CRAN CHILE

CHANITA ULIS

NATE PANTUMSINCHAI

PANRAVEE XOOMSAI

PIMLADA SRIVIPAPATTANA

SULEEPORN LUENGSIRIMONGKOL

WARANCHAI SOOKSIRI

About Cran Chile• Founded by Warren Simmons

- Developer of Pier 39 retail complex in San Francisco.

- Founder of Tia Maria and Chevy’s Mexican Restaurant chains.

• 1992 Idea to invest in Cran Chile

- Shortage to cranberry concentrate for making margaritas served in his Chevy’s restaurant.

- Selling his Chevy’s Restaurant chains to PepsiCo.

About Cran Chile• Located near Lanco

• Family managed enterprise

• The company's visions

“To grow and process the highest quality

cranberry products in the world and also

to be the global low cost producer of fruit

and concentrate.”

About Cran Chile• Growing Division:

8 farms with 1,025 acres of constructed cranberry beds less than an hour from processing plant.

• Processing Division:

– Processing Function : 25 acres sized plant with processing capability up to 2,100 metric tons of cranberries per month.

– Maintenance Function : Cold storage with capacity of 7,000 metric tons.

– Quality Control Function : Lab and integrated systems for tracking fruit.

About Cran Chile

Concentrate Suppliers for branded drinks in the United States, Canada,

Japan, Australia, and Europe.

1. What are the motivations and factors that influenced the foreign investment decision for Cran Chile?

HOME COUNTRY: NORTH AMERICA, US

HOST COUNTRY:LANCO, CHILE

Regulations

•unfavorable regulation for wetland cultivation

•foreign direct investment - freedom of activity in cultivation, location advantages, welcoming climates, relatively stable government, strong local currency

Yields

•hard time increasing yields•hesitate to shift to the new high-yielding: risk losing current income

•receives a double yield-per-acre production

•able to hire the locals - Chilean technicians

and specialist team of agronomy

Land Costs

•limited land and labor•higher cost of land - urbanization and land development

•low land cost•low labor wages

2. Relate Simmons’s process of international expansion with companies’ usual internalization process.

• Objective: Tap into Chile’s foreign resources and use them more

efficiently (not a market seeking strategy)• Target Market: The United States• Mode of Entry: Investment Entry Mode, Sole Venture: • Greenfield Operation: New Establishment• Entry Strategy Approach – long run time horizon, building permanent

market position• Advantages: complete control, protection of R&D know-how• Disadvantages: High development costs, slow entry speed, potential

political problems and risks

3. Cran Chile is essentially a contractor that suppliers components to other companies. What risks and opportunities does this relationship present to Cran Chile? Should Cran Chile begin marketing its own products to final consumers?

Risks• The uncertainty in potentially supplying year-round demand of cranberries juice concentrates may urge many clients to shift to competitors in the market. • The company might gain lower margin due to increasing numbers of competitors in the market.

Opportunities• Enlarging its customer’s base• Adding value by offering collaborative agreement with the existing customers in the

Research and Development • Expanding the product line to other fruit concentrate whose costs and resources can be shared with cranberries.

3. Cran Chile is essentially a contractor that suppliers components to other companies. What risks and opportunities does this relationship present to Cran Chile? Should Cran Chile begin marketing its own products to final consumers? (continued)

NO. Why?

• Risk to lose the current customers : Ocean Spray and Northland lost its share

• B2C requires greater investment to widen the scope of functions in value chain. – Marketing and supply chain

• The competition in the consumer goods market is fierce– Many big players possessing strong brand and high investment.

– Competitive advantage in terms of shared cost: Pepsi Co’s distribution cost is lower as it is shared by Pepsi, Tropicana

• Comparing the risks with expected gains, the risks are greater.

• Competitive advantage as a main contractor optimize this strength by capturing the opportunities and maintaining the good relationship with the customers.

4. Simmons knew very little about cranberry production or marketing when he decided to enter the cranberry business. what did he do to overcome his deficiencies?

By acquiring additional resources and capabilities to overcome his lack of knowledge both in the production and marketing

• For the production of cranberries

- Hiring one of the horticulturists specializing in cranberries to advise him on where and how to grow berries

- Hiring Chilean technicians with about 6 years of formal training on agronomy

• For the marketing

- Bringing in the new CEO and the new management team to help him solve the managerial problem when the company faced the hard time

- Extending the product line so as to attract the customers who might prefer to buy from companies that can supply them with variety of fruit juice

Suggestions

• Simmons’ initiative to find the land outside the United States to grow the cranberry is mainly to address resource issues in the U.S.

• Instead of resource seeking strategy, Cran Chile should have considered the joint venture strategy when making a decision to invest in the cranberry plantation in Chile to reduce the product, market and the operational risks.

•Had Simmons chosen the joint venture strategy by engaging with local or international business partners who already had the establishment in sourcing, marketing and distributing fruit products when he started this project, the impacts from the product and market problems should be decreased significantly

– More coverage in term of market

– More flexibility in term of product as the business partner could also supply other fruits to Cran Chile’ processing department to produce other products while the cranberry production is idle because of off-season.

–More time and resources to focus more on the operations of growing and processing cranberries hence the efficiency should have been even better.

Thank You.