The friendly white bear disguised as a baker, the official mascot of the Mexican company, Bimbo, was considered for a long time a Mexican symbol. But now, this white bear has become international and it has been adopted by many countries. Bimbo was founded by the Servitje family and associates in Mexico City in 1945. The principal objective of the enterprise was to “make excellent bread, nutritive, tasty, and fresh; made it good, with cleaning, with the great perfection, with the intentions to nurture, satisfy and to be present in all the homes of Mexico.”[1]
What the founders didn’t know is that the company wasn’t going to be the principal bakery for the families in Mexico; it was going to be the bakery of the world. Actually, Bimbo has presence in 22 countries, it has approximately 10,000 products and it has more than 100 brands with great reputation. The focus of the company is mainly in the bread area and its variants, sugar and salty bread, candies and snacks.
Even when Mexico’s a third world and an emerging country with a volatile environment, Bimbo has known how to manage all the ups and downs of the country. Bimbo has faced the devaluation in the 80s and 90s in its home country and also the global crisis in 2008. However, all these problems have not been an impediment for its growth. It can be considered that all these obstacles were part of its preparation to conquer the world.
The company has around 120,000 employees in the world and it has 4% of the global market share. Bimbo has the largest participation and the next players with similar portions are Mondelez International with 3% and Yamazaki Baking Company with 2%. The rest of the 91% is divided between 277,000 competitors.
The success of the company lies in its capacity to produce, package and deliver as soon as possible and also to go to the most remote places. In México there is a typical phrase for every time someone visits a distant town, “you’re not going to find doctors or meds, but you’ll find Bimbo products.”[2] Bimbo’s in charge to distribute its own products and it has a high knowledge of the distribution routes.
In 2008 the objective of the company was to be the “Bakery of the world” and the results until now have been extraordinary. Bimbo’s considered now the biggest industrial bakery in the planet.[3]
But not all has been good news and celebrations. In every market that Bimbo decided to enter, it had to adapt its strategies and accept loses of money. At the beginning, the company believed that the similar language and other similarities with culture would be factors to be accepted but at the end the bakery felt it was in a different place.[4] Even in its home country, when Bimbo started with the snacks segment with the brand of Barcel it lost money until the enterprise was able to learn the behavior of the customers. In the case of China, the Chinese prefer salty products instead of sugar, so Bimbo included to its main products the bread fill of meat and also added bicycles to its distribution fleet.
What have been the strategies of Bimbo to be the industrial bakery of the planet?
[1] (Bimbo, 2017)
[2] (Forbes, 2015)
[3] (Forbes, 2015)
[4] (Company, 2011)
Milestones
As it can observe in the milestones, the expansion of Bimbo and most of the acquisitions were done after Daniel Servitje was named CEO of the company. Before him, the company was more cautious and its penetration was only in Latin America and in the border of USA. The heir Servitje has quintupled the sales and under his orders the company reported sales of more than USD $10 billion in 2015.[1]
Additionally, Bimbo doesn´t create joint ventures. Before the actual CEO, the company started from scratch opening factories in Latin America and the examples are Guatemala, Argentina and Chile. With Daniel Servitje the strategy was different; the company performed full acquisitions of a well renowned local brand in the country. The only case in where Bimbo didn’t buy a local brand was in China, Bimbo bought a Spain company, Panrico, previously stablished.
One of the Bimbo FSA’s is the capability of the brand management expertise. Bimbo is synonym of brand recognition, market presence and good reputation. This advantage could be the Servitje’s booster to change the previous strategy applied in Latin America and begin to add well-known brands to his portfolio.
After the big acquisitions in USA with Sara Lee in 2011, sales have become bigger than its home country. USA represents the 48% of its sales and Mexico only 38%. The operations of every country are taken locally so this change between USA and Mexico doesn´t means that the principal corporation should be reassigned.
Another important point was the decision to create its own fleet for distribution. The decision was taken in 1947; in that year Mexico didn´t has the infrastructure in streets, highways and roads. Until now, the country still lack of proper highways, but for Bimbo this is not a problem, its products can be found in the most remote places. Moreover, in 1947 and even now there are no other companies that could be contracted for distribution with the same efficiency.
Since 1947, Bimbo has gained a lot of experience due to the lack of infrastructure in Mexico and also with the recognition and route mapping. A multinational enterprise from the first world could see Mexico´s infrastructure as an obstacle but Bimbo wanted or not didn´t have other choice and this obstacle is now and strength, not only to go far away in the distribution but also to apply this knowledge in similar environments.
In the case of China, 2006, Bimbo experienced an issue that had handled around 60 years ago. The infrastructure of the country was not ready to support its trucks because the streets were so narrow and most villages and towns didn´t have access for vehicles. The company didn´t see this obstacle as an impediment to sell its products and Bimbo took the decision to add bicycles to the fleet. The bicycles are easy to maneuver through those streets and can reach the most distant areas.
When Bimbo arrived to USA, it started to find problems with the distribution. However, in this case the infrastructure was not a problem; the issue was with the union labors because they didn´t like the idea to distribute at different times, similar to Mexico, but at the end it handled correctly the leaders and they had adequate different delivering shifts, for example, from 1am to 12:30pm to transport the fresh products.
Some decisions taken by Bimbo can be sound illogical or madness for many companies. However, in the case of the bicycles since many years ago until now in Mexico is very common to find people in the streets selling products on them. People can find a lot of things such as candies, bread, etc. Being from a third world is not an obstacle; it is an opportunity of adaptability and learning.
Internationalization Strategy
Respect to the entry model, Bimbo has had two phases. The first one was previous to Daniel Servitje, the company started in other environments from the scratch; this is the case of Latin America. The second phase was after Daniel was named CEO. Here, the internationalization strategy was totally directed to acquire local well-known brands; this is the case in North America, Europe, USA, etc.
The configuration of the activities is classified as concentrated. The company is in charge to do everything in house.
The control or autonomy of every business unit is classified as a combination between formalization and decentralization because the company knows that different strategies should be applied according to the environment and the business units or groups have the autonomy to mold them.
Some examples of autonomy are: in the case of China, adding to its products bread filled with meat because Chinese people prefer salty than sugar or the decision to add bicycles to the fleet. Other example is USA and Canada, in these environments Bimbo didn´t change the logo of the brands acquired and both have maintained their mission and vision. Quoting the CEO Servitje, “We consider that the operations should be managed locally but we try to stay closest to the operation, in such a way we avoid to dictate from the center all the decisions that should be applied to every environment.”[2]
Examples of formalization, Bimbo has applied the same standards for Latin America, Europa and Asia where all share the same mission, vision, values, logo, brand, uniforms etc. Even the trucks to deliver the products are decorated similar. The operations in the entire world are the same, produce in its factories and then distribute using their own logistics.
Finally, the strategy of Bimbo is targeted to value-based. Bimbo´s products are not the cheapest in the market. The good reputation of the brand represents also quality and all its products maintain the same standards everywhere and also the customer will always find bread in the stores. If someone visits Colombia, the white bread will be exactly the same as Spain and Mexico.
Key Capabilities
- Production: knowledge (recipes) and production process of the bread.
- Distribution: knowledge in the routes and own fleet for distribution. This capability permits to deliver the product as soon as possible to the most remote sites and avoid inventories.
- Quality standards: Bimbo´s products keep the same quality everywhere.
- Brand management: Bimbo is expert managing their image around the world. In Asia, Europe, America, the customers perceive Bimbo as a strong and trustful brand. In words of one Spanish partner, “Bimbo´s bread looks very clean and cuddly.” Additionally, the firm has conserved the reputation of the brands acquired.
[1] (Bimbo, 2016)
[2] (UGARTE, 2011)
Matrix of Value Creation
- As multinational company, Bimbo’s located in many environments, it has a lot of currencies and the level of institutionalization is low.
- The bubbles of Mexico, China and USA are little bit bigger because these are the environments in which Bimbo has adapted different strategies to create value.
Framework OLI-LLL
In the early stages of internationalization, when Bimbo went to Latin America, the company belongs to the OLI framework. During this initial season the company started new factories from scratch and then applied the knowledge learned in Mexico. Bimbo was the owner of the capabilities, the location was an advantage because the environment was similar to its home country and also all the activities kept internalized.
However, when Daniel Servitje arrived, the strategy was to acquire well-known brands. Now Bimbo belongs to LLL framework. As linkage, Bimbo acquired the factories, knowledge and reputation of the brand. Once Bimbo fully managed its acquisition, every business or group unit started to share their competitive advantages, in other words, a knowledge sharing network to learn one from the other.
Internalization of Transaction Cost
Bimbo has all the core competences internalized. Production was internalized because they have the knowledge to prepare the bread and distribution is also internal. Bimbo gained a lot of experience in Mexico with the distribution and when the company went to other countries kept this activity internalized. Additionally, Bimbo has its own distribution because its products are perishable and can’t be stored for long time.
Bimbo preferred to assume the costs of all its activities.
Liabilities of Origin
Bimbo was a latecomer in the international market. Even when the company had a lot of experience with its core competences, the firm started to have its internationalization growing in the last 20 years.
Bimbo has lack of experience in environments with high level of institutionalization. For almost 60 years was the king in Mexico and when they went to Latin America the environment was similar to its home. However, Bimbo didn’t have experience in environments such as North America and Europe.
Lack of Mexico´s reputation, this country is seeing as a cheaper labor force and low quality products. Many of the companies installed in this country are manufacturers. Customer could consider the Bimbo’s products as low quality.
The environment of its home country is too volatile. Mexico’s economy is not strong and depends enormously from USA, so every problem that appears in USA will affect Mexico. Additionally, the government doesn’t know how to manage the country and there are constant devaluations.
Recommendations
Use its distribution expertise in its CSR strategies. As it was mentioned before, there are sites in Mexico where someone can’t find medicines or water, but it can bet that people are going to find Bimbo’s products. Bimbo goes even further than the government and society could go. Why the company doesn’t use its distribution and knowledge of the routes and collaborate with these communities where there is nothing except Bimbo? Not only to carry just medicines; the white bear can help bringing doctors, medicines or teachers.
Using the expertise of distribution to go further than any other competitor or other product, Bimbo could use this to rent or deliver different products in its fleet. Some companies, such as Coca-Cola or any other could be interested to have presence in that places in which Bimbo only can visit. So, they can lease or use the space in its vehicles to deliver different products.
Sell specialized or luxury products around the world using a cross-border system. With the expertise of producing and distributing, Bimbo can experiment dispensing products produced in different countries. Maybe one specialized or luxury product created in China could be delivering in Canada or Mexico and sell it for customers that are looking something extravagant or foreigners living abroad. If Bimbo is able to manage the cross-border delivery system, it could be possible to compete against companies such as DHL and UPS.
Bimbo is one of the investors in the biggest wind farm in the world, the park Piedra Larga in Oaxaca, Mexico.[1] The company now is receiving clean energy to 65 of its installations. Bimbo could apply green energy also to its distribution flee. For example, Mexico was considered an oil country, but in the last years it has presented problems in this context and the prices of the fuel has augmented considerably, from $10 MXN ($.5 USD) in 2010 to $17.79 MXN ($.85 USD), almost the double. These changes represent more expenses and the problem of the oil will continue everywhere; Bimbo could start to experiment with other energies to reduce costs in its fleet due fuel increments.
Go for Africa and India. The environments are similar to Mexico. Bimbo has handled the lack of infrastructure in Latin America, especially in its home country, furthermore has managed different levels of institutionalization around the world. Many companies don’t like to go there because the infrastructure limits the distribution but for Bimbo is not a problem. So, now is the right time to go and conquer them.
Since when did the bread become gold? Ask Bimbo, it will have the right answer.
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[1] (Bimbo, 2017)
