispanic bread market is a big opportunity for the Mexican Company. By 2007, the

company was shipping Hispanic bread and sweet goods all over the United States, following a

year of double digit sales and profit growth. Third factor is unionization in U.S. Demands of

unions for unionized workers especially truck drivers bring heavy responsibilities and costs to

the company. Beside of these responsibilities daily schedule of truck drivers couldn’t satisfy

the demand of consumers and supermarkets. The Company solved this unionized worker and

daily schedule problem by starting to work with their truck drivers as independent contractors.

By this strategy company had get over the high costs of union demands.

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b) Improvement in Central and South America:

The Company’s Latin America division consisted of production and sales operations in

Argentina, Brazil, Chile, Colombia, Costa Rica, El Salvador, Guatemala, Honduras,

Nicaragua, Peru, Venezuela, and Uruguay. The Company faced several problems in these

markets as like U.S. First of these is the cultural and market differences between the

countries- even compared with the Mexico- that needed to be overcome if the company wants

to be successful. Second is low rate of the demand for the industrial bread especially in Peru.

Third is starting with wrong products in the first place. Consumers of South America prefer

pound cakes, cereal bars, and products with milk cream instead of preference of sweet goods

with strawberry jelly filling in Mexico. Wrong aiming on marketing resources in Brazil and

Argentina was another lesson to learn for the Company. Company made wrong choices

between mom-and-pop stores and hypermarkets. The Company solved its distinguishing and

union problems as the same way did in U.S.

c) Opportunity in China:

Daniel Servitje, the CEO of the company saw an opportunity for his Mexico-based bread and

sweet-goods company in the growing Chinese market and decided in the spring of 2006 to

make Grupo Bimbo one of the first Latin American consumer product companies to enter

China with both a production and sales presence. In March/April 2006, Grupo Bimbo

purchased the Beijing Panrico Food Processing Centre. The existing company, which had

been Spanish owned, had 775 employees and maintained operations in Beijing and nearby

Tianjin. It served a regional area of 40 million people, and its 186 routes were linked by a

combination of trucks and bicycles. It was able to access over 4,000 points of sale with an

existing portfolio of brands recognizable to Chinese consumers.

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The Company acquired the Beijing business after two years of studies on Chinese market. The

company hired a team of Chinese immigrants who live in Mexico to taste hundreds of

Company’s products and their recommendations on Chinese market to appeal. Then the

company narrowed the list down to the five of most recommended product that could be

transplanted. The company decided to continue producing existing products of the old

company, especially black bean bread and shredded beef bread. The Company had seen initial

success by using store promotion and university and school road shows to introduce the

Bimbo Bear and product samples to the Chinese. The Company started to work with internal

experts to get over the language problem. The company found it most economical to rely on

employees riding bicycles to transport the products and manage the shelf space as did it

before in Colombia.

The Company faced with the pricing problem as a main problem of marketing in China. And

one of the other situations in Chinese market was the market shares. Because none of the

existing companies owned more than the 2% of the Chinese bread market. The overall baking

market in China was highly fragmented.

3. ANALYSES

The company used its previous experiences to enter the Chinese market. But having

experiences doesn’t mean the company did the right thing in the past. Grupo Bimbo is an

excellent example for intercultural management. It is a successful global baking company.

The Company always created its own opportunities to turn the baking business as a profitable

business. The Company created these opportunities by using several strategies such as turning

its truck drivers to independent contractors. By using this strategy the Company reduced the

tax and distributing costs and gained an opportunity to turn an unprofitable business to a

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profitable business. The Company analysed the different cultural situations in different

countries successfully and turned these situations to opportunities.

The company’s main strategy of entering a new market is by acquisitions. This strategy

aiming to purchase an existing company and innovated their production lines for the

Company’s products. The Company using a long research process before entering a China

market to realize the necessities of these new markets but the Company made this research in

Mexico not in China. This situation can cause mistakes on the choices of the consumers

because of the changes of the consumer habits causing from the adaptation process of the

immigrants.

The Company is always focusing on the distribution phase of the production process. The

Company is trying to reducing its production costs by focusing on the reducing the costs of

the distribution but by this strategy the Company ignoring the costs of the raw materials

which is contain huge amounts in the production process.

The Company ignores the management habits of the local managers.

4. CONCLUSION

At the end the Grupo Bimbo is using lots of different strategies to entering new markets

depending on its experiences. But most of these strategies are focused on the financial

phases of the entering strategies. The Company mostly ignores the cross-cultural issues of

different countries and suffering from these issues. For example ignoring the cultural

differences between the Latin America countries is the one of the reason that decreasing the

success of the Grupo Bimbo in Latin America. The Company’s aim is entering a new market

fast and effective by acquisitions. But this strategy is causing problems on business. The

Company cannot list its priorities in a right way. The Company trying to find ways to

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manipulate their workers work as ındependent contractors instead of being a member of

union. This can cause legal problems in highly unionized countries.

5. RECOMMENDATION

Grupo Bimbo can stop ignoring the focusing on distribution phase of the production process.

Because trying to reducing cost only in one way will cause problems like the weakest piece of

a chain. The Company can try to work with local experts to make research about the markets

in Latin America for each country and for China. The Company’s some strategies for entering

Chinese market is right but not enough. The Company had to make the research about a new

market in that market. By making this research in another country even by using immigrants

can cause problems such as causing from adaptation that mentioned before. Grupo Bimbo

must avoid the misunderstandings from causing the language differences maybe not in

Central and Latin America but especially in China. The company must globalize their values

without ignoring local cultural differences if it wants to be a global Company.

Beside of these issues strategies of the Company is right but still need to develop.

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REFERENCES http://www.synergy-associates.com/cultural/i_mgmt.htm

http://en.wikipedia.org/wiki/Culture#cite_note-velkley-3

Velkley, Richard (2002). "The Tension in the Beautiful: On Culture and Civilization in Rousseau and

German Philosophy". Being after Rousseau: Philosophy and Culture in Question. The University of

Chicago Press. pp. 11–30

http://books.google.fr/books?id=I14RCjT3XAgC&pg=PA114&lpg=PA114&dq=Elisabeth+Marx

+financial+times&source=bl&ots=izY8WK7END&sig=gpBdp2J_s9ruZUbOqgx51g_k2fc&hl=tr&

sa=X&ei=vzbOT8nxMoHO0QXNxOSTDA&redir_esc=y#v=onepage&q&f=false

http://www.grupobimbo.com/en/index.html

http://www.kwintessential.co.uk/cultural-services/articles/intercultural-management.html

http://www.kwintessential.co.uk/cultural-services/articles/intercultural-manager.html

http://www.bakingbusiness.com/

http://gain.fas.usda.gov/Recent%20GAIN%20Publications/South%20Chinas%20bakery%20in

dustry%20is%20booming%20but%20demand%20for%20US%20_Guangzhou_China%20-

%20Peoples%20Republic%20of_12-6-2009.pdf

http://www.prlog.org/10546845-bakery-industry-in-china-shanghai-shandong-henan-are-

the-most-important-manufacturing-bases.html