Harvard Case - Doing Business in Lima, Peru
"Doing Business in Lima, Peru" Harvard business case study is written by Jeffrey T. Polzer, Leonard A. Schlesinger, Max Hancock. It deals with the challenges in the field of General Management. The case study is 29 page(s) long and it was first published on : Jun 23, 2023
At Fern Fort University, we recommend that the company, 'The Company,' pursue a strategic expansion into the Peruvian market through a phased approach, focusing on building a strong local presence and leveraging the existing strengths of its current business model. This approach will prioritize building strong relationships with local stakeholders, including government officials, suppliers, and customers.
2. Background
This case study focuses on 'The Company,' a successful multinational corporation (MNC) specializing in the production and distribution of consumer goods. The company is considering expanding into the Peruvian market, which presents both opportunities and challenges. The Peruvian market offers a large, growing consumer base, a favorable economic climate, and a strategic location for regional expansion. However, the company faces challenges such as navigating complex regulations, establishing a strong local presence, and understanding the unique cultural nuances of the Peruvian market.
The main protagonists of the case study are the company's senior management team, who are tasked with evaluating the feasibility of entering the Peruvian market and developing a comprehensive strategy for successful implementation.
3. Analysis of the Case Study
To analyze the case, we will utilize a framework combining Porter's Five Forces and SWOT analysis to assess the competitive landscape and internal capabilities of 'The Company.'
Porter's Five Forces:
- Threat of New Entrants: Moderate. While the Peruvian market is attractive, entry barriers exist, including government regulations, high infrastructure costs, and established competition.
- Bargaining Power of Buyers: Moderate. The Peruvian consumer market is diverse, with varying levels of purchasing power, creating both opportunities and challenges for 'The Company.'
- Bargaining Power of Suppliers: Low. Peru has a robust supply chain with diverse suppliers, limiting the bargaining power of individual suppliers.
- Threat of Substitute Products: Moderate. The market offers substitute products, but 'The Company's' strong brand recognition and established product portfolio provide a competitive advantage.
- Competitive Rivalry: High. The Peruvian market is characterized by intense competition from both local and international players, requiring 'The Company' to differentiate its products and services.
SWOT Analysis:
Strengths:
- Strong brand recognition and established product portfolio.
- Extensive experience in international markets.
- Robust financial resources and operational capabilities.
- Commitment to corporate social responsibility.
Weaknesses:
- Limited understanding of the Peruvian market and its unique cultural nuances.
- Lack of established local partnerships and relationships.
- Potential challenges in navigating complex regulations and bureaucratic processes.
Opportunities:
- Large and growing consumer base.
- Favorable economic climate with increasing disposable income.
- Strategic location for regional expansion.
- Potential for partnerships with local businesses and government agencies.
Threats:
- Intense competition from both local and international players.
- Political and economic instability.
- Potential for regulatory changes and trade barriers.
4. Recommendations
Phase 1: Market Entry and Local Presence (Year 1-2)
- Strategic Alliance: Partner with a reputable local company to gain market access, leverage local expertise, and navigate regulatory hurdles.
- Market Research: Conduct thorough market research to understand consumer preferences, competitive landscape, and regulatory environment.
- Pilot Launch: Launch a limited product line in a targeted region to test market response and refine the go-to-market strategy.
- Build Local Team: Hire local talent with strong market knowledge and cultural understanding to build a dedicated team.
- Community Engagement: Engage with local communities through corporate social responsibility initiatives to build trust and goodwill.
Phase 2: Expansion and Growth (Year 3-5)
- Expand Product Portfolio: Introduce a wider range of products tailored to the specific needs and preferences of the Peruvian market.
- Develop Local Supply Chain: Establish partnerships with local suppliers to reduce costs, improve efficiency, and contribute to local economic development.
- Marketing and Sales Strategy: Implement a targeted marketing campaign leveraging local media channels and digital platforms to reach the desired customer segments.
- Strengthen Local Presence: Expand operations to new regions, invest in local infrastructure, and further build relationships with key stakeholders.
Phase 3: Sustainability and Innovation (Year 5 onwards)
- Sustainability Initiatives: Implement sustainable practices across the value chain, focusing on environmental protection and social responsibility.
- Innovation and Product Development: Invest in research and development to introduce innovative products and services that meet the evolving needs of the Peruvian market.
- Digital Transformation: Embrace digital technologies to enhance operational efficiency, improve customer experience, and leverage data analytics for informed decision-making.
- Talent Development: Invest in training and development programs to nurture a skilled workforce and foster a culture of innovation and continuous improvement.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of the Peruvian market, 'The Company's' capabilities, and the potential for long-term success. They consider the following:
- Core competencies and consistency with mission: The recommendations align with 'The Company's' core competencies in production, distribution, and brand management while expanding its reach into a new market.
- External customers and internal clients: The recommendations prioritize understanding the needs of Peruvian consumers and building strong relationships with local suppliers and partners.
- Competitors: The recommendations address the competitive landscape by focusing on differentiation, building a strong local presence, and leveraging 'The Company's' unique strengths.
- Attractiveness: The recommendations are based on the potential for significant growth and profitability in the Peruvian market, supported by a phased approach that minimizes risk and maximizes return on investment.
6. Conclusion
'The Company' has a strong foundation for successful expansion into the Peruvian market. By adopting a strategic approach that combines market research, local partnerships, and a commitment to corporate social responsibility, the company can establish a strong presence, build trust with stakeholders, and achieve long-term success.
7. Discussion
Alternatives:
- Organic Growth: This approach would involve 'The Company' establishing its own operations in Peru without any partnerships. However, this would require significant investment and expertise in navigating the local market.
- Acquisition: This approach would involve 'The Company' acquiring an existing local company to gain immediate market access and expertise. However, this could be a costly and complex undertaking.
Risks:
- Political and Economic Instability: Peru's political and economic climate can be unpredictable, posing risks to business operations.
- Regulatory Changes: The Peruvian government may introduce new regulations that could impact 'The Company's' operations.
- Competition: Intense competition from both local and international players could limit market share and profitability.
Key Assumptions:
- The Peruvian economy will continue to grow and provide opportunities for 'The Company.'
- The company will be able to successfully navigate the regulatory environment and establish strong local partnerships.
- 'The Company' will be able to effectively adapt its products and services to meet the needs of the Peruvian market.
8. Next Steps
- Form a Task Force: Assemble a team of experts to develop a detailed implementation plan for the recommended strategy.
- Conduct Due Diligence: Conduct thorough research and analysis to validate the assumptions and assess the potential risks.
- Secure Funding: Secure the necessary financial resources to support the initial phase of market entry.
- Establish Local Partnerships: Identify and negotiate partnerships with reputable local companies.
- Develop a Marketing Plan: Create a targeted marketing campaign to reach the desired customer segments.
- Monitor Progress and Adapt: Continuously monitor the progress of the expansion and make adjustments as needed.
By taking these steps, 'The Company' can successfully navigate the complexities of doing business in Lima, Peru, and achieve sustainable growth in this dynamic and promising market.
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Case Description
This case examines the challenges and opportunities of doing business in Peru. It highlights Peru's economic transformation in the decades leading up to 2023 in the context of its history, culture, and politics. The case gives an overview of some of the main obstacles faced by businesses operating in the country, contrasting these with the efforts undertaken by the government to improve the country's business climate. This is illustrated through the discussion of a fictional business dilemma.
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