27/10/2018 International Business Plan & Strategy

Agenda

• Introduction
• Current Situation
• Internal Analysis
• Globalization Strategy
• Industry Analysis
• Strategy Analysis

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 Introduction
• Founded in 1977
• Owned by FEMSA
• Based in Monterrey, Nuevo León

• 17,246 points of sales in Mexico and Colombia

• 11.8 customers served everyday
• 129,000 employees

• Oxxo seeks to satisfy the everyday needs of its

customers by offering a large variety of goods and
services.

• Third-largest retailer in Mexico in terms of revenue

• The Retail Division opens one new OXXO store every

7 hours

• Brands of Oxxo

“The largest and fastest-growing chain of small-format stores in Latin America”

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LATAM

OXXO expanded to Bogotá, Colombia in 2009

• Alliances with gas stations

• Plans to open 5 to 10 stores per year
• Concentrate on the capital before moving into
other cities in Colombia

OXXO expanded to Santiago, Chile in 2017

• Acquisition of Big John’s - Chilean

Convenience Chain (48 stores)

OXXO expanded to Lima, Perú in 2018

• 10 stores by the end of the year and plans to

open 300 in two years

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Internal Analysis
 VRIO
Resource / Competitive
V R I O implications
Capability

Chain Business
✔ X - - Competitive Parity
Model

Price Strategies ✔ X - - Competitive Parity

24/7 Stores
Operations
✔ X - - Competitive Parity

17,246 points of Temporary Competitive

✔ ✔ X - Advantage
sale

+3,000 portfolio of Temporary Competitive

✔ ✔ X - Advantage
available products

7 exclusive quality Temporary Competitive

✔ ✔ X - Advantage
brands

2nd most valuable

Sustainable
brand in LATAM (2.6 ✔ ✔ ✔ ✔
Competitive Advantage
MUSD)

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 VRIO
Resource / Competitive
V R I O implications
Capability

Financial Inclusion Sustainable

✔ ✔ ✔ ✔
Services Competitive Advantage

Utility Bill Payment ✔ X - - Competitive Parity

OXXO CEDIS Sustainable

✔ ✔ ✔ ✔
Distribution Network Competitive Advantage

OXXO COCINA
Temporary Competitive
Development of ✔ ✔ X -
Advantage
Prepared Foods

¡O’Sabor! Hot meal Temporary Competitive

✔ ✔ X -
Advantage
concept

Real Estate Division ✔ X - - Competitive Parity

Amazon “pick-up Sustainable

✔ ✔ ✔ ✔
program” Competitive Advantage

OXXO’s main advantage is its Distribution Network

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 SWOT
Strengths Weaknesses

• 2nd most valuable brand in LATAM • Final costs higher than Traditional grocery retailers
• Financial Inclusion Services • Commission fee added to some services
• OXXO CEDIS • Limited products portfolio (Supermarkets)
• Amazon “pick up program”
• 17,246 point of sale
• +3,000 portfolio of available products
• 7 exclusive quality brands
• OXXO COCINA
• ¡O’Sabor!
• Chain Business Model
• Price Strategies
• 24/7 Store Operations
• Utility Bill Payment
• Real Estate Division

Opportunities Threats

• Increasing Global Demand in food consumption
• Increasing in Time-Starved Shopping Behavior
• Retail E-commerce sales worldwide increased 25% (2017)
• 4 million people in LATAM are Unbanked
• Globally, the trade channel mix is becoming more fragmented
as consumers shift toward smaller store formats.
• The C-store sector in Brazil accounts for only 16% of total
retail (The world average reaches the level of 22%)
• Growth of online grocery shopping Market
• Supermarket chains have developed in recent years their
versions of proximity markets
• Consumers are changing diet habits (Low fat / Meat free)
• Traditional grocery retailers are turning to associations and
technology to strengthen their positioning

Great opportunity
OXXO has thetocapacity
remain successfully in the
to expand into newglobal market
markets
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Next Stop
 BRAZIL
How
Join Venture with main Gas Brazilian Distributor
Petrobras

Why • 1st Economy in LATAM

• Supply Chain Integrated with FEMSA
• C-Stores raise fuel sales by around 20% (Increase
consumer confidence)
• 41,817 Active stations in Brazil and only 7,655 C-Stores

“Petrobas has been looking for potential partnerships

involving its profitable Convenience Store Segment”

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Industry Analysis
 Porter
New entrants New entrants
• Initial Capital requirements (high)

• Industry growth (medium) - Grew 2.3% from 2014 to 2015

and 3.9% from 2015 to 2016.

Complementary Substitutes • Product differentiation (medium)

P&S • Brand loyalty (high) – (Local brands)

• Supply- side economy of scale (high) – (In logistics)

• Demand- side economy of scale – (high)

• Government policy (medium) – (Government could help with

entry- owns 64% of Petrobras shares)

Degree of rivalry Buyer Power Substitutes

• Switching costs (medium)

• Cheap alternative (medium) – (Substitutes can offer better

discounts)

Supplier Power
• Existing market players (high) - (Supermarkets, Local stores,
street markets)
Gas % of gas Number of
C-Store 24hrs Buyer Power
Distributor stations C-Stores
White Flag
• Product differentiation (high) – Products standard

40% - - - • Price sensitivity (medium) – (Consumers are looking

stations
proximity)

BR • Number/Size of key buyers (medium) – (Medium class is

19.4% BR Manía 1,300 Yes
Distribuidora growing in Brazil/ also population between 25 and 65 is
Ipiranga 14.9% AM-PM 2,000 Yes majority in Sao Paolo)

• Switching cost (high)

Raizen
11.3% Shell Select 1,000 Yes • Dependence in BR brand (high)

(Shell)
• Consumers purchasing power (medium) - (Brazilian
Others 14.4% - - - economy is growing so is consumers expenses)

The main threat is Intense Competition

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 Porter
New entrants Supplier Power
• Number/size of suppliers (medium)

• Switching costs (high)

Complementary • Local suppliers (medium)

Substitutes
P&S • Forward integration (medium) – (Could be potential merged
or acquisitions of local suppliers w/ foreign companies)

• Dependence on the industry (medium)

• Wants presence in C-stores (low)

• Products differentiation (low) – All products have substitutes

Degree of rivalry Buyer Power Degree of Rivalry

• Number of competitors (high)

• Size of competitors (high) – (Leader C-Store in 2016, AM/

PM, has 14.9% of share market)

Supplier Power
• Product differentiation (medium)

• Exit barriers (high)

• Switching costs of consumers (high)

• New products (medium) – (Competitors could get an

Supermarket C-Store Number of C-Stores
exclusive brand or a unique product)

Carrefour Carrefour Express 82 • Price discounts (medium) – (C-stores don’t offer regular
discounts)
Hirota Food Hirota Food Express 18
Grupo Pão de Açúcar Complementary Services & Products
Mini Mercado Extra 197
(GPA) • Alliance with brands (low) – (Ex. Coca Cola)

Grupo Pão de Açúcar • Agreements to offer services of other companies (LOW) –

Minuto Pao de Azucar 79 (Ex. Amazon, unless a brand like 7-eleven enters to Brazilian
(GPA)
Market)

Lojas Americanas Americanas Express Plans to open 3,000 • Bills payments (low)

The main threat is Intense Competition

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Strategy Analysis
 Strategy Analysis
Arenas
• Brazil – Sao Paulo
• Target: Gas Stations
• Focus on people age 15-35y
• Advantage in Logistics and Information Systems
• Availability in crowded places, important neighborhoods and
Arenas touristic routes.

Population: 209M

Brazil Market: Increase of the middle class “C”

Staging Economic logic Vehicles
Vehicles: 37M

Sao Paulo Strategic Locations: Vila Madalena (2),

Pinheiros (5) and Bela Vista (4)

Gas Stations TOTAL: 41K stations

Differentiators

Information Inventories Logistics

Quality / Brand

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 Strategy Analysis
Vehicles
• Joint venture with Petrobras
• Strategic Alliances / FEMSA – Local brands
• Supply Chain integration

Arenas

• Petrobras: 8K gas stations

• P. Sao Paulo: 1K gas stations

Staging Economic logic Vehicles

• BR Mania: 1.3 K convenience stores

• BR Sao Paulo: 280 convenience stores

• Potential OXXO: Up to 1,500

• Strategic Alliances: FEMSA has operations with

Differentiators Solistica (Logistics) and refrigeration (IBERA).

• Agreement to market beer with the major producer in

Brazil AB InBev 70% market share

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 Strategy Analysis
Differentiators
• Better prices than similar competitors

• Customization based on preferences and needs

• Coverage in the main gas distributor (Petrobas)

• Strong distribution channels based on an optimum logistics
• Availability of Products
Arenas • Approved practices (own operational standards)

• Additional Services

Price Categories
Food Center

Staging Economic logic Vehicles

Dealers Distribution Center + Inventories Payment

C-Stores
Investment
Coverage
in personnel

Differentiators
Economic logic
• Low cost through scale advantage by distribution cost
• Profit margin due to negotiation with producers / dealers
• Segmentation
• Financial services
• Pick up programs

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 Strategy Analysis
Staging
• Develop 2 Distribution Center and 1 Food Production Center
• Make agreements with local producers/dealers for the rest of products

• Provision of other services (e.g. payment of invoices)

• First half of the year open 1 convenience store periodically

Arenas
• Second half of the year open 2 stores every day
• Second half of the year administration and segmentation store by
plaza
Moves
293 C-stores 1: Distribution center

1st year
1 Distribution center
2: Food production center

Staging Economic logic Vehicles 3:Negotiation with local producers/

dealers

4: Provision of other services (e.g.

1,173 C-Stores payment of invoices

5: The first six months open 15

convenience stores every month

Differentiators 6: The next six months open 34

1,467 C-Stores convenience stores every month

5th years
2 Distribution Center
7: Second half year administration and
segmentation store by plaza.

With OXXO’s success in Brazil it will consolidate the brand in LATAM

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Thank you!