Arla Foods seizing opportunities in Chile

Stefano Paternoster

Student thesis: Master thesis

Abstract

As part of the “Strategy 2017” plan Arla Foods commits to search for growth outside its core markets. With ambition to grow in the Latin American region, and reduced overall investment expenditure in the short-to-medium term, the company’s Business Development Department is striving to identify attractive markets to enter into. They identified an opportunity to enter Chile, and this thesis aims at proposing the optimal entry strategy to tap into this market’s potential. This is done by assessing the interaction of external factors, namely macroeconomic, market and industry related elements with internal factors, such as Arla Foods own resources, experiences and capabilities. The analysis is structured around a proposed analytical framework, which combines quantitative and qualitative data with some of the models and theories which are most commonly used in entry modes studies. According to findings Chile is a moderately attractive market for Arla Foods. The growing consumption of dairy products, a relatively large middle class and the progressive match of consumers’ preferences towards Arla Foods’ value proposition are identified as the main drivers for an entry in this this market. Nevertheless, Arla Foods faces some challenges in Chile. Specifically: a consolidated industry with very strong competitors, a lack of local market knowledge and overall, a reduced investment expenditure in the short-to-medium term. The proposed low-risk entry mode in Chile revolves around a 3-steps approach. First of all, Arla Foods is recommended to enter a non-equity-based Strategic Partnership with a local player. This partnership is aimed at gaining market knowledge and access to distribution channels, raise brand awareness and increase sales volumes. Second, once the partnership has been tested and Arla Foods has worked in the Chilean market for some time, the company needs to reassess internal and external variables in order to reshape the strategy. Third, according to the outcomes of strategy reshaping, the company either commits more resources to enter the market full-scale via Joint Venture or Acquisition, or decides to exit the market.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2015
Number of pages65