Table of Contents
2.0 Company Overview..
2.1 Reasons for its success.
2.2 Rational for choosing the business unit in copper production.
3.0 International Industry/Market sector.
3.1 Environmental Trends.
3.2 Pestle Analysis.
3.3 SWOT analysis.
4.1 Market/Geographical Development
4.2 Marketing Mix.
4.3 Product life cycle.
A successful company needs a good Global marketing strategy if it wishes to enter the international arena with its products and services. This is the process of being able to adjust a company’s marketing strategy to allow it to adapt in countries different to that of the home country. This strategy will vary from region to region based on different aspects of the chosen target market and country. The purpose of this report is to identify the global challengers, composed of threats and opportunities that a firm from a rapidly developing economy faces alongside providing indications on how to help this firm become a global player. This report will emphasise on a firm from a rapidly developing economy which is Grupo Mexico, a mining company which is located in Mexico. It will look at the background of the company and what has enabled this company to succeed in such a competitive industry domestically and internationally. Throughout the basis of such research this will then build upon developing an outline global marketing strategy to challenge its competitors within the market.
Future supplies of non-renewable resources get harder to obtain every time a location is depleted of its natural resource (Hackett, 2006). Identifying what resources are needed and the capabilities available to a firm enable it to enter a very competitive yet lucrative market. With natural resources being very scarce to find and very difficult to extract becomes a great challenge to companies working in this sector. Although this is a difficult proses, Chibana (2017) states that natural resources make the world go around which suggest the worlds requirement for such commodity is greater than any other which indicate that customer wants and needs for this product are high. The company Grupo Mexico is vastly diverse in mining and copper production, rail transportation and infrastructure. The company unit that this paper will focus on is with high references to its copper mining and production processes as this is its greatest asset.
2.0 Company Overview
Grupo Mexico is a Mexican based mining company which is a leading company in its copper production and it controls the largest rail network in Mexico while still providing services in infrastructure (Grupo Mexico, 2017). It began operations in 1942 where it started in the construction industry becoming one of the most vital construction companies within Mexico. From this the company grew with acquisitions of domestic and Foreign based mining companies to obtain many locational advantages which has enabled them to grow rapidly into becoming the 4th largest copper production company in the world (Grupo Mexico | Mining, 2017). With this great infrastructure the company developed and operate the largest network rail in Mexico giving them access to shipment ports and country borders around Mexico.
With many mining products the company focuses on sustainable development as this is an important aspect due to the vast amount of space that is needed for mining it is very damaging to the environment, therefore Grupo Mexico conduct all operations with strict admiration for the environment. As well as working hard to maintain a good health and overall wellbeing of its customers and employees (Grupo Mexico, 2017).
2.1 Reasons for its success
The success of such company is due to the locational advantages that they possess, as Dunning’s OLI framework discusses, the locational advantages are very important. With raw materials being located in many different areas around the world, it all depends on where these non-renewable metals are located and whether they are accessible (Cantwell, & Narula, 2003). It is discussed that natural resources are a matter of location as its located where it is. This non-renewable metal cannot be grown or relocated to benefit an organisation which in turn is an advantage to Grupo Mexico (Yan, 1999).
From this locational advantage the success Grupo Mexico has managed, also comes from its other services it provides. Given that it has been able to access the copper reserves that Mexico possess it has allowed them to develop and own the transportation division which is built up of 3 large rail road companies. It covers 71% of the geographical area of the country, but more importantly it has access to country borders and ports which enables its domestic and regional success as it provides a more vertically integrated supply chain (Grupo Mexico, 2017). Such vertically integrated supply chain is where the company owns the supply chain giving the them greater control of transportation and costs.
Furthermore, its international success comes from the copper it has managed to obtain, this has been done through acquisitions of domestic mining companies such as Minera Mexico and regional companies such as Southern Peru as well as ASARCO in the USA. It has also acquired the Spanish mining company Minera Los Frailes. This is believed to be done due to the similar cultural dimensions these two countries have. These acquisitions of foreign companies give Grupo Mexico a greater foothold into the international market and reduces the competitor’s ability by owning more companies in similar fields.
2.2 Rational for choosing the business unit in copper production
The rationale behind choosing the mining sector and especially in its copper production comes from the fact that copper is a vastly used material in many different products that people use in their daily lives. The uses of copper are very diverse due to the properties this metal has such as its flexibility, electrical and heat conductivity alongside its slow rate of corrosion enables it to be used in electronic equipment such as TV’s, Radios as well as pipelines and heating systems (Crisp, 2002). This makes copper a valuable metal, because of its many uses this gives Grupo Mexico access to many customers and companies which work in such fields. As the world gets more dependent on high-tech systems the need for copper is only going to increase, therefore a company such as Grupo Mexico need to have a good global marketing strategy in order to compete with other companies.
3.0 International Industry/Market sector
With the world becoming more automated, it is hard to avoid the fact that all of these automations are built using copper (Carr, 2017). The facts are that the uses for copper are everywhere to be found. For instance, there is around 1.5kg of copper in a computer, 100kg of copper within a home and 5 tonnes of copper are located in wind turbines (Greenspec, 2017). Practically anything that conducts heat or electricity has a trace of copper within. Hence the international market for such product is going to be very competitive yet very lucrative. The uses of such invaluable metal has increased the prices that people are willing to pay, as seen in Appendix 1. The graph shows that the prices of copper have drastically increased from 1998 to 2014 yet these prices are very volatile to change depending on how much copper can be obtained (Investmentmine,2017).
Also the location of copper is dominated by south America, countries like Chile and Peru hold the biggest copper mines in the world. Chile, which is the largest copper producing country has access to 6 of the largest mines in the world, followed by Mexico which has the world’s second biggest mine owned by Grupo Mexico and greatest reserves (MiningTech, 2017). This finite metal seems to be located in a specific area in the world which would hence support the reason as to why the top companies within this industry are also located within that area.
3.1 Environmental Trends
The environmental trends within this market sector are important to know as knowledge of these external trends allows the company to foresee situations which can influence the company and the global marketing objectives. Knowing these trends in turn help to formulate successful strategies which can overturn what once was a threat into an opportunity. The trends situated within this market is shown in the charts in appendix 2 and 3. These charts indicate the copper demand and supply and the consumption of copper. In appendix 2 it clearly shows that the demand is usually always greater than the supply of copper which poses as a positive for a copper mining company as it gives them the bargaining power on price. This supports the chart in appendix 3 that shows the global copper consumption has been increasing gradually each year (Statista, 2017).
3.2 Pestle Analysis
Although copper usage is increasing there are many challenges and risks that come when working with a finite resource. Grupo Mexico will face many threats and opportunities within this business unit therefore a good global marketing strategy is needed to minimise threats and maximise opportunities to be able to compete internationally. In order to do this a PESTLE analysis will be used to analyse the external marketing environment.
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By critically evaluating the Pestle analysis, it is clear that there are some external issues that need to be looked at in order to minimise problems to the company and still meet the needs of customers. Each factor plays its part on Grupo Mexico to some extent however, there are some factors that impact the company greater. With natural resources being scarce it is important that the government understands this and provides incentives for mining companies as in Mexico they hold a high number of the workforce (SeniorBank, 2017). Other factors to greatly affect Grupo Mexico is the technological factors as they need to consider and stay on top of the latest technological methods used in extraction as other competitors with cheaper alternatives can affect the company greatly.
3.3 SWOT analysis
Resulting from the pestle analysis, which looked at the external market environment that are beyond control, a SWOT analysis is undertaken to have a look at the internal strengths and weaknesses followed by the external opportunities and threats. Theory suggest these factors are not limited to stay in its given position. For example, a threat could turn into an opportunity and a weakness could potentially become a strength (Academy, 2017). The following table looks at the SWOT factors affecting Grupo Mexico.
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Looking at the SWOT analysis this stares deeper into the internal strengths and weaknesses that the company has. As shown in the table above there are number of different internal strengths that the company has. They own a lot of resources and mines as well as many companies regionally, also they have an efficient way of mining meaning they have the lowest extraction costs in the industry which benefits them internally as it provides them with greater financial revenue and maximises shareholder value (Grupo Mexico | Mining, 2017). Following these aspects there are a few internal weaknesses within the company, they have a fairly low international connections and mostly regional work is done and also a small workforce in comparison to the amounts of copper available to extract. Finally, Hofstede’s dimensions show they are a highly masculine company and country which could pose a threat when working internationally in more gender friendly countries (G.Hofstede, 2017) See appendix 4.
Moving onto the external opportunities and threats. There are a few opportunities that Grupo Mexico can exploit, for example searching and investing in even better mining techniques and technology that both have economic and environmental benefits. Another opportunity would be to have a division that recycles copper or look at possible alternatives to copper. Although alternatives would be good only if Grupo Mexico developed them, if competitors find alternative materials then this would become a threat to Grupo Mexico. The biggest threat to them would be the fact that copper is a Finite product, there is only so much available which why recycling it would extend the product lifetime of such commodity.
This section aims at providing a global strategy that will be based upon the earlier data regarding the product, the company and the environment it operates in. These recommendations will help the organisation build a competitive advantage, through its decisions within the marketing mix and branding to provide exceptional value for the customer.
4.1 Market/Geographical Development
In order to become a global player, the most ideal countries that Grupo Mexico can enter that will give them great financial benefits and in turn challenge the competitors. This can be done so by using the Ansoff matrix as seen in appendix 5. This is a framework that allows growth opportunities to be identified for an organisation in order to improve the market position they are in (Ansoff Matrix, 2017). With reference to Grupo Mexico the table below illustrates how this framework complies with this organisation.
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As seen in the table above, the Ansoff matrix allows identification of Grupo Mexico’s possible opportunities alongside current performance. From this there are two sections that can provide the greatest of benefits. The first one is market development which would increase Grupo Mexico’s presence in other continents and different markets, through acquisition of Spanish firm they are slowly entering the European market. This is a good move as Europe only has a few copper mining sites located in Scandinavia and Cyprus. Entering the European market allows them to get closer to manufactures who need the use of copper. As discussed earlier that wind turbines have 5 tons of copper within, Europe hosts the biggest wind turbine manufacturer in the world. This company is called Vestas located in Denmark. It is primarily focused on wind energy which in turn needs huge generators that require large amounts of copper (Vestas, 2017). Furthermore, it is also Investigated that China has among the fastest growing infrastructures in the world. With a big economy cities are getting bigger and bigger. Infrastructure requires a huge amount of copper. Therefore, entering the Chinese market allows Grupo Mexico to provide large amounts of copper for growing cities. This also reduces competitors and protects existing business (Doole, & Lowe, 2012). China is such a large growing economy, the demand for copper is high, Chinese companies are going to move to south America for the abundance of copper which will pose huge threats to Grupo Mexico.
- Quote paper
- Anonymous, 2017, The "Grupo Mexico". Identifying the challenges and opportunities of global marketing, Munich, GRIN Verlag, https://www.grin.com/document/412896