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Free «Foreign Market Entry and Diversification» Essay Sample

Modelo Company spread its wings in 1925 by a group of businesspersons creating its first brands beer modelo and Corona. The two brands set of the company’s fiscal gains as they performed well in the market to become the most imported brands in the United States. The company’s success expanded and more breweries followed across Mexico. Modelo brewery is the largest in Mexico enjoying 63% of distribution in the market, both domestically and internationally. Corona brand is one of its brands (Hoovers, 2010). Modelo was founded in 1925 and has monopoly, as the leading beer producer in Mexico. It functions with seven brewing plants with capacity to brew 60 million hectoliters. Modelo also imports other company’s brand, e.g. InBev’s products, Chinese and Danish products. The brand Corona has been performing well worldwide; it has penetrated in the market to over 150 countries. The beer is the best seller in Mexico and Northern states (Grupo Modelo, 2009)

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Trends in Global Beer Markets

The global trend in beer market has seen a significance change. Developing countries have seen gradual change in beer categories. North states also have suffered because of decline in beer consumption trends (Gmodelo, 2006). Amalgamations of brewers have also resulted to monopoly of production. Developing countries consumptions rise has seen positive returns to brewers; better standards of production have enhanced this. Additionally, it has resulted in shift by customer from unregulated brands to commercial beers; thus, subsistence alcohol brewers have seen reduced returns in profit margin (Gmodelo, 2006). Globally, emerging markets have grown by 5.7%; these markets are from south countries and the nation states. Developed countries have not performed well in the market resulting in unemployment and strained consumer spending. Western Europe suffers reduced gains caused by consumer’s preference in the choice of brands abandoning local brands. Beer industry forecast to gain considerably because of emerging markets, such as china, Brazil, Ukraine, and Nigeria among other states. Westernization has also changed taste preferences amongst younger generations; it has seen changes on certain brands. Advertising in lager markets also has positively reflected growth because of increased awareness on brands; marketing has compelled this growth trend and its awareness (Gmodelo, 2006). Statistically, global turnover averagely has maintained a 3.3 percent with emerging markets advancing a 5.7 percent. This growth emerged from South countries and nation states. China as an emerging market also recorded a rise of 6 percent; Africa rated at 8 percent a positive remark to volume sales. Despite this growth, these markets suffer inflationary pressures as well as uneven taxation, a good example being Colombia. Developing countries’ consumption suffers from unemployment rates as well as high fuel prices (Gmodelo, 2006). Another factor affecting market trend is consumers choice of other beverages thereby reducing turnover in consumption of beer. Therefore, forecast for market trend estimates 2.5 percent, which is estimated to be pushed by strong actors in the market, Africa inclusive (Hoovers, 2010)

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Strategic partnerships

Modelo’s strategic mission is to discover the leadership model in beverages globally as well as the market for consumer products. Modelo’s positive gains are because of marketing and advertising of the brand. The company has conducted massive analysis on its market base and has entered more than 150 countries, the latest being Brazil. Collaborating with the Brazilian market has enabled Modelo build its new factory and has transpired through continued advertisement. Consumers are importing the brands informally. Collaborating with other companies also has created an environment based on mutual trust, which is aimed at developing the brand. By collaborating with distributors, Modelo’s branching activities have seen its success. Some of the partners of Modelo Company include Texcoco, Estado de Mexico. This diversification has seen its worldwide expansion. In 1991, Modelo company expanded its network with subsidiaries, i.e. bottling company and machinery and manufacturing company, malting stores, logistics and other multinational (Hoovers, 2010). Modelo also formed partnership with an American beer company Anheuser-Bush; this was viewed as influential partnership that brought advantage of wider coverage of distribution of their brands. Its partnership with experienced distributors in local markets saw Modelo brewer acquire other plants that produced other brands. This enabled Modelo to search for international market and new partners this time not from the North (St James Press, 2009).

Foreign Market Entry and Strategies in Application

 
 
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Modelo Company targets to market its brands in South countries. These new markets have shown improved Modelo’s strategic entry point into foreign market is through forming logistics experts who have international linkages involving supplies all over (St James Press, 2009). The company was able to discover supply avenues in foreign market; this has aroused flexibility during supplies (St. James Press, 2009). The company also embarked in opening new distribution centers, which enabled Modelo to increase efficiency in distributions across Europe and earn the desired trust in the world foreign market.

Challenges Modelo faces over Inbev and its Remedy

One major challenge that Modelo faces is over diversification, which causes it to forget their competitors Inbev by dividing quality in their brands. Another challenge that Modelo faces is its blind approach to countries in hope of making returns; unlike Inbev that performs analysis of its market, Modelo is overly comfortable in waiting for market. To avert these challenges, Modelo response enhances its relationship with other players; this would grant them exclusivity to distribute its finest brands in the market. This would work a great deal and influence positively as Modelo Company has had over the years a distinguished reputation in its brands taste.

Future for Modelo and its Business Diversification

Modelo Company has proved financially successful even though the market suffers instability because of recession. However, it is quite clear that Modelo can diversify its business to other beverages, e.g. soft drinks and water. This is because of the company’s potential to claim its position as a leader in global beverages and increased products for consumers. Modelo’s diversification will target its primary objectives. This is through creating new brands that satisfy demographic taste, expanding its market internationally, acquiring of more distributive centers globally, and affiliations with other subsidiaries. Since its launch in 1925, the company has built its name in beverage world. The company’s domination to quality supports its continued line of business rather than entry into another business venture (St. James Press, 2009). This view is supported by the branching model, which Modelo adopted in 1980s when the company started establishing malting facilities, such as Calpulalpan, Tlaxcala, and Texcoco. An indicator Modelo has diversified, distributing quality brands in the market world over. In 1991, Modelo again diversified its beverages brands and started integration with subsidiaries.

   

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