Chupa Chups International Business Strategy
France, Germany and the United States, developing their distribution system with a partnership with a local manufacturer or distributor.
It then opened foreign commercial offices, first in Paris and New York, later in Bonn, London and Atlanta and a new manufacturing plant in France.
After having entered the Japanese market in 1968, it decided targeting less developed countries: Russia, China, India, Mexico and Brazil, following the same model in each country.
2.2. Management of international operations
Each subsidiary is embedded into the global procurement system and in Chupa Chups system of plant specialisation.
- Financial system: the headquarters in Barcelona keep an important control on the subsidiaries, through financial reports, monthly reports, Profit and Loss and Balance Sheets information.
- Procurement system: a central procurement system provides raw materials (excepted sugar and glucose) to every subsidiary, in order to ensure the production of Chupa Chups in a standard format.
- Plants specialisation: Spanish and French plants produce the sophisticated products and export them to the others markets. All the plants produce the Chupa Chups Classic. The process technology is transferred gradually to the subsidiaries.
- Marketing: a team of marketing managers from various nationalities develop the marketing plans. It is then a worldwide team.
- Distribution: in key markets, Chupa Chups operates through its own distribution company (Chupa Chups Diversificacion). In the others markets, it develops a partnership with a distributor carefully selected.
- Advertising: Chupa Chups works with an advertising agency in Spain but also with others abroad, more often medium and small agencies.
Campaigns are developed globally and the subsidiaries are allowed to adapt them locally if appropriate.
2.3. International strategy
Having seen how did the company expand to other markets, we can now analyse and define which strategy it adopted.
û Goals and Means framework
To develop a worldwide advantage a company must achieve three strategic objectives: Global scale efficiency, Multinational flexibility and Ability to learn from its international exposure.
They can be achieved through three means: National differences, Scale economies and Scope economies.
- Global scale efficiency: the company divides its production in five countries, so each site produces an important number of products. It allows the company to benefit from the experience, or learning effect, and thus from scale economies.
In France and Spain, it also produces different sorts of products. This joint production reduces the cost for the company because it shares investments and costs across the different production lines, what is source of scope economies.
By producing in less developed (and often low cost) countries the company would gain cost advantage. Chupa Chups mainly produce in Europe so does not benefit from national differences. But it starts producing in Russia and Brazil where costs (mainly labour costs) are lower.
- Multinational flexibility: Chupa Chups produces in countries where cultures are really different: Europe, Russia, China, Brazil (National differences). [next page]