Modelos Expansion Strategy - Essay Example

The beverage industry has had tremendous growth in the 19th century with its sales doubling in the last four decades.  First, it was small-scale production that was characterized by low and poor technology, lack of transportation systems to the market, and low-quality products. Then the introduction of superior technology and customer acceptance and loyalty increased the demand for its products driving up the sales. However, due to the introduction of other substitutes like wines and spirits in the industry, the market is likely to experience downswings in its sales in the future.

            Modelo’s expansion strategy was made possible through its strategic alliance with its two main distributors; Bartisor and Grambrinus, experienced, creative, and knowledgeable subsidiaries with knowledge about local customers in the US market. This strategy ensured that the risk of an increase in taxes is hedged. These distributors were delegated with all the value chain processes of the activities except production which was being carried out by the parent firm, Group Modelo back in Mexico. They had autonomous control of decisions regarding the marketing, insurance, transportation, and creative marketing captains, from which a campaign that leapfrogged the Grupo Modelo’s sales emanated in 1986.

            As pointed out in the report, wine is more competitive in Italy and Ireland, unlike beer. Therefore, it will have an opportunity to attempt to enter these foreign markets through both mergers and acquisitions from local importers and distributors. They can also adopt other strategic alliances with high expertise- mature companies in these countries. It can be pointed out that, for the company to stand tall, it needs, a sharper differentiation, identifying and focusing on the key marketing that region and developing a creative Marketing development a strategy

            Some of the challenges it is facing are cut-throat competition from a superior competitor, who have teamed up to ‘dethrone’ the company. It is also facing competition from other products that seem to have higher perceived quality than that of Modelo. A typical example is FEMSA, which has been leading in sales and market share since 2006. This enabled the sale of the group to dwindle leading to leaner profits. However, it can attempt a come-back focus strategy- by identifying and narrowing its target customers in the market. The company can utilize cost leadership as a strategy for reducing all the operation’s costs and pursuing customer excellence in all its customer services.

            Another major challenge facing Modelo is the volatility in the Mexican economy which is down performing which has led to low incomes, for both government and the households and a subsequent drop in their purchasing power. This has adversely affected the demand of the customers hence leading to dropped sales and loss of market share for the company.

            Modelo should diversify its current business by taking advantage of opportunities of moving into newer markets encompassing wine and spirits since it has enough experience in the industry. The reasons are that, first, its core competencies like intangible resources are excellent, especially the brand names, logos, experiences, and expertise of its human resources in technology, production, research, and development among other functions. It should also diversify to cushion risks associated with waning market shares of the company especially its stronghold like in Mexico.  The executives should reconsider changing the focus by clearly revising its customer segmentation to focus more on the unexploited regions other cities and rural places. It should strategically; articulate the kind of customers Sit wants to serve: her psychographic, demographical, and buying behaviors. These will serve as an impetus in pushing their sales upwards.

            Lastly, it should revise its strategic plans to include the current and expected customers. This will enable it to focus more on the type of product produced to satisfy customers’ needs and exceed the customers’ expectorations.