Excerpt
Table of contents
List of figures
List of abbreviations
Introduction
1. Grupo México’s profile
1.1 Structure, product and service portfolio and market focus
1.2 Pillars of success
1.3 Rationale for further investigation
2. Critical evaluation: Position on the global mining market
2.1 Environmental trends resulting from the PESTLE analysis
2.1.1 Political and legal environment
2.1.2 Socio-cultural and environmental aspects
2.1.3 Economic and technological tendencies
2.2 Relation between Grupo México and its competitors
2.3 The findings from the SWOT analysis
3. Conclusions and recommendations
3.1 Decision for the division to expand
3.2 Market selection
3.3 Adaptation of the organisation’s value chain
3.4 The suggestion at a glance
List of references
List of figures
Figure 1: Grupo México's corporate structure (Grupo México S.A.B. de C.V., 2015a)
Figure 2: Overview on Grupo México's mining division (Grupo México S.A.B. de C.V., 2015a)
Figure 3: Overview on Grupo México's transportation division (Grupo México S.A.B. de C.V., 2015a)
Figure 4: Overview on Grupo México's infrastructure division (Grupo México S.A.B. de C.V., 2015a)
Figure 5: Price development of copper from 45 years ago until the present day (as of 6th May) (Macrotrends.net, n.d.)
Figure 6: Comparative classification of the global champions in relation to Grupo México (own elaboration based on Doole & Lowe (2012))
Figure 7: Key figures of the operational performance of Grupo México's Rail Holding from the fiscal years 2014 and 2015 (Grupo México S.A.B. de C.V., 2015b)
Figure 8: The growing EBITDA margin of Grupo México's transportation division from the fiscal years 2011-2015 (Grupo México S.A.B. de C.V., 2015b)
Figure 9: Mexico’s cultural dimensions in comparison with Argentina and Peru (Hofstede Centre, n.d.)
Figure 10: Mexico’s cultural dimensions in comparison with Colombia and Chile (Hofstede Centre, n.d.)
Figure 11: Mexico’s cultural dimensions in comparison with Brazil and Venezuela (Hofstede Centre, n.d.)
Figure 12: Existing and proposed border-crossing rail lines in South America (Small, 2014)
Figure 13: The specified business portfolio matrix (based on Harrell & Kiefer (1993))
List of abbreviations
GM Grupo México
ROE Return on equity
S.A. Sociedad Anónima (Spanish for “Anonymous Company”)
S.A.B. de C.V. Sociedad Anónima Bursátil de Capital Variable
(Spanish for “Public Stock Corporation with Variable Capital”)
S.A. de C.V. Sociedad Anónima de Capital Variable
(Spanish for “Anonymous Company with Variable Capital”)
Plc Public limited company
Introduction
In the domain of present-day entrepreneurial activities, the zeitgeist is dominated by the dynamic nature of globalisation reflected in several aspects of global marketing. Under the assumption of free border and culture-crossing transfers of goods and services, the majority of international entities is continuously pressured to solve a variety of issues. For instance, while it is forced to stabilise its supply chain through B2B partnerships, stay informed about the market situation, evaluate the necessity of an adaptation and guarantee its own profit growth, the enterprise is not allowed to neglect the creation and delivery of the value needed by the customer, along with finding the best method to satisfy the stakeholders.
However, one of the greatest uncertainties an established company is permanently confronted with is the question whether it is ignoring the drastic pace of change. The consequence is visible through the loss of its competitiveness, provoked by the entry of new competitors or substitutes outrunning the firm in terms of market share, the customers’ brand loyalty, product quality, the degree of innovation etc.
According to the global market review by Azevedo, Chin, Khanna, León, Maggard, Meyer, Michael, Tansan, Ullrich and Verma from the Walters/Boston Consulting Group (2016), this risk increased especially due to the appearance of global challengers from rapidly developing economies, mainly hailing from Asia and Latin America.
Among all these newcomers, Grupo México (GM), a representative of the metals and mining branch, pertains to the group of the most auspicious firms and serves as the central object of investigation for this report.
In this context, the analysis is structured in the following manner.
The first chapter presents a topical overview of GM’s business units, their respective product portfolio and market focus. In addition, the description is accompanied by an explanation of reasons for the firm’s success on domestic, regional and international level to date, what includes a characterisation of the concerned competitive advantages. Lastly, a rationale is introduced in order to clarify the choice of the most significant company divisions for further scrutiny, which is supposed to lead to the definite draft of the marketing strategy.
The second chapter continues the exploration of GM’s current state with a critical evaluation of the environmental trends informing the international market sector of the extractive industries, particularly in the metals and mining branch. By drawing on the concepts of PESTLE and SWOT analyses (Lee & Carter, 2012) among others, this part unifies both the macroeconomic and the microeconomic business spheres to mirror the strengths, weaknesses, threats and opportunities, which the corporation is facing as a global challenger.
Taking all these factors into consideration, the third and final section contains a set of recommendations implying an exclusive strategic approach designed to underpin GM’s pursuit of becoming an established global player. Therefore, the developed outline is supposed to enable the organisation to defend and expand its competitive advantages against other existing competitors in the metals and mining market with the help of specific branding and marketing mix decisions. Incidentally, this chapter’s last paragraph summarises the aforementioned suggestions via SMART rules.
1. Grupo México’s profile
1.1 Structure, product and service portfolio and market focus
Founded in 1978 and headquartered in Mexico City (MarketLine Advantage, 2016a), the Grupo México S.A.B. de C.V. is a holding company with a broad operational scope permeating numerous industries. Although its main activities focus on the exploration, extraction and the processing of metallic natural resources, predominantly copper, silver and zinc, figure 1 below also conveys a strong commitment to freight forwarding services via railway transport and infrastructural projects.
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Figure 1: GM's corporate structure (Grupo México S.A.B. de C.V., 2015a)
As far as the corporate structure is concerned, it is characterised by a threefold division, making GM itself a parenting brand. While fully owning the subsidiaries Americas Mining Corporation and ASARCO, apart from serving the function of the major shareholder of the Southern Copper Corporation within its mining business unit, GM exerts a similar degree of co-determination in the remaining branches. This fact is mirrored by the similarly high percentage rates related to the possession of its subsidiaries, amounting to a proportion of either approximately 75% in the cases of the FM Rail Holding and the subordinate Grupo Ferroviario Mexicano, or 100% allowing the full control over other affiliates.
A closer look at every division reveals the respective product and service portfolio, along with the specific market focuses.
As indicated in figure 2, the primary line of activity covers the exploration, depletion and processing of copper, zinc, molybdenum and precious metals (Grupo México S.A.B. de C.V., 2015a).
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Figure 2: Overview on GM's mining division (Grupo México S.A.B. de C.V., 2015a)
Its wide scope is supported by an intercontinental presence consolidated under the major subsidiary, the mentioned Americas Mining Corporation. In this sense, there are several local branches to distinguish according to their size and the insinuated resource intensity:
- The Southern Copper Corporation penetrating the local market as well as the Peruvian one with a total of ten open pit and underground mines, seven exploration projects and 16 refineries and other metallurgical complexes operated by a personnel of ca. 14’000 people (Grupo México S.A.B. de C.V., 2015a; MarketLine Advantage, 2016a),
- The ASARCO Inc., active in the United States and comprising three open pit mines and 6 facilities for smelting and refining the won copper, which are run by approximately 2’500 employees (Grupo México S.A.B. de C.V., 2015a; MarketLine Advantage, 2016a),
- An exploration project commenced in Spain in 2015 (Grupo México S.A.B. de C.V., 2015a; MarketLine Advantage, 2016a).
At the same time, the figure 3 suggests that GM’s freight railroad and passenger services are basically concentrated on Mexico and represented by the FM Rail Holding company. In other words, the subdivisions Infraestructura y Transportes Ferroviarios with Ferrosur S.A. de C.V. and Grupo Ferroviario Mexicano with Ferromex S.A. de C.V. are incorporated directly (Grupo México S.A.B. de C.V., 2015a; MarketLine Advantage, 2016a).
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Figure 3: Overview on GM's transportation division (Grupo México S.A.B. de C.V., 2015a)
Thus, this conglomeration results in an enhanced track network amounting to about 10’000 kilometres, which is not only passing through Mexico, but also offering junctions at five border points with the USA as well as at ports at both the Pacific and Atlantic coast (Grupo México S.A.B. de C.V., 2015a; MarketLine Advantage, 2016a).
In view of this high level of connectivity, the corresponding services are not limited to the mere loading, forwarding and unloading cargo. They do also include a supporting coordination at the target terminals for clients from automotive, chemical, construction, energy, heavy and metal industries (Grupo México S.A.B. de C.V., 2015a; MarketLine Advantage, 2016a).
In the third and final case, the infrastructure division is led solely by the subsidiary México Proyectos y Desarrollos S.A. de C.V. However, its scope contrasts with the other penetrated sectors in size and the degree of internationalisation as depicted in figure 4.
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Figure 4: Overview on GM's infrastructure division (Grupo México S.A.B. de C.V., 2015a)
Evidence for that is provided in two respects. On the one hand, all the subordinate entities focus exclusively on the home market, except for Grupo México Servicios de Ingeniería operating in Peru as well. On the other, the low accumulated workforce of less than 3’000 employees might point out a comparatively less capital-intensive contribution to the operative business spanning consultancy and management services for projects in construction, engineering, infrastructure, power generation and oil production (Grupo México S.A.B. de C.V., 2015a; MarketLine Advantage, 2016a).
1.2 Pillars of success
Undoubtedly, GM’s success as one of the world’s largest producers of copper and the leading railroad company in Mexico (Grupo México S.A.B. de C.V., 2015a) must rest on a broader variety of reasons. The company size, the diversified portfolio, an enormous volume of capital embedded in all the processes and the firm’s situation in a resource-rich country are only a couple of factors.
In fact, a more profound analysis under the utilisation of the typology of assets by Doole and Lowe (2012) leads to the following additional sources of the holding company’s competitive advantage. In accord with this concept, the respective tangible as well as intangible indicators are highlighted and explained under the adaptation of a shareholder’s, a business customer’s and a stakeholder’s perspective.
In terms of intangible assets, it is possible to distinguish between the reputational, strategic and organisational/culture-bound categories (Doole & Lowe, 2012) exerting an impact on GM’s success.
The determinants of the corporation’s reputation are based on diverse initiatives reflecting its ambition to strengthen the brand recognition under positive and trustworthy associations.
One representative example is the augmented focus including projects related to the generation of energy from renewable sources like the wind and the sun in favour of a long-term low-carbon policy (Larrea Mota Velasco, 2015). It is to assume that this approach towards an incrementally modernised corporate culture might not only satisfy the Mexican government as well as investors and shareholders, but also the local society thanks to the consideration of social responsibility.
Another means consists of a bond of US$132 million invested in auxiliary training and health and safety programmes in both the Mining and the Infrastructure Division in 2015 (Larrea Mota Velasco, 2015). Although the financial aspect adds a tangible component to this endeavour, the positive effect on GM’s image results from the initiation of such preventive measures, which in turn level the working conditions between the main company and the regional collaborators and ensure a fair deal with these external stakeholders.
The third and final example of this kind is of organisational nature, namely the Risk Committee. Introduced as an internal agent, the responsibilities include more than the monitoring of the exact implementation of the risk management policy across the subsidiaries. Its remit also encompasses the submission of periodical reports on the operational effectiveness and issues at the working place to the Board of Directors, apart from the reception and redirection of subsequent adjustments set by the upper management (Larrea Mota Velasco, 2015). Conversely, such a thorough safeguarding implies to what extent GM is willing to guarantee the quality of a seamless workflow in compliance with its etiquette characterised by ensuring a trustful relationship with investors and shareholders in particular.
From a strategic point of view, GM benefits not only from a dominant position in the national extractive branch and a natural monopoly in the Mexican railway sector. Furthermore, the firm takes advantage of bilateral agreements granting exclusive privileges for decades, lowering the prospects of local rivalry and facilitating transregional growth.
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