This document provides an analysis of the art gallery industry in Mexico City, including suppliers, competitors, and buyers. It identifies three types of artist suppliers: established, mid-career, and emerging. It also identifies two types of competing galleries: premium and medium/low galleries. Finally, it outlines two segments of buyers: premium collectors and investors, and a massive market of enthusiasts and occasional buyers. Key data on the Mexican population, GDP, employment, and poverty levels is also presented to understand the target markets.

1.
STRATEGY
BUSINESS
CASE:
Delarte.mx
Crafting
a
new
strategic
positioning
in
the
art
industry
By
Daniel
Enriquez

2.
ART
PAINTING
GALLERY
INDUSTRY
IN
MEXICO;
Suppliers,
Competitors
and
Buyers
SUPPLIERS (PAINTERS)
SUPPLIERS; THREE TYPES OF PAINTERS
• Consagrados painters (Established artists)
• Consolidados painters (Mid-career artists)
• Emergentes painters (Emerging artists)
CONSAGRADOS PAINTERS (ESTABLISHED ARTISTS)
Definition
“They have developed a considerable art production that takes part of collections and museums around the
world. Before buying one of his pieces is important to check the authenticity to avoid becoming a victim of
fraud.” – El Economista, Mercado del arte: artistas, indices y evaluación, Febrero, 2012. (Translation from
Spanish to English by Daniel Enriquez, 2016)
Investment range:
• Paintings: $700,000 MXN pesos and above
• Graphic work: $20,000 MXN pesos and above
– El Economista, Mercado del arte: artistas, indices y evaluación, Febrero, 2012. (Translation from Spanish to
English by Daniel Enriquez, 2016)
Examples
Some examples of Mexican consagrados painters are Rufino Tamayo, David Alfaro Siqueiros, Diego Rivera,
Frida Kahlo, Leonora Carrington, etc. To see further artists see Appendix 1.
CONSOLIDADOS PAINTERS (MID-CAREER ARTISTS)
Definition
“They are in the middle of their career and have already participated in exhibitions and awards that have
generated some recognition. It is probable that in the future they become established artists and therefore their
artwork highly valuated.” – El Economista, Mercado del arte: artistas, indices y evaluación, Febrero, 2012.
(Translation from Spanish to English by Daniel Enriquez, 2016)
Investment range:
• Paintings: From $50,000 MXN pesos to $200,000 MXN pesos
• Graphic work: From $7,000 MXN pesos to $20,000 MXN pesos
– El Economista, Mercado del arte: artistas, indices y evaluación, Febrero, 2012. (Translation from Spanish to
English by Daniel Enriquez, 2016)
Examples
Some examples of Mexican consolidados painters are Jerónimo López Ramirez “Dr. Lakra”, Leonardo
Nierman, Fernando Andreacci, Pedro Friedeberg, etc. To see further artists see Appendix 2.
EMERGENTES PAINTERS (EMERGING ARTISTS)
Definition
“They have a few years of painting career but look as a promise. They are fostered by galleries, art dealers
and businessmen because it is expected that the value of their work will increase its value.” – El Economista,
Mercado del arte: artistas, indices y evaluación, Febrero, 2012. (Translation from Spanish to English by Daniel
Enriquez, 2016)
Investment range:
• Paintings: From $3,000 MXN pesos to $20,000 MXN pesos
• Graphic work: From $ 250MXN pesos
– El Economista, Mercado del arte: artistas, indices y evaluación, Febrero, 2012. (Translation from Spanish to
English by Daniel Enriquez, 2016)
Examples
Some examples of Mexican emergentes painters are Luis Sn Carlos, Carlos Génova, Carlos Vivar, Manuel
Miguel, Alain Bailleres, etc. To see further artists see Appendix 3.

3.
COMPETITORS (GALLERIES)
COMPETITORS; TWO TYPES OF COMPETITORS
• Premium Galleries: Top galleries
• Massive Galleries: Medium and Low galleries
Although, there are three main kind of business model (offline, hybrid and online) the grand majority of current
galleries in Mexico City are offline galleries, which means, the traditional gallery model that have been running
since the first galleries in our country since 1920. Therefore the focus of the following descriptive analysis will
be focus on offline galleries.
OFFLINE GALLERIES
Mexico
City
Map
with
main
competitors
Source: Google Maps Mexico, January 2016
Google Maps Mexico shows red dots that represent an art gallery in Mexico City. There are approximately 300
galleries in Mexico City. This information is key to denote an accurate geographic scope of competition.
Following, find the three main galleries clusters;
1. Zona Polanco/Chapultepec
2. Zona Cuauhtémoc/Roma/Condesa
3. Zona San Ángel
Zoom-in; Three main galleries clusters in Mexico City

4.
Source: Google Maps Mexico
Cluster Prior 1: Colonias Polanco / Chapultepec – Main Galleries
1. Galería de Arte Mexicano GAM (Chapultepec)
2. Nina Menocal (Chapultepec)
3. Galería Kurimanzutto (Chapultepec)
4. Galería Enrique Guerrero (Chapultepec)
5. Myto Gallery (Chapultepec)
6. Galería LABOR (Daniel Garza)
7. Zona Maco México Arte Contemporáneo (Lomas de Sotelo)
8. Galería de Arte Rafael Matos (Chapultepec)
9. Galería Alberto Misrachi (Polanco)
10. Galería de Arte Misrachi (Polanco)
11. Galería de Arte Divart (Polanco)
12. Galería Vintage Art (Polanco)
13. Galería Oscar Román Arte y Diseño (Polanco)
14. Galería Casa de Arte (Polanco)
15. Galería Pietra (Polanco)
16. Galería Nadia Montefiore (Polanco)
17. Galería Shwarcstein (Polanco)
18. Britto Mexico (Polanco)
19. Galería Talento Arte (Polanco)
20. Patricia Conde Galería (Polanco)
21. Galerías Grimaldi (Polanco)
22. Galería de Arte Diler México (Polanco)
23. Galería Juan Martín (Polanco)
24. LS Galería (Polanco)
25. Galería de arte LTBART (Polanco)
26. Galería de arte Marco y Compañia (Polanco)
27. Galería Petrarca (Polanco)
28. Ginocchio Galería (Polanco)
29. Galería Lopez Quiroga (Polanco)
30. Galería de Arte XXI (Polanco)
GALERÍA histería

5.
Cluster Prior 2: Colonias Juarez / Condesa / Roma – Main Galleries
1. Galería Arredondo / Arozarena (Juarez)
2. Galería 26 Arte (Juarez)
3. Galería Ethra (Juarez)
4. Galería de Arte Artdicré (Juarez)
5. Marso Galería de Arte Contemporáneo (Juarez)
6. EDS Galería (Condesa)
7. Galería Ligia Fenollosa (Condesa)
8. Proyecto Paralelo (Condesa)
9. Galería Casa LAMM (Roma)
10. Galería OMR (Roma)
11. Galería Arroniz Arte (Roma)
12. Galería Massimo Audelio (Roma)
13. Galería Vertigo (Roma)
14. Galería Toca (Roma)
15. Galería fifty24MX (Roma)
16. Galería 13 (Roma)
17. Galería Nina Menocal (Roma)
18. Galería Muca (Roma)
19. Galería Metropolitana (Roma)
20. Andres Siegel Arte (Roma)
21. Galería Hispánica Contemporánea (Roma)
22. Galería Medellín 174 (Roma)
23. Galería Cultura Colectiva (Roma)
24. Zafra Design & Art (Roma)
25. Proyectos Monclova (Roma)
26. Garash Galería (Roma)
27. Terreno Baldio Arte (Roma)
28. Treager & Pinto Arte Contemporáneo (Roma)
29. Latitud Gallery (Roma)
Cluster Prior 3: Colonia San Ángel – Main Galleries
1. Galería Jardín del Arte (San Ángel)
2. Galería Mario Várguez y Theo Camacho (San Ángel)
3. Galería El Carmen (San Ángel)
4. Galería Arte Riverol (San Ángel)
5. Galería Rosano (San Ángel)
6. Galería Arte Soy México
7. Galería Doce (San Ángel)
8. Galería del Obispo (San Ángel)
9. Galería Santa Olalla (San Ángel)
Other Galleries
Jardín del arte (Sullivan)
There are 67 main galleries in Mexico City segmented in three main clusters. All these galleries represented
the main motor in the gallery art in Mexico going from very high price pieces of art from “consagrados” painters
to more accessible and low price pieces from artists “consolidados” and “emergentes”. According to different
art sources we have identified the top 10 art galleries in Mexico that dominate the market.
Top 10 Galleries in Mexico City
1. Galería Kurimanzutto (Chapultepec)
2. Galería Enrique Guerrero (Chapultepec)
3. Galería LABOR (Daniel Garza)
4. Galería de Arte Mexicano GAM (Chapultepec)
5. Zona Maco México Arte Contemporáneo (Lomas de Sotelo)
6. Galería Alberto Misrachi (Polanco)
7. Galería de Arte Misrachi (Polanco)
8. Galería Oscar Román Arte y Diseño (Polanco)
9. Galería OMR (Roma)
10. Galería Jardín del Arte (San Ángel)

6.
BUYERS
BUYERS; SIX TYPES OF COMPETITORS
• Premium buyers: Art collectors, Snob buyers and Art investors
• Massive buyers: Art enthusiast, Occasional buyer, Person who wants to decorate walls
There are two main segments of buyers for the art gallery industry in Mexico; premium buyers and massive
buyers and they have key differences and characteristics that drive the behavior of the art gallery market in
Mexico.
Premium buyers represented by art collectors, snob buyers and art investors are willing to buy original high
price pieces of art. They belong to upper class and have a very high-income level. Premium buyers have a
very high disposable income; therefore, they are the target market that can afford to buy high price art pieces
for collection, pleasure or investment.
Massive market represented by art enthusiast, occasional buyers and any person who wants to decorate a wall
with a reasonable cost. They belong to middle upper, middle and lower class and have a medium- and low-
income level. Massive buyers have a limited disposable income; hence, investing in just one piece of art that
costs millions, hundred of thousands or ten of thousands MXN pesos is unplayable.
Premium and massive market are a consequence of the distribution of wealth in the country. Hence, having an
overview of macroeconomic data in Mexico is essential to understand the market.
Mexico Offline Data (All data from Euromonitor, 2012)
Population
Population: 116,146,800
Male: 49.3%
Female: 50.7%
GDP
GDP (USD): $1.2 Trillion
GDP (MXN): $15,709,262,000,000
Age Group
Population aged (0-14): 28.3%
Population aged (15-64): 65.1%
Population aged (65+): 6.6%
Babies/Infants (aged 0-2): 5.5%
Kids (aged3-8): 11.5%
Tweens (aged 9-12): 7.6%
Teens (aged 13-17): 9.2%
Young Adults (aged 18-29): 20.4%
Middle Youth (aged 30-44): 21.8%
Mid Lifers (aged 45-49): 14.5%
Later Lifers (aged 60+): 9.5%
Employment
Employed Population: 48,276,700
Employers: 2,136,800
Self-employed: 10,841,100
Family workers: 2,390,400
Employees: 32,908,300
Poverty
Poverty percentage: 53%
Gini Index: 48% (0.481)
Socio-Economic

7.
Social Class A (Total population aged 15+): 12%
Social Class B (Total population aged 15+): 8%
Social Class C (Total population aged 15+): 15%
Social Class D (Total population aged 15+): 27%
Social Class E (Total population aged 15+): 38%
Economic Units (Companies) (INEGI, Censo Económico 2014)
Total Companies in Mexico: 5,654,014
Total Employed People: 29,642,421
MEXICO OVERVIEW
Mexico is the 12
th
biggest economy in the world representing the third most important economy in American
continent, just below United States of America and Brazil. Furthermore, Mexico the 12
th
most populated
country in the world reaching a total population of 121 million people in July 2015 (CIA World Factbook). Even
though, Mexico occupies a privilege position in the world economy the distribution of wealth is an important
problem that neither external nor internal entities in the country have been able to reverse this situation.
Socio-economic levels
One of the key indicators showing the important inequality is the socio-economic level. Euromonitor 2012
shows that social class A ($25,925 MXN monthly income) and B ($21,604 MXN monthly income) represented
20% of the total population aged above 15 years old but social class C ($17,283 MXN monthly income), D
($8,641 MXN monthly income) represented 42% of the population and E ($4,320 MXN monthly income)
represented an alarming 38% of the population.
Other national statistical sources show more strict numbers in terms of wealth distribution. For instance, AMAI
shows that 8.3% of the Mexican employed population has no monthly income level and 74.1% of the Mexican
employed population has a monthly income level of up to 1 to 5 minimum wages.

8.
Additionally, the National Institute of Statistics and Geography (INEGI by its name in Spanish), realized an
exhaustive study titled “Quantifying social middle class in Mexico; Exploratory exercise”. In this study,
INEGI presents strong supported data to measure social classes in Mexico. One of the key objective of this
study is that INEGI wants to know whether Mexico is a middle class country or low class country. The answer
is the following;
Comparison between social classes and selected variables

9.
It is not surprising that a big gap of wealth inequality in socio economic levels is also supported by other
metrics such as poverty percentaje of 53%, gini index or coefficient of 0.48, relative income poverty of 21.4%
and Top 10% vs. bottom 10% of 30.5.
Gini Coefficient
OECD (2012) defines gini coefficient as
“A measure for income inequality. The Gini is zero if everyone had the same
income and is one if a single person had all the income. Income after taxes and
transfers, adjusted for difference in household size.”
According to OECD, Mexico has the second worst gini coefficient out of 34 countries of OECD. Following a
chart showing gini coefficient of all OECD countries;
Relative Income Poverty
Definition of relative income poverty by OECD (2012)
“Share of the population with an income of less than 50% of the respective
national median income. Income after taxes and transfers, adjusted for difference
in household size.”
Mexico has the worst relative income poverty of 34 countries of OECD. Behind a graph showing the ranking of
relative income poverty of participants of OECD;

10.
Top 10% vs. Bottom 10%
Definition of top 10% vs. bottom 10% by OECD (2012)
“The average income of the top 10% as a multiple of the average income of the
bottom 10% of the income scale. Income after taxes and transfers, adjusted for
difference in household size.”
Mexico has the worst top 10% vs. bottom 10% index of 34 countries of OECD. In Mexico, the richest 10% earn
30.5 times more than the poorest 10% of the population. Behind a graph showing the ranking of top 10% vs.
bottom 10% of participants of OECD.
Economic Units
Based on Instituto Nacional de Estadística y Geografía (INEGI), Censos Económicos 2014, Mexico’s GDP is
produced by micro, small, medium and big companies summing up a total number of 5,654,014 million
companies and representing a total employed people of 29,642,421 million. However, it is important to
acknowledge the distribution of company sizes in order to understand, from another perspective, the Mexican
market. The total number of companies and the employment that generates is directly correlated with labor
force, salaries, socio-economic levels, disposable income and, therefore; the potential buyers in an economy.

11.
INEGI illustrates that MPyMes (micro, small and medium companies) represent 99.8% of the total 5.6 million
companies in Mexico, employ 71.2% of the total economically active population and they contribute to 35.9%
of the total GDP. On the contrary, big companies represent 0.2% of total companies, employ 28.8% of the
labor force and achieve 64.1% of total GDP. A small number of big companies with the highest influence on
gross production, remunerations and fixed assets drive the Mexican economy. To dimension the impact of big
corporations in the economy, the sales Fortune 500 Companies in Mexico 2012, published by Mexican
magazine CNNExpansión, represented 70% of the total GDP. Only 500 companies out of nearly 5.6 million
drive the economy of Mexico. It is probable that employees who work in a big company, 3 out of 10 Mexicans
economically active population, have access to better salary, compensations and disposable income.
The big majority of MPyMes are micro companies – micro company has no more than 10 workers – that
employ nearly 40% of total labor force with the lowest remuneration, hence; it is expected to have a massive
labor force population with low salaries, compensation and very limited, or in some cases none, disposable
income.
Top 10 billionaires people in Mexico

12.
According to Forbes magazine (2012), the top 10 richest billionaires in Mexico sum a total net worth of $128.4
Billion USD representing approximately 11% of Mexico GDP (2012). When 10 people, in a total population of
116 million Mexicans in 2012, capture 11% of wealth of the total products and services in a country, it is an
overwhelming evidence of the massive gap between rich and poor in Mexico.

13.
FIVE
COMPETITIVE
FORCES
THAT
SHAPE
STRATEGY
“Competitive forces reveals the roots of an industry’s current profitability while
providing a framework for anticipating and influencing competition and profitability
over time.”
“Five forces can help a company understand the structure of its industry and
stake out a position that is more profitable and less vulnerable to attack.”
“Considering five forces, a strategist keeps overall structure in mind instead of
gravitating to any one element.”
– Michael Porter, The Five Competitive Forces That Shape Strategy
The five competitive forces of Michael Porter – suppliers, competitors, buyers, entrants and substitutes – will
be the first milestone of this analysis in order to have an holistic view of the art gallery industry, understand the
industry structure, study all main players involve, and use all this information to present an accurate diagnosis
of the industry and seek a profitable, scalable and sustainable position of delarte.mx in the market.
POWER OF SUPPLIERS (PAINTERS)
DEFINITION
“Powerful suppliers capture more of the value for themselves by charging higher prices, limiting quality or
services, or shifting costs to industry participants.” – Michael Porter, The Five Competitive Forces That Shape
Strategy
POWER OF SUPPLIERS PRESSURE
• Squeeze profitability
• Raising prices of materials
• Limiting quality
• Limiting services
• Shifting costs to industry participants
SUPPLIERS IN THE ART GALLERY MARKET
• Consagrados painters
• Consolidados painters
• Emergentes painters
SUPPLIERS DISTRIBUTION
The academic paper “The Reward System in Art Markets: A System Dynamic Approach,” written by PhD.
Fernando Buendía, mentions how the distribution of revenues of artists follows the Zipf’s law, or in other words,
how a small number of artists produce very high revenues and a large number of artists generate low
revenues.
Buendía (2012) pointed out:
“There are other studies about the uneven allocation of reward, however very few
empirical and theoretical studies have been done to address the rewards
allocation system in art markets. Recently, however, Buendía (2012) provides
empirical evidence about the stardom phenomenon by analyzing the nature of
dispersion of auction income among painters, specifically, using the publicly
available data on art market trends in terms of annual auctions sales published by
the firm Artprices, he shows that the distribution of income of artists by auctions is
self-organizing.”
Following the graph showing the Zipf’s distribution law of Artists income in 2010 from data published by
Artprices;

14.
Buendía (2012) explanation of Figure 1 graph:
“An example of the results that Buendía (2012) obtained is shown in Figure 1. In
this figure the slope of the regression line relating the logarithm of artists’ rankings
and the logarithm of the revenues that the artists obtained in the 2010 auctions is
close to 0.9, so it follows Zipf’s law. These results clearly show that the rewards
system of art markets is subject to a process of self-reinforcement or, to put it in
economic terms, strongly determined by increasing returns.”
Based on Buendía (2012) research and data of very few sales up to millions of dollars for few consagrados
Mexican painters and many sales of more accessible price such as 1,000 USD for emergentes and 10,000
USD for consolidados painters, we can expect that the suppliers or artists in Mexico follow a Zipf distribution
law.
The following graph illustrates the Zipf distribution law in a qualitative example. Few leaders have high sales,
prices, profits, brand name, networks and public relations who domain the market. Many laggards –
consolidados and emergentes painters - have a fragmented market share, low brand name or recognition
resulting in low prices, sales and profitability.

15.
POWER OF SUPPLIERS IN THE ART GALLERY MARKET
Suppliers more concentrated than the industry it sells to: Medium power of supplier = Medium threat of
suppliers
• The supplier side or painters in Mexico is structured by few consagrados painters, some consolidados
painters and many emergentes painters. Therefore, suppliers (painters) are concentrated in terms of
consagrados painters, but it is quite fragmented in terms of consolidados and emergentes painters.
• Exclusivity contract of painters is another important reason for a consolidation of the supplier side.
Top established galleries in the industry already captured top consagrados and consolidados painters
through exclusivity contracts. These galleries aim to protect their market share and profitability
through these contracts. Many times the consolidation of the supplier side is dictated by the blessing
and influence of top galleries giving as a result a closed market – consolidation of top painters with
exclusivity - monopolized by top galleries
Supplier group does not depend heavily on the industry for its revenues: Low power of suppliers in
dependency of the industry for revenue = Low threat of suppliers
• Painters depend heavily on the industry for their revenues. Painters produce art but they have many
obstacles selling them due to lack of business knowledge, time for selling and difficulties to reach their
target market. Hence, Painters depend heavily on sales channels such as galleries, art brokers,
department stores, decorative stores or any other point of sales to promote, distribute and sell art
Industry participants face switching costs in changing suppliers: Low switching cost power of suppliers =
Low threat of suppliers
• Industry participants do not face significant switching cost in changing suppliers. This is one of the
main reasons why the traditional art galleries have a rapid rotation of paintings from different painters
in their walls
Suppliers offer products that are differentiated: High power of suppliers in products differentiated = High
threat of suppliers
• Each painter has a very differentiated product in terms of style, technique and price of his/her art. In
other words, each product is unique. Top consagrados or consolidados painters have a lot of
recognition so taking into account that their art is unique, these top painters could leverage
importantly their art price
There is no substitute for what the supplier group provides: Low substitute power of suppliers = Low
threat of suppliers
• There are many substitutes for the painting art market such as photos, lithographs, mixographs, mats,
replicas, printings, posters and reproductions (gyclée print)

16.
Supplier group can credibly threaten to integrate forward into the industry: High power of suppliers to
integrate forward = High threat of suppliers
• It is a common practice that painters integrate forward and build their own painting gallery
• Another common practice is that painters who are consagrados o consolidados collaborate with
others painters and build a gallery with a team of painters, so they can divide costs, investments,
leverages and risk
CONCLUSION: POWER OF SUPPLIERS
The power of suppliers is not strong
There are some important supplier (painters) strengths such as suppliers offer products that are quite
differentiated or supplier groups can credibly threaten to integrate forward into the industry. However, supplier
strengths do not overpass supplier weaknesses because painters depend heavily on the industry for their
revenues (sales channels, branding, marketing, access to target markets, etc.) and there are many substitutes
for its product such as photos, lithographs, mixographs, mats, replicas, printings, posters and reproductions
(gyclée print) with a much lower cost.
The power of supplier is strong merely for top consagrados and consolidados painters
Consagrados painters already have a name, reputation, networking and very tight relations with the best
agencies, art runners and art influencers. They are not so dependent of sale channels or point to sell because
it is easy for them to sell a painting. Even though, consagrados painters has an extreme power of supplier, this
scenario is not frequent, because there are a few number of top “consagrados” and “consolidados” painters in
comparison with the main stream of "consolidados" or the massive number of "emergentes" painters.

17.
RIVALRY AMONG COMPETITORS
DEFINITION
“High rivalry drives down an industry's profit potential depends, first, on the intensity with which companies
compete and, second, on the basis on which they compete. The strength of rivalry reflects not just the intensity
of competition but also the basis of competition. The dimensions on which competition takes place, and
whether rivals converge to compete on the same dimensions, have a major influence on profitability.”
– Michael Porter, The Five Competitive Forces That Shape Strategy
RIVALRY AMONG COMPETITORS PRESSURE
• Rivalry is high = limit industry profitability
• Rivalry is low = industry profitability attractive
INCUMBENTS IN THE GALLERY ART MARKET
300 total incumbent art galleries that are structure in the following three segments;
• 223 low art galleries (massive galleries)
• 67 middle art galleries (massive galleries)
• 10 top art galleries (premium galleries);
1. Galería Kurimanzuto
2. Galería Enrique Guerrero
3. Galería LABOR
4. Galería de Arte Mexicano (GAM)
5. Zona Maco México Arte Contemporáneo
6. Galería Alberto Misrachi
7. Galería de Arte Misrachi
8. Galería Oscar Román Arte y Diseño
9. Galería OMR
10. Galería Jardín del Arte
GALLERIES DISTRIBUTION
There are approximately 300 galleries in Mexico City divided in two generic segments; 1) premium galleries,
made of top galleries, and 2) massive galleries, made of middle and low galleries. Galleries interact directly
with suppliers (painters) and buyers, so based on painters Zipf distribution and the extreme high inequality of
buyers income distribution, we believe that Galleries follow the same trend of very few winners take very much
(premium galleries), and the rest (great majority of massive galleries) left with little, or in other words, galleries
have few leaders and many laggards

18.
RIVALRY AMONG COMPETITORS IN THE GALLERY ART MARKET
Competitors are numerous or are roughly equal in size and power: Rivalry is high
Premium galleries (top art galleries)
• There are few premium galleries (top 10 art galleries in Mexico City) that are similarly in size and
power and domain the art gallery market
• Premium galleries protect their market share, revenue and profitability with a strong portfolio of top
artists with exclusivity contracts
• In the short term premium galleries will acquire top painters with aggressive exclusivity contracts in
order to protect and seal their market
• Current premium galleries fight for the same competitive dimensions driving a zero-sum competition
environment and a limited and squeezed profitability for the whole art market
Massive galleries (middle and low art galleries)
• Competitors are numerous and they are roughly equal in size and power
• Some well established galleries with strong portfolio of artists and with exclusivity contracts for top
painters
• In the short and middle term some massive galleries will take top-middle painters with exclusivity
contracts to protect their gallery business
• Current massive galleries fight for the same dimensions and this is driving a sum-zero competition
environment in the art industry in Mexico resulting in a limited and squeezed profitability, price war
and almost no profitability for the massive gallery art market
Industry growth is slow: Rivalry is high due to slow grow.
• Premium market rivalry is high especially for top galleries that do not have so much market share
and high costs
• Massive market is in a growth stage however due to the fragmentation the overall growth is slow and
rivalry high
• Artists are one of the main drivers of the Mexican art market. Due to the segmentation of artists in
Mexico distributed as a small number of consagrados, medium number of consolidados and large
number emergentes, the market is in a mature stage (stagnant) because of consagrados painters –
the main driver of sales in the art market in Mexico.
• The massive market, conformed by consolidados and emergentes, is in a immature stage. Current
competitors mainly in massive market with a no big pie for profitability and overall slow growth of the
industry will defend and protect their current share

19.
Exit barriers are high: High exit barriers mainly for top and medium size galleries = Rivalry is high
• High exit barriers for current players due to capital investment in gallery store, marketing, public
relations, know-how of the art market
Rivalry is highly committed to the business and has aspirations for leadership, specially if they have
goals that go beyond economic performance in the particular industry. Rivalry is high
• The current galleries in the market live from their business, so there are huge intangibles barriers of
exit that go beyond economic performance such as prestige, reputation, emotional ties with their
business and time invested
INCUMBENTS PRICE SENSITVE
Price competition symptom one: Products or services of rivals are nearly identical and there are few
switching costs or buyers
• No switching costs for buyers, so we expect price competition coming from; painter, gallery, art runner
or any other vendor (sales channel)
Price competition symptom two: Fixed costs are high and marginal costs are low
• Fixed costs are very high (gallery infrastructure, rent, staff, investment in art, PR costs) and the
marginal costs are low (60% or 40% margin from gallery depending of brand name, reputation and
selling records)
Price competition symptom three: Capacity must be expanded in large increments to be efficient
• Galleries in order to be profitable employ two selling strategies; 1) sell very high price art to get 60%
or 40% – model of premium galleries –, or 2) sell many medium or small price art pieces to get a
reasonable profit – model of massive galleries.
CONCLUSION: RIVALRY AMONG COMPETITORS
The rivalry among competitors is quite fierce.
The size of the art market in Mexico is around 20 million USD, in which, 12 million USD or 60% of the sales in
come from Galleries. To dimension the size of the art market in Mexico, according to the Mexican newspaper;
El Economista, the Mexican art market represented merely 0.05% of world art sales in 2011. Moreover, the
growth of art in Mexico is stagnant and there are approximately 300 galleries in Mexico City and they are
distributed as few leaders and many laggards. Therefore; with a small size of art sales in comparison with
other countries, and a very populated competition of galleries similar in size and power in the premium
segment and massive segment it is logical that the market will show symptoms of fierce competition. Other
important factors such as competing in the same dimensions, rivals nearly identical, no switching costs for
buyers, high fixed costs, low marginal costs and price sensitivity are important elements for expect a high
rivalry among competitors

20.
POWER OF BUYERS
DEFINITION
“Powerful customers can capture more value by forcing down prices, demanding better quality or more service
(thereby driving up costs), and generally playing industry participants off against one another, all at the
expense of industry profitability.” – Michael Porter, The Five Competitive Forces That Shape Strategy
POWER OF BUYERS PRESSURE
• Squeeze profitability
• Raising prices of materials
BUYERS IN THE GALLERY ART MARKET
• Premium buyers (Art collectors, Snob buyers and Art investors)
• Massive buyers (Art enthusiast, Occasional buyer, Person who wants to decorate walls)
BUYERS DISTRIBUTION
Buyers: Few leaders and many laggards.
POWER OF BUYERS IN THE GALLERY ART MARKET
There are few buyers, or each one purchase in volumes that are large relative to the size of a single
vendor: High power of buyers = High threat of buyers
• Premium buyers are a small and high income buyers such as art collectors, snob buyers and art
investors who purchase most of original art in the art gallery market
• Massive buyers are a huge and medium-high, medium and medium-low income buyers such as art
enthusiasts, occasional art buyers or any person who wants to decorate a wall, but they currently
represent a very low volume of purchases of original art in the art gallery market
The industry’s products are standardized or undifferentiated: High power of buyers = High threat of
buyers
• Premium buyers. In terms of the traditional art gallery industry there are not standardized or
undifferentiated products because each painter has his own technique, style and art personality. The
top painters, top traditional art galleries and premium market look for this kind of unique product
characterized with high prices and a well-known painter reputation.
• Massive buyers. In the massive market the industry works differently, there are many painters, many
galleries, department stores, online players and hybrid (offline-online) players with many substitutes

21.
products such as photos, lithographs, mixographs, mats, replicas, printings, posters and
reproductions (gyclée print)
Buyers face few switching costs in changing vendors: High power of buyers = High threat of buyers
• Buyers do not face switching costs in changing vendors. Buyers face no monetary costs whether they
buy from a established gallery, new gallery, online gallery, hybrid (offline-online) gallery, painter, art
broker or other art vendor
Buyers can credibly threaten to integrate backward and produce the industry's product themselves if
vendors are too profitable: Low power of buyers = Low threat of buyers
• It would take an important amount of capital, know-how, worth of mouth, public relations and business
and digital knowledge to integrate backwards. At least in the short term is not feasible for a buyer to
build a gallery of art.
BUYERS PRICE SENSITIVE
The product represents a significant fraction of tis costs structure or procurement budget
• Premium buyers: no price sensitive
• Massive buyers: very high sensitive (product represent a significant fraction of their budget)
INCUMBENTS
CONCLUSION: POWER OF BUYERS
The power of buyers is strong.
Premium buyers: There are few buyers with the willingness and disposable income to acquire a medium or
high price piece of art. These premium buyers buy most of original and unique art the in the art gallery market.
According to a study made by Deloitte and ArtTactic in 2011, the three main reasons for buying art – mainly in
premium buyers - are: 1) 84% emotional value, 2) 61% social status and 3) 60% exclusivity. Top premium
buyers expect to get the most prestigious art from top painters at most prestigious top art galleries in Mexico.
Premium buyers do not face switching costs in changing vendors so competition among incumbents is fierce to
get these premium buyers. Therefore, PR, networking and key connections become crucial to top art galleries
to make business with the premium buyers.
Massive buyers: The power of buyers in massive customers is not strong. Massive buyers such as art
enthusiasts, occasional art buyers or any person, who simply wants to decorate a wall, want to acquire a
stylish piece of art at low cost. Massive buyers have no knowledge in the art industry, they do not want to get in
the complexity of the art market and they are going to buy art more for a decorative purpose rather than
emotional value, social status or exclusivity. Massive buyers have many substitutes such as photos,
lithographs, mixographs, mats, replicas, printings, posters and reproductions (gyclée print), hence; the price
represent a key factor for making a purchase.

22.
THREAT OF SUBSTITUTES
DEFINITION
“Substitute performs the same of a similar function as an industry's product by a different means. The threat of
substitution is downstream or indirect, when a substitute replaces a buyer industry's product.” – Michael Porter,
The Five Competitive Forces That Shape Strategy
SUBSTITUTES IN THE GALLERY ART MARKET
• Photographs
• Lithographs
• Mixographs
• Mats
• Replicas
• Printings
• Posters
• Reproductions (gliclée pint)
THREAT OF SUBSTITUTES IN THE GALLERY ART MARKET
It offers an attractive price-performance trade-off to the industry's product: No threat of substitutes =
Substitute threat is null (industry profitability is attractive)
• Premium market (top suppliers, galleries and buyers): There are no substitutes products for premium
market
• Massive market (no top suppliers, galleries and buyers): There are many attractive price-
performance trade-off products such as photos, lithographs, mixographs, mats, replicas, printings,
posters and reproductions (gyclée print)
Buyer's cost of switching to the substitute is low: No threat of substitutes switching costs = Substitute
threat is null (Industry profitability is attractive)
• Premium market (top suppliers, top galleries and top buyers): There are no substitutes products for
premium market
• Massive market (no top suppliers, no top galleries and no top buyers): Although, there are many
substitutes products, there are not switching costs from one another substitutes.
CONCLUSION: THREAT OF SUBSTITUTES
The threat of substitutes is null in the premium market and is quite strong in the massive market
Premium market (top suppliers, top galleries and top buyers): There are not substitutes products for the
premium market
The threat of substitutes is quite high. There are many attractive price-performance trade-off products such
as photos, lithographs, mixographs, mats, replicas, printings, posters and reproductions (gyclée print) to
substitute original or reproduction art product. Moreover, buyers face no switching costs whatsoever to
substitute original or reproduction art product so there will be an expected competition to get the best quality
products at the best price.

23.
THREAT OF ENTRY
DEFINITION
“New entrants to an industry - start-ups, foreign companies or companies in related industries - bring new
capacity and desire to gain market share.” – Michael Porter, The Five Competitive Forces That Shape Strategy
NEW ENTRANTS IN THE GALLERY ART MARKET
• Established printing companies
• Established decorative businesses
• Painters - Art runners
• Online companies
• Entrepreneurs
THREAT OF ENTRY IN THE GALLERY ART MARKET
Supply-side benefits of scale: High barriers of entry = Low threat of entry
• Established agencies have important network effects which brings brand recognition and high volume
of offline traffic and sales. Therefore, these established companies demand better terms from
suppliers (painters) such as exclusivity contracts to tied their portfolio. When suppliers have a
exclusivity contract, they have to give all their paintings exclusively to a certain art gallery and painters
cannot share any painting with other gallery or art trader. Due to exclusivity contracts suppliers
(painters) give better prices, terms and inventory to the specific art gallery
Demand side benefits of scale: High barrier of entry = Low threat of entry
• There are a small number of important, established and recognized galleries in Mexico that take
advantage of their network, PR and brand recognition to sell most of the top art in Mexico. Therefore,
buyers trust these kind of established companies to buy art from a reliable source
• Limited willingness of customers to buy from a newcomer
Capital requirements: Low requirements = High threat of entry
• There are low capital requirements to get in the art industry in Mexico. As Javier Lumbreras, president
of Artemundi Global Fund, mentioned to the newspaper El Economista:
“Any person with a hammer and an nail could open a professional art gallery, because there is not
any formal requirements that regulate the entry of art galleries in the market. The result of this lack of
regulation affects other important aspects such as the ownership of the piece of art. Therefore, in the
art market prevails distrust and lack of reliable information.”
Incumbent advantages independent of size: High barrier of advantages = Low threat of entry
• Incumbents have multiple advantages independent of size such as brand identity, reputation, art
knowledge, public relations, networking with artists and networking with high-income market
Unequal access to distributions channels: High barrier of entry = Low threat of entry
• There is a high barrier to unequal access to distribution channels (point of sales, expositions, national
and international art events, etc.) due to the networking, brand identity and public relations of the
established galleries. New entrants cannot access to distribution channels in the short term, so they
must distinguish themselves via price breaks, promotions, intense selling efforts, market knowledge,
online infrastructure, public relations with painters and collectors
Restrictive government policy: No restrictive government policy = High threat of entry
Expected retaliation: High barrier of retaliation = Low threat of entry
• Incumbents have a high barrier of retaliation because they want to defend their business. Some of the
most relevant examples of retaliation are 1) fierce competition to get the most important painters
(consagrados and consolidados), 2) aggressive exclusivity contracts from galleries to painters to
secure market, 3) high Incumbents patronization and blessing for selected painters to strength
relations with specific painters and 4) high qualitative resources such as networking, PR and influence
of their brand in the market to fight back or defend current market share

24.
CONCLUSION: THREAT OF ENTRY
High threat of entry for new informal galleries but low threat of entry for profitable and sustainable
gallery
Even though, there are many high barriers of entry there is a high threat of entry due to the very low capital
requirements to do a gallery. As Javier Lumbreras, president of Artemundi Global Fund, mentioned to the
newspaper El Economista; “Any person with a hammer and an nail could open a professional art gallery.”
However, all high barriers of current incumbents prevent profitability from new entrants through high supply-
side benefits of scale, high demand side benefits of scale, high incumbent advantages (no economic) from
current incumbents, unequal access to distributions channels and a high-expected retaliation for premium
painters and premium market - the most profitable part of the industry.
In conclusion, it is quite easy to open a gallery but it will be quite difficult to make a profitable business with a
gallery due to the current advantages of the well-positioned top galleries in the industry
DELARTE.MX
A
NEW
STRATEGIC
POSITION
IN
THE
ART
GALLERY
MARKET
ART MARKET DESCRIPTION
Art
Market
• Size:
20
Million
USD
(2011)
• Growth:
0.6%
CAGR
15
years
(1992
to
2007)
Art
Market
by
Sales
Channel
• Galleries
Sales:
12
million
USD,
60%
of
total
sales
• Auction
Houses:
6.5
million
USD,
32%
of
total
sales
• Art
Dealers:
1.5
million
USD,
8%
of
total
sales
Art
Gallery
Market
• The
traditional
art
gallery
market
is
divided
in
two
markets;
Premium
market
and
Massive
Market.

25.
The
art
industry
in
Mexico
registered
20
million
USD
in
2011,
the
growth
have
been
stagnant
La
industria
de
arte
en
México
registró
en
2011
20
millones
de
dólares
con
un
crecimiento
e
Underestimating the potential of ecommerce in Mexico
Taking into account that Mexico reach 71 million internet users in 2016, it is quite important to know where
customers did their purchases after researching online.
According to Consumer Barometer (Google)
Technology is a factor and delarte.mx will take advantage of it. However, the real innovation with delarte.mx is
not the technological tangibles but the customer value innovation. Delarte.mx will be focused on generating
customer value – that so far have been overlook by current competitors – in the art market through internet and
ecommerce, addressing massive buyers such as art enthusiasts, occasional art buyers, or any person who
wants to decorate walls, selling art through reproductions – gyclée printing – that have low prices, high quality,
certified by the painter and delarte.mx and fulfilling the ultimate goal to have an stylish or beautiful painting in
the wall of our customers.
Technology is a great boost for this stagnant and highly competitive industry (entrants, suppliers, buyers,
substitutes and incumbents). In fact, the technology specifically taling about internet, ecommerce, digital
customization in the website will give a whole new dimensions for competition.
- Innovation will represent another key factor for this industry. We are focusing Delarte.mx as a value

26.
innovation company focused on customer value, positive-sum competition, creating a new demand focused in
profitability and not merely in competition with current incumbents.
- In conclusion technology and innovation will change the rules of the game for this red ocean art industry in
Mexico
- Technology such as internet, ecommerce and digital customer experience will rise new barriers of entry
based on knowledge and digital experience.
- Technology will impulse the art awareness for our suppliers (painters) to present their art not merely to a
focused and small market (colectors or high income customers with knowledge)
- Technology will help buyers to find a new way to aquire art - currently it does not exist - a easy way to buy art.
Lack of knowledge, guarantees, reliability, etc are huge barriers for buying
- Rivalry will benefit from this strategy because we are pursuing a positive sum competition, we are creating a
new demand a massive market that is sleeping
- Substitutes such as photography, posters, and printings will find a new way to acquire art with an easy, low
price and fun way to buy
DESCRIPTION OF CURRENT INDUSTRY
- Intimidating
- Pretentious
- Complexity of taste
- Truly challenge to the inexperienced palate
- Art know-how
- Willingness to pay high prices for a single piece of art
- Prestige
- Quality of art at a price point
- Traditonal competitive strategy
- Prestige, knowledge, price are viewed as a function of adding complexity to the art piece based on the
blessing of top art galleries and reinforced by well known curiators, art experts, art runners or gallery owners in
the industry
- Complexity layered personality and special characteristics that reflect uniqueness of the piece of art equates
with quality
- What the traditional art gallery model lack is not opportunity or a new bonanza for the art buying market in
Mexico, but some managerial update applying basic management principles (publicly available since more
than 50 years ago) and taking into account the digital tsunami that already smashed the market and its way of
living, searching, seeing, learning, using, checking and therefore buying on the internet.
- The traditional art gallery model is asleep showing important symthomps of a common desease in the
businesses of the XXI Century, specially in Mexico and generally in emerging markets, which is obsolescence.
The lack of a new business model and value innovation (customer oriented) shows a terminal desease and its
lack of interest in digital knowledge and implementation is nurturing the metastasis.
Such as Theodore Levitt describes in his paper "Marketing Myopia"; "The history of every dead and dying
"growth" industry shows a self-deceiving cycle of bountiful expansion and undetected decay."
DESCRIPTION OF NEW INDUSTRY
- Uncomplicated
- Technology is such a great equalizer because either Art experts, colectors, art lovers, art beginners, curious
people, or any person interested in putting a beautiful painting in his walls is a customer for Delarte.mx.
- Easy going
- Removed technical jargon
- Customized pieces of art (price, size, frame and material)
- Appealing to any buyer not just collectors or art experts
- Result: a flexible and friendly ecommerce gallery that did not requires art knowledge, experience palate or
any complexity to buy a good piece of art
- This novo strategy allow us to dramatically reduce or eliminate all the factors that current art industry has
such as; phisical art gallery, rent, logistics of phisical walls, inventory in the store, complexity, etc
- Delarte.mx challenges the status quo of the art industry and the industry's strategic logic and business model
- Redifined the problem of art industry as how to make a customized, price accesible and simple the process of
buying art
- Looking at the demand side of substitutes of pothographs, posters, printings, lithograpsh or any other piece to
decor the walls, the mexican painters should promote and find new sales channels to enhanced and stimulate

27.
the art market with original pieces (usually high prices) or reproductions (accesible prices) that target a
massive middle class market with no knowledge or art
- Remove all the complexity and sometimes intimidating process of buying art in a Gallery
- Creation of a blue ocean; instead of offering painting as painting, Delarte.mx created reproductions of original
paintings, certified by the painter and Delarte.mx, printed in traditional canvas, with top printing quality with a
life spam of more than 200 years (new printing technology). Besides, it is quite resistible and you can clean
with a wet rag. Any reproduction is eady to hang (you do not need to frame it, altough you have the option to
do so) and a very low cost sometimes 10x the price of the original painting.
- Delarte.mx created 3 new factors; infinite wall of gallery, easy to choose, easy to buy, and low price
reproduction with top quality. it eliminates or reduced everything else

28.
FACTORS
NO
FORCES
THAT
SHAPE
STRATEGY
TECHNOLOGY & INNOVATION
TECHNOLOGY FACTOR IN MEXICO
Before going into detail to analyze how technology changed the rules of the game in the art industry, and
basically of any industry, it is fundamental to be aware of important technology trends in the country.
The technology tsunami mainly driven by Internet, smartphones, computers and ecommerce is flooding global
markets and Mexico is not an exception; In the following chart, there are some key indicators demonstrating
the aggressive adoption of technology in Mexico:
In Mexico, from 2010 to 2015, there have been significant growths of three digits in B2C ecommerce, online
buyers, social network users, mobile Internet users, and smartphone users. Internet users grew 86% in the last
five years. This photograph of five years of information shows how easily the market is embracing technology
through the usage of Internet, tech devices and ecommerce. The market already took the advantages of
technology and each year internet users are becoming more tech savvy, dependent and efficient in the way
that interact with internet. The adoption of technology is irreversible and imminent giving as a result endless
opportunities for supply and demand.
There are three important indicators to get a generic diagnosis of online markets; 1) internet users, 2) tech
devices adoption and 3) ecommerce. In the following section, there will be the description of each indicator.
Internet penetration in Mexico (eMarketer 2015)

29.
According to eMarketer (2015), Mexico will reach an Internet penetration of 71 million in 2016, representing an
internet penetration of 58%. Even though, the Internet penetration reaches “only” half of the country (58%), this
percentage represents a huge market. 65.1 million of Internet users is more than three times the total
population of Australia. Not only the volume of internet users is important, but also the growth. For instance,
eMarketer forecasts an internet user compound annual growth rate (CAGR) of 8% from 2014 to 2018.
Devices Sales in Mexico (Euromonitor 2014)
Euromonitor forecasts – graph on the left side – that Mexico will sell 24.8 million smartphones, 6 million feature
phones and 4.3 million of computers, which includes desktops, laptops, netbooks and tablets. With a
smartphone penetration of 37%, Mexico will maintain its aggressive smartphone growth for the following years.
In the computer category – graph on the right side – laptops have been the main driver of growth. However,
Euromonitor forecasts that tablets will surpass the laptops units in 2015, and tablets will lead the growth of
computer devices in Mexico.
B2C Ecommerce in Mexico (eMarketer 2015)
According to eMarketer, B2C ecommerce in Mexico will reach $22 billion USD in 2016 positioning Mexico as
the second biggest and most important market in Latin America after Brazil. Besides, the size of the market,
B2C ecommerce shows appealing growth rates. For instance, eMarketer predicts that Mexico will experience a
compound annual growth rate (CAGR) of 26% from 2014 to 2018. These positive and attractive numbers of

30.
ecommerce size and growth in Mexico reflect the emerging-growth stage in the ecommerce life cycle, mainly
driven by early adopters and innovators companies.
Digital Buyers in Mexico (eMarketer 2015)
Mexico will reach 18.2 million digital buyers in 2016 representing 33.3% of internet users and 15% of total
population. According to eMarketer, digital buyers will have a compound annual growth rate (CAGR) of 11%
from 2014 to 2018.
Internet penetration, devices adoption and ecommerce dynamic numbers demonstrate an attractive digital
opportunity driven more by the market (demand) than the companies (supply). The traditional gallery model is
not taking into account the online market opening a big door for new entrants with a more dynamic and
updated business model.
The top 10 galleries are not worry by implementing technology and online assets and knowledge because their
market is already dominated by sales, profit, branding, networks and PR that there is no need to move from
their comfort zone. Besides their circle of premium buyers that are small and exclusive do not depend so much
of technology to buy art, they are comfortable with the traditional gallery model.
The massive galleries, middle and low sales galleries, are overseen the opportunity to take advantage of the
online market. Massive galleries are constantly implementing the “me too” strategy reaching an strategic
convergence characterized by competing with same dimensions. This model is not sustainable, so the
increasing pressure on fixed costs and constant rivalry among competitors will lead to more price sensitive
companies and squeezing profitability.
GOVERNMENT
GOVERNMENT INCENTIVES FOR DELIVERY
New entrants: government is setting a low barrier of entry due to the Fedex delivery subsidizing for ecommerce
- charge $100 MXN - for delivery to any part of the country. This could be a good incentive for new entrants in
ecommerce art industry.
New entrants: different national contests such as INBA is giving funding for projects that promotes culture and
technology, so this is a very high incentive for new entrants to start a business in the art industry in Mexico
COMPLEMENTARY PRODUCT & SERVICES
Current complements that enhanced the attractiveness of the gallery are expositions, presentations, art events,
and catalogs for painters. There are no online complements in the art gallery traditional model, so there is an
important opportunity to affect the overall online demand providing complement in products and services in the
online field. Online complementaries could represent a huge barrier of entry, a great assets for painters, a
great introduction to massive market, a way to distinguish Mexican relevant art among current substitutes and
a great way to differentiate an online + ecommerce gallery from the rest of incumbents

31.
GROWTH
STRATEGY:
Delarte.mx
SYSTEM DYNAMICS APPROACH
In order to elaborate a comprehensive business growth strategy is imperative to understand the fundamental
behaviors of growth, and system dynamics approach provides suitable knowledge to address this attempt.
What is system dynamics?
System Dynamics (SD) is a methodology invented by professor Jay Forrester of MIT in the mid 1950s. Since
then, SD has been an approach – system thinking – and modeling tool – computer simulations – to solve
complex world problems of any discipline.
System Dynamics Society, a worldwide leader in producing and System Dynamics (SD) theory, define it as
System Dynamics is a computer-aided approach to policy analysis and design. It
applies to dynamic problems arising in complex social, managerial, economic, or
ecological systems — literally any dynamic systems characterized by
interdependence, mutual interaction, information feedback, and circular causality.
System thinking, the approach or philosophy of systems dynamics, and more specifically
feedbacks will be the corner stone of Delarte.mx growth strategy.
Feedback
PhD. John D. Sterman, professor at MIT Sloan Business School, explains feedbacks processes in his book
Business Dynamics as;
Much of the art of system dynamics modeling is discovering and representing the
feedback processes. Which, along with stock and flow structures, time delays,
and nonlinearities, determine the dynamics of a system… All dynamics arise from
the interaction of just two types of feedback loops, positive (or self-reinforcing)
and negative (or self-correcting) loops.
Positive Loops
Positive or reinforcing loops as its name describes tend to amplify or augment the links in the
system. For example; a Reinforcing or positive causal loop diagram for delarte.mx sales is self-
reinforcing. Below in the image 1, the more sales delarte.mx experience, the more market share
the company will gain. The arrows reflects the causal relationship between sales and market
share, the positive signs indicate that the effect is positively related to the cause and the R in
the middle of the loop denotes reinforcing loop. Image 2 illustrates delarte.mx behavior or
dynamics of sales and market share.

32.
Negative Loops
Negative or balancing loops are self-correcting, seek balance and equilibrium, and tend to
counteract change. For example; a balancing or negative loop diagram of delarte.mx internal
company limits is self-reinforcing. In image 3, the more sales delarte.mx experience, the more
internal limits or problems the company will face, which then will bring sales down. The letter B
in the middle of the loop symbolizes balancing loop.
Dynamics of Multiple-Loops Systems

33.
Traditional life cycle follows a predictable pattern comprehended by four main stages: emerging, growth,
maturity and decline. Majority of companies, despite multiple empirical documented cases and many published
business cautions, follow this pattern over and over.
Since more than half century, different recognized academics have been cautioned and advised managers in
order to overcome these common terminal diseases of industries and companies. However, history has
showed that year after year, companies and industries still succumb under “mature” and “decline” stage of
industries. Theodore Levitt, professor at Harvard Business School, published the revolutionary article
Marketing Myopia in 1960. Levitt explained how a company can ensure its continued growth, and emphasized
that management was the main responsible in the destiny of a company, not external factors.
Every major industry was once a growth industry. But some that are now riding a
wave of growth enthusiasm are very much in the shadow of decline. Others,
which are thought of as seasoned growth industries, have actually stopped
growing. In every case the reason growth is threatened, slowed, or stopped is not

34.
because the market is saturated. It is because there has been failure of
management… In truth, there is no such a thing as a growth industry, I believe.
There are only companies organized and operated to create and capitalize on
growth opportunities. Industries that assume themselves to be riding some
automatic growth escalator invariably descend into stagnation. The history of
every dead and dying “growth” industry shows a self-deceiving cycle of bountiful
expansion and undetected decay.
Professor Levitt pointed out that companies will be shadow of obsolescence when they have
product-oriented management, employs a narrow view of the industry, think in terms of limited
products, satisfy management and product needs and desires, choose to make things rather
than satisfy customer needs, bank on the presumptive longevity of their products, prefer selling
instead of marketing, fill markets and view marketing as a consequence of the product.
Conversely, Levitt encouraged companies to rather have customer-oriented management,
applies a broad view of the industry, think in terms of unlimited products, satisfy customer needs
and desires, choose to satisfy customer needs rather than make things, prefer marketing
instead of selling, find markets and view product as a consequence of marketing.
PhD. Michael Porter, economist, researcher, author, advisor, speaker and Bishop William
Lawrence professor at Harvard, pinpoint out
Blue Ocean
The importance of not competing with the same dimensions, or what Porter would call “me too” strategy, with
causes strategic convergence
Companies usually blame external factors – exogenous – for the failure of their business some common
phrases such as “it is not a growth industry anymore”, “the problem of ecommerce is that there is not a high
credit card penetration”, “internet users do not want to buy on the internet.”
Not the same, Chan Kim and Moubournge call Blue Ocean vs Red Ocean
Uniqueness, Porter call Zero sum strategy vs Positive sum strategy

35.
“Competing in overcrowded industries is no way to sustain high performance. The real opportunity is to create
blue oceans of uncontested market place.”
Thinking, planning and changing a priori is imminent in a complex and dynamic world. This is a lesson that
corporations have had many problems in the history of business. For example, over one third of the Fortune
500 largest industrial firms in 1970 had disappeared in 1983 (Geus 1997). Therefore, being aware and taking
in advance important key decisions of strategic positioning or strategic movements is essential to thrive in the
business field.
The Market Dynamics of Value Innovation
The impact of innovation in demand, cost, price, profit and growth.
Differentiation and low cost means in that graph the part of innovation (create new market, blue ocean, new
demand) going from D1 to D2 and low cost strategy or target costing going from LRAC1 to LRAC2 so in
scenario 1 RED OCEAN was buyers axb and company profit abcd, with the BLUE OCEAN buyers receive a
leap in value going the consumer surplus of eyf and company a leap in profit and growth of efgh.

36.
PRICING
STRATEGY
TARGET MARKET
In
order
to
assess
a
congruent
pricing
for
delarte.mx
products
we
must
understand
the
context
of
different
target
markets
in
the
current
industry.
Understand
the
structure
of
the
current
market
is
imperative
to
identify
business
opportunities
for
delarte.mx
pricing
model.
In
the
image
above
we
can
see
four
different
target
markets
for
the
art
industry.
The
dominant
player
in
the
art
industry
is
the
line
a
represented
by
top
galleries
targeting
very
high
socio
economic
level
who
can
buy
a
very
expensive
piece
of
art.
Second
player
is
letter
b
integrated
by
middle
and
low
galleries
characterized
to
have
consolidados
and
emergentes
painters
with
high-­‐low
socio
economic
level.
Letter
d
represent
all
substitutes
products
mainly
for
decoration
purpose
with
low
cost
such
as
photos,
lithographs,
mixographs,
mats,
replicas,
printings
and
posters.
However,
delarte.mx
is
targeting
middle-­‐high
social
economic
level
buyers
who
want
to
acquire
a
piece
of
art
with
accessible
prices
not
so
high
as
an
original
oleo
painting
and
not
so
cheap
as
a
poster.
The
troy
horse
product
to
satisfy
this
need
is
a
reproduction
with
the
printing
technique
gyclée
on
canvas
and
ready
to
hang
–
it
includes
stretcher
–
no
need
to
invest
in
a
frame.

37.
Perspective
from
the
nature
of
delarte.mx
product.
delarte.mx
has
two
main
target
market
segments
based
on
socio
economic
level;
priority
1)
High-­‐Low
and
Middle-­‐high
with
monthly
average
gross
monthly
income
between
$17,000
MXN
and
$26,000
MXN.
This
segmentation
is
key
to
identify
a
pricing
model
going
starting
with
willingness
to
pay
from
our
target
mass
customers.

38.
RIVALRY
AMONG
COMPETITORS
OFFLINE
COMPETITORS
Online
Traffic:
Top
10
Galleries
in
Mexico
City
Source:
www.similarweb.com
*
Country
Rank
(Mexico)
=
Traffic
rank
of
site,
as
compared
to
all
other
sites
in
its
leading
country
**
NA
=
Not
enough
data
for
that
website
All
top
10
galleries
have
very
low
online
monthly
traffic
to
their
websites.
Besides,
all
the
websites
are
quite
basic,
with
the
exception
of
kurimanzutto,
Galería
Oscar
Román
and
Zona
Maco.
None
of
the
top
ten
galleries
have
any
tag
(pixel)
implemented
in
their
website
making
impossible
to
do
website
analytics
or
remarketing
campaigns
with
the
relevant
traffic.
None
has
an
ecommerce
option
even
for
low
price
pieces
of
art.
These
galleries
own
the
majority
of
profitability
in
the
art
gallery
industry.
Top
10
galleries
have
the
most
important
artist
“consagrados”,
“consolidados”
and
“emergentes”
and
they
shape
the
industry
and
profitability
due
to
their
high
brand
recognition,
public
relations,
and
the
massive
networking
with
painters,
high
income
buyers
and
media.
MAIN
ONLINE
COMPETITORS
Currently,
there
are
around
8
million
art
queries
in
Google
Search
Network
(Source:
Google
Adwords/Keyword
Tool),
which
means
an
average
of
approximately
200,000
art
queries
per
day.
However,
a
very
few
companies
–
mainly
internationals
–
are
taking
advantage
of
this
huge
and
dynamic
demand.
Following,
there
are
the
top
10
online
art
companies
in
Mexico
CHANGES
IN
INDUSTRY
STRUCTURE
Diagram
main
players
• Painters
• Reproduction
supplier
(pixelarte)
• Marqueros

39.
• Sellers
first
market
(galleries,
online
galleries,
ecommerce
galleries,
painters,
art
runners)
• Sellers
second
market
(Casas
de
subastas
y
evaluadores
ponen
precio)
• Delivery
(Fedex)
• Buyer
(aficionado,
coleccionista,
snobista,
inversionista)
• New
Entrants
• Substitutes
-­‐
José
María
Velasco
Gómez
(1840-­‐1912)
/
Temascalcingo,
Edo.
México
-­‐
Antonio
M.
Ruiz
“El
Corcito”
(1892-­‐1964)
/
Texcoco,
Edo.
México
-­‐
Diego
Rivera
(1886-­‐1957)
/
Guanajuato
-­‐
José
Clemente
Orozco
(1883-­‐1949)
/
Zapotlán,
Jalisco
-­‐
David
Alfaro
Siqueiros
(1896-­‐1974)
/
Camargo,
Chihuahua
-­‐
María
Izquierdo
(1902-­‐1955)
/
San
Juan
de
los
Lagos,
Jalisco
-­‐
Rufino
Tamayo
(1899-­‐1991)
/
Oaxaca
-­‐
Frida
Kahlo
(1907-­‐1954)
/
Ciudad
de
México
-­‐
Alfredo
Ramos
Martínez
(1871-­‐1946)
/
Monterrey
CONSAGRADOS
PAINTERS
Some examples of consagrados painters;
1. Rufino Tamayo (1899-1991)
2. David Alfaro Siqueiros (1896-1974)
3. Diego Rivera (1886-1957)
4. Frida Kahlo (1907-1954)
5. Saturnino Herrán (1887-1918)
6. José María Velasco Gómez (1840-1912)
7. Gerardo Murillo Cornado “Dr. Atl” (1875-1964)
8. José Clemente Orozco (1883-1949)
9. Leonora Carrington (1917-2011)
10. Remedios Varo (1908-1963)
11. María Izquierdo (1902-1955)
12. Antonio M. Ruiz “El Corcito” (1892-1964)
13. Alfredo Ramos Martínez (1871-1946)
14. José Miguel Covarrubias (1904-1957)
15. Juan Francisco Rodríguez Montoya “Juan Soriano” (1920-2006)
16. Alfredo Zalce (1908-2003)
17. Raúl Anguiano (1915-2006)
18. Pedro Coronel (1923-1985)
19. Gabriel Orozco
20. Damián Ortega
21. José Luis Cuevas
22. Pedro Friedeberg
23. Sergio Hernandez
24. Abraham Cruzvillegas
25. Carlos Amorales
26. Rodolfo Morales
27. Francisco Toledo
CONSOLIDADOS
PAINTERS
Some examples of consolidados painters;
1. Jerónimo López Ramirez “Dr. Lakra”
2. Minerva Cuevas
3. Hugo Lugo
4. Yishai Jusidman
5. Franco Aceves Humana
6. Daniel Lezama
7. Jorge Satorre

40.
8. Carmen Maza
9. Paco Soriano
10. Lino Chavez
11. Primo Vega
12. Carlos Génova
13. Sebastián Canovas
14. Julie Sasson
15. Manuel Miguel
16. Samuel Rojas
17. Fernando Andreacci
18. Luis Sn Carlos
19. Guillermo Pacheco
20. Alejandro Filio
21. Pantaleón Ruiz Martinez
22. Jorge Tellaeche
23. Vicente Vertiz Pani
24. Leonardo Nierman
25.
EMERGENTES
PAINTERS
Some examples of consagrados painters;
1. Alejandro Fernandez “Rothman”
2. Luis Urbano
3. Max Sanz
4. Oswaldo Ramirez
5. Rosendo Vega
6. Marco Antonio
7. Carlos Bazán
8. Emmanuel Serrano
9. Claudia Marcela González Nery
10. Alain Balleres
11. Carlos Humberto Hernández Vargas “Carhum”
12. Jose Antonio Gurtubay
13. Lydia Hierro
14. Alexis Mata “Ciler”
15. Anibal Catalan
16. Gretel Joffroy
17. René Almanza
18. Alejandro Pintado
19. Javier Areán
20. Javier Peláez
21. Ricardo Pinto
22. Rich Amauda
23. Edison Blas
24. Carmina Alcalá Roiz
25. Mónica Saucedo
26. Nidia González
27. Rich Arnauda
28. Felipe Gonzalez
29. René Villalobos
30. Alan Téllez
31. Felipe Gonzalez
32. Carlos González Nacif
33. Maca Muller
34. Beatriz Ezban
35. Vivianne Koplewicz
36. Mayte Guzmán
37. Ricardo Mazal
38. Rolando Rojas
39. Didier
40. Xavery Wolsky

41.
41. Abelardo López
42. Ixrael Montes
43. Isabel Garfias
44. Perla Krauze
45. Manuel de Cisneros de Soto
46. Luisa de Noriega
47. Ana Santos

42.
MEXICAN
ART
DEALERS
(MAD)
COMPETITOR

43.
Competitor
Overview
Comparison
among
Painters
Pricing,
Size
of
Canvas
and
Painter
Sales

44.
Graph
Description:
-­‐ “X”
Axe
=
Size
of
Canvas
in
centimeters
(cm).
-­‐ “Y”
Axe
=
Price
of
Painter
in
centimeter
square
(cm^2
in
$MXN)
-­‐ Size
of
the
Bubble
=
Volume
of
sales
($MXN)
Insights:
MAD
sold
224
paintings
reaching
$7.5
million
of
MXN
pesos
and
80%
of
those
sales
have
the
following
characteristics;
-­‐ 82%
of
total
sales
come
from
top
10
painters
(total
46
painters)
-­‐ 74%
of
total
paintings
sold
come
from
top
10
painters
(total
46
painters)
-­‐ 80%
of
total
sales
are
between
the
size
of
100
x
100
cm
and
138
x
138
cm
(middle
and
big
size)
-­‐ 83%
of
total
sales,
have
a
cm^2
pricing
between
$1.00
and
$3.80
MXN
Top
10
Painters

45.
Selling
Canvas
Sizes
Painter
Pricing
in
cm^2
$MXN
Mexican
Art
Dealers
(MAD)
Pricing
Insight:
80%
of
the
painters
have
a
cm^2
below
$4.00
MXN
Matrix
Summary
of
43
Artists
in
MAD
Facebook
Page
(Absolute
numbers)

46.
Matrix
Summary
of
43
Artists
in
MAD
Facebook
Page
(Weighted
numbers)

47.
Number
of
Paintings
Sold
Ranking

48.
Out
of
total
of
631
paintings
available
in
MAD
Facebook
Page,
consumers
bought
a
total
of
224
paintings
and
74%
of
those
sales
came
from
top
10
painters.
Top
1:
Rothman
32
paintings
sold.
Top
2:
Manuel
Miguel
27
paintings
sold.
Top
3:
Carlos
Génova
27
paintings
sold.
Top
4
Carhum
21
paintings
sold.
Top
5:
Alain
Bailleres
18
paintings
sold.
Top
6:
Pacco
Soriano
12
paintings
sold.
Top
7:
Claudia
Nery
8
paintings
sold.
Top
8:
Lydia
Hierro
7
paintings
sold.
Top
9:
Carlos
Vivar
7
paintings
sold.
Top
10:
Rosendo
Vega
6
paintings
sold.
Painters
Sales
Ranking
Out
of
total
of
631
paintings
available
in
MAD
Facebook
Page,
consumers
bought
a
total
of
224
paintings
and
80%
of
those
sales
came
from
top
10
painters.
Top
1:
Carlos
Génova
sold
27

49.
paintings
summing
up
a
total
of
$2
million
MXN
pesos
in
sales.
Top
2:
Rothman
sold
32
paintings
adding
a
total
of
$872,300
MXN
pesos
in
sales.
Top
3:
Carlos
Vivar
sold
7
paintings
reaching
a
total
of
$809,00
MXN
pesos
in
sales.
Top
4:
Manuel
Miguel
$597,000
MXN.
Top
5:
Alain
Bailleres
$438,500
MXN.
Top
6:
Carhum
$434,100
MXN.
Top
7:
Pacco
Soriano
$279,500.
Top
8:
Isabel
Garfias
$261,500
MXN.
Top
9:
Maria
Sordo
$253,800
MXN.
Top
10:
Carlos
Bazán
$166,000
MXN.
Top
10
Painters
Art
Extra
Top
Painter
Luis
Sn
Carlos

50.
Luis
Sn
Carlos
does
not
show
price
data
in
MAD
Facebook
Page.
However,
MAD
shows
that
Luis
Sn
Carlos
has
sold
22
Paintings.
From
another
source,
we
estimated
that
Luis
Sn
Carlos
has
a
$6.03
cm^2
MXN.
Estimated
sales
=
$2.5
millions
pesos
Top
1.
Carlos
Génova
Carlos
Génova
sold
27
paintings
summing
up
a
total
of
$2
million
MXN
pesos
in
sales.
Carlos
Génova
cm^2
=
$3.80
MXN

51.
Top
2:
Alejandro
Fernandez
(Rothman)
Rothman
sold
32
paintings
adding
a
total
of
$872,300
MXN
pesos
in
sales.
Rothman
cm^2
=
$1.83
MXN

52.
Top
3:
Carlos
Vivar
Carlos
Vivar
sold
7
paintings
reaching
a
total
of
$809,00
MXN
pesos
in
sales.
Carlos
Vivar
cm^2
=
$6.77
MXN

53.
Top4:
Manuel
Miguel
Manuel
Miguel
sold
27
paintings
summing
up
a
total
of
$597,000
MXN.
Manuel
Miguel
cm^2
=$2.05
MXN

54.
Top
5:
Alain
Bailleres
Alain
Bailleres
sold
18
paintings
reaching
total
sales
of
$438,500
MXN.
Alain
Bailleres
cm^2
=
$2.05
MXN

55.
Top
6:
Carlos
Humberto
Hernández
Vargas
(Carhum)
Carhum
sold
21
paintings
reaching
total
sales
of
$434,100
MXN.
Carhum
cm^2
=
$1.04
MXN

56.
Top
7:
Pacco
Soriano
Pacco
Soriano
sold
12
paintings
reaching
total
sales
of
$279,500
MXN.
Pacco
Soriano
cm^2
=
$2.06
MXN

57.
Top
8:
Isabel
Garfias
Isabel
Garfias
sold
4
paintings
reaching
total
sales
of
$261,500
MXN.
Isabel
Garfias
cm^2
=
$2.75
MXN

58.
Top
9:
María
Sordo
María
Sordo
sold
5
paintings
reaching
total
sales
of
$253,800
MXN.
Isabel
Garfias
cm^2
=
$1.17
MXN
Top
10:
Carlos
Bazán
Carlos
Bazán
sold
6
paintings
reaching
total
sales
of
$166,000
MXN.
Isabel
Garfias
cm^2
=
$1.52
MXN

59.
Painters
Sold
Paintings
Ranking
80%
of
total
sales
are
between
the
size
of
100
x
100
cm
and
138
x
138
cm
(middle
and
big
size).
Consumers
prefer
to
buy
middle
and
middle-­‐big
sizes
of
paintings
to
decorate
their
walls.

60.
Painters
Sold
Paintings
Ranking
38
painters
out
of
46,
which
represents
83%
of
the
total
painters,
have
a
cm^2
below
$4.00
MXN.
Moreover,
90%
of
total
paintings
sold,
which
represent
83%
of
total
sales,
have
a
cm^2

61.
pricing
between
$1.00
and
$3.80
MXN
Benchmark
Painter
cm^2
This
matrix
represent
a
reference
in
order
to
position
the
pricing
of
painters
depending
of
its
cm^2.

63.
Number
of
artists:
46
Minimum
cm^2:
0.53
Maximum
cm^2:
20.24
Median:
2.59
Average:
2.78
13th
Percentile:
1.0
20th
Percentile:
1.3
30th
Percentile:
1.8
40th
Percentile:
2.1
50th
Percentile:
2.6
60th
Percentile:
3.9
70th
Percentile:
3.1
80th
Percentile:
3.8
90th
Percentile:
5.0
90%
of
total
portfolio
of
46
artists
is
in
a
range
between
0.53
and
5.0,
the
mean
is
2.59
and
the
average
2.78.