THE LUKSIC GROUP • Founded by “Andronico Luksic Sr.” in the city of 1950 Antofagasta in Northern Chile. • Expanded to Metal processing, electric power 1960 distribution, general manufacturing, shipping, agriculture etc. • Private sector in Chile was restricted. Expanded 1970-73 into Argentina, Colombia and Brazil • Restrictions were eased in Chile. Diversified 1974 to telecommunications, banking, food & beverages , hotels and railways • Became one of the world’s largest copper 2003 mines.
QUINENCO • Originally engaged in logging and supplying 1957 wood to Chilean coal mining industry • Andronico acquired a majority of the 1960 company. 1996 – • Luksic ownership structure was reorganized. Owned 82.4 % shares of Quinenco. • – Succeeded in raising US$280 mn on NYSE. 1997
LUCCHETTI PERU • March - Final decision to go ahead with the construction of plant • July - Certificate of Compatibility from both Municipality of Chorillos and1996 city of Lima • May- Press reports claim that LP causing pollution as a result City of Lima revokes the permit • Oct- Restarted construction of plant after court approval1997 • Price wars started. LP’s COGS/ton is 107 % of sales • Jan - City of Lima again declares permit void • Nov – After court approval plant construction accelerated due to increase import tariffs1998 • Dec- Production started • Not many problems sales grew to $36 million1999 • Gross margins became positive • Political upheaval2000 - • Drop in sales due to negative image 20012002 - • LP given final orders to shut down plant 2003
DEVELOPMENT OF GLOBAL CORPORATION Export- Import Technology Transfer Direct FDILucchetti 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 repatriationpolicies where favourable then.Competitive pricing by other players and high import costsaccelerated their plan for setting up the plant. Was it a mistake??
STRATEGIC ORIENTATION OF A GLOBAL FIRM Ethnocentric Polycentric Geocentric Regio-centricLucchetti followed a ethno-centric approach. Itstarted Lucchetti Peru SA as a subsidiary ofLucchetti Chile.
EXTERNAL ENVIRONMENT Location purchased – near Pantanos de Villa wetlands Political climate – intertwining of business and politics Competitor movements
LucchettiEFE MatrixOpportunities Weight Rating WScoreHigh consumption rates of pasta in 0.1 3 0.3PeruLower quality of pasta sold in Peru 0.05 2 0.1markets currentlyGrowing Peruvian economy 0.1 3 0.3Willingness of customer to purchase 0.1 3 0.3higher quality, higher priced pastaTax and repatriation benefits 0.05 2 0.1ThreatsPolitical Climate 0.15 3 0.45Fluctuating government policies 0.15 2 0.3Competitors 0.1 1 0.1Price wars 0.10 2 0.2No local connections 0.1 3 0.3
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
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