Lucchetti

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I. STRATEGIC PROFILE AND CASE ANALYSIS PURPOSE
Case Background

Lucchetti, a subsidiary of Quinenco, has entered the Peruvian market after seeing the growth opportunity that had yet to be taken hold of. The company was known for the quality, nutritional value, and competitive prices of its products, most especially its pasta. Amidst the powerful competition, Lucchetti could have succeeded, if it hadn’t been only for the issues it faced in Lima city.

Lucchetti began by importing pasta from Chile, and then from Italy. Sales underwent continuous growth, but because of the seemingly ensuing price war in Peru and the high cost of importation, Lucchetti was tempted to consider the construction of a plant in Lima.

Because of certain oppositions, the construction was always disrupted, but finally went on line in 1999. However, in 2001, Lima City issued an order to close the LP plant, revoking the operating license, another in 2002, and finally in 2003 wherein it was truly shut down.

Lucchetti’s board decided to close immediately. However, in the ensuing months several local mayors in other parts of Lima offered to allow Lucchetti to relocate to their districts at preferential prices with favorable tax terms. This would mean an opportunity for Lucchetti to make up for its losses. It has however been emphasized the measure of getting out Peru, and Argentina as well, is to better concentrate its efforts in Chile where it has strong brand recognition, significant market share, access to a critical mass of consumers, and an in-house distribution capabilities.

Statement of the Problem

Considering all the losses they have incurred in Peru, should Lucchetti continue with its Peru operations or should it proceed leaving the country and concentrate its efforts in Chile?

Vision: To become the leading pasta company in South America.

Mission: “Lucchetti is committed to upholding our consumers’ well-being by providing every Peruvian high quality pasta made only from higher quality semolina and by taking heed to the call of environment protectors. I.SITUATION ANALYSIS

A. General Environmental Analysis

External environment factorsChange and ThreatsNature of ThreatImpact on Industry's revenues

Technological
The main players in the market were still offering lower quality pasta that was produced in older production facilities. Thus an opportunity to offer pastas marketed at higher ranges of the price spectrum.

Opportunity
Increased Revenues

Economic
Peruvian pasta market appeared to be ripe for harvesting; consumption rates per capita were virtually identical to those of Chile.

Opportunity

Increased Revenues
Peru had a basically sound and growing economy, prices would go up, and the demand for higher-quality pasta could be exploited. Opportunity
Increased Revenues

The “Fujishock” had made life difficult for domestic manufacturers, workers, and the poor, but on the other hand, the economy was growing and inflation was low.

Opportunity

Increased Revenues

Relations with international lenders were good and foreign investments was flowing in.

Opportunity

Increased Revenues

Aggressive competitive pricing in Peru and continuing high costs of importing pastas.

Threat

Decreased Revenue

Socio-cultural
Peruvian consumers gained greater spending power and learned to appreciate higher quality pasta products.

Opportunity

Increased Revenues

In Peru only 10 percent of food was sold in supermarkets, majority of food sales were through small neighborhood mom-and-pop stores.

Threat

Decreased Revenue

Political/Legal
The Peruvian government allowed foreign investment returns to be taxed at the same rate that was effective when the investment was initially made.

Opportunity

Increased Revenues

No discrimination between local and foreign investors.

Opportunity

Increased Revenues

However, in an effort to...
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