MNC Analysis: Venezuela

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IBU 210 sophomore year.

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MNC Analysis: Venezuela

  1. 1. MNC ANALYSIS Venezuela Mark, Mike, Zaneta, Will
  2. 2. Labor Force • Agriculture: 7.3% • ( Corn, Sugarcane, Rice, Vegetables, etc.) • Industry: 21.8% • (Petroleum, Textiles, Steel, etc.) • Services: 70.9% • ( Public services, Electric, Maids, etc.)
  3. 3. Exports/Imports • Main Imports: Agricultural products, Raw materials, Machinery, medical equipment and chemicals. • Main Exports: Petroleum, Aluminum, Minerals, Basic manufactures.
  4. 4. Exports/Imports Cont. • 40% of Venezuelan exports go to the United States. • 10.5% of exports go to China • 95% of export earnings are oil
  5. 5. Unemployment/Poverty • In 2011 Venezuela’s unemployment rate was 8.2% • In 2011 the World’s average unemployment rate was 8.5% • Although unemployment is lower than average, 27.4% of Venezuelans live below the poverty line.
  6. 6. GDP • GDP is approximately $12,700. U.S. dollars per capita. • Earning a higher yearly wage than 12,700 would require obtaining a high-stress job in the capital of Caracas • Lately, minimum wages have been risen in order to boost the economy; causing a 28% inflation rate in Venezuela.
  7. 7. Overview of AES • • • • Founded January 28, 1981 AES originally stood for Applied Energy Services One of the worlds largest power companies In 2010 total revenue was 16.6 Billion U.S. Dollars
  8. 8. AES’s Entrance into Venezuela • • • • AES purchases Electricidad de Caracas in 2001 Controlled 14% of the electricity consumed in Venezuela Supplied 1 million customers in Caracas Company was fully staffed, inserted CFO Andres Gluski (Venezuelan)
  9. 9. Reason for purchase • • • • AES saw Venezuela as a market saturated with talent Also saw potential growth from the economy Lower income families could provide a large customer base Applied same strategies to Sal Palo Eclectic company and a Cameron Electric company
  10. 10. Marketing and Production • • • • • Negotiated initial prices with regulators upon acquisition. Production of Electricity in five main plants All coal Fired plants Had a production capability of 2,616 megawatts AES refereed to Electricidad de Carcass as ECD
  11. 11. Human Resources • Venezuelan’s who were in place before Chavez proved to be extremely well qualified • Almost all had transferable skills around the world • American companies saw this as a reason to invest • Chavez fired many of these employee’s who fled to other MNCs
  12. 12. Exit strategy • In 2005 AES began to apply it’s exit strategy to the Venezuelan market • To diversify its investor base they offered stock on the Venezuelan stock exchange • One year later they applied the same tactic and sold stock on the Spanish Stock exchange. • When PDVSA became nationalized sped up plan
  13. 13. Cont.. • As AES sold stock also began to move essential personal out of Venezuela and into other countries • This included Andres Gluski, who is now the current CEO of AES • Once Verizon lost its investment AES went to the government to negotiate their sale • Sold company to PDVSA of 739 billion US dollars
  14. 14. Intro to PepsiCo • US Conglomerate • Formed in 1902 • 300,000 employees worldwide • Distributed to over 200 countries • Net revenue 43.3 billion • Entered VZ in 1939 • VZ headquarters: Caracas
  15. 15. Marketing • A marketing push in 1969 gained PepsiCo the majority • That majority was greatest in 1985 when Pepsi controlled 85% of the Venezuelan soft drink market • Currently PepsiCo reaches its VZ consumers by promoting blackberry giveaways, music contests, and baseball. • Additionally Pepsi recently marketed the Miss Venezuela pageant on its soda cans.
  16. 16. VZ vs. US Pepsi Products
  17. 17. Venezuela’s Food & Drink Risk/Reward Rating • Venezuela is ranked 11th and thus last in BMI’s Risk/Reward Ratings matrix for the main markets of Latin America. • The country’s composite score is just 41.6, well below the average for the region. • Both foreign and domestic companies face a number of challenges in Venezuela’s food and drinks marketplace
  18. 18. Top 3 in VZ Drink Market Empresas Polar is the VZ company that PepsiCo has a partnership with.
  19. 19. Pros and Cons for Pepsi in VZ • Sales of alcohol and soft drinks are expanding rapidly, driven by increased consumer spending in recent years. • High per capita consumption of coffee, beer and soft drinks. • Since 2003, the food and drink industry has endured price controls introduced by the government at the retail level, as well as from agreements on guaranteed prices for primary producers, with both measures endangering margins. • Foreign investors are likely to remain cautious about entering the Venezuelan market until the political situation stabilizes and the business environment improves. • Bolívar devaluation will continue to undermine companies
  20. 20. References • Jay Kloosterboer, Executive Vice-President of Business Excellence ( At the time) • "Venezuela and Verizon Reach Deal." Los Angeles Times. Los Angeles Times, 13 Feb. 2007. Web. 13 Nov. 2012. • "AES to Collect USD 98.6 Million in Profits from Electricidad De Caracas." EL Universal. N.p., 1 Mar. 2007. Web. 13 Nov. 2012. < 0179.shtml>. • Venezuela food & drink report - Q1 2012. (2012). (). London, United Kingdom, London: Business Monitor International.