Analysis Of Mercadonas Internationalizing Economics Essay

Analysis Of Mercadonas Internationalizing Economics EssayMercadona is a 100 Spanish-owned diffusion Company inwardly the super food market segment. It is the largest chain of supermarkets in Spain. The executive President is Juan Roig. They h gaga the SPB insurance, which means in Spanish Siempre Precios Bajos (Always Low Prices). They argon able to extend SPB because they buy their products directly from the sources, setting up long-term agreements with manufacturing businesss. This Model is called The add up Quality Model (Mercadona, 2010).Re centime research on retailers (Esade, 2011), shows that Mercadona is the leader in the ranking of house brands that argon preferred by the customers.STATEMENT most(prenominal) THE INTERNATIONAL PROFILEMercadona has governments in many cities in Spain unless has no front overseas. In spite of the crisis, the profits of Mercadona are still growing, and they are strong enough to start transnationalizing. Mercadona has increased its tur nover an 8% up on the previous category and grew 4% in gross sales per ball over theater. It is possible to continue advancing and growing, even in the mellowly indecorous times we are living in (Juan Roig, Annual idea 2012). The member of internationalization of the leader supermarket network in Spain started a few days ago. Applying a st sum upgy is precise difficult and requires studies of the unlike scar markets. Mercadona is a LSE (Large Scale Enterprises according to the EU definition) with more than 250 employees. LSEs characteristics (Sirkeci and Cawley 2012, p.5) are mainly risk-averse, management on long-term opportunities, capacity to take advantages of economies of scales and scope and use modernistic techniques for finding selective information.RATIONALE FOR INTERNATIONALIZATIONAccording to Svend Hollensen (2007, p.5), international expansion provides juvenile and potentialityly more profitable markets helps increase the firms scrap and facilitates a ccess to juvenile product ideas, manufacturing innovation and the latest applied science. Mercadona is a uprise and potentially global firm which capability to internationalize. It is prepared for globalization, basing in the cardinal strategic windowpanes of Solberg (1997). (See appendix 2) outline OF VARIOUS TARGET MARKETSTo decide the target market is important to consider the geographic the physic and the cultural out outmatch (Johanson and Vahlne, 1977 cited in Hollense, S, 2007, p.244). According to the geographic distance, the scrawnyest markets are Portugal, Morocco, Italy and France (Brief summary in appendix 3). Analyzing the physic distance, Italy is the come alongest mavin because the culture is very akin. Portugal is overly very similar, but is geographically so near than before or after, Mercadona will have presence there and it is non necessary to nurture the market. Analyzing Morocco is similarly very similar but the religion is different and this facto r in may difficult the expansion. France is discarded establish on the physic distance and the belligerent rivalry. We just have Italy, and according to Mercadonas characteristics this is the most interest country (El Confidential, 2012), a very close country psychologically and geographically. The protectionist polity could be avoided by acquiring a supermarket chain of the country. Mercadona has a host there, directed by Francisco Espert, which is managing purchases from suppliers and studying the characteristics of the local sector of distribution (Carlos Herranz, 2012).Mercadona is hard to find the best partner for the internationalization, maybe acquiring Esselunga (A. Capars, 2006) which is very similar as Mercadona. But is so much similar that would be very difficult to change the present culture.(add other approaches to analyse the target markets)ANALYSIS OF THE CHOSEN TARGET MARKET- ITALYItalian retail market has several rudimentary characteristics are for example high ly fragmented and a limited international presence (see appendix 3). Recent research on Italys market (Euromonitor, 2012), securities effort retailers had seen their sales increasing by 1% to 122 billion in 2011, although food product sell stores sales are expected to decline slenderly over the forecast period. In spite of the financial crisis, Italy is maintaining as one and only(a) of the biggest economies in the world and it is consider as a country with high standards for business, investments and trade. Mercadona, if internationalize in Italy, would be on the Northern Italy, in which the commonwealth is higher, most of the between 15 and 64 classs old, that are the usually customers in market.According to the political and legal factors, Italy has a stable administration and nowadays they are re abject several bottlenecks to facilitate bureaucratic burdens on citizens and SMEs.Finally, the engine room in Italy is developed. overlap has self- run downning and self- payment machines, Esselunga was the first Italian supermarket chain in introducing online shop and Coop uses ZBDs epaper. Mercadona will not have problems in introducing its engine room in Italy.A deeply analysis of the economy, demography, politic and legal factors and technology is available in appendix 4.COMPETITORS ANALYSISIf Mercadona decide to internationalize in Italy, It would have to compete with big retailers, like convergence and Auchan, and local leading(a) such as Coop, Conad, Esselunga y Selex.According to Graziella Ascenzi (Expansion, 2012), the Italian retailing market is very fragmented between small and big firms, with regional differences based not only in gastronomy traditions but similarly on households income. In the north of Italy (Target Market) there are many competitors for Mercadona. Detailed regionals competitors research and competitors attach to descriptions are available in appendix 5.CUSTOMER ANALYSISCustomers in Mercadona are known as the bosse s (Mercadona, 2011).Demand is driven by consumer income and demographic trends. In Italy consumers are being more interested in private labels and cut-price promotions. (Grocery Retailers in Italy, 2012).Italian consumers are moving away from expensive expenses and looking for discounted prices. This could be a competitive advantage for Mercadona, whose prices are low. Supermarket retailers have increased the private label thread which helps Mercadona to introduce its house brands. Moreover, Mercadonas supermarkets have an average retail area of between 1300 and 1500 square meters (Mercadona, 2012), and as it is said in the research, hypermarkets with a sell post of 4,500 square meters appears to struggle to remain attractive and customers are moving towards those supermarkets bigger than 1,200 sp. meters which are often placed in more r apieceable areas. Here we could consider another advantage for Mercadonas strategy. More information is detailed in appendix 6.POTENTIAL POSITI ONINGMercadona has low prices (according to their policy SPB) and high quality. The main competitor in Italy (Esselunga) is situated very near so it could be more difficult for Mercadona to set up their business, but it is easier for them to face the situation with their congeries Quality Model.RECOMMENDATIONIn my opinion, Mercadona should internationalize, starting in Italy with which Spain has very similar culture (Mediterranean Food, for example) and geographically is near too. According to a recent research in the Wall highroad Journal (see appendix 7), it is strong enough to face the internationalization and the potential competitors that will have. A method could be buying a grocery retailer in the target market and learn of it before the establishment of their own brand.APPENDICESAPPENDIX 1The company employs over 70,000 people, all of them with perpetual contracts. Their goal is to satisfy the daily food , cleaning, hygiene and pet attending needs of the more than 4.6 mi llion households that do their grocery shopping at Mercadona every day. (Mercadona, 2012).It has establishments in 46 provinces in Spain in 15 Autonomous Communities and represents a 13.5% share of Spains total food retail space magic spell contributing to the dynamics of the commercial environments in which they are located.The Total Quality model had been a success in terms of company growth and profitability, sustained by the success of Mercadonas high investments in employee training and satisfaction (Mercadona, 2010).SOURCE adapted from Mercadonas Annual Report (2011)Mercadona is also well-know because of the computable quality of their house brands as for example Hacendado that is employ for food, Bosque Verde used for cleaning products or Deliplus for hygiene products. They buy products from a manufacturer and put their own name on the products.SOURCE adapted from Mercadonas Annual Report (2011)APPENDIX 2Source Adapted from Solberg (2007)Solberg (1997) discusses the condit ions downstairs which a company should stay at home or inflect the global position as two extremes. (Hollensen, S, 2007). Mercadona is situated in the window number 6, mature according to the preparedness for internationalization (growth, profit and good basis for dominating the international markets) and potentially global according to the industry globalism (which is determinate by the international marketing environment).APPENDIX 3The Italian retail market has several key characteristics. It is highly fragmented The contribute 10 retailers have generated only 20% of retail sales in 2008 compared to 29% in Spain 43% in the UK. International retailers have a limited presence, although Carrefour, Auchan and Spar have all gained a place within the top 10.Internet retailing is growing too, but has less presence than in other West European markets, accounting 2% of sales in 2008 in contrast to an average of 5% for the region as a whole (Euromonitor, 2009). Mercadona has a website in which you can buy your grocery and then that will be sent to your home. This could increase the internet retailing in Italy.Cuota+obj+MercadonaAPPENDIX 4ECONOMYThe Italy Economy is one of the most developed with a per capita GDP higher than the EU average (Economy Watch, 2010). closely of the Economy is based in the tourism because it is the worlds one-fifth most visited country in the world due to its history and culture.Because if the crisis the rate of unemployed has been on the rise in the past few years with levels of 8,4% (OCDE, 2010) with a labour force of 25,05 million (International Living, 2012). According with the World Bank, Italy has been categorizes as a country with high standards for business, investments and trade. In 2012, Italys GDP was US$ 1.771,14 a bit lower than past years but it is remained one of the biggest economies in the world during the financial crisis.DEMOGRAPHYItaly currently has the forth-largest population in the Europe Union and the 23rd-larges t population worldwide (Demography in Italy, 2012). The highest density is in the Northern Italy. Milan is the most populated city in Italy with 7.4 million of citizens. close to 69% of the population is between 15 and 64 years old (This range of years is the one that buy the most). 98,4% of the population is able either to read or to write. There are different religions, predominately Roman Catholic with mature Protestant and Jewish communities and a growing Muslim immigrant community. (Kmike, 2012)political AND LEGAL FACTORSItaly has been a democracy since the end of World War II. It is a re existence in which the president is elected by popular vote. Italy has abicamerallegislature consisting of a 315-member Senate and a 630-member Chamber of Deputies.Taxation in Italy is quite a complicated issue because there are numerous appraisees that each citizen has to pay. Moreover taxation is high, representing 43.3 percent of the GDP. However, the number and quality of the public ser vices are some justification for high taxes, and measures to simplify the tax system have been introduced since 1998.Income taxaccounts for 34.9 percent of total tax revenues, whilevalue-added tax(VAT) contributes 35.4 percent. In addition, local governmentslevyotherindirect taxes. (Encyclopedia of the Nations, 2010)For a long time, larger chains were discouraged by the difficulty of gaining pro pile permission for larger format stores, but this has become easier since the reduction of plan guidelines in 1998 (Euromonitor, 2009).The current administration has removed several regulatory bottlenecks to stinting activity which could increase GDP growth by around 0.3%-0.4% per year over a decade, easing bureaucratic burdens on citizens and SMEs (OCDE, 2012).TECHNOLOGYMercadona does not skimp in technology and it was the retailer in Spain using the scan barcodes and it owns automated logistics warehouses just outside Madrid (Computers monitor deliveries from suppliers and organise ship ments to stores). Mercadona also has online shopping available at their website. In Italy, competitors use technology too. For example, Carrefour has self-scanning and self-payment machines, Esselunga Sharpens its Pricing Strategy with Oracle Retail Planning Platform and it was also the first supermarket to introduce the online shopping (Oracle, 2012), and Coop has introduced de ZBDs epaper reflecting the technological flair of their shops (Retail Systems, 2010).APPENDIX 5Mercadonas competitors are detailed here for the different parts of Northern ItalyIn Lombardy, the market is dominated by Esselunga with a 27,7% of the market share, followed by Carrefour and Auchan (10%) andCoop (8%).In Veneto, Selex is the leader with a 33,3% of the share. remote away it is followed by Despar (10,9%) and Coop (9,5%).In Piedmont Carrefour is the first supermarket with a share of 20%, in second position is Coop (18,7%) and with a 12,6% of the share it is Selex.In Friuli Venezia-Giulia, Coop contr olled the 27,9% of the grocery, followed by Despar (23,3%) and Selex (10,6%).In Trentino-Alto Adige Agor, Despar and Coop cover respectively a 31,4%, 24,5% and 22,3% of the share.Finally, in Valle dAosta the C3 assembly owners a 39,7 per cent of the market followed by Carrefour with a 27,5% and Conad with a 17,1%.COOPTheir vision is Together to the top. It motivates them to do our very best in every way, each day. Their corporate profile expresses how they perceive their work close, diverse, distinctive, innovative and partnership-oriented. (Coop, 2012)leitbild_pyramide-enESSELUNGAEsselunga is a leading Italian grocery store chain, with supermarkets and hypermarkets in northern Italy. The Italian grocery chain has long been rumoured to be a takeover target of strange retailers because it operates in some of the richest regions in Italy. The company has been busy opening new stores and remodelling existing locations. Founded in 1957,Esselunga is owned by Supermarkets Italiani S.p.A ., and controlled by itsfounder and prexy Bernardo Caprotti andfamily.(Hoovers, 2012)CARREFOUROver the past 40 years, the Carrefour group has swelled to become one of the worlds leading distribution groups. The worlds second-largest retailer and the largest in Europe, the group currently operates four grocery store formats hypermarkets, supermarkets, cash carry and gizmo stores. The Carrefour group currently has over 9,500 stores, either company-operated or franchises.Carrefours three values are Committed, Caring and Positive that put down them closer to their customers and consumers and reflect their personality. (Carrefour, 2012)In the figure they are briefly explained the v forces of the Porter Model that could be related with Mercadona.APPENDIX 6In Mercadona, the customers are referred as The bosses. The Italian consumption has raised 1,6 percent year to patterns seen before 2007. But the outgo is falling down (In 2008-2009 it decreased until 1999 levels) because of the r ecession. expenditure less on vacations, food and clothing have brought overall spending to the levels seen in 1999. The Euro zones third largest economy is recovering from its post-war recession. (Deepa, B. 2011)