Las Ferreterias de Mexico

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LU Ferreter1.a da Mllxico. S.A. da C.V.

We had been opt-'fating our company like a family, but maybe we're too big to opemte Ihat way. I think some of our people have gotten lazy, and ourperfonn· anee has suffered. That is why r asked for Ihe design of a new ineentive .compensation plan. We need !O be more compelitive to survive. I Want OUf people to focus on what they can do to imp. ove .company r perfollllanee, and if we're successful, I am quitt willit;lg to share a good proportion of the pro.ceeds of our success. FUfUlndo Gonzalez, Chairman and ClW. Las Ferreterlas de Mex;co, SA. de C.v.

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THECOMPANY
Las Ferreterfas de Mexico, S.A. de C.V. (FeITeterlas) was the second largest retailer of lumber, building materials, aud home improvement products and equipment in Mexico. Ferreterfas operated 82 stores in Mexico City and throughout most of the northern regions of Mexico. Each of Ferret.er{as' stores offered between 10.000 to 20,000 stock keeping units (SKUs) in a retail sales area, an outside lumberyard area, and a garden center. The total store areas ranged from 10,000 to 35,000 square feet. Ferreterfas was founded in 1902 in a suburb of Mexico City by Femando Gonzalez' grandfather. Over tbe years, the company added more locations. It was listed on the Mexican Stock Exchange in 1983. In 2002. Ferre/erlas had sates of 2,210 mil" Iion pesos and profits of almost 120 million pesos (see summary financial statements in Exhibits 1 and 2),1

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• At the time of the case,
mately 1)S$O.IO.
O/It'

Mexlcan peso was worth

appro~i·

Starting in the late 1980s, Femando Gonzales launched a major company expansion to take advantage of the growth in the Mexican economy. He thought that his company needed tO emulate the methods of the large American homebuilding tetailers, such as Horne Depot and Lowe's, in order 10 survive. Thus, improving market share and improving operating efficiencies became Ferreterfas' strategie priorities. Tbe store manageJS...
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