Harvard Case - Empresas La Polar, S.A. (A)
"Empresas La Polar, S.A. (A)" Harvard business case study is written by Edward Waitzer, Matko Koljatic. It deals with the challenges in the field of International Business. The case study is 9 page(s) long and it was first published on : Oct 17, 2016
At Fern Fort University, we recommend that Empresas La Polar, S.A. (La Polar) pursue a strategic expansion into emerging markets, particularly in Latin America, focusing on the development of a robust international business model. This strategy should leverage La Polar's existing strengths in retail, finance, and food services, while incorporating a strong emphasis on cultural intelligence, global branding strategies, and sustainable business practices. This approach will enable La Polar to capitalize on the growth potential of emerging markets, diversify its revenue streams, and solidify its position as a leading regional player.
2. Background
Empresas La Polar, S.A. is a Chilean conglomerate with a long history of success in retail, finance, and food services. The company has a strong brand presence in Chile and a loyal customer base. However, La Polar faces challenges in a saturated domestic market and increasing competition from international players.
The case study focuses on La Polar's CEO, Patricio Jottar, who is considering expanding the company's operations into new markets. Jottar recognizes the need for a strategic approach to internationalization, considering the complex factors involved in navigating foreign markets.
3. Analysis of the Case Study
This case study can be analyzed through the lens of Porter's Five Forces framework, which helps assess the competitive landscape and identify opportunities for strategic advantage.
- Threat of New Entrants: La Polar faces a moderate threat from new entrants, especially in emerging markets. However, the company's established brand recognition and expertise in retail and finance could serve as a competitive barrier.
- Bargaining Power of Buyers: Customers in emerging markets might have more bargaining power due to lower disposable incomes and a wider range of options. La Polar can mitigate this by offering competitive pricing and tailored product offerings.
- Bargaining Power of Suppliers: La Polar's dependence on local suppliers in emerging markets could expose it to risks related to quality, pricing, and availability. The company needs to develop a robust supply chain management strategy to mitigate these risks.
- Threat of Substitutes: La Polar's diverse business model provides some protection against substitutes. However, the company needs to be aware of emerging trends and technologies that could disrupt its core businesses.
- Competitive Rivalry: Competition in emerging markets is likely to be intense, with both local and international players vying for market share. La Polar needs to differentiate itself through innovation, global branding, and customer-centric strategies.
4. Recommendations
- Focus on Emerging Markets: La Polar should prioritize its expansion efforts in Latin America, specifically targeting countries with strong economic growth potential and a growing middle class. This region offers cultural familiarity and proximity, reducing the risks associated with cross-cultural management and international relations.
- Develop a Robust International Business Model: La Polar should implement a transnational strategy, adapting its core business model to the specific needs of each target market. This will involve:
- Global Marketing: Tailoring marketing campaigns to local preferences and cultural nuances.
- Product Distribution: Optimizing product offerings and distribution channels to cater to local consumer demands.
- International Finance: Managing currency exchange risks and accessing local financing options.
- Global Supply Chain Management: Establishing efficient and reliable supply chains to ensure product availability and quality.
- Leverage Existing Strengths: La Polar should leverage its expertise in retail, finance, and food services to create a competitive advantage in emerging markets. This includes:
- Branding: Building a strong brand identity that resonates with local consumers, emphasizing La Polar's commitment to corporate social responsibility and environmental sustainability.
- Financial Services: Offering financial products and services tailored to the needs of emerging market consumers, such as microfinance and mobile banking solutions.
- Food Services: Expanding La Polar's food service offerings to cater to local tastes and preferences, while incorporating innovative and sustainable practices.
- Strategic Alliances and Partnerships: La Polar should explore strategic alliances with local businesses and organizations to gain access to local expertise, distribution networks, and customer insights. This will help the company navigate the complexities of cross-cultural business relations and government policy and regulation in emerging markets.
- Embrace Innovation and Technology: La Polar should invest in technology to enhance its operations, improve customer experience, and drive efficiency. This could include:
- E-commerce: Developing a robust online platform to reach a wider customer base and offer convenient shopping experiences.
- Data Analytics: Leveraging data analytics to understand customer behavior, optimize pricing strategies, and personalize marketing campaigns.
- Supply Chain Optimization: Implementing advanced logistics solutions to streamline supply chains and reduce costs.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The proposed expansion strategy aligns with La Polar's core competencies in retail, finance, and food services, while also extending its mission to serve a wider customer base and contribute to economic development in emerging markets.
- External Customers and Internal Clients: The strategy focuses on meeting the needs of emerging market consumers while providing opportunities for growth and development for La Polar's employees.
- Competitors: The recommendations aim to differentiate La Polar from its competitors through its focus on cultural intelligence, global branding strategies, and sustainable business practices.
- Attractiveness: Emerging markets offer significant growth potential and attractive investment opportunities. The proposed strategy aims to maximize return on investment through efficient operations and a customer-centric approach.
6. Conclusion
By embracing a strategic approach to internationalization, La Polar can capitalize on the growth potential of emerging markets, diversify its revenue streams, and solidify its position as a leading regional player. The company's success will depend on its ability to adapt its business model, leverage its existing strengths, and cultivate strong relationships with local partners.
7. Discussion
Alternative options for La Polar's expansion include:
- Focus on Developed Markets: Expanding into developed markets such as the United States or Europe could offer access to a larger customer base and more sophisticated markets. However, this approach would require significant investment and adaptation to local regulations and consumer preferences.
- Organic Growth: La Polar could focus on organic growth within its existing markets, investing in new stores, product lines, and services. However, this approach would be limited by the saturation of the domestic market and increasing competition.
The risks associated with the recommended strategy include:
- Political Instability: Emerging markets can be subject to political instability, which could disrupt business operations and impact investment returns.
- Economic Volatility: Emerging market economies can be volatile, which could impact consumer spending and affect La Polar's profitability.
- Cultural Differences: Navigating cultural differences can be challenging, and La Polar needs to be sensitive to local customs and values.
The key assumptions underlying the recommendations include:
- Continued Economic Growth in Emerging Markets: The success of the strategy depends on the continued economic growth of emerging markets.
- Favorable Regulatory Environment: La Polar assumes a favorable regulatory environment in target markets, allowing for smooth business operations and investment.
- Effective Cross-Cultural Management: La Polar assumes its ability to effectively manage cross-cultural differences and build strong relationships with local partners.
8. Next Steps
To implement the recommended strategy, La Polar should take the following steps:
- Conduct a thorough market analysis: Identify specific target markets within Latin America based on economic growth potential, consumer demographics, and regulatory environment.
- Develop a detailed business plan: Outline the specific strategies for each target market, including marketing, product distribution, financial management, and supply chain management.
- Secure funding: Identify potential sources of funding for the expansion, including bank loans, private equity, and strategic partnerships.
- Establish a local presence: Set up subsidiaries or joint ventures in target markets to facilitate operations and build relationships with local partners.
- Develop a cultural intelligence program: Train employees on cultural sensitivity, communication skills, and local customs to ensure effective cross-cultural interactions.
- Monitor progress and adapt: Continuously monitor the performance of the expansion strategy and make adjustments as necessary to optimize results and mitigate risks.
By following these steps, La Polar can successfully navigate the complexities of international business and achieve sustainable growth in emerging markets.
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Case Description
On June 9, 2011, Empresas La Polar S.A., a Chilean retailer, informed the Chile's securities commission that it had detected irregularities in its accounting for credit card receivables. A fraudulent credit card scheme masterminded by key executives and missed by directors and auditors was going to result in an estimated write-off in excess of US$300 million. On June 17th, the company advised the commission that the write-off would, in fact, be double the original estimate, amounting to US$640 million, resulting in negative equity. The filing contributed to a decrease in the value of the company's stock market value, dropping from US$1.2 billion to US$281 million and putting the company at risk of bankruptcy. Should the directors be held responsible and punished for what had happened? What role did the regulators and auditors play?
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