2. 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.
3. 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
4. LUCCHETTI PERU
• March - Final decision to go ahead with the construction of plant
• July - Certificate of Compatibility from both Municipality of Chorillos and
1996 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 approval
1997
• 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 tariffs
1998 • Dec- Production started
• Not many problems sales grew to $36 million
1999 • Gross margins became positive
• Political upheaval
2000 - • Drop in sales due to negative image
2001
2002 - • LP given final orders to shut down plant
2003
5. DEVELOPMENT OF GLOBAL CORPORATION
Export- Import
Technology Transfer
Direct FDI
Lucchetti first adopted the import-export initially.
And as volumes of sales increased they moved on to Direct FDI.
Investing in FDI was then attractive as tax rates and repatriation
policies where favourable then.
Competitive pricing by other players and high import costs
accelerated their plan for setting up the plant.
Was it a mistake??
6. STRATEGIC ORIENTATION OF A GLOBAL FIRM
Ethnocentric
Polycentric
Geocentric
Regio-centric
Lucchetti followed a ethno-centric approach. It
started Lucchetti Peru SA as a subsidiary of
Lucchetti Chile.
7. EXTERNAL ENVIRONMENT
Location purchased – near Pantanos de Villa
wetlands
Political climate – intertwining of business
and politics
Competitor movements
8. Lucchetti
EFE Matrix
Opportunities Weight Rating WScore
High consumption rates of pasta in 0.1 3 0.3
Peru
Lower quality of pasta sold in Peru 0.05 2 0.1
markets currently
Growing Peruvian economy 0.1 3 0.3
Willingness of customer to purchase 0.1 3 0.3
higher quality, higher priced pasta
Tax and repatriation benefits 0.05 2 0.1
Threats
Political Climate 0.15 3 0.45
Fluctuating government policies 0.15 2 0.3
Competitors 0.1 1 0.1
Price wars 0.10 2 0.2
No local connections 0.1 3 0.3
9. Lucchetti
IFE Matrix
Strengths Weight Rating Wscore
Quality product 0.2 3 0.6
Distribution and service network 0.2 3 0.6
Have diversified holdings 0.05 1 0.05
Strong balance sheet 0.1 2 0,2
Higher market share 0.05 1 0.05
Weakness
Weak strategy formulation team 0.1 3 0.3
No political connections 0.1 2 0.2
Ethnocentric approach 0.2 3 0.6
11. 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
12. 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
