Arcor should continue to focus on its internalization plans to expand its footprint within Latin America as going global at this point in time is too risky and outweighs the opportunities. Arcor has the ability and capacity to successfully dominate the Latin America market and has much room for growth. See exhibit 13 which illustrates how Arcor has captured a minimal percentage of the market in Lation America outside of Argentina. A new group of countries in Latin America are emerging as stronger economies with a youthful population and a growing middle class. Prior to attempting to go up against the key players in the confectionary industry – Arcor must concentrate on improving their financial strength and they must at first establish their brand name throughout Latin America.
The confectionary industry in developed markets relies heavily on advertising and therefore, price competition plays a secondary role. This is an issue for Arcor as their competitive advantage is their “good value at an affordable price” promotion. According to some analysts historical advertising expenditures could be as high as 6.5% for chocolate and 6% for candy depending on the region. Mars’ global advertising expenditure during this time was around $400 million - television consuming 80-90% of this amount, in where Arcor was spending around $225k in advertising AND R&D combined (see exhibit 10 detailing Arcor’s financial position). Arcor historically invested heavily in distribution and getting products to the markets rather than advertising. When a product was introduced they spent almost no money on advertising. They would focus on training distributors to understand the product lines and their distribution techniques which was successful within their local environment. Outside on Latin America most distributors prefer to carry only well-known brands. Going global would mean that Arcor would have to shift their strategy but most importantly it would cost them tens of...
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