Introduction
Grupo Herdez S.A.B. de C.V. is a food company in Mexico and provides Mexican food in the United States. The Company’s product portfolio includes burritos, guacamole, frozen yogurt, homemade salsas, mayonnaise, mole, pasta, spices, tomato puree, tuna, vegetables organic foods, among others. Grupo Herdez sells mainly to retail chains, wholesalers, and foodservice businesses (Grosse, 2016). The focus of the assignment is the expansion into the emerging market of Europe for the Herdez group. It explores the external factors such as the PESTLE and CAGE distance framework for the Company to analyze its strategic business decisions, planning marketing activities, product development, and research fr successful expansion into the emerging markets.
Emerging market.
The different characteristics of the emerging market for Herdez are:
Market Volatility – It provides a clear picture to the investors regarding the risks in the exchange rates, which fluctuate and the market’s performance.
The potential of growth and investment – Foreign investors are always attracted to emerging markets. This domain helps Herdez understand the country’s economic condition it wants to expand to as an emerging market.
It is essential for Herdez to concentrate on the characteristics of the emerging market for expansion into the market.
Justification of Hertz
Herdez deals in the preserved food industry and is a multinational company, so it already has a brand value. The resources needed to expand the product in European markets are an investment and adequate and skilled human resources. Various external factors analysis is helpful to identify Herdez the best organization for emerging markets. Political Europe is an ideal sector for most emerging markets; according to MCIS, Europe is the leader of emerging markets in this era, which creates a smooth pathway for Herdez to expand
in the domain. Europe’s market is volatile. The politics do not influence the markets around it. Therefore, the amount of instability is less in the European market; hence, expanding its reach in Europe will be a boon.
Economic The external factors’ influence is less in any kind of price movement, and this is a plus point. All this leads to a good fact that gives a clear picture to the investors. Investing a good amount is very risky, and that too on a new entered product. The investors need a clear picture of the company’s history and a market overview of the performance of the product in the new market. So, the investor needs a strong image of the market’s economic conditions where the new product will enter. It is an important characteristic of an emerging market that the instability of the political influences, the price movements that are external. These shocks come from the demand-supply due to several reasons including the natural disaster. This makes a clear picture to the investors regarding the risks in the exchange rates, which fluctuate and the market’s performance. Foreign investors are always attracted to the emerging markets, and this is because they get high returns on the investment made. It is quite interesting to look at the transition from the agricultural-based economy to the industrial base economy, and huge capital is collected from this transition.
So the availability of the investors will be easy. Social Herdez focuses on the new expansion and is carrying the advertisements to make the expansion. The relation between Europe and North America is very good, and this good relationship is continuing in past years. Moreover, Europe will happily welcome Herbez as this will improve the chances of
employment and help in Europe’s gross domestic product.
Technology Europe is a developed nation, and so they will have ample technologies. Moreover, Herdez has purchased Qlik Sense as this helps in visualizing the data, which helps in operations. Later, Herbez also found it good to invest in the Qlik view, which helps analyze the business and helps in all decision-making regarding the I.T. and helps the stakeholders get a clear view of the business. This software helps the Company to grow at a faster rate in the emerging new market.
Table 1: CAGE Framework
Source: (Created by Learner)
Analyzing through CAGE DistanceFramework :
This analysis is very important because it is very important to have a detailed analysis of the country where the product will be expanded. This helps in getting the difference between the countries and can be used by the strategy makers, so that good strategy is implemented. This implementation can be done considering the cultural, administrative, geographic, and economic conditions of the country,
Cultural differences There is a huge cultural difference between Europe and North America, the language they use in Mexico is Natural, and the language used in Europe is English. But this will not be a problem because after expansion Herdez will have European staff and both countries use English. There will indeed be differences in ethics and cultural beliefs, but the language barrier will not be an issue. However, the Company needs to inherit the local workforce and create a diverse one for smooth operations.
Administrative differences There are some administrative issues in both countries. For example, in Mexico, in one year of employment, the employees have six paid vacation days. At the same time, Europe has good administration regarding the holidays. So the amount of holidays is less in Mexico if compared with Europe. So these changes in the
administration can affect the work culture, so it is important to analyze this and get the remedies.
Geographic differences will not matter in the expansion of the product because the product is canned food or preserved food, and this is consumed in every part of the world. The
culture of Mexican food popular exists in Europe as well.
Economic differences Europe’s economic conditions are far better and more fruitful than Mexico, which acts as an advantage to Herdez.
Table 2: CAGE Framework
Source: (Created by Learner)
Institutional Voids for Herdez:
Institutional voids” are economic institutions such as product, capital, or labor markets that have matured in developed nations but have not reached a sufficient maturity level in emerging markets, thus creating a void. America is a developed nation, but some problems are still there, which creates problems in the business of the preserved food industry. The different problem
which arises is:
Labour – Labour is an important factor and also helps in the work to be delivered. The expansion of the Company will need laborers, and as there are cultural differences and
administration differences. But Herdez, after expansion, must employ local people as this is necessary. But the treatment of employees and the rules and regulations would be different for different employees after expansion. The minimum wage must not be less than $1 an hour, as this is not enough to lift Europe’s poverty rate.
Products – The Company must concentrate on the products that must be used as a unique product, and that must be according to the taste and preferences of the new country or place where the expansion is going to happen. The advertisements should be done so that they respect the ethics of the people around them. The local customers must be happy and satisfied with the products delivered by Herdez. People who are also the customers must not get hurt by the products sold, and when the word hurts is referred to, it signifies hurting the sentiments (Prud’homme, and von Zedtwitz, 2019).
Information Availability – As discussed earlier, Europe is a developing nation, and it has a huge scope of investors. The main characteristics of the emerging market for Herdez are providing a clear picture to the investors regarding the risks in the exchange rates, which fluctuate. The market’s performance and Foreign investors are always attracted to the emerging markets (Hoang, 2018). This domain helps Herdez understand the country’s economic condition it wants to expand to as an emerging market. Therefore some basic information is very important for decision making. The available information is of good use as they are important for decision making and can also work as analyzing the risk.
Infrastructure – Infrastructure is very important, and for any new expansion, the availability of infrastructure is important. Without sufficient infrastructure, the expansion of companies is not possible. The retails should be in an attractive place which can be easily located by the customers. Hard-working employees also come under infrastructure, which is also a great concern (Ferreira and Ferreira, 2018).
Suggestion for the institutional voids The different recommendations which could be used in solving the institutional voids are:
a) Credibility enhancers – These are kinds of institutions that help the new Company by guaranteeing certified suppliers and consumers. They consist of auditors who help
analyze the facts about the expansion, which leads to a good result as it is better to be cautious rather than be in a problem. The investor needs a strong image of the
market’s economic conditions where the new product will enter (Giachetti and Peprah, 2020). It is an important characteristic of an emerging market that the instability of the
political influences, the movements of the price which are external. These shocks come from the demand supply due to several reasons including the natural disaster. This
makes a clear picture to the investors regarding the risks in the exchange rates, which fluctuate, and the market’s performance.
b) Aggregators and distributors – This is defining such possibilities which could help in demand and supply of the product as it is new to the market, once it is habituated, there
will be no need for aggregators and distributors, but till then, it is very much required (Dadzie et al., 2017).
Impact of rising of Global Value Chains:
The global value chain is a chain that describes the people, activities involved in the production, and the supply of the goods. The expansion requires a clear picture of the investors regarding the risks in the exchange rates, which fluctuate and the market’s performance. It also requires foreign investors to always be attracted to emerging markets. This domain helps Herdez understand the country’s economic condition it wants to expand to as an emerging market. The expansion of Herdez will need adequate people as employees, and the supply chain system must be unique to do something new. The impacts will be :
a) People – The entire productivity depends upon the people, how they will run the process, and how much time will this be delivered. Herdez must create such an
the environment of work that can help advance the work, which impacts the company’s growth (Kumar and Srivastava, 2019.).
b) Activities – Expansion to entirely different areas is difficult because it takes a lot of trouble to set a new business in an entirely new country. There are too many activities
that must take place for promotions or openings, so these all activities must be seen by the stakeholders of Herbez as they will have keen knowledge about the required
activities.
Conclusion:
This report focuses on the expansion of Herbez into the European markets, which is also an emerging market. A market can be defined as an emerging market of a developing nation when there is an engaged relationship between the market and the global market. The report has focused on the expansion into the emerging market of Europe for the Herdez group. It explores the external factors such as the PESTLE and CAGE distance framework for the Company to analyze its strategic business decisions, planning marketing activities, product development, and research for successful expansion into the emerging markets. Lastly, the discussion is on the impact of Herbez on the global value chain as this helps in expanding the business.
