Reference no: EM131286743

Arcor: a Latin American confectionery player is globalizing its business
Arcor (www.arcor.com.ar/eng/) was founded in 1951 to produce sweets. However, in order to tell the company's history fully we must go back to 1924, the year Amos Pagani, a young Italian immigrant, decided to start a bakery in the Province of Córdoba. Today Arcor is still a private company owned by the Pagani family. In the 1970s and 1980s Arcor transformed itself into a vast industrial complex, showing the way for other companies in the country, and continued to grow both in Argentina and in different countries in the region. Arcor started operations in Paraguay in 1976, in Uruguay in 1979, in Brazil in 1981 and in Chile in 1989.

In 1999 in Brazil Arcor opened the most advanced chocolate plant in the region, whose facilities also include the largest product distribution centre in that country. This was a start-up that put the company at the cutting edge of technology and production on the continent. It also permitted Arcor to consolidate its position in the very attractive Latin American market. In order to continue with its expansion process Arcor established itself in Barcelona in 2002. Arcor's goal has always been to expand beyond the borders of its own country, and the opening of this new office allows the company to create closer bonds with customers from the European Economic Community, the Middle East and Africa.

Today the Arcor Group has 41 plants in the region (30 in Argentina, 5 in Brazil, 4 in Chile, one in Mexico and one in Peru). ARCOR prepares more than 1,500 products in the four areas that make up its business focus: foods, confectionery, chocolates, cookies and crackers. In all these segments the company has developed a very high degree of know-how that has allowed it to become a true specialist in everything it produces. Arcor has the widest product portfolio in the bakery and confectionery market in all key sectors, except for dairy. At present Arcor is well established in Latin America, but outside this area it is relatively weak.

Of the total sales in 2007 of US$1,850 million less than 5 per cent derived from outside Latin America. In the coming years, Arcor faces three big challenges within its international expansion framework: becoming the no. 1 Latin American confectionery and chocolate company; continuing to grow and establish itself in high development potential markets outside Latin America, such as the emerging Asian markets; and strengthening product penetration in the most demanding markets in the world: the United States, Japan and the European Union. The group is an active participant in various strategic alliances (production and/or marketing agreements) with international players, such as Nestlé and Brach's.

The most recent example is their partnership with Danone Group (France) in the biscuits and cereal bar business in Argentina, Brazil and Chile. In April 2004 the two companies merged their biscuit manufacturing activities into a single company, Bagley Latinoamérica SA, which resulted in the biggest biscuit company in South America. The joint venture company is owned 49 per cent by Danone SA (France) and 51 per cent by Arcor. This partnership includes highly recognized brands in local markets like Formis, Maná, Saladix, Hogareñas, Sonrisas, Merengadas, Criollitas, Rumba, Opera, Aymoré, Triunfo, Selts and more. Arcor also manufactures private label products and brands for third parties, such as Wal-Mart Stores Inc. and the Sara Lee Corp

In 2000 the Arcor Group launched www. arcorsales.com, the first food industry website in Latin America devoted to business-to-business (B2B) markets, a new trade channel for its products, to leverage those currently in use. In 2006, it partnered with the Bimbo Group for the production of sugar and chocolate confectionery in Mexico, in order to serve the Mexican market and also other world markets.

QUESTIONS

1. What would be the major obstacles to Arcor's attempt to penetrate markets outside Latin America?

2. How could Arcor use the concept of the virtual value chain to increase internationalization?

3. Where are Arcor's competitive advantages in the value chain?