EVREN KUCUKKAYA

INTERCULTURAL MANAGEMENT
Mehdi Majidi, Ph.D.
Grupo Bimbo

2012

ISG-INTERNATIONAL MBA

1 Evren KUCUKKAYA

INDEX
EXECUTIVE SUMMARY......................................................................................................................... 2 INTRODUCTION ................................................................................................................................... 3 1. GRUPO BIMBO ................................................................................................................................. 4 2. SITUATION ....................................................................................................................................... 7 a) b) c) Strategic Challenge in the U.S.: ............................................................................................... 7 Improvement in Central and South America:.............................................................................. 8 Opportunity in China: .................................................................................................................. 8

3. ANALYSES......................................................................................................................................... 9 4. CONCLUSION ................................................................................................................................. 10 5. RECOMMENDATION ...................................................................................................................... 11 REFERENCES ...................................................................................................................................... 12

2 Evren KUCUKKAYA

EXECUTIVE SUMMARY
The term "culture," which originally meant the cultivation of the soul or mind, acquires most of its later modern meanings in the writings of the eighteenth-century German thinkers, who on various levels developing Rousseau's criticism of modern liberalism and Enlightenment. Thus a contrast between "culture" and "civilization" is usually implied in these authors, even when not expressed as such. Two primary meanings of culture emerge from this period: culture as the folk-spirit having a unique identity, and culture as cultivation of inwardness or free individuality. The first meaning is predominant in our current use of the term "culture," although the second still plays a large role in what we think culture should achieve, namely the full "expression" of the unique of "authentic" self. Term of culture described as above by Velkley.1 The globalisation of the economy, with increased cross-border alliances, ventures and global relocations, as well as the advent of e-commerce, has brought about major changes in the field of international customer relations and intercultural diversity management. This has led to an increased appreciation by companies that managing cultural differences properly can be a key factor in getting things done effectively across borders. With increased contact of personnel and customers from diverse cultural backgrounds, there is a growing demand for businesses to understand and manage the diverse values, perceptions, business worldviews and behaviour of corporations, staff, and its customers. Intercultural communication and management is an

Velkley, Richard (2002). "The Tension in the Beautiful: On Culture and Civilization in Rousseau and German Philosophy". Being after Rousseau: Philosophy and Culture in Question. The University of Chicago Press. pp. 1130

3 Evren KUCUKKAYA

interdisciplinary human resources field concerned with facilitating communication, management and effective interaction of personnel and customers across borders.2

INTRODUCTION
This study will try to look inside the intercultural management challenges of the Grupo Bimbo on China, United States, Central America and South America. With the globalization of the world and economy, management in different countries and on different cultures getting a rising trend of importance day by day. A successful management strategy in different countries and on different cultures mostly depends on a successful intercultural management strategy. With the technological and communication developments all cultures become interacted and this situation makes harder to make analyses on a single culture. All developing cultures are interacting with each other by communication techniques such as internet or television and exchanging cultural habits between them. This situation causing changes on cultures especially towards the developed western countries and makes analysing the cultures harder. In addition all cultures have unique traditions which can be totally different or opposite from another culture. Such as differences between body languages and direct or indirect communication skills. In an article (5 April 2001) in the Financial Times by Elisabeth Marx titled 'Shock of the alien can sink a merger', for instance, it was said that "Research on cross-border acquisitions has shown that differences in management style (particularly in attitudes towards risk) have a negative effect on company performance. Sadly, very few companies consider the softer, cultural factors of mergers, which may be a significant contributor to their subsequent failures. Far too few companies even begin to consider the effects on staff or the human
2

http://www.synergy-associates.com/cultural/i_mgmt.htm

4 Evren KUCUKKAYA

implication of a merger." The article carries on to say that "it is easy to end up in a situation where the whole is worth less than the sum of its two parts", the very opposite of the intention behind the merger, and quotes the DaimlerChrysler merger as a case in point. The article advises: "Managers' first task is to conduct more extensive business analysis before taking the decision to merge. In addition to carrying out traditional financial and commercial due diligence, they should complete a thorough examination of the cultural compatibility of the parties involved."3 Grupo Bimbo is challenging to give the right decisions on a totally different culture then them and trying to find the answer of a problem that is questioning them about national values of the company.

1. GRUPO BIMBO
Grupo Bimbo is one of the global baking companies which are operating in several different countries. The company is operating in 19 countries in America, Asia and Europe. They have nearly 10.000 products and over 103 brands under the operations of company. 4 The companys base is established in Mexico. Companies CEO is Daniel Servitje. The Servitje family had a proud history in the bread business even before the founding of Grupo Bimbo. Daniel Servitjes grandfather Juan had invented Mexicos first machine for mass-producing bolillo breads in 1918. Grupo Bimbo, originally named Panificacin Bimbo, in turn was launched in 1945 by a group of siblings and close friends led by Daniels father, Lorenzo. Daniels uncle Roberto, who at age 17 had been the sales manager at the time of the companys founding, had received his management education in Harvard Business Schools
3

http://books.google.fr/books?id=I14RCjT3XAgC&pg=PA114&lpg=PA114&dq=Elisabeth+Marx+financial+times& source=bl&ots=izY8WK7END&sig=gpBdp2J_s9ruZUbOqgx51g_k2fc&hl=tr&sa=X&ei=vzbOT8nxMoHO0QXNxOST DA&redir_esc=y#v=onepage&q&f=false

4

http://www.grupobimbo.com/en/index.html

5 Evren KUCUKKAYA

Management Development Program (PMD), and still served as the chairman of the companys board some 62 years later.

Map 1: Operational countries of Grupo Bimbo Some of the brands of the company are:

6 Evren KUCUKKAYA

When the company first opened out of its tiny factory in 1945, it quickly adopted the use of the little male bear named Bimbo on its packaging and advertisements. The company used the bear to market its initial product line of just four basic types of bread and toast.

The company used its first differentiation strategy in the first Mexico City plant. Grupo Bimbo distinguished itself from its competitors by wrapping its bread and toasted products in clear cellophane (instead of the conventional wax paper) so the products freshness and quality would be maximally apparent. Competitors had used the wax paper to sell product that was already stale, whereas Bimbos clear cellophane enabled its customers to both see and feel the freshness of its product. Starting with one small production site in Mexico City, the company employed 10 trucks to deliver its products to nearby stores. By 1955, the company was ready to expand into sweet pastries and cakes. In subsequent decades, Bimbo expanded by creating literally thousands of bread and sweet-goods products that it produced in factories noted in the industry for their scale and flexibility. In the early 1970s the company entered the snack market with its Palomitas (popcorn) product; it also diversified by manufacturing and marketing its own chocolate and candy brands, and in 1980 it listed its shares on the Mexico Stock Exchange. Between 1984 and 1997, under the leadership of Daniels uncle Roberto, the company expanded across borders into the U.S. as well as Central and South America. Daniel Servitje, a Stanford-educated MBA, took over as CEO in 1997. The company further expanded its global footprint through a large Brazilian acquisition in 2001, the major U.S. acquisitions of Mrs. Bairds in 1997 and Westons western division in 2002, and the companys choice to become one of the first few Latin American consumer product companies in China in 2006.

7 Evren KUCUKKAYA

2. SITUATION
a) Strategic Challenge in the U.S.:

The Company had grown to become one of the five-largest bakers in the world, although its profitability still came largely from its Mexican operations. The Company began exporting Mexican products to the US in the mid-1980s and start to expand their operations in US by acquisitions. The Companys acquisition was Pacific Pride Bakeries (in California) in the late 1980s. In the late 1990s and early 2000s, regional bakers west of Chicago, Mrs Bairds in Texas, Oroweat (the western division of Toronto-based George Weston), Entenmanns and Thomass English muffins in the western half of the U.S acquisitions followed.

The Company faced three situations in U.S. First of all unsold inventory was returned to the bread producer, who suffered the cost. U.S. grocery store buyers demanded fully stocked bread aisles even in the presence of recurring fad diets and supermarkets expected to see their shelves filled. Second is the Hispanic population in U.S. 43 million Hispanics are living in U.S. and Hispanic bread market is a big opportunity for the Mexican Company. By 2007, the company was shipping Hispanic bread and sweet goods all over the United States, following a year of double digit sales and profit growth. Third factor is unionization in U.S. Demands of unions for unionized workers especially truck drivers bring heavy responsibilities and costs to the company. Beside of these responsibilities daily schedule of truck drivers couldnt satisfy the demand of consumers and supermarkets. The Company solved this unionized worker and daily schedule problem by starting to work with their truck drivers as independent contractors. By this strategy company had get over the high costs of union demands.

8 Evren KUCUKKAYA

b) Improvement in Central and South America:

The Companys Latin America division consisted of production and sales operations in Argentina, Brazil, Chile, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Peru, Venezuela, and Uruguay. The Company faced several problems in these markets as like U.S. First of these is the cultural and market differences between the countries- even compared with the Mexico- that needed to be overcome if the company wants to be successful. Second is low rate of the demand for the industrial bread especially in Peru. Third is starting with wrong products in the first place. Consumers of South America prefer pound cakes, cereal bars, and products with milk cream instead of preference of sweet goods with strawberry jelly filling in Mexico. Wrong aiming on marketing resources in Brazil and Argentina was another lesson to learn for the Company. Company made wrong choices between mom-and-pop stores and hypermarkets. The Company solved its distinguishing and union problems as the same way did in U.S.

c) Opportunity in China:
Daniel Servitje, the CEO of the company saw an opportunity for his Mexico-based bread and sweet-goods company in the growing Chinese market and decided in the spring of 2006 to make Grupo Bimbo one of the first Latin American consumer product companies to enter China with both a production and sales presence. In March/April 2006, Grupo Bimbo purchased the Beijing Panrico Food Processing Centre. The existing company, which had been Spanish owned, had 775 employees and maintained operations in Beijing and nearby Tianjin. It served a regional area of 40 million people, and its 186 routes were linked by a combination of trucks and bicycles. It was able to access over 4,000 points of sale with an existing portfolio of brands recognizable to Chinese consumers.

9 Evren KUCUKKAYA

The Company acquired the Beijing business after two years of studies on Chinese market. The company hired a team of Chinese immigrants who live in Mexico to taste hundreds of Companys products and their recommendations on Chinese market to appeal. Then the company narrowed the list down to the five of most recommended product that could be transplanted. The company decided to continue producing existing products of the old company, especially black bean bread and shredded beef bread. The Company had seen initial success by using store promotion and university and school road shows to introduce the Bimbo Bear and product samples to the Chinese. The Company started to work with internal experts to get over the language problem. The company found it most economical to rely on employees riding bicycles to transport the products and manage the shelf space as did it before in Colombia. The Company faced with the pricing problem as a main problem of marketing in China. And one of the other situations in Chinese market was the market shares. Because none of the existing companies owned more than the 2% of the Chinese bread market. The overall baking market in China was highly fragmented.

3. ANALYSES
The company used its previous experiences to enter the Chinese market. But having experiences doesnt mean the company did the right thing in the past. Grupo Bimbo is an excellent example for intercultural management. It is a successful global baking company. The Company always created its own opportunities to turn the baking business as a profitable business. The Company created these opportunities by using several strategies such as turning its truck drivers to independent contractors. By using this strategy the Company reduced the tax and distributing costs and gained an opportunity to turn an unprofitable business to a

10 Evren KUCUKKAYA

profitable business. The Company analysed the different cultural situations in different countries successfully and turned these situations to opportunities. The companys main strategy of entering a new market is by acquisitions. This strategy aiming to purchase an existing company and innovated their production lines for the Companys products. The Company using a long research process before entering a China market to realize the necessities of these new markets but the Company made this research in Mexico not in China. This situation can cause mistakes on the choices of the consumers because of the changes of the consumer habits causing from the adaptation process of the immigrants. The Company is always focusing on the distribution phase of the production process. The Company is trying to reducing its production costs by focusing on the reducing the costs of the distribution but by this strategy the Company ignoring the costs of the raw materials which is contain huge amounts in the production process. The Company ignores the management habits of the local managers.

4. CONCLUSION
At the end the Grupo Bimbo is using lots of different strategies to entering new markets depending on its experiences. But most of these strategies are focused on the financial phases of the entering strategies. The Company mostly ignores the cross-cultural issues of different countries and suffering from these issues. For example ignoring the cultural differences between the Latin America countries is the one of the reason that decreasing the success of the Grupo Bimbo in Latin America. The Companys aim is entering a new market fast and effective by acquisitions. But this strategy is causing problems on business. The Company cannot list its priorities in a right way. The Company trying to find ways to

11 Evren KUCUKKAYA

manipulate their workers work as ndependent contractors instead of being a member of union. This can cause legal problems in highly unionized countries.

5. RECOMMENDATION
Grupo Bimbo can stop ignoring the focusing on distribution phase of the production process. Because trying to reducing cost only in one way will cause problems like the weakest piece of a chain. The Company can try to work with local experts to make research about the markets in Latin America for each country and for China. The Companys some strategies for entering Chinese market is right but not enough. The Company had to make the research about a new market in that market. By making this research in another country even by using immigrants can cause problems such as causing from adaptation that mentioned before. Grupo Bimbo must avoid the misunderstandings from causing the language differences maybe not in Central and Latin America but especially in China. The company must globalize their values without ignoring local cultural differences if it wants to be a global Company. Beside of these issues strategies of the Company is right but still need to develop.

12 Evren KUCUKKAYA

REFERENCES
http://www.synergy-associates.com/cultural/i_mgmt.htm http://en.wikipedia.org/wiki/Culture#cite_note-velkley-3
Velkley, Richard (2002). "The Tension in the Beautiful: On Culture and Civilization in Rousseau and German Philosophy". Being after Rousseau: Philosophy and Culture in Question. The University of Chicago Press. pp. 1130

http://books.google.fr/books?id=I14RCjT3XAgC&pg=PA114&lpg=PA114&dq=Elisabeth+Marx +financial+times&source=bl&ots=izY8WK7END&sig=gpBdp2J_s9ruZUbOqgx51g_k2fc&hl=tr& sa=X&ei=vzbOT8nxMoHO0QXNxOSTDA&redir_esc=y#v=onepage&q&f=false http://www.grupobimbo.com/en/index.html http://www.kwintessential.co.uk/cultural-services/articles/intercultural-management.html http://www.kwintessential.co.uk/cultural-services/articles/intercultural-manager.html http://www.bakingbusiness.com/ http://gain.fas.usda.gov/Recent%20GAIN%20Publications/South%20Chinas%20bakery%20in dustry%20is%20booming%20but%20demand%20for%20US%20_Guangzhou_China%20%20Peoples%20Republic%20of_12-6-2009.pdf http://www.prlog.org/10546845-bakery-industry-in-china-shanghai-shandong-henan-arethe-most-important-manufacturing-bases.html