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Supermercados Disco Joining Up with Royal Ahold - Case Study Example

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Supermercados Disco Joining Up with Royal Ahold

It is also a growing market. The countries in consideration in Latin America are Argentina, Brazil, Chile, Ecuador, Mexico, Peru and Venezuela. These countries have fairly stable governments and political environment and it is possible to do business here on long term basis although the economic and geographical conditions vary from country to country.
The immediate problem is future strategy. It is the course of action needed to increase profitability and market penetration in Latin America. There are several options before Supermercados Disco. However, the main options are whether the company should choose to go ahead with a joint venture with Royal Ahold or continue independently. Other than this problem, there are choices to do with pestel analysis.
There was strong economic growth in the 1990s, making it vital for the political dispensation to frame policies to maintain the growth curve. Economic prosperity made it imperative for political factors to go along with economic parameters and shun despotic influences.
Argentina and Brazil became the favored destinations for retailers in the 1990s. Argentina was favored because of its wealth and Brazil because of its purchasing power due to its large middle class population. Brazil, Chile, Mexico, and Venezuela were roughly equal in terms of disposable income, but they had unequal distribution of wealth excluding up to 40% of these countries' populations from normal consumer activity.
The region was projected to growth continually in the ensuing decades producing increase in the size of the working population. Due to foreign investments, there was also the fact that cities would grow disproportionately in size and wealth improving communications and infrastructure. These changes were bound to favor retailers.
State-owned enterprises were thrown open for privatization. Most of the steel mills, chemical, petrochemical, shipping and aircraft companies were sold to private parties. Price controls were lifted in 1993. In Chile, tariffs were cut down from 75% in 1975 to just 11% currently.
Social factors
Improving economic conditions had an effect on social factors. In the six largest countries of Latin America viz. Argentina, Brazil, Chile, Columbia, Mexico, and Venezuela, the population was over 80% urban.
Brazil faced the biggest social problems due to poverty and lack of education. The country had to resort to credit schemes to allow poorer members of society to buy consumer durables, food and clothing. Brazil has the sixth largest population in the world. Hence, although Brazil has good middle class population, she has her share of poverty problems.
Other than the Brazil factor, social factors in other Latin American countries showed improvement financially. People had money to buy what they needed.
Technological factors
Attraction of foreign investment ...Show more

Summary

Supermercados Disco has the option of joining up with Royal Ahold, the Dutch supermarket group, or it acquires Santa Isabel, a Chilean Supermarket chain. If it joins Royal Ahold, it will have to go through the normal process of joint ventures and share in the give and take relationship such ventures entail…
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