Recommendations To Atlas ElйCtrica - Case

Atlas Elйctrica -recommendation:

External strategy:

1) Buy La Indeca and the store chain La Curacao:

- Why: To keep market shares and leadership in Central America, deeper market coverage.

- How: Take long-term loans

- Alternative: It will kill the company if other competitors buy La Indeca (Mabe, Whirlpool, LG, Samsung in Mexico)-they would take market shares from Atlas Elйctrica and by the time wipe out the company from Central America where Atlas Elйctrica has the biggest market shares.

2) Focus on Central America:

- Why: to keep the market leadership in that region -deeper coverage to its natural market. -It will strengthen the company - and prepare it to expand or to win market shares in The Caribbean and South America. First it must strengthen its financial situation in order to have the resources to expand in other regions (it will need to put emphasis on marketing and to develop products that correspond to customer needs in the other regions -especially regarding stoves).

3) Keep the focus strategy:

Why: Its cheaper to keep the old customers than finding new ones!

The middle-income segment is the largest consumer group and the brand names are aimed at this particular target group, so Atlas Elйctrica should keep focusing on this segment until the market is ready for more product lines.

Refrigerators and stoves are the main product lines in which Atlas Elйctrica has its core competences. They are also working fine due to the production system.

The market is not ready yet for more product lines even though the economy is growing because the purchasing power is not that strong compared with the ones in South America. Therefore there is not yet profit to gain by diversifying the products. Another reason not to diversify the products is that in that case Atlas would need to invest in more production systems in order to bring down production costs and to be more efficient. This the company cannot afford at the moment.

How: Be up to date with the market needs and keep on developing the product lines in order to be up front with the newest products. Keep the focus also on customer guarantee. Improve the distribution of products (By acquisitioning La Indeca the company can use the retail-store chain La Curacao to distribute its products in order to reach its target group. Keeping the Cetron brand for refrigerators owned by La Indeca the company would be able to gain market shares in the middle-income segment which is La Indecas target group. It is important that it takes market characteristics in Mexico and Guatemala into account in its product lines as these countries are different from the rest of Central America.

4) Gaining market shares -South America/Caribbean:

- When: Financial situation is strengthened from profitable markets in Central America.

- How: It should try to gain more market shares in countries where it is already

operating by putting more emphasis on marketing and by establishing trade subsidiaries so that it can be more present on the markets. These trade subsidiaries should take care of sales, promotion, marketing, orders and the market research both in relation to customers/consumers and the competitors. This is then communicated back to the head quarter in Costa Rica. In this way Atlas Elйctrica can better be in touch with its markets and can better meet the demands. It is important that Atlas Elйctrica takes the market characteristics into account in South America as these are different from those in Central America. Here the trade subsidiaries can be useful. Once it has gained market shares in these markets it should establish production plants in order to become more price competitive, to improve its customer service and gain economies of scale like some of its competitors. This would strengthen its position in those regions.

5) Expansion in South America:

Where: Brazil, Colombia and Peru

Why: They have a strong purchasing power, a large population, economic growth and have a relatively high GDP rate.

When: Atlas Elйctrica should wait with Brazil until it has attained a stronger position in South America because the leading competitor, Multibras S.A, has nearly 40 % of the Brazilian market with strong brand names. It has five plants in Brazil and has alliances with two whirlpool Co affiliates. Its financial position is also very strong. Once Atlas Elйctrica has attained a stronger position in the countries where it is already operating and once the economic and political situation have become more stable -it should enter Brazil.

Internal strategy:

Redesign the organisation: More international oriented, change from domestic functional structure to a multinational polycentric in order to focus on local success and to be more flexible with the local environment. The change will have to take place gradually as the company internationalizes. The first step is to establish trade subsidiaries to take care of sales, marketing, research and orders in each market. Later production plants should be established at central areas which can reduce transport costs and improve customer service/guarantee in terms of delivery time.....

Briefly:

1. Transformational change -acquisitioning La Indeca Consolidation in Central America, market penetration in the Caribbean and South America (existing products in existing markets -gain additional market shares). Redesign of the organisation into a more international oriented with local focus in order to be responsive. It should strive to become a multinational polycentric company.

2. Expansion

Market development: Existing products in new markets (Adaptation to market characteristics, trade subsidiaries and later production plants to become price competitive). Polycentric approach

Advantages: Atlas Elйctrica can attain additional market shares and deeper coverage of its natural

Markets in Central America and thereby keep its position