GRUPO BIMBO

ADVANCED BUSINESS CONCEPTS

INSTRUCTOR: FATIMA OMER

Group Name: Palta

Group Members:
M. Mohteshim Ashraf
Kh. Owais Qurni
M. Ammar Khan
Imran Yaqub

Contents
Summary ....................................................................................................................................................... 3
Analysis ......................................................................................................................................................... 3
Environment ............................................................................................................................................. 3
Mexico................................................................................................................................................... 3
USA ........................................................................................................................................................ 3
South America ....................................................................................................................................... 4
China ..................................................................................................................................................... 4
Key to success ............................................................................................................................................... 4
Quality of product ..................................................................................................................................... 4
Low Manufacturing cost ........................................................................................................................... 4
Innovation ................................................................................................................................................. 4
Efficient operations ................................................................................................................................... 5
Marketing .................................................................................................................................................. 5
Level of competition ..................................................................................................................................... 5
USA ............................................................................................................................................................ 5
South America ........................................................................................................................................... 6
China ......................................................................................................................................................... 6
Competitors Strengths .................................................................................................................................. 6
USA ............................................................................................................................................................ 6
South America ........................................................................................................................................... 6
Competitive Edge .......................................................................................................................................... 7
Barriers of entry: Overall low to medium ................................................................................................. 7
Threat of SUBSTITUTION: High ................................................................................................................. 7
Power of Supplier: Medium to Low .......................................................................................................... 7
Power of buyer: High ................................................................................................................................ 7
Impact from Competitors ......................................................................................................................... 7
SWOT Analysis............................................................................................................................................... 8
Strengths ................................................................................................................................................... 8
Weakness .................................................................................................................................................. 8
Opportunities ............................................................................................................................................ 8
Threats ...................................................................................................................................................... 8

Identifications ............................................................................................................................................... 9
Where are the problems or issues? .......................................................................................................... 9
What weakness will get Grupo Bimbo in trouble? ................................................................................... 9
What are the major opportunities and threats? ...................................................................................... 9
Recommendations ...................................................................................................................................... 10
Implementation .......................................................................................................................................... 11
Customer Perspective ................................................................................................................................. 11
Categorizing the customers .................................................................................................................... 12
Increase the number of customers ......................................................................................................... 12
Get more customers from existing customers ....................................................................................... 12
Operations .................................................................................................................................................. 12
Supply...................................................................................................................................................... 12
Production............................................................................................................................................... 13
Distribution ............................................................................................................................................. 13
Risk Management ................................................................................................................................... 13
Customers Management ............................................................................................................................ 13
Target Groups ......................................................................................................................................... 13
How to Attract?....................................................................................................................................... 14
How to keep and retain Customers? ...................................................................................................... 14
Innovation ................................................................................................................................................... 14
Future Products/Services ........................................................................................................................ 14
Research & Development ....................................................................................................................... 15
Test Markets ........................................................................................................................................... 15
Product Rollout ....................................................................................................................................... 15
Social Regulatory......................................................................................................................................... 15
Increase environmental incentives ......................................................................................................... 15
Human Capital............................................................................................................................................. 16
IT ................................................................................................................................................................. 16

SUMMARY
This study inspects on the case of the company grupo Bimbo. The company started functioning in
1918 in Mexico. The strategy used by the company was growth through acquisition. In this manner
they acquired 100 brand plus five thousand products including pastries, cookies, processed foods,
chocolates, pastas and sweet plus salted snacks. The company many challenges when entering
USA and South America mostly were operational challenges. Now they are looking into Chinese
market by acquisition of panrico. This where they need to some kind of strategic guide line if they
want 100 percent control over the empire stretching from Mexico, USA, South America and China.

ANALYSIS
ENVIRONMENT
The analysis of four markets in which Grupo Bimbo exist is explained below.
Mexico
Possessing 90% of market share they are the market leader. Followed by good overall reputation.
The problem with this market is that there is limited growth.
USA
Basically Grupo Bimbo introduced Latin products so the population of Latin people is rising which
healthy indicator. This industry in which the Grupo Bimbo operates is highly competitive. The
truck drives are independent operators rather than a union. On the other hand the disadvantage of
changing consumer trend towards organic food. Increases in hypermarkets. The unionized workers
have more power which has resulted decrease in quality to serve the hypermarket. Finally 2 of
the major competitors are in jeopardy.

South America
Brazil is working and showing profitable results. The market has some problems like the demand
of bread is low. Distribution management is different from country to country.
China
Panrico is well established having the share in Chinese market of 38%. Overall experience of
acquisition was relaxed. New segment as they have entered a new market is a new challenge for
the company. The pricing and segmentation was not managed properly by the ex-owners. Market
is competitive.
After the analysis of the above mentioned markets it is obvious for no reason that Grupo Bimbo
wants global expansion through acquisition.

KEY TO SUCCESS
Following are the factors to remain successful I in the market.

QUALITY OF PRODUCT
Includes good portfolio of product and brand. This would help Grupo Bimbo to target the consumer
segment well across the globe.

LOW MANUFACTURING COST

The manufacturing cost of the company is low.

INNOVATION
Grupo Bimbo wants global expansion which means different consumer segment from place to
place. So innovation would help the company with changing market.

EFFICIENT OPERATIONS
Maintaining the needs of hypermarket and other consumer segments along with low cost
operations.

MARKETING
Brand recognition can only be achieved through proper marketing which in turn helps in profitable
returns.
LEVEL OF COMPETITION
The existence of Grupo Bimbo is in four different regions of the world. In Mexico it has the largest
market share. In USA they are in top 5. In South America the competition is from private labels.
In china the completion is from large local and foreign competitors.

USA
In USA the competitors were
1. IBC
2. Sara lee
3. George Western
4. Panrico SA
5. Flower Foods
IBC and Panrico almost bankrupt. George western, Flower foods and Sara lee were doing well.
George western and flower food were innovating in low grains wheat bread. It was the demand of
health conscious segment.

SOUTH AMERICA
The major competitors were private labels and artisanal. Apart from that there were substitutes
more than competitors. Reason was the consumption of bread was low as compare to Mexico and
US markets.

CHINA
In china most of the companies held not more than 2% of market share. The market is highly
fragmented. The competitors were mostly multinationals companies which penetrated through
acquisition strategy same as grupo Bimbo. On the other hand local competitors had rest of the
share with the advantage of knowing the market better.

COMPETITORS STRENGTHS
USA
Bimbs direct competition was with flower foods. Sara lee and George western had already
captured most of the market share and they were head of Bimbo and flower foods.
George western had 66 baking facilities comprising of 150000 employees. Flower food had
outstanding brand recognition and low cost operations. The brand recognition was achieved
through efficient marketing strategy. Sara lee had non-unionized work force which helped it to
serve in a better way to hypermarkets.

SOUTH AMERICA
Substitute products was the main challenge for Bimbo rather than competitors due lo consumption
of bread in the region.

COMPETITIVE EDGE
BARRIERS OF ENTRY: OVERALL LOW TO MEDIUM
a. In Usa was high as it served hyper markets.
b. In South America as the completion was from private labels so it was low to medium.
c. In China market was favorable towards domestic industry as it was highly fragmented so
it has low barrier of entry.

THREAT OF SUBSTITUTION: HIGH

a. USA is high because of low carbohydrate product demand.
b. South America is High the reason for this is low consumption of bread.

POWER OF SUPPLIER: MEDIUM TO LOW

a. In USA high reason is unionized workers.
b. China low ( nonunionized workforce and low cost raw materials)
c. South America low (same as of China)

POWER OF BUYER: HIGH

a. Hypermarkets have high power of buyer ( high substitutes, low switching cost)

IMPACT FROM COMPETITORS

The overall industry analysis shows that its highly competitive and fragmented. They can do
things (Grupo Bimbo)
a. Low cost production line across the globe can be achieved as they do in Mexico.
b. In Latin American group they have good brand recognition.

SWOT ANALYSIS
STRENGTHS

Panirco acquisition in China has given them a good position in Beijing.

Brand reputation among the Latin USA.

The selection among the product and brands.

Market leader in Mexico and operating efficiency and capability in Mexico.

Focus towards R&D and human capital in Mexico

The US operating and Brazil operation has almost break even.

WEAKNESS

They have not enough experience in China.

Some fast food products in portfolio are underperforming in America.

Lack of involvement in dealing with unionized workers.

Their entrance into the south USA market without much due diligence.

OPPORTUNITIES

Acquired company Panirco has 38% share in Beijing market.

Population growth in Latin USA and growth in hypermarkets south and central USA.

The non-unionized work force in south USA and china.

THREATS

Competition is increasing in China and USA and Latin America.

Customer pattern towards healthier dirt is changing.

Consumption of bread in South America is low.

IDENTIFICATIONS
WHERE ARE THE PROBLEMS OR ISSUES?
Grupo Bimbo has expanded aggressively in international market outside Mexico with focus on
being a global leader in term of quality and size. The success in Mexico is taken for granted and
they trying to follow a same strategy internationally. This causes them huge losses in operations
and it also damages the brand loyalty and employee miss-management in some places. Moreover,
the market of USA is changing and consumption and market tendency in South America is
fluctuating from places and areas.

WHAT WEAKNESS WILL GET GRUPO BIMBO IN TROUBLE?

Grupo Bimbo has not much experience in dealing with unionized workers; this is a big problem
for them. As the increases demand from the workers will reduced the productivity and profitability
of Grupo Bimbo. And their lack of performing due to diligence in South USA market led Grupo
Bimbo to a position where they are facing operational losses and continuing with their current
strategy they will incur more losses and that will indeed effect on their overall profitability.

WHAT ARE THE MAJOR OPPORTUNITIES AND THREATS?

By dropping the control to union workers Grupo Bimbo will eventually lose the flexibility needed
to support the hyper markets. The major threat in South American market is lower consumption
of bread and if this threat continues it further decreases the profits of Grupo Bimbo.
As far as the opportunities are concerned the biggest opportunity for Grupo Bimbo is the increasing
population of Latin America and this opportunity can be capitalized considering its brand value
among the Native USA. Grupo Bimbo also has acquired Panrico in China which has 38 percent
market share in Beijing and this market is one of the big markets in China.

RECOMMENDATIONS
There are some recommendations for Grupo Bimbo which helps them to convert their weakness
into strengths. For becoming a global leader in baking industry they have to achieve sustainability
in profits so for that they have to postpone their target from 2010 to 2015. So for now they must
stop expanding aggressively and do no enter into new markets until 2010 and focus in improving
its business in China and South America and USA.
For USA Grupo bimbo must have proper solution to resolve their issues with unionized workers.
They must have hired a professional who have great negotiation skills in dealing with unionized
workers and try to come up with answer where unions have no or limited power and more number
of trucks driver are either IOs or work in union without conceding on the flexibility needed to
serve the hypermarket. Grupo Bimbo must have come up with innovate products to meet the
demand of new customers who are seeing for less carbohydrate products.
For America, they must analyzed every market to understand the demand of consumers in those
places and regions. Moreover, they must have come up with distinct market strategy and
distribution for each and every location they have their business.
For China, Grupo Bimbo streamlines the operation in plant of Panrico by introducing best practices
from Mexico and also continues to sell products and service of Panrico which they were selling
before acquisition. In China they must have established a firm position in Beijing. They must have
introduces some new products in china which are related to their culture values and norms.
The best practices that Grupo Bimbo follows in Mexico will be used to streamline the plants across
the globe to minimize the cost and increases their profit margin. These recommendations will also

help Grupo Bimbo emphasis on its weakness in terms of absence of experience in China and
control unions and its aggressive entrance into South America.

IMPLEMENTATION
Grupo Bimbo must have implement strategies to improve its position in local market of USA,
China and America and sustain its position in Mexico. They must decrease their cost and increases
their profit margin. So in conclusion they must adopt following strategies:

Solidifying its position in the market: Gaining control in supply and distribution of services
to customers and become cost efficient. And enhance their quality from competitors
goods.

Implementing the best practices: by duplicated the strategies of Mexico into other plants in
South America, China and USA and they cut down their cost.

In order to cut down cost Grupo Bimbo has to downsize its portfolio of products in every
market based on demand of the products.

CUSTOMER PERSPECTIVE
Grupo Bimbo segments the product portfolio on the basis of geographical preference of the
customers. It must follow the below for each region it is operating:

Categorizing the customers on the basis of profitability

Increase the number of customers

Get more revenues from the existing customers

CATEGORIZING THE CUSTOMERS

It needs to categorize its customers on the basis of profitability because in USA, Mexican
Americans and Latin Americans are the most profitable customers so it should categorize or apply
this classification in each country they are operating.

INCREASE THE NUMBER OF CUSTOMERS

It must increase the number of customers by increasing its business with supermarkets chains and
also by making fast food and restaurant chains its associate.

GET MORE CUSTOMERS FROM EXISTING CUSTOMERS

Grupo Bimbo should bring in some innovative products which can compliments other products in
its product line. Or it can have a partnership with firms offering compliment products such as milk,
butter, jam etc.

OPERATIONS
SUPPLY
It should make it its main goal to reduce the cost of production with maintaining the same level of
quality of the product. Its Mexican plants are under best practices and should transfer that
knowledge to other locations. The supply chain must be of high quality which can ensure to meet
the aggressive demand in USA, China and South America. For decreasing costs, it should develop
a partnership with the suppliers and for improved quality, raw material should be checked regularly
and time from completion of product from raw material until ready for use by customers and
percentage of on-time delivery by the supplier should be calculated to remove any flaws and delays
in delivery.

PRODUCTION
It should be lowering the cost of production by improving development process and should
duplicate the best practice in other firms too. For regular analysis of change in costs it should
measure cost per unit of output and transportation cost as percentage of total costs.

DISTRIBUTION
High delivery responsiveness should be ensured on the basis of customer demands. And should
provide repairing services for its delivery means. It should use some flexible or innovative
distribution system where hypermarkets are dominating. It should also measure its advances
through lead times from order to delivery and percentage deliveries that did not met customer
demands to overcome in future.

RISK MANAGEMENT
It should consult with firms having vast experience dealing with unionized worker as there is high
risk of strikes in US due to unions and avoid such risks in future. It should maintain high credit
quality and operating profits to manage its financial risks and to overcome operational risks it
should have backups in time of emergency like power cut etc. and should consistently keep an eye
on machineries to ensure efficiency.

CUSTOMERS MANAGEMENT
TARGET GROUPS
In each region it should understand the customer segment, in USA its target is Latin American and
Mexican customers who are the fastest growing minorities in the country and should target
customers looking for healthier products. In South America, supermarkets and chain of fast food

restaurants should be targeted and long term contracts should be established. And also target
customers with high consumption of bread products.

HOW TO ATTRACT?
It must maintain its brand position within the market and its reputation within the Mexican
customers and increase recognition form the Latin American market. To improve demand for
healthier products it should encourage social responsible causes such as better health and lifestyle
in American market. It should carry out brand awareness survey and customer preferences on
regular basis in order to develop and maintain a relationship with its customers and also to measure
its success over the time and dealer scorecard should be used for dealer or distributor relationship.
It should also be introducing new innovative and attractive products to acquire new customers and
to further increase the share of market.

HOW TO KEEP AND RETAIN CUSTOMERS?

By creating highly loyal customers and ensure that the quality of products remains fresh and good
and packaging is also improved for preserving freshness of the products, it can keep hold of and
retain new customers. Offering discounts for repeat and mass purchases can also be strategy for
this. And it should try to have as many contracts with fast food chain and restaurants in all the
regions they operate so that there is always a demand for their product.

INNOVATION
FUTURE PRODUCTS/SERVICES
For increasing market share it should have an experienced team of marketing researchers to
forecast and anticipate the demand of future products in USA, South American and Chinese

market. In each region it is operating it should carry out sample surveys before releasing the
products.

RESEARCH & DEVELOPMENT

For increasing profits and lowering costs it would have to maintain the superiority of the product
and carry out better innovation and for this it would have to carry out research in the market.

TEST MARKETS
For entering new markets like Europe and Australia it should test these markets for some time.
And in markets where it is already operating such as china, it should test this market to introduce
Mexican products which are not available in this area.

PRODUCT ROLLOUT
For increasing market share it has to introduce or enhance the products in its product line. And in
China it must concentrate on the existing product line until the process in the plant is streamline
and controlled based on the best practices in Mexico.

SOCIAL REGULATORY
INCREASE ENVIRONMENTAL INCENTIVES
As being a food firm Grupo Bimbo should take some social responsibility to improve living
conditions. USA market is becoming more and more health conscious and by taking social
incentives related to health and environment, it will position itself as a responsible company
dedicated to the health of its customers.

HUMAN CAPITAL
The employees of this plant must be from the host location. Management should have enough
experience and knowledge in the food market of that region in which the plant is located. But the
employees will be trained in Mexican plant as all other plants are following the best practices of
its headquarter in Mexico. Also it should have highly skilled labor force and should hire people
with matching or proper skills and train them to achieve the best products. Grupo Bimbo would be
dealing with hypermarkets in USA, China and some countries in South America so it should hire
people with best skills and task force should be divided according to the product demands in that
market.

IT
It must capitalize on the information technology to improve and increase efficiency and take on
time orders and provide on time delivery. IT should also be helpful for Grupo Bimbo in analyzing
its future demand and production and also to analyze cost of operations and should take steps
immediately to overcome any flaws and delays in operations and delivery.