Marcopolo: The Making of a Global Latina

Which factors have been important for the success of Marcopolo’s

internationalization?

● Marcopolo’s success up to 2002 could thus be credited to three main factors:

verticalized production, flexible production lines and the tailoring of products
to the needs of customers in local markets.
● The verticalization model went against the grain of outsourcing that was
gaining ground in the automobile industry
● The parts used in the three Brazilian factories were made alongside each line
as needed, using the just-in-time concept.
● The company managed to combine the concept of low inventories and
flexible production lines. The latter was necessary because Marcopolo worked
with different chassis.
● To maintain this flexibility while meeting the requirements of customers in
many different countries, the company created a new system – partially
knocked down (PKD) – whereby the body is shipped nearly ready, including
paintwork and internal finishes, and only needs to be mounted on the chassis
at the destination.
● Another important factor for the company’s success was its bet on Porto
Alegre, 120 kilometres from Caxias do Sul. Traditionally the busiest ports in
Brazil’s southern region are Itajaí and São Francisco do Sul.The cost of
trucking the bodies/parts to the port terminal in Porto Alegre is 60% cheaper
using the PKD system.
● Marcopolo’s internationalization strategy was first based on entering its
natural markets10: neighbouring countries such as Argentina and Colombia,
and Portugal (which shares the same language), as well as Mexico and South
Africa, which had a similar economic potential to Brazil’s and spoke Spanish a
similar language to Portuguese.
What advantages have been obtained from its international expansion?

● Access to foriegn markets

● Strategic partnerships with key partners which will help in further
diversification of business assets and strategies
● International diversification into strategically strong road ways market like
India which enjoys a 50 50 road/train split will help the company stay in
better shape during financially troubled years
● Increase in stock prices and valuation will give the company better leverage
and access to capital to further strengthen and streamline operations
● Increasing scale will hasten modernization efforts.
● Risk diversification

What consequences in terms of central coordination will Marcopolo face in

managing its subsidiaries in countries culturally distant from Brazil?

The cultural distance between Marcopolo and its subsidiaries, if managed through a
central coordination can have series of consequences:

● Business Failure of the subsidiary due to the vast cultural difference, as the
requirement in terms of the size or model of the bus.
● Lack of ability to customize product offering based on the cultural and social
belief system of the country.
● Inability to understand domestic labour, leading to poor people management
in the country.
What patterns can you observe in Marcopolo’s international process and
expansion?

Success upto 2002 could be credited to:

1. Verticalized Production

2. Flexible Production Lines

3. Tailoring of Products to the needs of customers in local markets.

The initial expansion strategy was a two pronged strategy and the aim was to enter
neighbouring markets due to cultural similarities before moving to culturally distinct
countries/ markets.

● The focus was on producing in-house, exporting components, and doing final
assembly in the destination country, especially for the city buses, primarily to
reduce tariffs and cost. (Completely Knocked Down or Semi- Knocked Down)
● The production process focus for the intercity bus was more on customization
and exported as a fully assembled unit, as it had higher margins.

However, in 2006, fierce local market competition, higher cost of raw materials and
inputs, and increased export cost due to currency fluctuations of the Real led
Marcopolo to make strategic changes in its export processes. The focus then
shifted.

● Marcopolo decided to capitalize on joint ventures/ strategic partnership with

local partners to both manufacture and assemble parts abroad.
● Marcopolo used its expertise to bring in the technology, design and other
aspects, while the local player brought in the manufacturing capabilities with
the local market understanding.